This was an appeal from orders made by a single Judge in the Federal Court of Australia on 13 December 2013. The appellant had arrested the respondent’s three vessels and claimed its charges for goods and services which it supplied to each of those vessels under an agreement with Hako Offshore Pte Ltd (Hako).

Hako was the demise charterer of the vessels. The appellant succeeded in part and was awarded a sum of money, including interest in each action. However, the awards made in the appellant’s favour did not include its charges for the goods and services it supplied to the vessels during the period from 20 April 2012-18 May 2012. For all but one day in that period, the ships were under arrest. The goods and services provided by the appellant to each vessel included the provision of a crew, catering services and other services.

In April 2010 Hako chartered the vessels to Boskalis Australia Pty Ltd (Boskalis) using the SUPPLYTIME89 form. The charter was a time charter.

Boskalis was a principal contractor providing services to the Gorgon Liquefied Natural Gas project and needed the vessels to tow rock from Henderson near Fremantle to Barrow Island off the coast of Western Australia. The time charter specified the port of redelivery was Henderson, WA or Dampier, WA to charterer’s discretion. However, the time charter also required Boskalis to pay a mobilisation fee and demobilisation fee on delivery and redelivery and the Port or place of mobilisation was identified as the Singapore/Batam region. The time charter specified the employment of the vessel was for ‘Rock Transport Activities’.

In June 2010, Hako entered into a ‘Marine Manning and Services Agreement’ with the appellant. By around the middle of 2010 the appellant began supplying marine manning, catering and other services pursuant to that agreement. By early 2011, Hako had fallen substantially into arrears in payments due to the appellants and in March 2011 the appellants arrested the vessels.

On 7 April 2011 the appellant, Hako and Boskalis entered into a tripartite deed of agreement entitled 'deed of continuing services and assignment of debt' (deed). In reliance upon the deed, the appellant agreed to release the vessels from arrest.

The deed provided that the appellant was to continue providing manning services, catering services and other services for which the appellant was to send an invoice every fortnight and payment was to be made by Hako within 14 days. Hako’s existing debt to the appellant was to be assigned from the appellant to Boskalis and in return, Boskalis agreed to pay the appellant as an assignment fee, the amount of that existing debt plus arrest costs (AUD 5,960,315.58 plus AUD 115,000.00). As to future dealings, Boskalis agreed to take assignment from the appellant of the debts owed to it by Hako as the appellant issued invoices from time to time.

The relevant clauses of the deed in this matter were cls 8, 11, and 16. Clause 8 of the deed provided that Boskalis might reduce its payment in percentage terms if any of the Hako Vessels were not on-hire under the time charter and that it was not liable to the appellant on any invoice issued by it. Rather Boskalis was liable to the appellant on the assignment of the Hako debt from the appellant to it.

Clause 11 provided that any of the vessels might be validly and lawfully arrested by the appellant or Boskalis in any jurisdiction to recover any amount due to that party under the deed.

Clause 16 of the deed placed an obligation on Hako to indemnify the appellant for certain losses caused in whole or in part by any breach of the document by Hako. Clause 20 placed obligations on Boskalis. First, there was an obligation to notify the appellant in the event that any of the Hako vessels came off hire under the time charter and then when the vessels came back on hire. Second, by cl 20(b), Boskalis was under an obligation to give the appellant 14 days’ written notice of any expected completion of services under the time charter. The deed gave each of the parties the right to terminate in certain circumstances. One of the grounds upon which Boskalis could terminate the deed immediately was if it terminated the time charter.

The appellant commenced three in rem actions by writs issued on 2 April 2012. In each of the appellant’s writs, the particulars of claim were to the effect that the appellant’s claim was for the provision of goods to the ship, and of services in the form of master and crew, for its operation ‘pursuant to or in accordance with the terms of a deed’, being the deed dated 7 April 2011. An alternative basis for the appellant’s claim which appeared in the particulars of claim in each writ was that the appellant was entitled to be subrogated to the master and crew’s maritime lien as referred to in s 15 of the Admiralty Act 1988 (Cth) (the Admiralty Act). In a previous decision of the Federal Court (Full Court), that basis for the appellant’s claim was held not to be available to it: Ships ‘Hako Endeavour’, ‘Hako Excel’, ‘Hako Esteem’ and ‘Hako Fortress’ v Programmed Total Marine Services Pty Ltd [2013] FCAFC 21 (see CMI588).

The primary Judge found that the Hako Esteem and Hako Excel released their final rock-laden barges at Barrow Island on 3 April 2012. The Hako Endeavour (although arrested by the appellant on 16 April 2012) released its final rock-laden barge on 19 April 2012. Boskalis gave notices to Hako of the redelivery of each ship under the time charter. The primary Judge proceeded on the basis that the notices were effective.

At the time the ships were arrested, each of them was manned by a master and crew provided by the appellant under the deed and each of them was off Dampier in Western Australia. On 17 May 2012 all three vessels were released from arrest after letters of undertaking were provided to the appellant. On the same day, the appellant entered into an agreement with Go Marine Group Pty Ltd (Go Marine) to provide goods and services to the vessels for their journey to Benoa in Indonesia. The negotiations leading up to that agreement had commenced by 19 April 2012. On 27 May 2012, the appellant’s crew were removed from the vessels and Go Marine crewed the vessels directly for their subsequent return to Batamec.

The primary Judge found that the marine rock transport was completed on 19 April 2012 and that the term of the deed ended on that day. Therefore services provided by the appellant after that date were not provided under the deed. Thus the charges in relation to those services fell outside the terms of the particulars of claim in the writs issued by the appellant. Absent an amendment to the writs and the statements of claim to allege an alternative basis or bases for the appellant’s claim it would fail. On 26 August 2013 the appellant issued an interlocutory application in each action and amended these applications on 16 September 2016 to include, as alternative bases of its claim, a claim based on an implied contract, a claim based on quantum meruit, a claim under the indemnity clause in the deed or a claim for the charges as the costs of the proceeding.

With respect to the claim that there was an implied contract between the appellant and Hako, her Honour said that there were a number of reasons why this claim would not succeed. First, there was nothing to indicate any agreement with Hako to supply services to the vessels after their arrest and after 19 April 2012 even though Hako knew the appellant was still doing so. Her Honour said that the fact that the appellant was negotiating with the owners from at least 9 April 2012, and that those negotiations concerned or included the provision of services to the vessels for their journey to Benoa, pointed against the existence of an agreement between the appellant and Hako.

Her Honour also said that it was relevant to the claim based on implied contract to consider whether Hako had taken the benefit of the provision of services to the vessels during their arrest. She held that it had not done so. The marine rock transport project had been completed and Hako could not use the vessels during the period they were under arrest. The owners had seen fit to step in to secure the release of the vessels with a view (as eventually happened when they were released from arrest) to their demobilisation back to Benoa in Indonesia. Her Honour found that Hako did not choose for the appellant to continue to provide services after the deed had come to an end and it (as distinct from the owners) did not take the benefit of the appellant’s work during the relevant period in 'any meaningful sense'. The owners took that benefit.

The primary Judge said that the appellant’s quantum meruit claim would not succeed for similar reasons.

The primary Judge said that the appellant’s claim for its charges based on the indemnity clause in the deed would not succeed. Her Honour said that, even if it was accepted that there was a causal link between Hako’s failure to pay the amounts due to the appellant and the arrest of the vessels, it had not been shown that there was a sufficient causal link between Hako’s breaches of the deed and the incurring of the charges.

The primary Judge said that the appellant’s claim for its charges as the costs of the proceeding would not succeed because, on reviewing the correspondence and discussions that passed between the appellant’s solicitors and the Admiralty Marshal after the arrest of the vessels, the Marshal had not incurred the costs and expenses of the crewing and provisioning of the vessels while under arrest within the meaning of r 41 of the Admiralty Rules 1988. Her Honour said that there was no indication that the Marshal required the appellant to continue to crew the vessels.

Although the primary Judge concluded that the proposed amendments would not succeed and should be disallowed on that basis, she went on to discuss whether the Court had the power to allow the amendments, and, if there was power, whether the amendments should be allowed as a matter of discretion. However, her Honour did not express a concluded view about either of these matters.

With respect to the Court’s power to allow the amendments, the respondents submitted that there was no power to allow the amendments because the existence of such a power would be inconsistent with the requirements for an action in rem in s18 of the Admiralty Act which provides:

s 18 Right to proceed in rem on demise charterer’s liabilities

Where, in relation to a maritime claim concerning a ship, a relevant person:
(a) was, when the cause of action arose, the owner or charterer, or in possession or control, of the ship; and
(b) is, when the proceeding is commenced, a demise charterer of the ship;
a proceeding on the claim may be commenced as an action in rem against the ship.

The respondents submitted that a proceeding on a claim based on the alternative causes of action or the grounds in the proposed amendments could not be brought against them as an action in rem because, as at the date of the application to amend, Hako was no longer the demise charterer of each vessel. It followed that the proposed amendments to introduce alternative causes of action or grounds could not be allowed. As to this submission, although her Honour refrained from expressing a final view, she said that the wording of s 18 suggested that ‘the addition of new claims must also satisfy the requirements of s 18’. 

With respect to the Court’s discretion to allow or refuse the amendments, the respondents submitted that if s 18 of the Admiralty Act did not mean that the Court lacked the power to allow the amendments, nevertheless, the rationale for s 18 was a powerful discretionary consideration against allowing the amendments. The primary Judge referred to the decision of Rares J in EMAS Offshore Pte Ltd v The Ship ‘APC Aussie 1’ [2009] FCA 872 [33] and concluded that the scope of s 18 and the limitations which it imposed ‘weigh[ed] against granting leave to amend in the present circumstances’.

The appellant appealed. The respondents cross-appealed on the grounds that the primary Judge should not have awarded a part of what is called a Retention and Continuity Allowance ('RCA'), which was an allowance paid to the master and crew of each vessel. The relevant part of the allowance which was challenged is that part which related to the performance of services prior to 7 April 2011 and the commencement of the deed.

Held: Appeal allowed. Cross appeal dismissed.

1. The deed did not give rise to an obligation on Hako to engage the appellants for demobilisation services. It was reasonable to conclude that the parties intended the arrangement established by the deed to continue only for as long as Boskalis needed the vessels for its rock transport activities.
2. The Court’s general power to allow an application to amend a cause of action is part of the context in which s 18 was enacted. The section does not yield up a clear limitation on that power. Section 18 is relevant to the discretion and not the Court’s power to allow an amendment. The claims based on implied contract and quantum meruit were the same maritime claims within s 4(3) of the Admiralty Act 1988 (Cth) as the existing claim based on the deed. There was power to allow the amendments sought by the appellants. Allsop CJ further explained that s 18 reflects Australia’s view of the proper scope of demise charter arrest under art 3.4 of the Arrest Convention 1952. This Australian view, reflected in s 18, permits the arrest of an owner’s ship for demise charterer’s liability in the absence of a maritime lien. The critical importance of the date of commencement of the proceeding in Australia is that from the date of filing the proceedings in rem against the owner’s ship for demise charterer’s liabilities, a species of security is created in the ship by reference to the proceeding. No restriction on the operation of the Rules of Court as to amendment is discernible from s 18. The cause of action arose when Hako, as the relevant person, was the demise charterer of the tugs; thus para (a) of s 18 was satisfied. The proceeding (that came to be amended) was commenced when Hako was still the demise charterer of the tugs; thus para (b) of s 18 was satisfied.
3. The primary Judge erred by not granting the appellant leave to amend and add claims based on implied contract and quantum meruit. A request for services by Hako should have been implied where the appellant continued to provide services and Hako did not countermand what should have been viewed as a continuing request for services. Hako acquiesced in the provision of services by the appellant and knew they were not being provided gratuitously. In view of the continuing demise charter, Hako received the benefit of the services provided by the appellant.
4. The primary Judge was correct in holding that the appellant’s charges for services provided to the vessels during the period of the arrest were not caused in whole or in part by Hako’s breach of the deed. Therefore, they did not fall under the indemnity in Clause 16 of the deed. (Rares, Besanko JJ; Allsop CJ dissenting).

In dismissing the cross-appeal, the similarity in the words of the marine manning and services agreement and the deed indicated the parties had a similar approach in mind in relation to the payment of the RCA. On the respondent’s approach this would have meant that the appellant should have included the RCA on each invoice issued each fortnight. This would have meant the appellant was receiving monies that were not yet owed to the crew. The word 'incurred' in cl 5.14 of the deed was significant. In context it meant to come under an immediate obligation to pay a sum of money, rather than the accrual of an entitlement to a sum of money payable at some time in the future. That meant that the appellant could not have included an allowance for RCA in invoices issued under the marine manning and services agreement unless the allowance was due and payable on completion.