Australia: Legal position of jurisdiction following the collapse of OW Bunkers

This information is part of a wider article which offers a broad overview of the legal position across jurisdictions following the collapse of OW Bunkers. View the complete article or alternative jurisdictions.

Leading case

Reiter Petroleum Inc v The Ship “Sam Hawk” [2015] FCA 1005;
The Ship “Sam Hawk” v Reiter Petroleum Inc [2016] FCAFC 26.

Summary of legal position

Australia is an ‘arrest-friendly’ jurisdiction, where ships can be arrested quickly and efficiently. It is widely accepted, however, that the Admiralty Act does not, as a matter of Australian law, permit the arrest of bunkers separately from the ship on which they are loaded.

A claim in respect of bunkers supplied to a ship would fall within the definition of ’general maritime claim‘ under the Admiralty Act, because it would constitute “a claim in respect of goods, materials or services supplied to a ship for its operation or maintenance”. However, it would be necessary for a claimant to establish a cause of action directly against the shipowner (rather than against a time charterer) in order to proceed in rem against the ship concerned. Ordinarily, therefore, it would be difficult for a physical supplier to establish a direct cause of action sufficient to arrest the ship, in circumstances where bunkers have been supplied to the account of a party other than the shipowner (e.g. a time charterer).

In its 2015 decision in the “Sam Hawk”, the Australian Federal Court held at first instance that a claimant may establish such a cause of action, and therefore arrest a ship in Australia, based on a maritime lien that exists under applicable foreign law but which does not exist under Australian law. For instance, US law recognises the supply of “necessaries”, including bunkers, to a ship as giving rise to a maritime lien (which is not the case under Australian law).

This decision was reversed on appeal in the September 2016 judgment of the Full Court of the Federal Court. The Australian law position on the enforceability of maritime liens arising by operation of foreign law therefore remains in line with the decision of the Privy Council in the “ Halcyon Isle”. That is, a foreign law maritime lien will not, in principle, be enforceable in Australia where the same circumstances would not give rise to a maritime lien under Australian law.

Practicalities

HFW has recently published a briefing note on the Full Court’s appeal decision in the “Sam Hawk” and the practical implications arising from that decision. Please refer to:
http://www.hfw.com/Arrest-of-the-SAM-HAWK-October-2016

Contributing authors

Simon Shaddick, HFW Melbourne