Transfield ER Futures Ltd (Transfield) filed a writ in the Federal Court of Australia against the ship MV Giovanna Iuliano seeking security for enforcement of a final judgment sum owed by the ship to Transfield. The judgment sum had been awarded to Transfield in the English High Court following the ship’s breach of four freight forward swap agreements (FFAs). A warrant of arrest was issued on 17 May 2012 and the ship was arrested on 18 May 2012.

The writ alleged that the Federal Court had jurisdiction over the case pursuant to ss 17 and 4(3)(f) of the Admiralty Act 1988 (Cth) (Admiralty Act). The beneficial owner of the ship, Deiulemar Shipping SpA (Deiulemar) and the ship challenged that jurisdiction and therefore the legitimacy of the arrest. The defendants applied to have the writ and the arrest warrant set aside and sought damages under s 34 of the Admiralty Act.

Held: Writ and arrest warrant set aside for want of jurisdiction and ship released from arrest.

The issue was whether the breach of an FFA, which is traded as a financial instrument and provides some form of insurance to freight companies, could satisfy the criteria of a general maritime claim under s 4(3)(f) of the Admiralty Act. FFAs do not directly involve the chartering of ships or the carriage of goods, which is the subject matter of s 4(3)(f). The exact wording of the section describes the relevant kind of general maritime claim as ‘a claim arising out of an agreement that relates to the carriage of goods or persons by a ship or to the use or hire of a ship, whether by charterparty or otherwise’. For Transfield’s claim to succeed, it was necessary to establish that the claim on which the writ was based had the legal character required by s 4(3)(f).

Gordon J approved the statement of Allsop J in Heilbrunn v Lightwood plc (2007) 164 FCR 1 [28] that the Admiralty Act must be read in the light of both its legal and historical context, and of international definitions of maritime claims such as those in the Arrest Convention 1952. In Heilbrunn Allsop J noted a preference for a wide construction of s 4(3)(f) of the Admiralty Act, given its basis in an international Convention, and given that art 1 of the Arrest Convention 1952 framed the various maritime claims in a broad sense. Further, as a result of 'the need for the 1952 Convention to apply to a wide variety of legal systems and given the capacity of maritime claims to arise by reference to chartering and carriage arrangements often of some complexity, it would make little practical sense to limit the types of claims to which this paragraph [s 4(3)(f) of the Admiralty Act] was directed to contractual claims between parties to the agreement'.

In its arguments, Transfield placed great emphasis on Allsop J's statement in Heilbrunn that non-contractual claims under s 4(3)(f) only needed to arise out of an agreement - to which the plaintiff did not need to be a party - and which agreement had a relevant relationship with the carriage of goods, or otherwise fell within the wording of s 4(3)(f).

Gordon J held that this comment by Allsop J did not operate in Transfield’s favour. In Heilbrunn the plaintiff’s claim arose from an agreement for the carriage of goods, and was still connected to an agreement evidenced by a bill of lading. Therefore, the claim had the legal character required by s 4(3)(f) of the Admiralty Act. The words ‘relates to’ from that section were to be given a somewhat narrow construction, requiring a ‘reasonably direct’ connection between the claim and the activities listed under s 4(3)(f).

The Judge concluded that none of the FFAs had a ‘direct connection’ with the carriage of goods on a ship, and there was no relationship between the plaintiff’s claim and the MV Giovanna Iuliano in this case.