7.01  Immediately upon arrest, a ship becomes security in the custody of the court to await the result of the proceedings giving rise to the arrest. The ship remains in the custody of the court until released upon the provision of alternative security or sale by the court.¹ It is to be noted in this respect that the Marshal has custody but not possession. Any pre-arrest rights and remedies based upon possession are not affected by the arrest.²

(p. 155) 7.02  Once the property has been arrested, the Registrar issues standard directions ordering that the Admiralty Marshal may at any time:

1. (1)  take measures to preserve the ship, its machinery, and equipment;

2. (2)  move the ship up to five miles within the limits of the port where it is lying under arrest, either for its safety or to comply with the requirements of the Port Authority;

3. (3)  supply the minimum victuals, domestic fuel,³ and water necessary to avoid hardship to the crew.⁴

In The Merdeka,¹⁰ the master of the vessel, knowing her to be under arrest, moved the ship and took her out of the jurisdiction. Sheen J was of the opinion that this was a case of serious contempt and that proceedings to redress contempt were necessary in order to impress on others the consequences of flouting the orders of the court.

(p. 156) 7.04  The extent of any punishment will depend on the circumstances of the case. The relatively minor contempt that was the subject of The Synova attracted a fine of only £100. In The Merdeka, the master’s written contrite apology, coupled with his voluntary return to London with the vessel, were taken into account in imposing a fine of £350, together with an order for costs.

7.05  An order for the stay of proceedings has no effect on the arrest of property or the provision of security. An arrest remains in force and any security representing the property remains in place.¹¹

7.06  Despite having custody of the property under arrest, the Marshal does not insure the property.¹² Section N13 of the present Admiralty and Commercial Courts Guide confirms the position, which was first adopted on 1 May 1970, that the Marshal will not insure arrested property for the benefit of the parties.¹³ Nonetheless, there is authority for the proposition that the Marshal owes a duty to take reasonable care of the vessel whilst it is in his custody and is liable for damage caused by his negligence.¹⁴ The Marshal may therefore insure against his own negligence.

7.07  If the Marshal needs to move the vessel either in accordance with his powers under the standard directions on arrest or pursuant to a specific order of the court, the Marshal will attempt to advise all parties known to him as being on the record in an action in rem of his intention to move the vessel or move it beyond the area covered by the usual port risks policy.¹⁵

7.08  Any person interested in property under arrest, or in the proceeds of sale of such property, or whose interests are affected by any order sought or made, may be made a party to any claim against the property or proceeds of sale.¹⁶ Such a person will include the owner of cargo on board the arrested vessel, a mortgagee, a charterer, and anyone who may suffer ‘not merely financial loss or commercial difficulty, but even danger to persons or property’.¹⁷

7.09  The fact that property is under arrest does not prevent an in rem claim form being served upon it or its arrest by any other person claiming to have an in rem claim against it.¹⁸ Nor does the sale of the ship prevent an in rem claim form being issued against the fund in court.¹⁹ The High Court of Hong Kong has emphasized that the fund in court represents the ship; it is therefore not a valid basis for challenging jurisdiction to suggest that the fact that a ship has been sold and the proceeds of sale used to constitute a fund in court means that the ‘ownership’ nexus cannot be satisfied by later in rem claimants.²⁰

7.10  Where any undertaking is required to be given to the Admiralty Marshal, it must be given in writing to his satisfaction and in accordance with such arrangements as he may require.²¹ A court is unlikely to accept a personal undertaking from a solicitor if it is apparent that the amount of the undertaking is beyond the means of the (p. 158) solicitor.²² It is open to any party to seek a ruling from the Registrar in relation to any requirement relating to an undertaking.²³ Disobedience to any undertaking given to the court can result in committal or, in the case of a solicitor’s undertaking, in enforcement of the undertaking pursuant to the court’s inherent power over its officers.

7.11  It is the practice of the Admiralty Marshal to divide the expenses of keeping a vessel under arrest equally between all parties who have arrested the vessel. The reasons for this practice are that the Admiralty Marshal is not in a position to determine whether the claimants in the different actions have valid causes of action, nor the amount for which the claimant in any particular action will obtain judgment, nor the order of priorities. It has been suggested that the basis of this rule of thumb is the maxim ‘equality is equity’. The application of the equitable maxim however, can produce inequity in circumstances where one party becomes liable to pay some part of the expense of the arrest even though it will be unable to recover its contribution from the funds in court or make any recovery on the claim because a party with higher priority will exhaust the fund.²⁴

7.12  In The Falcon,²⁵ Sheen J expressed the view that whilst justice would not necessarily be done by dividing equally between various claimants the expense of maintaining the arrested ship, neither would it necessarily be achieved by dividing the expenses in proportion to the size of the claims. A claimant who had arrested a ship should be required to pay all the expenses of the arrest and maintenance of the arrest until such time as he released his arrest. If a second claimant arrests the ship, the expenses which the first claimant undertook to pay are not thereby increased. Furthermore, if a second arrest is effected, the first arrester can release his arrest and enter a caveat against release. Thereafter, all the expenses of maintaining the arrest will fall on the second arrester. The Judge urged the Marshal to adopt the practice of charging all expenses of custody and sale of the ship to the party who obtains the order for appraisement and sale from the date when he lodges the commission for appraisement and sale, so that each litigant will know the extent of his obligations.

7.13  If there is more than one action and if the ship is appraised and sold by an order in the second or subsequent action, the claimant in the first action should apply to the court for reimbursement of the expenses of preserving the property. The court will so order unless the first claimant has acted in bad faith.²⁶

7.14  A party who seeks to be released from an undertaking must make the application for release himself and must show sufficient grounds for the variation or rescission (p. 159) of the undertaking, supported by appropriate evidence.²⁷ A solicitor who gives an undertaking on an application for an arrest warrant may seek to be released from that undertaking in circumstances where he is no longer able to obtain instructions from his client. In such circumstances, the court may release the solicitor from the undertaking, but usually on condition that the vessel be released immediately and that all the fees and expenses of the Marshal up to and including the release of the vessel first be paid by the solicitor.²⁸

7.15  It has been observed above that a claimant with an in rem claim may arrest a ship as of right, provided that there is jurisdiction for the claim and the statutory criteria for the issue of an arrest warrant are satisfied. At that point the ship is held as security for the claim or is released upon the provision of adequate security. Once security is provided, the security replaces the ship.

7.16  Originally, bail was given as security for the ship in the same way as bail is provided for an individual under arrest. The security was provided either in the form of a bail bond or cash payment into court. Gradually, in addition to those forms of security, other types of security were provided such as a guarantee to the satisfaction of the claimant or the Marshal, often in the form of a P&I Club letter of undertaking. However, these alternative forms of security were a matter of private arrangement between the parties, and the court had no power to order the provision of security in an alternative form to that to which the plaintiff was entitled under the rules of court, namely, bail or payment into court.²⁹ The use of bail bonds has become obsolete in modern times and there is no longer any specific provision for bail bonds in the CPR.³⁰ The court’s powers with regard to the form of security (p. 160) have been widened considerably by CPR 61.5(10), which gives the court power to specify both the amount and form of security which is to be provided.

7.17  The security most often proffered will take the form of a guarantee or letter of undertaking from a bank, insurance company, or P&I Club, or cash paid into court. The wording of any guarantee or letter of undertaking must be scrutinized carefully to ensure that it deals adequately with substantive rights. It should also contain an appropriate choice of law and forum clause to govern disputes arising from the security itself. Not infrequently, the security includes a submission to the jurisdiction on the part of the defendant.

7.18  The security provided by a defendant for the release of a ship under arrest must be for such sum as represents the claimant’s reasonably arguable best case including interest and the claimant’s costs of the action.³¹ This principle applies also where the release is pursuant to statutory provisions because of a stay or dismissal of proceedings on account of an arbitration agreement or the commencement of litigation in a foreign jurisdiction.³²

7.20  The court may not permit the arrest or rearrest of the property to facilitate further security if the total security would exceed the total value of the property either at the time of the original arrest or when the security was first given.³⁶

7.21  In an application for a reduction in the amount of security sought for the release of a vessel, the conduct of both parties is to be considered in determining who should pay the costs.³⁷

7.22  A person who claims to have a right in rem against property which is already under arrest and who wishes to be notified of any application in respect of that property or its proceeds of sale can protect his interests³⁸ by filing a request for a caution against release.³⁹ On the filing of such a request, a caution against release is entered in the Register.⁴⁰ There is provision for the filing of a caution against release even where the Registry is closed.⁴¹

7.23  A person who has entered a caution against release which results in delay to the release of the property can be ordered to pay damages for losses suffered by any (p. 162) person who has an interest in the property.⁴² However, a court will not make an order for damages if there was good reason for the entry and maintenance of the caution.⁴³

7.24  Property will be released from arrest if:

1. (1)  it is sold by the court;⁴⁴

2. (2)  the court orders that it be released on an application made by any party;⁴⁵

3. (3)  the arresting party and all other persons who have entered cautions against release file a request for release;⁴⁶ or

4. (4)  any party files a request for release containing an undertaking, together with consents to the release of the arresting party and all persons who have entered cautions against release.⁴⁷

As with cautions against arrest, provision has been made for an application for release to be dealt with even when the Registry is closed. It is not automatic that the after-hours process will achieve a release but, if the Admiralty Marshal is contactable and available and there are facilities at the relevant port to assist with a release, it may be possible to proceed after hours.⁴⁸

7.25  Under South African law, a ship is deemed to be released from arrest one year after the giving of a letter of undertaking, whether the undertaking is given by private arrangement between the parties or pursuant to the rules of court.⁴⁹

7.26  A vessel which has been arrested and released may be rearrested.⁵⁰ However, if security has been provided, rearrest will only be permitted where not to do so would create oppression or unfairness. In The Arctic Star,⁵¹ subsequent to the provision of adequate security, the vessel’s owners took steps which seriously impaired the value of a guarantee. In the circumstances, the Court of Appeal concluded (p. 163) that rearrest was appropriate. Similarly, in The Hero,⁵² rearrest was permitted in circumstances where, due to a clerical error, the plaintiff had miscalculated the proper amount of security.

It is respectfully submitted that the approach of the New Zealand Court of Appeal correctly reflects the authorities. In truth, the ‘rule’ against rearrest is now no more than a back-stop to a regime driven by a reluctance to see a claimant over- or under-secured.

7.28  It will often be the case that a ship is arrested but the cargo on board is not. In such circumstances, anyone interested in the cargo who wishes to discharge it may request the Marshal to authorize steps to discharge the cargo.⁵⁴ Those making such a request of the Marshal do not become parties to the proceedings. If the Marshal considers the request reasonable,⁵⁵ and the applicant gives a written undertaking to pay, on demand, the Marshal’s fees and expenses,⁵⁶ the Marshal will apply to the court for an order to discharge the cargo. If the applicant is unable or unwilling to give the requisite undertaking, the applicant may be made party to the proceedings and apply to the court for the orders sought and directions as to the Marshal’s fees and expenses in relation to the discharge and storage of the cargo.⁵⁷ In some circumstances, it may be necessary to seek a declaration as to the ownership of the cargo.⁵⁸

7.30  Accordingly, if there is indeed any power to permit a ship to trade whilst under arrest, it is unlikely that such a ship would be permitted to trade outside territorial waters. The difficulty with the concept of the ship trading whilst under arrest is that the duty of the Marshal, to keep the ship in safe custody and preserve it, does not extend to managerial control and operation of the ship for the purpose of generating an operational profit for the shipowners and those interested in it. This is clear from the procedures in relation to insurance arrangements in England and Australia for ships under arrest,⁶¹ which specifically provide that the Marshal does not take out indemnity or commercial insurance. The operational control of a ship requires that the master and crew operate the ship in accordance with the owner’s or demise charterer’s instructions. It is impracticable for the Marshal to exercise a veto in respect of those instructions and the on-board management of the ship unless the Marshal or his nominee is presently on board the ship and supervising its operation. Where the ship is traded, the crew is not engaged by the Marshal.

7.31  The approach taken in Australian cases of the same type was to attempt to distinguish between continuing to trade the ship and moving the ship within the jurisdiction, albeit several hundreds of kilometres, to offload the cargo. Specific power to move a ship that is under arrest is provided in the Admiralty Rules 1988,⁶² but as the cases referred to below reveal, the court’s use of the provision has become sparing.

7.32  In Den Norske Bank (Luxembourg) SA v The Ship ‘Martha II’,⁶³ orders were sought for the ship to be moved to other ports and for the discharge of cargo. The Martha II(p. 165) was arrested in Melbourne at the behest of the mortgagee. In the expectation that the ship would be refinanced and released, the owner applied to the court for permission to sail the ship to Sydney, and there to load and unload cargo in accordance with its scheduled cargo operations. The application was opposed by the plaintiff mortgagee. The Victorian Deputy Sheriff would not consent to the movement without formal orders of the court. Olney J granted the application subject to certain conditions being fulfilled and undertakings being given by the time charterer, including payment before the ship left Melbourne of the Marshal’s costs of supervising the movement and the costs of arrest up to the time of the order. The Marshal and two armed members of the Australian Protective Service were on board. The ship proceeded to Botany Bay, where some cargo was offloaded. On the same day, Sheppard J varied the order of Olney J to direct that no new cargo be loaded on board, the refinancing not having materialized, and ordered the ship to proceed from Botany Bay to Port Jackson to berth or anchor in the custody of the Marshal. The owner and the time charterer then applied for permission for the ship to proceed to Port Botany to offload the balance of the cargo other than mineral sands and then to proceed to Newcastle to discharge the mineral sands, it being alleged there were no suitable discharge facilities anywhere else. Sheppard J made orders for the movement of the ship and discharge of the cargo, but would not allow the ship to sail to Newcastle. He distinguished his earlier decision in Malaysia Shipyard and Engineering Sdn Bhd v Iron Shortland,⁶⁴ where he had approved orders permitting the arrested vessel to sail between Port Hedland in Western Australia and Port Kembla in New South Wales, on the grounds that the orders in that case were by consent, undertakings were provided by Australian third party charterers, and the case involved ‘public interest’, namely the potential shortage of iron ore at the Port Kembla steelworks.

7.33  A similar application was made in relation to the cargo on board the Socofl Stream in Sovremenniy Kommercheskiy Flot v The Ship ‘Socofl Stream’.⁶⁵ The applicant was the consignee of the cargo of steel coils and sought orders permitting the vessel to sail from the port of arrest, Brisbane, to Newcastle in order to discharge the cargo. The arresting party did not oppose the order and the applicant offered cash security to cover the Marshal’s expenses of the voyage. There was evidence that it would not be necessary for the vessel to leave the territorial sea in the course of the voyage and so the vessel could, at all times, remain within the jurisdiction of the Federal Court. However, the Marshal strenuously opposed the application on the basis that nothing, not even the presence of security officers on board, could prevent the ship ‘turning left’ if the master so decided. Kiefel J accepted the Marshal’s argument and declined to make the orders.

(p. 166) 7.34  It is submitted that the approach of Kiefel J in The Scofl Stream and that of Sheppard J in The Martha II accords with the underlying rationale of the jurisdiction to arrest. For some time it seemed unlikely that, at least in the Australian context, the orders made by Sheppard J in The Martha II and The Iron Shortland would again be made. However, in Commandate Marine Corp v The Boomerang I  ⁶⁶ Allsop J permitted a vessel to sail whilst under arrest from Fremantle in Western Australia to Sydney. The basis for the decision appears to have been serious doubt as to the legitimacy of the arrest given earlier authority against the proposition that the word ‘owner’ in s 19(b) of the Admiralty Act included a demise or bare-boat charterer.⁶⁷ It is submitted, with respect, that this is wrong in principle. 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 or significant public policy considerations⁶⁸—obvious practical considerations militate against its being permitted to set sail, even if its ostensible destination is another port within the jurisdiction. Or it is not properly under arrest, in which case it ought to be released. It is difficult to see why the need to resolve a short point of law, even at short notice, should produce a different result.

A more orthodox (and, it is submitted, correct) approach was taken in Tai Shing Maritime CO SA v The Ship ‘Samsun Veritas’ as surrogate for the Ship ‘Tai Hawk’,⁶⁹ where the Federal Court of Australia made orders permitting a vessel arrested in Port Hedland to sail to the Port of Dampier. The vessel was fully laden with 140,000 tonnes of iron ore and the spring tides meant there was a ‘very real likelihood’ that the vessel would run aground unless she was moved. The journey involved the vessel leaving Australia’s territorial waters for part of the voyage but the Marshal did not oppose the ship going to Dampier provided adequate security arrangements were accommodated. Most importantly, the Court considered that the ‘very significant public policy considerations’ of safety meant the ship should be permitted to sail to Dampier while under arrest.

7.35  In New Zealand, a passenger vessel was arrested near the start of a week-long voyage. The innocent charterer was threatened with the loss of reputation and the tourists on board with the prospect of a wasted and expensive trip to New Zealand to embark on the voyage. The Court held that it had jurisdiction to authorize the Registrar to permit the vessel to continue with the cruise.⁷⁰ Again, it is submitted that this decision is dubious in principle.

7.38  As with requests for the discharge of cargo, a shipowner can, without becoming a party to the proceeding, request the Marshal to discharge the ship in circumstances where only the cargo on board has been arrested.⁷⁶ If the Marshal considers (p. 168) the request reasonable⁷⁷ and the applicant gives a written undertaking to pay, on demand, the Marshal’s fees and expenses,⁷⁸ the Marshal will apply to the court for an order to discharge the ship. If the applicant is unable or unwilling to give the requisite undertaking, the applicant may be made party to the proceedings and apply to the court for the orders sought and directions as to the Marshal’s fees and expenses.⁷⁹

7.39  The arresting party will not normally be concerned about the crew on board the arrested vessel because trading ships will usually provide a P&I Club letter of undertaking or post other security to secure release. If they do not, however, and particularly if it becomes necessary to remove the crew from the ship so that it can be sold, the position of the crew may become a lively and intractable issue— and can seriously delay the process of sale.

7.40  To take a fairly extreme example, in The River Andoni,⁸⁰ the vessel was arrested by bunker suppliers on 20 September 1994 and judgment in default of defence entered and an order for appraisement and sale made on 4 November 1994. By mid-December it had become clear that the position of the crew was not straightforward. Most if not all of the 49-strong crew were Nigerian and could not simply be removed from the vessel, but had to be repatriated; they were, moreover, owed substantial amounts in unpaid wages and lacked the wherewithal on their own to commence proceedings;⁸¹ they also had substantial personal possessions,⁸² which they could not afford on their own to repatriate. Eventually contact was established with the ITF and proceedings were issued on 19 January 1995 on behalf of most of the crew. A month later an order was made that the crew vacate the vessel by a date set a week or so later, but that deadline was later extended by nearly a month. It was not until 17 March 1995, nearly six months after the vessel had first been arrested,⁸³ that the matter was resolved and an order made for the vessel’s release.

7.42  It follows that a claimant faced with a situation in which an owner has become insolvent, leaving an unpaid crew on board the vessel, will be well advised to take steps to address the crew’s position sooner rather than later.

7.43  The Marshal owes no duty to the crew on board an arrested vessel, but his approach to crew issues may depend on the extent to which the crew’s continued presence on board the ship impacts on his duty to ensure the safe custody and preservation of the ship. Where a ship can be safely locked up as a dead ship, as would be the case, for example, if a yacht or a trawler could be stored on a hardstand or a permanent slipway, it may be unnecessary for even a ship’s keeper to be appointed,⁸⁶ let alone for the crew to remain on board.

7.44  The Marshal will incur no liability for crew wages until such time as there is an agreement between the Marshal and the crew that the latter will provide services as and when requested by the Marshal.⁸⁷ That may arise if, for example, the Marshal (p. 170) is required to move the arrested ship because it is adversely affecting the operation of the port or berth, posing a risk to safety in the position where it was arrested, or if it is incurring substantial wharfage charges where arrested.⁸⁸ In such circumstances, the Marshal may engage such crew members as are necessary to achieve the purpose and to maintain the crew at a prudent level consistent with the discharge of his duty.⁸⁹

7.46  If the crew on board refuses to assist in the movement of the ship, the Marshal may determine to tow the ship to a new location as a dead ship.⁹²

7.47  The arrest of the ship does not determine the employment relationship between the owners or demise charterers and the master and crew. Nor will the issue of a claim form against the ship by the master or crew to recover outstanding wages automatically determine this relationship. It will be a question to be ascertained on the facts of each case whether or not the employment contracts of the master and crew have come to an end.⁹³ Even if the employment relationship has been terminated, then crew members may seek to recover wages accrued up until the termination and, thereafter, damages for breach of contract calculated by reference to the wages lost, the cost of sustenance for a reasonable time at the place of termination pending repatriation to their home port, and the cost of repatriation.⁹⁴

7.48  The consequence of the continued employment of the crew after arrest will be the pro tanto reduction in the value of the ship or proceeds of sale by the amount of the accruing liability for wages—in other words, a reduction in the overall amount available to satisfy those claims which have a lesser priority than the claims of the master and crew.⁹⁵ Although the continued engagement of the crew by the owner will give the former rights to wages and entitlements, such as accommodation on board and the right to sustenance, those rights are not enforceable against the Marshal. However, the Marshal may, if he considers it necessary for the safety of the ship or to preserve it, pay wages and provide accommodation and sustenance to the crew on board.⁹⁶

7.49  The presence of the crew on board is justifiable only for so long as it does not interfere with the ship or the Marshal’s custody of it, and does not increase the Marshal’s costs of maintaining custody of the ship and preserving it. If a ship can conveniently be laid up as a dead ship pending trial or the provision of security, a crew will not, all else being equal, be permitted to remain on board where that would involve, for example, unnecessary expense in providing power or access to the ship to enable the crew to live on board. Giles J of the New Zealand High Court observed in this connection that it was unnecessary for the crew to remain on board either to assert or protect their rights; just as a mortgagee would not be allowed to enter into possession or exercise powers adverse to the Marshal’s custody or, a trade creditor (p. 172) asserting a retention of title clause would not be permitted to unbolt the ship’s equipment pending determination of its claims, so it seemed wrong in principle that seafarers should be permitted to remain on board to try and force acceptance of their claims.⁹⁷ Without disagreeing with Giles J’s observations in principle, it is submitted that much may depend on the particular facts of the case. It may be, as in The River Andoni,⁹⁸ that disembarking the crew is simply not a practical proposition until arrangements have been put in place to meet their legitimate claims⁹⁹ and to secure their orderly repatriation together with their belongings.

7.51  The result is that, in the ordinary course, a claimant will receive no advantage by paying out the claim of the crew, including the payment of repatriation costs, unless it receives the leave of the court to make the payment and to stand in the shoes of the crew in respect of any sums so paid.¹⁰² Where a party stands in the shoes of the crew after payment, the right to recover monies so paid is postponed until after satisfaction of the Marshal’s costs and expenses, and also until after satisfaction of the costs of the producer of the fund. Payment of the monies without the leave of the court gives the payer no right to subrogation.¹⁰³

7.53  Alternatively, where no claimant is prepared or able to pay off the crew in order to obtain vacant possession of the ship, the court may order that the Marshal pay the crew’s repatriation expenses and, if necessary, the claim for wages. Such expenses may then be rationalized as payments made to realize the ship on a Marshal’s sale to best advantage. If so ordered, the expenses will form part of the Marshal’s expenses.¹⁰⁶

7.54  These two approaches both result in the payment of the crew’s claim. However, the order in which the outlay is reimbursed from the fund arising from the sale of the ship is dependent upon who has made the payment. When paid by a party other than by the Marshal, the costs will rank after the Marshal’s costs and expenses of the arrest, the costs and expenses of appraisement and sale, and the costs of the producer of the fund. When paid by the Marshal, the crew will obtain a priority unavailable on a proper distribution because its claim will have been met in priority to the costs and expenses of the arresting party and the judgment creditor.

7.55  A party may apply to the court at any time during the proceeding of a claim, including prior to the determination of the claimant’s claim, for an order for the survey, appraisement, and/or sale of a ship.¹⁰⁷ The word ‘party’ does not include a person who has done no more than file a caution against release, but such a person will be given notice of any application concerning the sale of the ship.¹⁰⁸ It is not expressly provided in the rules that the property must be under arrest at the time when an order for sale is made, but the Practice Direction envisages that, at least in (p. 174) relation to an order for sale, the property will be under arrest.¹⁰⁹ This is consistent with earlier practice.¹¹⁰

7.56  The sale of a ‘ship’ extends to her appurtenances.¹¹¹ The ordinary meaning of ‘appurtenance’ is a mechanical accessory or some apparatus or gear which appertains or belongs to the ship.¹¹² It does not include fuel oil.¹¹³

7.58  An application for appraisement or sale contains a personal undertaking by the solicitors for the party making the application to pay on demand the fees and (p. 175) expenses of the Marshal incurred by him or on his behalf in respect of the appraisement and sale of the property, or of endeavours to appraise or sell the property.¹¹⁵ Any person interested in property under arrest or the proceeds of sale or whose interests are affected by any order sought may be made a party to the proceedings.¹¹⁶ Any such application will be heard in public and notice of the application must be served on all parties to the claim, all persons who have requested cautions against release, and the Marshal.¹¹⁷ If the application for appraisement and sale is made by the Marshal himself in the exercise of his general powers in respect of property under arrest, it would appear that the Marshal will have to fund the costs of the sale himself until those costs can be recovered from the proceeds on completion of the sale.¹¹⁸

7.59  The rules clearly contemplate that an order for sale may be made before judgment. Such an order may, however, only be made by the Admiralty Judge and not by the Registrar.¹¹⁹ A court should not make an order for the appraisement or sale of a ship pendente lite, whether or not the action is defended, except for good reason.¹²⁰ The principles applicable to such an order were identified by Brandon J in The Myrto.¹²¹ Normally an order for sale before judgment will be sought only where there is a default of acknowledgement of service or defence. In such circumstances, it is common practice for the court to make an order on the basis that the security for the claim will be diminished by the continuing costs of maintaining the arrest (p. 176) to the disadvantage of all those interested in the ship. If the action is defended, then the court will examine the question of whether there is good reason for making the order more critically, and a significant factor influencing that decision will be the effect of maintaining the arrest on the value of the claimant’s security.¹²² Where a vessel is sold pendente lite, it is still the Marshal that must appraise the vessel and advertise and invite offers for the sale of the vessel. Except in special circumstances, the court will not order the Marshal to sell to a purchaser found by the arresting party, even if the proposed price appears to be at or around the market value for the vessel.¹²³ This is because a private sale by the arresting party would tend to undermine the impartiality of the Marshal.¹²⁴

7.60  The decision in The Union Gold reflects sentiments voiced by Waung J in the earlier Hong Kong case of The Margo L.¹²⁵ The Singapore High Court followed The Union Gold and The Margo L (and an even earlier Canadian case)¹²⁶ in The Turtle Bay ¹²⁷ and The Sea Urchin.¹²⁸ Belinda Ang J held that the court would only permit what it termed a ‘direct judicial sale’ in ‘special circumstances’ or where ‘powerful special features’ required it. In The Sea Urchin, even the presence of a perishable (and perishing) cargo, with mounting daily costs, was insufficient to qualify.

7.61  Evidence in support of an application for sale pendente lite might include:

1. (1)  the overall value of the claim;

2. (2)  the number of cautions against release and other claims against the ship and their likely value;

3. (3)  the value of the ship and its likely diminution in value during the course of the arrest;

4. (4)  the costs of maintaining the vessel’s arrest, including such costs as port and berth charges, ship’s keeper, crew wages and emoluments, supply of domestic fuel to the vessel, and so on, and the consequent diminution in the claimant’s security;

5. (5)  any (prospect of) deterioration in the condition of the ship;(p. 177)

6. (6)  any necessary work to be done on the ship either to keep it afloat or to enable it to be moved;

7. (7)  the unwillingness of the shipowner to contribute to the costs of the arrest;

8. (8)  the financial position of the shipowner and his unwillingness or inability to provide security for the ship’s release;

9. (9)  the likely intervention of claimants with higher priority;

10. (10)  humanitarian considerations in relation to the crew;

11. (11)  whether, if the claimant obtains judgment in his favour, the judgment can be satisfied by the defendant without the need to sell the ship in any event.

7.62  At any time up until an order for sale is made, the shipowner is at liberty to arrange for its sale. Even if such a sale is made, the ship will remain under arrest and subject to the claim upon it.¹²⁹ Once an order for sale has been made, however, it is a contempt of court for the owner to attempt to sell the ship.¹³⁰

7.63  Once the court has made an order for sale¹³¹ it will usually set a time within which notice of claims against the proceeds must be filed and the time and manner in which the notice must be advertised.¹³² Unless the court otherwise orders, the Marshal is required to have the ship appraised by an experienced valuer¹³³ who will certify the value of the ship, and the Marshal is required to sell the ship for the highest price he can obtain,¹³⁴ which—absent a special order—must not be less than the certified value of the ship. If the Marshal conducts the sale of a vessel negligently, he may be liable for loss suffered in the same way as he is liable for loss or damage suffered by the vessel whilst in his custody.¹³⁵ There is no provision in the rules relating to the manner in which a sale must be conducted by the Marshal, but it will most commonly be by private treaty following reasonable advertisement of the ship for sale.¹³⁶

7.64  In the event that circumstances change between the making of an order for appraisement and sale and the completion of a sale, a party may apply to the court for the order to be suspended¹³⁷ or even set aside. The suspension of an order for sale will only be made on confirmation that there are, or will within a specified and short period be,¹³⁸ sufficient funds within the jurisdiction¹³⁹ to satisfy all the claims before the court. Such an order will not be made lightly, particularly when the Admiralty Marshal has commenced negotiations with third parties for the sale of the vessel.

7.65  The proceeds of sale are paid into court by the Marshal. The Marshal may sell in a foreign currency, in which case, the funds are placed on one day call in an interest bearing account unless the court otherwise orders.¹⁴⁰ An application may be made to the Registrar to place foreign currency on longer term deposit.¹⁴¹ In any event, notice of the placement of foreign currency in an interest bearing account must be given to all parties interested in the fund,¹⁴² and any party who objects to the mode of investment can apply to the Registrar for directions.¹⁴³

7.66  After the time prescribed for the filing and advertising of claims against the proceeds of sale, any party with a judgment against the property or the proceeds of sale may apply to the court for the determination of priorities.¹⁴⁴ Such an application must be served on all persons who have filed claims against the property.¹⁴⁵ The determination of priorities may only be made by the Admiralty Judge, unless the Judge otherwise orders.¹⁴⁶ The principles relating to the determination of the order of priorities are considered in Chapter 8. Once a determination of the order of priorities has been made, payment out of the proceeds of sale is made to the judgment creditors in order of that determination or as the court otherwise orders.¹⁴⁷

7.67  Judicial sale as a step in the enforcement of a claim in rem extinguishes the maritime lien or the statutory claim in rem in respect of the ship, and transfers it to the (p. 179) fund in court. A purchaser from the Admiralty Marshal, therefore, gains clear title to the ship free from any claims, liens, or encumbrances.¹⁴⁸ Despite this well-established principle, it depends for its recognition upon courts in other jurisdictions. In some circumstances, it may not be possible in fact to relieve a ship of all encumbrances and liens if the courts of another country refuse to recognize the judicial sale as having such effect.¹⁴⁹ Difficulties can also arise where a third party, who is neither a party to the arrest proceedings nor amenable to the jurisdiction of the court, is required to facilitate or cooperate in the removal of the registration of an encumbrance on a ship.¹⁵⁰ There is little that a buyer can do to remedy such a situation, and this risk must be taken into account when considering entering into a sale agreement with the Admiralty Marshal.

7.68  A conflict may arise between the Marshal’s power with respect to the sale of an arrested vessel in Admiralty proceedings and the entitlement of statutory authorities under other legislation empowering detention and forfeiture of the same ship. It has been held that the court cannot make an order for the sale and delivery of a ship to a purchaser which would deprive a dock authority, without its consent, of its statutory right of detention.¹⁵¹ Brandon J appeared to consider himself bound by these authorities in Corps v Owners of the Paddle Steamer ‘Queen of the South’, although he would have preferred to treat the statutory possessory lien of a dock or harbour authority in the same way as the common law possessory lien of a repairer, and the statutory right of sale of such an authority in the same way as a contractual or statutory right of sale of a mortgagee:¹⁵²

The inconvenience was resolved in that case by authorizing the Marshal to pay off the rates owed to the authority and include the expenditure in the Marshal’s expenses of sale.¹⁵³

(p. 180) 7.69  The Federal Court of Australia considered a similar conflict arising out of the detention of an illegal fishing vessel by the Australian Fisheries Management Authority (AFMA) pursuant to the Fisheries Management Act 1991 (Cth) and the subsequent arrest of the vessel by mortgagees.¹⁵⁴ The question considered by the court was whether the rights asserted by the AFMA constituted a defect of title to the ship which a purchaser would acquire upon the sale of the ship in the proceedings in rem by the Admiralty Marshal. So far as any conflict between the Admiralty jurisdiction and civil powers of detention are concerned, the conflict has been resolved by s 36 of the Admiralty Act 1988, which provides that the court’s power of arrest prevails, but the claim which is the subject of the statutory power of detention is converted into a claim against the ship having an appropriately high priority.¹⁵⁵ In the case before the court, the right of detention claimed was in aid of a forfeiture by way of penalty and had no relation to a civil claim. Thus, s 36 of the Admiralty Act was of no application. In the light of the provisions made in relation to civil claims, Ryan J considered that the legislature intended to leave to the Court of Admiralty the adjustment of competing rights of the authorized officer under the Fisheries Management Act on the one hand and the plaintiff in an action on the other.

7.70  The case was significant in that it emphasized the broad discretion of the court to resolve the competing interests of a statutory authority and the powers of the court following an arrest. Following the decision, however, the Fisheries Management Act was amended to provide expressly that the seizure, detention, or forfeiture of a boat under that Act has effect despite any arrest pursuant to the Admiralty Act 1988, or the sale or order for sale of the boat pursuant to the provisions of the Admiralty Act 1988.¹⁵⁶ The Full Federal Court considered the application of s 108A in Scandinavian Bunkering AS v The Bunkers on Board The Ship FV Taruman and Others.¹⁵⁷ The Court confirmed that s 108A of the Fisheries Management Act prevailed over any valid arrest of a vessel under the Admiralty Act, with the effect that the arrested vessel, including her bunkers, was automatically forfeited to the Commonwealth under s 106A of the Act.

7.72  The justification for the principle is that, in an admiralty action in rem, the arrest of the res is the necessary foundation of the action.¹⁶³ If the res is arrested under a mistake of fact or law, but bona fide, the court will not punish the arresting party. However, if a malicious intention to punish the owner of the res by the use of arrest is proved, damages will follow.¹⁶⁴ A claim for damages for wrongful arrest can be brought in the main action.¹⁶⁵ Proof of actual damage is not necessary and nominal damages will be awarded in the absence of proof of special damage.¹⁶⁶

7.73  In Gulf Azov Shipping Co Ltd v Idisi,¹⁶⁷ the Court of Appeal described Colman J’s formulation in The Kommunar (No 3) ¹⁶⁸ as ‘this exposition of the modern law’,¹⁶⁹ in holding that the defendants had, at the very least, acted without any serious regard as to whether there were adequate grounds for continuing the arrest in respect of a claim in the sum of USD17 million once it had been decided by Sanyaolu J in the (p. 182) High Court in Lagos that the reasonably arguable best case was a claim in the sum of USD1 million. Following the decision of Sanyaolu J, it was alleged that the first defendant, Chief Idisi, had exercised improper influence in preventing the vessel leaving after the release order had been issued; that Chief Idisi had orchestrated the forcible boarding of the vessel to force it to move to a berth adjacent to the second defendant’s premises where it was blocked; that Chief Idisi was responsible for the use of gunfire and men boarding the vessel when she was legitimately trying to leave, and that Chief Idisi exercised improper influence over the judiciary in Benin. The Court of Appeal held that, on a summary judgment application, it could not be satisfied that the persons preventing the vessel from leaving were under Chief Idisi’s orders, but that it was satisfied that Chief Idisi must have been aware that his claims were not sustainable in the sum of USD17 million. There was thus no arguable defence to the claim for unlawful detention of the vessel and damages were awarded.

7.74  In The Nicholas M,¹⁷⁰ the owners had commenced proceedings against the charterers and obtained a maritime attachment of the charterers’ assets under New York law. The charterers counterclaimed for the tort of wrongful attachment, which they argued was analogous to the doctrine of wrongful arrest. The Court considered the charterers had a ‘good arguable case’ that there was a cause of action for wrongful attachment under US federal law. The Court also remarked, obiter, that had English law applied, then wrongful attachment of a person’s assets would probably have fallen within the scope of the existing tort of wrongful arrest such that the charterer would have been entitled to relief.¹⁷¹ These remarks suggest English courts are not averse to widening the application of the doctrine of wrongful arrest in appropriate circumstances.

7.75  In The Fearless I,¹⁷² a wrongful arrestor argued it was entitled to reimbursement of its costs in arresting and maintaining two vessels in priority to all others except the Chief Bailiff. The wrongful arrestor’s earlier claims had been dismissed partly on the basis that the claims did not fall within the admiralty jurisdiction of the High Court. The vessels were subsequently rearrested by two other claimants, whose claims against the vessels succeeded. The Hong Kong Court of First Instance roundly dismissed the wrongful arrestor’s claim and distinguished between costs incurred by a wrongful arrestor and those incurred by a lawful arrestor. It was not inequitable for a wrongful arrestor to bear the legal and financial consequences of its own actions and to hold otherwise ‘would only serve as a judicial encouragement for wrongful arrests’.¹⁷³

7.77  It has been held that a lack of honest belief will negative ‘reasonable and probable cause’ in this context,¹⁷⁶ although it is, with respect, a little hard to understand how. ‘Reasonable and probable cause’ is, to English eyes at least, an objective test, in which the subjective mens rea of the arresting party is irrelevant. Of course, the absence of an objectively reasonable and probable cause may point to a lack of honest belief, but it would be unnecessary to go that far in order to hold that the test was not satisfied. Moreover, it may be far harder to establish a lack of honest belief, which would ordinarily require cross-examination, than it would to show that the arresting party had no ‘reasonable and probable cause’ for doing so.

7.78  This provision was used as the basis for the Australian provision now contained in the Admiralty Act 1988. However, there had been criticism of the breadth and vagueness of the language in the South African provision and thus the Australian provision is said to be an attempt ‘to strike a more precise balance between plaintiff and defendant’.¹⁷⁷ Further, unlike the South African provision, the Australian provision restricts the right to recover to those parties (or persons with an interest in the property) who have suffered loss or damage as a direct result of the arrest. Thus, s 34 of the Admiralty Act provides:

1. (1)  Where, in relation to a proceeding commenced under this Act:

   1. (a)  a party unreasonably and without good cause:

      1. (i)  demands excessive security in relation to the proceeding; or

      2. (ii)  obtains the arrest of a ship or other property under this Act; or(p. 184)

   2. (b)  a party or other person unreasonably and without good cause¹⁷⁸ fails to give a consent required under this Act for the release from arrest of a ship or other property;

      • the party or person is liable in damages to a party to the proceeding, or to a person who has an interest in the ship or property, being a party or person who has suffered loss or damage as a direct result.

2. (2)  The jurisdiction of a court in which a proceeding was commenced under this Act extends to determining a claim arising under subsection (1) in relation to the proceeding.

7.79  The need for a statutory provision was said to be that wrongful arrest is otherwise very difficult to prove and, in practice, the vexatious or frivolous plaintiff will seldom need to be concerned with the risk of having to pay damages.¹⁷⁹ Despite the legislative interventions, however, it may be noted that there appear so far to have been no decided case in which a shipowner has successfully sought damages for wrongful arrest in Australia and no more than a handful in South Africa.¹⁸⁰

Apparently on the brink of rejecting the test in The Evangelismos, the Court of Appeal then retreated and instead decided ‘to leave this issue to be addressed more fully at a more appropriate juncture’ after it had received full arguments from counsel and submissions from those in the maritime industry.¹⁹³

For now, therefore, the test in The Evangelismos remains the law of Singapore but it seems that the Court of Appeal would be receptive to arguments that the threshold should be lowered, should the issue arise again.