Ipsofactoj.com: International Cases [2003] Part 5 Case 11 [NZCA]



"The Clarabelle";

Det Norske Vertas AS

- vs -

Owner of Ship




10 JUNE 2002


Panckhurst J


  1. This is a relatively unusual appeal in admiralty proceedings. The appellant had the ship Clarabelle arrested for non-payment of a survey account rendered by it. Security was claimed in a sum of $125,000 in accordance with the established formula viz., the "reasonably arguable best case". After receiving representations from the parties the Registrar released the vessel for a sum significantly less than would have been encompassed by that formula. The appellant then applied to re-arrest the vessel to secure what it regarded as the proper figure for security, in accordance with the established authorities. The application was declined on the footing that, in exercising its inherent jurisdiction in admiralty, the High Court has a very broad discretion. The appellant now appeals to this court on the grounds that the Judge in so proceeding was wrong in law, and failed to follow the established (and narrower) admiralty principles. The appellant further maintains that a failure to adhere to these principles would give rise to significant commercial inconvenience, and be out of line with accepted international admiralty practice.


  2. DNV is a Norwegian based classification society which provides annual surveys to keep vessels in class throughout the world. The Clarabelle is a New Zealand owned and registered vessel. Its owner, Straight Arrow Holdings Ltd, is based in Wellington and conducts a fishing business using several vessels including the Clarabelle.

  3. In January 2001, DNV undertook an annual survey of the Clarabelle at Capetown, South Africa. On 6 February 2001, it rendered an invoice for US$23,029.19 for its services. The contractual terms provided for payment within 30 days, failing which interest may be charged at 24% per annum. Payment was not forthcoming.

  4. In late August the vessel owners wrote to DNV complaining that the level of charge was excessive for the survey of a vessel of this size, 38 meters in length. A reduction was sought, in part on the basis that Straight Arrow Holdings Ltd was "struggling" and could not afford to pay the account. DNV responded with a demand for payment in terms of s.289 of the Companies Act 1993. The owners on 25 October moved to set aside the statutory demand. By this stage, it had been discovered that a holding tank on the Clarabelle was leaking and the vessel had been slipped for repairs at Nelson earlier in the month. The owners asserted that the problem was one which should have been detected in the course of survey when it could have been attended to with comparatively little disruption.

  5. On 26 November in the High Court at Wellington, DNV, in light of the affidavit evidence, abandoned its opposition to the application to set aside the statutory demand. Costs followed the event. Not to be outdone DNV then commenced this admiralty proceeding in the High Court at Auckland.

  6. On 5 December a warrant of arrest was executed against the Clarabelle at the port of Tauranga. The arrest prompted an immediate response. There were exchanges between solicitors concerning the amount of security necessary to secure the vesselís release. Representations were made to the Registrar at Auckland. DNVís advisors sought security in the sum of $125,000. This figure was made up of the survey invoice $57,573 (converted from US$23,012.19), interest at 24% for two years of $27,623, and costs according to scale for a two day trial assessed on a 2B basis of $36,940.

  7. By contrast, the ownerís advisors contended that security should be fixed in the sum of the debt itself, interest at 24% to 6 December and costs as claimed in the notice of proceedings in rem of $6,020, a total of $73,927.74. On the evening of 6 December, the Registrar determined that the lesser figure was appropriate and released the Clarabelle from arrest upon payment of that sum.

  8. DNV, aggrieved that security had not been assessed on the basis of its reasonably arguable best case, applied ex parte on 12 December to re-arrest the vessel. The following day a Judge directed that the application proceed on notice. Later in the month the owners gave an undertaking to the court that pending a defended hearing of the application the Clarabelle would fish in New Zealand waters. Against this background the parties filed affidavits in preparation for a hearing on 12 March 2002. On that day the matter was fully argued and resolved in an oral judgment.


  9. After reviewing the factual background the learned Judge recorded that he accepted jurisdiction existed to make the order for re-arrest sought by DNV. He noted that re-arrest was not expressly provided for in the High Court rules, but Rule 767 empowered the Court to determine the most appropriate procedure in such circumstances. Further, the Judge accepted the Court had an inherent jurisdiction to direct re-arrest for the purpose of obtaining adequate security: The "Hero" (1865) 13 WR 927.

  10. The Judge then observed that the power to order re-arrest was a matter of "broad discretion which must, of course, be exercised judicially". He saw the discretions arising in relation to original arrest and re-arrest, as having much in common, save that in the latter case the vessel owners affairs had already been disrupted until security was provided and that they would almost certainly have ordered their affairs on the reasonable assumption that security having been provided they were free to resume fishing without further disruption. In reliance upon Turners & Growers Exporters Ltd v The Ship "Cornelis Verolme" [1997] 2 NZLR 110, General Motors New Zealand Ltd v The Ship "Pacific Charger", (Wellington High Court, AD135, 24 July 1981, Savage J), and a passage from Nigel Meeson on Admiralty Jurisdiction and Practice 2nd Ed, 2000, at 4-066, (to which we shall return shortly), the Judge concluded he enjoyed a complete discretion to order release, with or without conditions, following an initial arrest, and likewise a similarly broad discretion in relation to re-arrest where further security was sought.

  11. Turning to the issue of security, the Judge agreed that prima facie DNV was entitled to security assessed to cover its claim, with interest and costs, on the basis of its reasonably arguable best case: The "Moschanthy" [1971] 1 LLR 37. Moreover, the Judge was satisfied that so approached security at $125,000, as sought by DNV, was justified. However, he continued:

    Mr. David saw the Moschanthy principle as the end of the matter - the principle not having been applied in this case, re-arrest should automatically follow. I think it important to observe that, at least when the matter comes before a Judge, the Moschanthy principle does not absolve the Court from the responsibility of deciding whether security for full costs is warranted in the individual case. In the interests of simplicity and expedition it might well have been appropriate for the Registrar to require the higher sum, whether paid in cash or secured by other means. The matter does not end there, however, because whatever may or may not have been done by the Registrar in the first instance, these matters are subject to judicial oversight by way of an application to this Court, whether for release, reduction in the sum secured, deletion of the security, or re-arrest.

    In all cases where there is the time and opportunity to judicially consider the justification and level of security for release, there is an anterior decision to be made before quantifying the security in Moschanthy terms. The question is whether in the circumstances of the individual case any security is warranted at all and, if so, at what level and on what terms. As was pointed out by Brandon J in the Moschanthy decision itself (at p 46):

    It seems to me that the power to exact security in support of a claim in rem is a very strong power and it must not be used oppressively.

    It should not be assumed that security at a Rolls Royce level is the inalienable right of a plaintiff simply because the Admiralty jurisdiction has been invoked.

  12. Then followed a number of observations: that a plaintiff had no automatic right to security against a future judgment in other classes of litigation, that admiralty cases were not immune from the need to justify the quantum of security and the terms on which it was ordered, and that each case needed to be closely examined to see what security, if any, was justified particularly where the owners and the vessel were based in New Zealand.

  13. Then the Judge applied the principles as he had elucidated them to the instant case. On the one hand he noted DNVís arguments that there was every reason for security assessed at a Moschanthy level given that the Clarabelle had recently been in South African waters, could go off shore again, and that the owners had conceded in the very context of non-payment of the survey invoice that the company was "struggling" and could not "afford to pay".

  14. But as against these factors, the Judge had regard to the vessels New Zealand registration and ownership, that its 20 crew members were New Zealanders, that there appeared to be a genuine dispute as to the merits of the underlying debt, that there was also evidence to show Straight Arrow Holdings Ltd was a company of substance ("admittedly (evidence) more obscure than it should have been"), and, finally, that the owners had already suffered considerable disruption and expense due to the original arrest.

  15. The Judge then stood back and viewed the case in the round. He concluded it would be oppressive to order re-arrest for the purpose of increased security, since he saw "the usual reasons for ordering security at the highest possible level in an admiralty case (as) diluted in this one". Accordingly the application to re-arrest was dismissed, with costs.

  16. Counsel for the owners immediately sought release from the undertaking given on 17 December 2001 that the Clarabelle would fish in New Zealand waters until May 2002. The Judge declined this, in part on the basis that DNV wished to consider its appeal rights in relation to the judgment he had just delivered.


  17. Mr. David, in support of the appeal, argued that the Judge erred in his approach to the issue of re-arrest, by viewing the underlying issue of security as a matter of broad general discretion to be assessed with reference to all relevant factors. Correctly, counsel submitted, the discretion was to be exercised against the background of the nature of the particular rights in an admiralty proceeding. That is, that a plaintiff may arrest a ship as of right, if the claim is within the jurisdiction and certain statutory criteria are satisfied. At that point, the arrested vessel is either held as security for the claim, or released upon provision of adequate security whether in the form of a bail bond, payment into court, or a guarantee to the satisfaction of the claimant or the Registrar. Thereby the security replaces the ship. Put another way, the purpose of security is to provide the arresting party with the same rights over a fund of money as it had over the ship. Hence, Mr. David contended, the Judge failed to recognise the fundamental nature of in rem rights and treated the re-arrest application as being a matter of general discretion.

  18. Support for this thesis was claimed by reference to English practice, the fundamentals of which apply equally in New Zealand and in other Commonwealth countries. Counsel suggested that the notion of full security before judgment, although common place in the admiralty jurisdiction, was "perhaps unattractive to a common law lawyer". Nonetheless, admiralty procedure necessarily favoured an approach which was fast, readily understood, and could be carried out at a largely administrative level by Registrars. Otherwise commerce would be hindered on account of contested applications for release involving an inquiry into the circumstances of the vessel, its owner and even the merits of the dispute.

  19. Finally, Mr. David submitted, the approach adopted may be seen to have an unfortunate parochial ring. That is, that significant weight was given to the circumstances that the Clarabelle was New Zealand owned, New Zealand crewed and that it operated for the most part in New Zealand waters. But to take account of such factors was said to be completely at odds with international practice in countries with a similar admiralty heritage.

  20. The focus of Mr. Gartrellís approach was rather different. Realistically, he accepted that security is commonly assessed on a reasonably arguable best case basis, in terms of the so called Moschanthy principle. Moreover, he was content to agree that $125,000 was not out of the way in such terms. However, Mr. Gartrell contended that a decision having been reached by the Registrar, albeit at a lesser level, security having been paid in that sum and the Clarabelle released, the issue became whether re-arrest for the purpose of added security was appropriate. Different legal requirements obtained. In general terms there was, after provision of security, an immunity from re-arrest, or as it is sometimes put, a rule against re-arrest. He cited a passage in Toh "Admiralty Law and Practice", Butterworths (1998) p 179 in support. Mr. Gartrell argued that in determining an application of this nature, the Court must consider whether it was just to allow re-arrest or whether re-arrest would be vexatious and oppressive to the owner who had already provided security. Hence, he submitted that exceptional circumstances were required to justify re-arrest in a case of this nature.

  21. Against this background he not surprisingly supported the approach of the Judge below in looking at a broad range of matters, not just essentially whether security in terms of the Moschanthy principle had been fixed. It was also urged that the decision of the Registrar as to the level of security, was not in the nature of a slip, or error, rather a rational determination as between competing alternatives. In the end, Mr. Gartrell contended that given the context the approach adopted was appropriate. It followed that the decision reached by the Judge was not one which could be challenged as a wrongful exercise of discretion.


  22. Since Mr. Gartrellís argument owed much to the circumstance that DNVís application was one to re-arrest the Clarabelle, we raised with counsel whether it would not have been appropriate for DNV to have applied to review the decision of the Registrar in releasing the vessel upon provision of security at the lesser level, pursuant to Rule 795(2) in Part 14 of the High Court Rules which deals with Proceedings in Admiralty:

    Any party to a proceeding who is effected by a decision of the Registrar under this part may apply by interlocutory application to review that decision, and the court may make such order as it thinks fit.

    It is of course apparent that DNV was dissatisfied about the terms of release at the very time, 6 December 2001. A few days later the ex parte application to re-arrest was filed and was subsequently served as required by a Judge.

  23. Hence this is not a case where security was fixed to the satisfaction of the arresting party and, after an hiatus, application for re-arrest was made in an endeavour to increase security on account of some subsequent development. Rather DNV was dissatisfied from the outset and moved promptly to repair its position, albeit by re-arrest of the vessel rather than by review.

  24. Although it seems Rule 795(2) may well have been employed, the Judge below dealt with the matter on the basis of the inherent jurisdiction to permit re-arrest. Certainly, Mr. Gartrell did not challenge DNVís approach, indeed he relied upon the circumstance of re-arrest as fundamental to his case in opposition. Nonetheless we think it relevant to have regard to the right conferred by Rule 795(2) and to the obvious feature of this case that it is not an application to re-arrest divorced from the original release from arrest in time and circumstance. To the contrary, the application is by way of prompt challenge to, and akin to a review by a Judge of, the decision of the Registrar. That there was some delay before the matter was argued, with the situation secured by undertaking in the meantime, is not of moment.

  25. Rightly, in our view, the Judge approached the case de novo, uninhibited by the circumstance that a decision of the Registrar was the underlying reason for the re-arrest application. We think it was appropriate for the Judge to revisit the essential exercise of discretion concerning the appropriate level of security afresh, and in light of the further and better information which was before him.

  26. As noted above (para [10]) the Judge relied upon Nigel Meeson at 4-066 as authority for the proposition that the terms upon which a vessel may be released from arrest are discretionary, the Court having a complete discretion to order release, with or without conditions, as the justice of the case may require. By analogy, he saw the issue of re-arrest for the purpose of provision of additional security, as involving an equally broad discretion. As to this however, we think it important to set out paragraph 4-066 in full:

    Property under arrest may not be released unless either the arresting party consents, which will normally only be upon terms that full security is provided for the claim, or the court orders release. Unlike arrest, the release of a ship from arrest is discretionary. However, the usual practice of the court is only to order release upon the provision of sufficient security to cover the amount of the claim, plus interest and costs, on the basis of the claimantís reasonably best arguable case. The court may release arrested property without such security being provided, but this is only done in exceptional circumstances, and only where some satisfactory alternative to ordinary security is provided. For example, the court could order the release on terms of a fishing vessel whose continued detention deprives the defendant of his livelihood and ability to pay the claim, where no injustice would be done to the claimant.

  27. We are unable to agree that release, and re-arrest (as in the present case) does involve the exercise of a broad largely unfettered discretion. To the contrary, we think the above passage accurately reflects the well established and soundly based principle applied in the cases upon which the passage is based, namely that security on the basis of the claimants reasonably best arguable case is the normal approach, save that in exceptional circumstances other alternatives forms of security may be approved. The example described in the concluding sentences of the passage provides an apt illustration.

  28. The Judge also relied upon an observation of Brandon J in the Moschanthy itself (see para [11]) namely that the power to exact security is a very strong power and must not be used oppressively. Again, with respect, we think a somewhat longer passage from another decision of Brandon J in the "Polo II" [1977] 2 LLR 115 at 119, is worthy of note. There, speaking of his decision in the Moschanthy, Brandon J said:

    I took the view that the power of the court to control security in that way was derived from the inherent jurisdiction of the Court to prevent any abuse of the process of the Court, or the use of Court procedure in an oppressive way. As I pointed out in that case the power to arrest a ship is a very drastic power. And the power to insist that she shall remain under arrest unless security of a certain amount is given is equally a drastic power, and my view, which I expressed in The Moschanthy and which I repeat now, is that that power must not be exercised oppressively, and if it is exercised oppressively then the Court can and should interfere to prevent conduct of that kind. At the same time the Court must make sure that the plaintiff is not left without sufficient security to cover his reasonably best arguable case.

  29. With reference to when it is appropriate to re-arrest a vessel, we are content to refer to two cases, one decided more recently and one in the nineteenth century. In the "Arctic Star" (The Times, 5 February 1985) Lloyd LJ said this:

    Mr. Page referred us to a number of cases which establish the general rule that, once a vessel has been arrested and released on bail (whether in this jurisdiction or in any other jurisdiction) this court will not normally permit a second arrest, the reason being, as stated by my Lord, that the bail is said to represent the ship. But that rule is not without exceptions. The justification for the rule is, and always has been, the need to avoid oppression and unfairness. For myself, I can see nothing in the least oppressive or unfair in allowing the plaintiffs to arrest this vessel within this jurisdiction to top up their security in the circumstances which my Lord has mentioned.

    In that case subsequent to the provision of adequate security the vesselís owner took steps which seriously impaired the value of a guarantee. In those circumstances the Court of Appeal readily concluded that re-arrest was appropriate.

  30. Even more in point is the case of the "Hero" (1865) 13 WR 927 in which Dr Lushington held that the re-arrest of the ship was appropriate "to do full justice to the plaintiff" when, on account of a clerical error, the plaintiff had miscalculated the proper amount of security. A warrant for re-arrest was granted, albeit the plaintiff was fixed with costs on account of their earlier mistake.

  31. It follows that in our view the principles relevant to the determination of the present application to re-arrest are clear and well settled. First, following arrest a plaintiff is entitled to security assessed on a reasonably arguable best case basis in terms of the Moschanthy principle. Departure from that approach may be appropriate, in which case strict terms designed to provide adequate alternative security, for example of the kind described in Meesonís Admiralty Jurisdiction and Practice at paragraph 4-066 (see para [26]), are to be expected. But the present was not a case in that category. The partiesí representations to the Registrar concerned only the level of security. It was not suggested with reference to the Clarabelle that its owners were incapable of providing security, but would submit to other terms designed to achieve the same end. Rather the issue was solely one of quantum. As to that, a result was reached by the Registrar which was unsupportable in principle.

  32. Second, we do not accept the argument that re-arrest for the purpose of provision of increased security is only appropriate in exceptional circumstances. On the one hand there is a rule, or immunity, against re-arrest. Its expression is ordinarily couched in terms of the need to avoid oppression or unfairness to a shipís owner who has already provided security and thereby secured the release of the ship in the first place. But, on the other hand, there are clear exceptions to that rule, including in the situation where security was fixed at an inadequate amount initially, or where the actions of the owner have rendered originally adequate security inadequate. In such cases, an application to re-arrest may be granted in fairness to the plaintiff.

  33. These principles we regard as in keeping with an observation of this court in Baltic Shipping Co Ltd v Pegasus Lines SA [1996] 3 NZLR 641 at 650 where McKay J said:

    There is no doubt that the writ in rem and the arrest of a vessel is a very strong and effective remedy, but that does not make it unreasonable. It is a seizure by judicial process, to ensure that the ship or some alternative security is available to satisfy a claim which has still to be substantiated. It has been found expedient in international trade as giving some protection to those who give credit or who suffer damage in the course of maritime trade. If a claim is made unreasonably, in the sense of being without foundation, the defendant can always move to strike out as well as challenging jurisdiction, as was done in the "Moschanthy".


  34. We accept the submission of Mr. David that the learned Judge erred in his approach to the present application. The matter was not susceptible of decision upon the basis of the exercise of a broad discretion whereby the domestic circumstances of the vessel and its owners were brought to account. The case was one to be approached in terms of the normal rule in that DNV was entitled to security assessed in terms of its reasonably arguable best case. It was common ground that such figure was $125,000. Straight Arrow Holdings Ltd did not mount a case for security to be given on some basis removed from the normal rule.

  35. That the matter was before the learned Judge essentially on review, but in the context of an application to re-arrest we do not see as of great moment. For the reasons already given, the case clearly fell within an exception to the rule against re-arrest on account of the inadequate security which was fixed in the first instance. There was nothing oppressive or unfair on the part of DNV in seeking to re-arrest. It moved promptly to challenge the decision of the Registrar as soon as it was evident the situation could not be retrieved by negotiation. In these circumstances, a broad inquiry, of the type undertaken by the Judge, was inappropriate and contrary to admiralty practice.


  36. The appeal is allowed. We consider it appropriate to make an unless order, namely that leave is granted and the Registrar is directed to re-arrest the Clarabelle unless additional security of $51,072.26 is paid into the High Court or otherwise secured to the satisfaction of the Registrar within two days of delivery of this judgment. In that event the undertaking with reference to fishing in New Zealand waters given by the owners and extended as to its duration in this Court to the end of July 2002, shall lapse.

  37. The appellant is entitled to costs in the sum of $3,500 with the reasonable expenses of the appeal, including counselís travel and accommodation costs, to be settled if necessary by the Registrar. Costs in the High Court are to be fixed in light of this judgment.


The "Hero" (1865) 13 WR 927; Turners & Growers Exporters Ltd v The Ship "Cornelis Verolme" [1997] 2 NZLR 110; General Motors New Zealand Ltd v The Ship "Pacific Charger", Wellington High Court, AD135, 24 July 1981; The "Moschanthy" [1971] 1 LLR 37; The "Polo II" [1977] 2 LLR 115; The "Arctic Star", The Times, 5 February 1985; Baltic Shipping Co Ltd v Pegasus Lines SA [1996] 3 NZLR 641 


High Court Rules: Rule 795(2)

Authors and other references

Nigel Meeson on Admiralty Jurisdiction and Practice 2nd Ed, 2000

Toh "Admiralty Law and Practice", Butterworths (1998)


P W David & S J Park for Appellant (instructed by Wilson Harle, Auckland ).

E W Gartrell & D M McKnight for Respondent (instructed by E W Gartrell, Wellington).

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