Reef Shipping Company Ltd v The Ship Fua Kavenga

JurisdictionNew Zealand
Judgment Date13 August 1987
Date13 August 1987
CourtHigh Court
New Zealand, High Court (in Admiralty), Auckland.

(Smellie J)

Reef Shipping Co Ltd
and
The Ship Fua Kavenga

State immunity Jurisdictional immunity Foreign government Hire of vessel Commercial purposes Whether immune from suit Doctrine of restrictive sovereign immunity Admiralty jurisdiction Government-owned ship

Jurisdiction Admiralty jurisdiction Convention Relating to the Arrest of Seagoing Ships, 1952 Effect of sister ship jurisdiction Ship owned by Tongan Government Arrest of ship in New Zealand Action in rem Claim in respect of another ship Question of possession and control Jurisdiction under the Admiralty Act 1973 Plea of sovereign immunity by the Government of Tonga The law of New Zealand

Summary: The facts:The plaintiff company, Reef Shipping Co Ltd (Reef), was the owner of the ship Ha'amotaha. Reef chartered the vessel to the Pacific Navigation Co Ltd (PNCL), a corporation registered in Tonga. The Government of Tonga guaranteed all sums payable by PNCL under the charterparty. Reef executed a further charterparty of the vessel to Pacific Navigation of Tonga (PNT). The vessel suffered damage while under charter. Reef made claims against PNCL. Without any reference to the Government of Tonga, the plaintiff and PNCL varied the terms of the charterparty so as to provide that any dispute arising from the charterparty would be referred to arbitration and that the law of New Zealand would apply. The arbitrator made an award in favour of Reef. Having failed to recover damages from PNCL under the award, the plaintiff brought an action against the Government of Tonga in the Supreme Court of Tonga for payment under the guarantee. The Supreme Court rejected the claim. An appeal to the Privy Council of Tonga also failed on the ground that the payment under the award was not one of the obligations the Government of Tonga had guaranteed.

Reef registered the award in New Zealand under the Reciprocal Enforcement of Judgments Act 1934. It also obtained a warrant for the arrest in New Zealand of a vessel, the Fua Kavenga, owned by the Government of Tonga. The vessel was arrested and released on security provided by the Government of Tonga. In an action in rem under the Admiralty Act 1973 the Government of Tonga entered a conditional appearance and moved to set aside the enforcement of the award. The Government of Tonga contended that Reef's claim did not found jurisdiction in rem against the defendants. It also pleaded that the Government of Tonga was entitled to sovereign immunity from suit.

Held:The motion was dismissed and the plaintiff allowed to proceed with the action. The plea of sovereign immunity by the Government of Tonga was directly connected to the Court's jurisdiction to entertain the plaintiff's claim.

(1) The provisions of the Admiralty Act 1973 of New Zealand were based on the sister ship provisions in the United Kingdom Administration of Justice Act 1956 which was enacted under the treaty obligations of the International Convention Relating to the Arrest of Seagoing Ships, 1952. The plaintiffs claim was based on the provisions of the Act in respect of damage to the vessel Ha'amotaha during the course of the charterparties and alternatively under the guarantee which, it contended, was an agreement arising out of the use or hire of the vessel. Given a wider interpretation the sister ship jurisdiction could be invoked as long as there was some degree of possession or control by the party alleged to be liable. In this case the fact that the Government of Tonga was neither the owner nor the demise charterer of the vessel was not itself sufficient to prevent Reef from invoking the sister ship jurisdiction.

(2) The steps that the Government of Tonga had taken in the proceedings were all pursuant to the leave granted to enter a conditional appearance. Following the approach in the United Kingdom, New Zealand applied the restrictive theory of sovereign immunity.

In the present case, immunity was not available in respect of either cause of action. The allegation that the Government of Tonga had hired the vessel Ha'amotaha for commercial trading would, if established, render the transaction a commercial one and it would not be protected under restrictive sovereign immunity. Furthermore, the guarantee of the charterparty was a mixture of commercial and governmental interest in a commercial act, having more the quality of a commercial transaction than an act of State and, therefore, immunity was not available.

The following is the text of the relevant parts of the judgment of the Court:

This case requires (apparently for the first time in New Zealand) a consideration of the sister ship jurisdiction to be found in ss 4 and 5 of the Admiralty Act 1973. The case also calls for a consideration of the availability of a plea of sovereign immunity in what may be described as rather complex and unusual circumstances.

Admiralty actions involving issues of sovereign immunity come but infrequently before the High Court. I cannot claim learning or experience (other than to a very limited extent) in either branch of the law. I therefore wish to say immediately that I have been greatly assisted in this matter by the thorough research and competent presentation of all counsel on both sides of the argument.

The factual background

The plaintiff, Reef Shipping Co Ltd (Reef), operates from Norfolk Island and at one time was owner of the Fijian Swift, subsequently renamed Ha'amotaha. On 15 December 1975 Reef entered into a charter by demise (a bare boat charter) with Pacific Navigation Co Ltd (PNCL), a corporation registered in the Kingdom of Tonga in respect of the Ha'amotaha.

A little later on 12 January 1976 the Government of Tonga executed a deed of guarantee guaranteeing inter alia payment of all sums payable by PNCL to Reef arising from, and the performance of all PNCL's obligations pursuant to, the charterparty.

Some two years later in January 1978 Reef executed a further charterparty with Pacific Navigation of Tonga Ltd (PNT), a corporation also established and registered in the Kingdom of Tonga. During the course of the charters by demise referred to above certain damage was suffered by, and losses incurred in respect of, the Ha'amotaha. Claims were made by Reef against PNCL in respect of those damages and losses.

After the damages and/or losses were suffered, but without reference to the Government of the Kingdom of Tonga, Reef and PNCL varied the terms of the charterparty by providing first, that disputes arising under it would be referred to arbitration and, secondly, that the law of New Zealand would apply to such disputes. As a consequence the claims by Reef against PNCL were referred to arbitration in 1979 and after a five week hearing the arbitrator (J H Wallace QC) delivered his award on 2 August 1979. In it he found that Reef was entitled to recover against PNCL the sum of NZ$165,114.79, together with interest thereon.

On 6 December 1979 Reef, having failed to recover pursuant to the award from PNCL, filed a writ of summons against the Tongan Government in the Tongan Supreme Court seeking payment of the award pursuant to the guarantee. Subsequently the matter went to trial.

On 17 July 1980 the judgment of the Supreme Court of Tonga rejecting Reef's claim was handed down. In essence the Court found that there had been a material variation of the obligations of the principal debtor without the agreement of the surety and as a consequence the Government of the Kingdom of Tonga was released from any obligations pursuant to the guarantee.

Reef took the decision of the Supreme Court of Tonga on appeal to the Privy Council of Tonga. Precise information as to the composition of the Privy Council for the hearing of Reef's appeal was not placed before me. But it was accepted on both sides that the Privy Council, on the occasion in question, had the benefit of the advice and guidance of the Honourable Sir Trevor Henry, a much respected retired Judge of the High Court of New Zealand. The ruling on appeal went against Reef. The ratio decidendi of the Privy Council's decision was much debated (as indeed was the ratio of the decision of the Supreme Court) but this much is clear, that the major ground for refusing relief was that the action sought to enforce the arbitrator's award whereas payment pursuant to such an award was not one of the obligations which the Kingdom of Tonga had guaranteed. Reef at that stage, on its own admission, was a disappointed litigant.

...

To continue reading

Request your trial
1 cases

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT