Trade and Transport Bulletin - The value of a lien

A recent dispute dealt with by the Supreme Court of New South Wales involving an analysis of some interesting points of maritime law, provides a good illustration of the value which can be obtained by the exercise of a lien. The decision of Justice Rein in Rail Equipment Leasing Pty Ltd v CV Scheepvaartonderneming Emmagracht can be found at [2008] NSWSC 850.

Background

Rail Equipment Leasing Pty Ltd (REL) purchased six second hand locomotives from a vendor in Sweden and arranged for them to be shipped to Newcastle, New South Wales.  A house bill of lading was issued by Baltship AS (Baltship), and an ocean bill was issued to Baltship by CV Scheepvaartonderneming Emmagracht (the carrier). 

During the voyage, two locomotives shifted, allegedly because the cradles provided by Baltship on which the locomotives were placed were defective. The locomotives sustained damage themselves, and also caused significant damage to the ship.  The ship called at Savannah in the United States, where the locomotives were discharged, repairs to the ship undertaken, and new cradles for the carriage of the locomotives constructed. 

The ship arrived in Newcastle on 21 July 2008, but the carrier notified REL and Baltship that it was exercising a lien over the locomotives pending settlement of its claim for US$1,098,877.67 for the cost of repairs to the ship and associated expenses. 

For reasons which were not clear to Justice Rein, neither REL nor Baltship was prepared to provide security in respect of the carrier's claim, even though the carrier offered to provide a cross security.  In the end therefore, when the matter came before Justice Rein on 5 August 2008, he had before him a claim by REL, a claim by Baltship, and a claim by the carrier in rem against the six locomotives which it was holding.  As well as these three sets of proceedings, it seems that the carrier, together with some associated parties, had already commenced proceedings against REL and Baltship in Holland, and that Baltship had commenced proceedings against the carrier in the United States.

Jurisdiction

The carrier argued that the Court had no jurisdiction to hear the claims of REL or Baltship, as the carrier's bill required that 'disputes arising out of or in connection with this bill of lading shall be exclusively determined by the courts and in accordance with the law of the place where the carrier has his principal place of business, as stated on page 1…'.

Justice Rein, however, found it relatively easy to decide that this clause was of no effect because of the provisions of section 11(2)(c) of the Australian Carriage of Goods by Sea Act 1991. Section 11(2)(c) provides that an agreement which precludes or limits the jurisdiction of an Australian Court in respect of a sea carriage document for the carriage of goods from any place outside Australia to any place in Australia, is of no effect.  He went on to point out that even if this was not so, the carrier's bill of lading did not on page one provide an address of the principal place of business!  As such, the carrier's challenge to jurisdiction was easily dealt with by the Court.

The carrier's claim against the locomotives

This claim had been made mainly for the purpose of obtaining security in relation to the proceedings which had commenced in Holland.  However, given that Justice Rein had concluded that the New South Wales Supreme Court had jurisdiction, there was no basis for an order for security in relation to the Dutch proceedings.

The liens

The substantial question which arose for determination was whether the carrier had either a contractual lien arising out of provisions in the bill of lading or a maritime lien within the meaning of the Admiralty Act 1988 (Cth), or perhaps both.

Justice Rein was doubtful that a maritime lien existed in the circumstances of the case, but he was satisfied that there was an arguable case that the carrier had a contractual lien.  This lien arose due to the provisions of clause 11 in the ocean bill providing the carrier with a lien 'on all cargo for any amount due under this contract' and because clause 10(b) of the bill rendered the merchant liable 'for all costs and expenses of …. repairing damage to and replacing packing due to excepted causes, and any extra handling of the cargo …'. Although not entirely convinced, his Honour also considered it arguable that Article IV Rule 6 of the Hague Visby Rules (which deals with goods of a dangerous nature) applied in favour of the carrier.

The debate about the existence of a maritime lien was more complex, and proceeded on the basis of the carrier's argument that Baltship had committed a tort on the high seas by providing defective cradles to the carrier.  However, Justice Rein was doubtful that a maritime lien over cargo for a tort on the high seas was known or recognised by Australian law, and went on to point out that even if such a lien was recognised, it would be necessary to identify the wrongdoer and establish that the goods claimed to be the subject of the lien were owned by the wrongdoer. In the circumstances of this case, Baltship was the party alleged to have been the wrongdoer, but the locomotives were owned by REL.

The outcome

The carrier was unsuccessful in its challenge to jurisdiction, and was also unsuccessful in its assertion that it was entitled to a maritime lien. However, failure on those points meant nothing in the end, as Justice Rein concluded that the carrier was entitled to a contractual lien, entitling it to retain possession of the locomotives pending either the provision of security or the resolution of its claim. The old saying that possession is nine-tenths of the law, while not truly the legal position, is perhaps another way of illustrating the value which can be obtained from a lien.  The case illustrates the importance of including a well-worded lien clause in contracts of carriage. 

For more information, please contact:

Cheri Chestnut, Foreign Associate
Tel +61 2 9286 8084
cheri.chestnut@dlaphillipsfox.com