In 1995 the Skulptor Konenkov was arrested and subsequently sold by order of the Federal Court. The ship, as well as another that was sold off, was owned by the Baltic Shipping Co (BSC). In December 1995, Sheppard J ordered that the priorities of the claims on the Skulptor Konenkov sale fund should be determined, and in January, Opal Maritime Agencies Pty Ltd (Opal) issued notice of the intention to claim on the fund. At the same time, Opal filed a caveat against release of the proceeds of sale. At that time, Opal was under the control of a provisional liquidator.

Opal's claim was for goods, materials and services it had provided to the owners of the Skulptor Konenkov. In April 1996, Opal clarified in a statement of claim that those goods, materials and services were provided to BSC and its ships under a written agency agreement. Further, Opal had incurred disbursements on account of BSC's ships. What this meant was that Opal was responsible for managing an 'offset' account into which BSC's customers paid freight costs. Disbursements by Opal for services and materials for BSC's benefit were also debited to the offset account. This was done in accordance with the agency agreement between the parties.

Opal claimed that in July 1995, the balance in the offset account proved that BSC owed it AUD 2,551,019.13. AUD 1,912,246.28 of that amount was subtracted for a claim by BSC against Opal, allowed by Opal's provisional liquidator. That initial amount was altered further as other evidence revealed debts and credits on either side. Opal's claim that its two remaining heads of claim - for the equipment operation account and the general account - constituted general maritime claims under the Admiralty Act 1988 (Cth) (the Act) was rejected at first instance by Sheppard J.

Opal was granted leave to file and serve an amended statement of claim by Tamberlin J following Sheppard J's decision. The plaintiff's case was heard in October 1997 before Tamberlin J. Tamberlin J confirmed that Opal's claims for agency commission on the equipment operation account and the general account were not general maritime claims under s 4(3) of the Act, and were not claims in rem that could be brought against the proceeds of sale. Likewise, the disbursements that Opal claimed in respect of the containers was not a general maritime claim, and could be recovered by an action in rem against the proceeds of sale. There were, however, other items in the disbursement accounts that did allow for a general maritime claim.

On appeal, Opal argued that where a claim could not be commenced in rem under ss 15, 16, or 18 of the Act, then ss 4(3), 17, 19, and 24 of the Act granted claimants a statutory right of action in rem against the ship at fault or a sister ship, or the proceeds of sale of the ship at fault.

Held: Appeal allowed in part. Opal had a potential general maritime claim in relation to an unpaid Suez Canal fee, but its allegation that it had a general maritime claim otherwise and in respect of agency commission and fees could not be made out.

The Court observed that Opal could recover if it satisfied the conditions of s 24 of the Act. That section requires claimants to prove that they could commence proceedings against the ship at fault in rem, were it not for the ship's sale. If that is established, then the claimant may commence an action against the proceeds of sale as an action in rem. Sections 15-19 are the source of the right to commence an action in rem, and these statutory rights are the only opportunity for recovery, as provided by s 14.

Opal pleaded in its amended statement of claim that it had the right to commence proceedings in rem under ss 4(3) and 19 of the Act, and on appeal, pleaded that it was entitled to commence an action in rem under s 17. Section 19 regards the right to commence an action against a 'sister ship' in the 'guilty' ship's absence, as long as both ships are owned by the same entity at the time the action is commenced. To satisfy the conditions of s 19, Opal needed to have both a general maritime claim in respect of a ship, and needed to demonstrate there was a 'relevant person' who owned that ship when the claim arose, and owned a different ship when proceedings commenced. The 'relevant person' had to be liable through a claim in personam, if such a claim were initiated.

Further, to succeed under s 19, the Skulptor Konenkov would need to be the second-named ship, but to succeed under s 17, it would need to be the first-named ship, and the ship to which a general maritime claim had first attached. Section 19 acts as an exception to the rule that for a claim to be commenced in rem against a ship, that ship must be the same ship against which a general maritime claim is brought.

The Court drew attention to the Arrest Convention 1952, and the list of claims contained in art 1, which are based on those which were then allocated under the admiralty jurisdiction in the UK. The Arrest Convention served to achieve a balance between English and European laws regarding ship arrest. An aspect of that compromise, as noted in The Deichland [1989] 2 Lloyd's Rep 113, 117 (CA) (CMI2233) was to limit the power to arrest to 'maritime claims', as defined in the Arrest Convention 1952, and to extend the power to arrest to sister ships. In The Eschersheim [1976] 1 WLR 430 (CMI2166), Lord Diplock described art 3 as most clearly capturing that compromise, widening the previously restrictive powers of arrest allowed in Common Law countries. Articles 1, 2 and 3 provided clarity and uniformity in respect of different kinds of maritime claims and defined the 'sister ship' rule to make it easier to claim. The right to arrest, however, by necessity could only arise if there was a claim in respect of a particular ship, and the owner was liable in respect of a claim relating to that same ship. The claim and the 'guilty' ship must be related.

The Court found that that relationship between ship and claim applies to all heads of claim under s 4(3) of the Act. It is thereby essential also to ss 17 and 19. Section 4(3) describes what a general maritime claim is, and ss 17 and 19 of the Act implement that into what sorts of claims (and ships) can be pursued.

Did Opal, therefore, have any sort of general maritime claim that it could pursue in accordance with s 4(3), for the purpose of satisfying ss 17, 19, or 24? Opal argued that the agency commission payable to it by BSC on the equipment operation and general accounts under the parties' agency agreement was a general maritime claim. Opal argued that this claim fell under ss 4(3)(m), (r), and/or (o). These address, respectively, the supply of goods, materials, or services to ships for their operation or maintenance, claims in respect of the alteration, repair, or equipping of a ship, and finally, claims by masters, shippers, charterers, or agents in respect of disbursements on account of a ship.

The Court reviewed a number of past UK and Australian decisions in reaching the conclusion that s 4(3)(o) of the Act should not be read any more widely than the comparative provision in s 20(2) of the Supreme Court Act 1981 (UK), which is a copy of s 1(1)(p) of the Administration of Justice Act 1956 (UK). These sections regarded the right of an agent to be reimbursed for making disbursements for an employer. The Court in this case referenced Bain Clarkson Ltd v The Owners of the Ship 'Sea Friends', in which Lloyd LJ determined that both s 20(2)(p) of the Supreme Court Act 1981 (UK) and art 1.1.n of the Arrest Convention required an agent's disbursement to be in the nature of a master's disbursement, for the sake of a particular ship. The wording in all of these provisions, including the equivalent in s 4(3)(r) of the Act, demands that there be a connection between the disbursements on account of a ship, and the general maritime claim being brought in rem.

Disbursements cannot merely be made for a ship's owner - they must be for a ship itself, to which a general maritime claim relates, and not to any other ship. Here, the Court determined that the agency agreement between BSC and Opal stated that Opal would supply agency services to any of BSC's unnamed ships, and not any ship in particular. The agency agreement distinguished between agency fees and agency commission and these were payable in different circumstances. The Court agreed with Tamberlin J that Opal was responsible under the agency agreement for rendering services generally to BSC as a shipowner, in the conduct of its business carrying cargo in and out of Australian ports, and that Opal was to manage the containers that BSC kept in Australia whether these were owned or being leased by BSC. Opal was an agent to BSC as shipowner, and not to any particular vessel. Further, Opal's role in managing the supply of goods and services with third parties was not a 'disbursement' on account of the ship, as Tamberlin J found and the Court here agreed. Repairing or surveying a container was not the same as providing services to a ship.

Therefore Opal's claim that its agency commission and agency fees were disbursements on behalf of a ship was not made out and s 4(3)(r) was not satisfied.

However, could the agency commission and agency fees be a claim in respect of the supply of goods, materials, and services, so as to fall within s 4(3)(m) of the Act? Opal submitted that the Act was intended to be extended to cover activities of persons other than those who directly supply goods or services to the ship: eg s 4(3)(r) and (o) dealing with agents and subcontractors respectively. Section 4(3)(m) was extended to cover services supplied or to be supplied. The extension was made, Opal submitted, in recognition of the modern commercial practice whereby agents rather than masters of ships incur disbursements on account of ships. The decision in The River Rima was, Opal submitted, distinguishable because of textual differences and because s 20(2)(m) of the 1981 UK Act was based upon art 1.1.k of the Arrest Convention 1952, to which Australia was not a party. In those circumstances the distinction between goods and services supplied to a ship and goods and services supplied to a shipowner ought not to be drawn and supply to either ought to come within s 4(3)(m) of the Act. The Court rejected this argument, noting the earlier judgment by Sheppard J in which his Honour observed the difference between supply to a ship, and supply to a shipowner on behalf of a ship, where only the former is recoverable through an action in rem. That distinction was supported by the Australian Law Reform Commission Report that led to the creation of the Act, as well as the wording in various pieces of UK legislation and cases. In particular, based on the Administration of Justice Act 1956 (UK), Opal's role in booking and handling cargo for BSC and the remuneration due to it for performing those duties would not classify as a claim for 'necessaries'. This term came about to mean claims for advances of money made so that necessaries could be bought, before the Act came into being.

Again the Court confirmed Tamberlin J's conclusion that to satisfy s 4(3)(m) of the Act, there needed to be a distinction drawn between supplying services directly to a ship and supplying services to a shipowner, and as Opal was supplying services to the shipowner, then it could not claim for agency commission and agency fees regarding the General Agency Account or the Equipment Operating Accounts under s 4(3)(m).

The question then arose whether Opal could claim for services it provided in respect of containers, which it argued were part of the ship. The Court referred to s 3 of the Act which defines 'ship', but makes no reference to what constitutes part of a ship. A 'ship' could not be defined, the Court determined, as including all property owned by the shipowner which happened to be onboard. The connection needed to be stronger than that. Moreover, the equipment operating accounts that Opal referred to were about agency services in respect of containers not actually aboard the Skulptor Konenkov. Containers were not ships, and whether a container was an integral part of a ship, or just a piece of equipment in use, was a question of fact varying from case to case. In these circumstances, the containers that BSC used were part of a 'pool' where each container could end up on any ship at any time. Each functioned only as a package for cargo and was not specifically designed for use with particular ships.

These findings led the Court to conclude that the containers were not part of the ship so as to satisfy s 4(3)(m) of the Act, and so the agency services provided in respect of those containers was not for the benefit of the ship, but was for its owner.

Opal's final contention was that the transactions conducted on the equipment operations account were a claim in respect of the equipping of the ship, so as to satisfy s 4(3)(o) of the Act. The Court did not accept that it was a given that containers were used by BSC to carry cargo, or were necessarily the 'equipment' of the ship. Services rendered to the containers was not the same as services rendered to the ship and in respect of equipping the ship. Section 4(3)(o) of the Act was consequently not satisfied. The fact that the containers were owned by BSC and supplied by BSC to shippers did not mean they were equipment of a ship.

The Court concluded overall that none of Opal's grounds of appeal with respect to agency commission and fees were made out, and there was no possible action in rem available or a general maritime claim under s 4(3) of the Act.

Another issue that the Court considered was the non-payment of a substantial fee, in respect of which Opal did have a general maritime claim under s 4(3) of the Act. In March 1995, BSC asked Opal to provide a Suez Canal fee to Asswan Shipping Agency in Egypt, for one of BSC's vessels. This did not come under the parties' agency agreement. The money was drawn from Opal's account and never repaid. Opal could not, however, receive judgment for the sum it was owed because when Sheppard J granted permission to reopen the case, it was specified that Opal could not recover over a certain amount in respect of the two equipment operation accounts and the general account. The Suez Canal fee was not related to those accounts.

The Court considered the issue and declared that Opal had a general maritime claim for the Suez Canal fee, but whether it could come into consideration against Skulptor Konenkov's sale proceeds would only be considered later, once opposing arguments had been heard.