Marine Trade Consulting GmbH v Globus [1996] FCA 1071

CATCHWORDS ADMIRALTY - appeal from orders for release of a vessel from arrest and an order setting aside the warrant for the arrest of the vessel pursuant to the Admiralty Rules - whether it has been established that the Black Sea Shipping Company of Odessa ("BLASCO') is the "owner" of the vessel when the cause of action arose - whether BLASCO was the beneficial owner or demise charterer - whether the contract for sale of the vessel was a sham. APPEAL AND NEW TRIAL - admission of fresh evidence - whether leave to adduce further evidence on the hearing of the appeal pursuant to s27 of the Federal Court of Australia Act (1976) (Cth) should be granted. Admiralty Act 1988 (Cth) ss17, 18 Federal Court of Australia Act 1976 (Cth) s27 Malaysia Shipyard v "Iron Shortland" (1995) 131 ALR 738 Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 Richard Waller Pty Ltd v Commissioner of Taxation (unreported, NG681/96, Lockhart, Hill and Lehane JJ, delivered 14 June 1996) No: NG 752 of 1996 MARINE TRADE CONSULTING GmbH AND GLOBUS BLACK CJ, HILL and WHITLAM JJ SYDNEY 9 DECEMBER 1996

IN THE FEDERAL COURT OF AUSTRALIA ) ) No. NG 752 of 1996 NEW SOUTH WALES DISTRICT REGISTRY ) ) GENERAL DIVISION IN ADMIRALTY ) On appeal from a single judge of the Federal Court MARINE TRADE CONSULTING GmbH Appellant AND GLOBUS Respondent CORAM : BLACK CJ, HILL and WHITLAM JJ PLACE : SYDNEY DATE : 9 DECEMBER 1996 MINUTES OF ORDER THE COURT ORDERS THAT: The appeal be dismissed, with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA ) ) No. NG 752 of 1996 NEW SOUTH WALES DISTRICT REGISTRY ) ) GENERAL DIVISION IN ADMIRALTY ) On appeal from a single judge of the Federal Court MARINE TRADE CONSULTING GmbH Appellant AND GLOBUS Respondent CORAM : BLACK CJ, HILL and WHITLAM JJ PLACE : SYDNEY DATE : 9 DECEMBER 1996 REASONS FOR JUDGMENT THE COURT: This is an appeal, by leave, from an order made by Tamberlin J for the release from arrest of the vessel "Kareliya" and from an order setting aside the warrant for the arrest of the vessel. The appellant, Marine Trade Consulting GmbH, is the plaintiff in a proceeding in this court against the "Kareliya". Its principal claim is for money due for management fees and outstanding disbursements incurred in relation to the "Kareliya" and surrogate vessels. On the morning of 30 August 1996, acting on a warrant taken out by the plaintiff, the Marshal arrested the vessel in Sydney. The "Kareliya", which is a large passenger ship, was due to depart Sydney on a cruise with over 300 passengers on board later that day. Soon after the vessel was arrested an application was made under rule 52 of the Rules made pursuant to the Admiralty Act 1988 (Cth) ("the Act") to release the vessel from arrest. An earlier application to set aside the arrest warrant was also brought on for hearing. The applications were made by a Ukrainian entity called Globus which claimed to be the bareboat charterer of the vessel. Black Sea Shipping Company of Odessa ("BLASCO") was named in the writ as the owner of the vessel and as the entity that owed the amount claimed. It is the "relevant person" for the purposes of ss17 and 18 of the Act and the primary issue before Tamberlin J was whether BLASCO was, at the time the proceeding was commenced on 15 August 1996, either the owner of the "Kareliya" for the purposes of s17(b) of the Act or a demise charterer of the vessel for the purposes of s18(b). His Honour accepted, on the authority of the decision of Sheppard J in Malaysia Shipyard v "Iron Shortland" (1995) 131 ALR 738, that "owner" for the purposes of s17 of the Act includes a beneficial owner. That conclusion was not challenged on the hearing of this appeal. The applications were heard on 30 August 1996 and Tamberlin J, having considered the evidence and the submissions of the parties, made an order for the release of the vessel later that day. He ordered that the vessel be released upon the undertaking to the Court of CTC Package Holidays Pty Ltd to use its best endeavours to ensure that the vessel returned to Australia in accordance with its existing schedule of departures. Tamberlin J delivered his reasons for judgment on 5 September 1996. After a careful review of the evidence, most of which was of a documentary nature, Tamberlin J concluded that although there was evidence of a general and circumstantial nature to indicate that there might be links between the vessel and BLASCO, the evidence did not disclose that on 15 August 1996 BLASCO had any ownership interest in the vessel, beneficial or otherwise. His Honour concluded that the owner was Maddock Trading Inc from which there was a bareboat charter to Globus, which in turn had entered into a time charter contract with Charter Travel Company Limited. Tamberlin J then turned to the question whether, on the assumption that BLASCO was not the owner, it was a demise charterer of the "Kareliya". On this question the Plaintiff had placed particular reliance upon evidence about the relationship between BLASCO and the master and crew of the vessel. It relied upon evidence given by Dr Markov, the general director of CTC Package Holidays Pty Ltd and a director of Charter Travel Company Limited, that the master and crew were "employed" by BLASCO. This evidence was, however, qualified in several important respects by Dr Markov's answers in cross-examination. He did not agree that the master and crew were paid by BLASCO or that they were under the control and direction of BLASCO. He said that, on his understanding, Globus was the entity able to repatriate, engage and dismiss the crew. Although the crewing agreement between BLASCO and Globus was in evidence, it was in the Russian language and the only evidence as to its effect was that of Dr Markov. His Honour's conclusion on this issue was that the evidentiary basis for the submission that BLASCO had been shown to be a demise charterer had not been made out. He went on to express the view that the documentary evidence provided substantial support for the conclusion that BLASCO was not, when the proceedings were commenced, a demise charterer of the vessel. Having given his reasons for making the order for the release of the vessel, his Honour then made the order that the warrant for the arrest of the vessel be set aside. He ordered the plaintiff to pay the costs of Globus both in relation to the hearings before him and an earlier hearing in the proceeding before Sheppard J. Mr Street, who appeared with Mr Nell for the appellant, submitted that the primary judge had approached the question of ownership in an incorrect way. In essence, his submission was that the starting point should have been a finding that BLASCO was the owner of the vessel when the cause of action arose and that the evidence of events occurring after that did not justify the conclusion that there had been any change in the registered or beneficial ownership of the vessel. Although, in the circumstances, Tamberlin J did not find it necessary to decide the question of owner-ship as at the time when the cause of action arose, it is clear that he looked at the whole history of the matter as revealed by the evidence placed before him and that he appreciated the force of the plaintiff's contention that the ownership of BLASCO up to the early half of 1995 was unchallenged. We do not agree with the submission that, in the circumstances of this case, his Honour's approach was incorrect. Mr Street also submitted that Tamberlin J was in error in concluding that the circumstances upon which the plaintiff relied did not establish that BLASCO was the beneficial owner of the vessel at the time the proceeding was commenced. In support of this submission and also in support of the submission that the evidence did not establish that registered ownership has passed from BLASCO, counsel for the plaintiff argued that the contract for the sale of the vessel was a sham. A Full Court of this Court considered the concept of "sham" in Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449. Lockhart J, at 454, referred to a number of the cases in which the concept had been examined and concluded: "A 'sham' is therefore, for the purposes of Australian law, something that is intended to be mistaken for something else or that it is not really what it purports to be. It is a spurious imitation, a counterfeit, a disguise or a false front. It is not genuine or true, but something made in imitation of something else or made to appear to be something which it is not. It is something which is false or decep­tive."

More recently, in Richard Walter Pty Ltd v Commissioner of Taxation (unreported, NG 681/96, Lockhart, Hill and Lehane JJ, delivered 14 June 1996), the Full Court again considered the concept of sham. Lockhart J adhered to his description of sham in Sharrment. Hill J defined a transac­tion as being a sham where it involved: "A common intention between the parties to the appar­ent transaction that it be disguised for some other and real transaction or for no transaction at all." The submission that the contract for the sale of the vessel was a sham must be rejected. There was no basis, on the evidence that was before Tamberlin J upon which his Honour should, or indeed could, have concluded that the bill of sale was a sham in the sense in which that expression is used in Australian law. On the broader issue of proof of beneficial ownership the primary judge set out, in his reasons for judgment, the various circumstances that the plaintiff relied upon in support of its contention that BLASCO was the beneficial owner of the vessel. Whilst recognising that there was some force in these considerations, his Honour was not persuaded that when considered in the light of the documentary evidence and the oral evidence of Dr Markov, the circumstances were of a sufficient weight to establish that BLASCO was the beneficial owner of the vessel at the relevant time. In our view, the conclusion that his Honour reached was amply justified by the documentary evidence to which his Honour referred. Although the appellant's principal argument about the contract for the sale of the vessel was that it was a sham, the contract was the subject of some other submissions to which we should make brief reference. It was submitted that there was no evidence that the consideration for the sale had been paid, that proof of the execution of the contract of sale was defective and that evidence of the registration of the contract of sale, according to Ukrainian law was necessary, but was absent. These, however, were issues that were not raised before the primary judge and counsel for the respondent objected to them being raised on appeal for the first time because, he said, assuming that the points had any merit they could have been dealt with by evidence at the hearing before Tamberlin J. We agree that it is too late for these points to be raised now. It is unnecessary for us to consider the submission made by counsel for the respondent that there was, in any event, some admissible evidence of payment. On the hearing of the appeal an application was made on behalf of the appellant for leave to adduce further evidence. Counsel relied upon s27 of the Federal Court of Australia Act 1976 (Cth) which provides: "27. In an appeal, the Court shall have regard to the evidence given in the proceedings out of which the appeal arose, and has power to draw inferences of fact and, in its discretion, to receive further evidence, which evidence may be taken: (a) on affidavit; or (b) by video link, telephone or other appropriate means in accordance with another provision of this Act or another law of the Commonwealth; or (c) by oral examination before the Court or a Judge; or (d) otherwise in accordance with section 46." The fresh evidence it was sought to tender was in the form of an affidavit to which share certificates were exhibited. It was said that the certificates supported the conclusion that the sale was a sham and also bore upon the question whether the consideration for the sale had been paid, because the certificates showed that the shares in Maddock Trading Inc were bearer shares of no par value. We reserved for further consideration, in the context of the whole argument, whether leave should be given for further evidence to be adduced. We have concluded that leave should not be given because the evidence would be in no way decisive of the issues raised on the appeal and in any event it is clear that evidence about the structure of Maddock Trading Inc, to the same effect as the evidence provided by the share certificates, was available to the appellants at the time of the hearing before Tamberlin J. We therefore refuse the application to adduce further evidence. The appellant also submitted that Tamberlin J was in error in concluding that BLASCO was not, when the proceedings were commenced, a demise charterer of the vessel. Particular reliance was placed upon the evidence of Dr Markov that the master and crew were "employed" by BLASCO but, as we have noted, that evidence was qualified in several important respects by Dr Markov's answers in cross-examination. Those answers were given on the basis of his understanding of the crewing agreement and although that agreement was in evidence there was no translation of it into English. A translation has since been made and it was placed before us by counsel for the appellant without objection by counsel for the respondent. Although the document should be treated with some caution, because there is reason to suppose that it is not complete in that it does not have attached to it any Appendix 1 or Appendix 2, both of which are referred to in the body of the agreement, the translation does not assist the appellant. In essence, what is provided for by the agreement is the provision by BLASCO for Globus of the officers and crew for the "Kareliya" but not on terms that suggest the retention of any operational control by BLASCO. It seems too that it is Globus, and not BLASCO, that has the obligation to pay the crew. A right to repatriate a crew member in various specified circumstances is with Globus and not BLASCO. In our view Tamberlin J was correct in concluding that the evidence did not establish that BLASCO was a demise charterer and the translation of the agreement does not lead to any different conclusion. In these circumstances, the appeal should be dismissed with costs. It is unnecessary to deal with the only ground in the notice of contention that was pressed in argument, namely that Tamberlin J should have held that it had not been made out for the purposes of ss17, 18 and 19 of the Act that the claims were general maritime claims within s4(3). I certify that this and the preceding 7 pages are a true copy of the reasons for judgment of the Court. Associate: Dated: 9 December 1996 Counsel for the Appellant : A Street and G Nell Solicitors for the Appellant : Phillips Fox Counsel for the Respondent : B W Rayment and J R J Lockhart Solicitors for the Respondent : Ebsworth & Ebsworth Hearing Date : 25 September 1996