National Admiralty Seminar 2017
Some practical aspects associated with the judicial sale of ships
Gregory Nell SC, Senior Counsel, New Chambers
1. I have been tasked to speak about some of the practical aspects associated with the judicial sale of a ship, from a practitioners' point of view. Tony Tesoriero will comment on some of the same matters from the Admiralty Marshal's point of view.
2. Whilst the Court's power of sale under the Admiralty Act extends to the sale of "a ship or other property", the following comments are confined to the judicial sale of "a ship". Although some of what I will say may also apply to the judicial sale of "other property" under the Admiralty Act 1988 (Cth) (the Act).
When can an order for sale be made
3. Rule 69(1) of the Admiralty Rules 1988 (Cth) (the Rules) provides that the Court may order that a ship be sold upon application by a party "either before or after judgment". Rule 69(5) provides that where the ship "is deteriorating in value", the Court can order its sale "at any stage of the proceeding" and "with or without application".
4. As Professor Derrington has already touched upon the circumstances in which an order for sale can be made (including the possibility of the sale of a ship pendente lite or before judgment) and form of the order for sale, I do not propose to say anything more about those matters. However, I would make some additional observations.
5. First, the Court cannot order the sale of a ship unless that ship is under arrest (and in the hands of the Court in that capacity) when the order is made. In Australia, this is plain from the terms of rule 69(1). Whilst it is not expressly stated in rule 69(5), it is (I think) necessarily implicit in the application of that rule. This is also the position in England.
6. Secondly, it follows from the foregoing that an order for the sale of a ship cannot be made where either the ship has merely been served with an in rem writ without being arrested or it was arrested but then released from arrest following the provision of security for the plaintiff's claim. At least, an order for the sale of that ship cannot be made in those circumstances without the ship being arrested or re-arrested here first. That of course can only occur if the ship is in or has returned to Australia.
7. Accordingly, if the ship has left Australia without ever having been arrested and judgment is obtained against it in an in rem proceeding, then that judgment can only be enforced by an order for the sale of that ship in Australia if the ship is or returns to Australia and is arrested here first. Of course, if the ship is not Australian based and there is an outstanding judgment in rem against it here, its return to Australia may be unlikely, in which case so is the enforcement of that judgment by an order for sale here. Although, in those circumstances, the judgment if unsatisfied may provide a basis upon which further in rem proceedings may able to be brought against that ship elsewhere and an order for the sale of the ship obtained there.
8. Alternatively, if the ship left Australia after having been earlier arrested here, judgment is obtained against the ship in that in rem proceeding and that judgment remains unsatisfied, then again that judgment in rem can only be enforced by an order for the sale of that ship in Australia if the ship is in or returns to Australia and is thereby able to be and is in fact arrested here. Although in these circumstances, the plaintiff / judgment debtor would first need to apply to the Court under section 21 of the Act for leave to re-arrest the ship before it could be re-arrested and an order for sale then made. That would in turn require persuading the Court that there was either default in the performance of a guarantee or undertaking given to procure the release of the ship from its earlier arrest or there is "some other sufficient reason" to justify the ship's re-arrest.
9. Thirdly, it also follows from the foregoing that an order for the judicial sale of a ship cannot be made where the claim is being pursued in an action in personam. This is so even if that proceeding is nevertheless still in the exercise of the Court's admiralty jurisdiction under the Act.
10. Nevertheless, in those circumstances, it may still be possible for the plaintiff to have a ship belonging to the defendant to that in personam action sold once it has obtained judgment against that defendant in those proceedings. But:
a) this would be by sale pursuant to a writ of execution (or writ of fi fa)  rather than the judicial sale of the ship; and
b) as such does not have the same effect nor offer the same advantages (or potential advantages) as a judicial sale. In particular, the sale of a ship under a writ of execution does not clear the res of all existing in rem claims, in the same way as a judicial sale does under Australian law. As a result, the sale of a ship pursuant to a writ of execution is unlikely to achieve the same price than it would if it were to be sold by judicial sale (and indeed might not even be sold at all) as a result of the possibility that it will it continue to be subject to earlier in rem claims even after the sale in and even in the hands of the new purchaser. This is an issue that Stuart Hetherington will be speaking on shortly and about which I therefore propose to say no more.
11. Fourthly, the ship must be under arrest in the proceeding in which the application for its sale is made. Or to put it another way, an order for the sale of a ship is usually made in the proceeding in which the ship is under arrest at the time the order is sought. Again, in Australia, this is apparent from the terms of rule 69(1). This may have procedural consequences where the order for sale is being sought by someone other than the party who arrested the ship in the first place, such as another in rem claimant or mortgagee of the ship.
Who may apply for an order for the sale of a ship
12. An application for the sale of a ship under rule 69(1) of the Rules may be made "on application by a party to a proceeding" (emphasis added). Moreover, as I have explained, they must be a party to "the proceeding" in which the vessel is under arrest (emphasis added).
13. The word "party" is not defined in the Act or Rules. However, the word does appear in the heading of rule 15. That rule appears to contemplate that the parties to an action in rem are the plaintiff(s) and the "relevant person" associated with the res that is the subject of that proceeding and who is liable for the claim.
14. Clearly this will include (and an application for the sale of a ship may be made by) the plaintiff in the in rem proceeding in which the ship was arrested.
15. It can also include the owner of that ship, at least where the owner is the "relevant person" in respect of that claim the subject of the in rem proceeding and for which the ship is under arrest. The ship owner may apply for an order for sale if, for example:
a) the proceeds of the sale of the ship are expected to exceed all of the in rem claims against the ship, the balance of the proceeds of sale are therefore likely to be remitted to the shipowner, the shipowner therefore has a direct interest in the outcome of the sale of the ship and may be concerned that any delay in the sale of the ship might result in the reduction or extinguishment of its share of the proceeds of sale; or
b) the owner of the ship hopes (through another corporate vehicle) to reacquire the ship upon its judicial sale, free of all of the existing in rem claims on the ship and which exceed its value, thereby allowing the owner to reclaim and resume trading the ship free of those existing claims.
16. This reference to "a party" in section 69(1) may also include a demise charterer of a ship the subject of an action in rem brought under section 18 of the Act and who is the "relevant person" for the claim made in that action. Although, in that situation, a Court may be wary of the demise charterer seeking to have a ship that it has only chartered and does not own sold in order to repay debts which are owing by it (and not the owner of that ship). This is especially if there is opposition to that sale from the owner of that ship.
17. But it is doubtful that the phrase "a party to a proceeding" in rule 69(1) would include a caveator against the release of a ship from arrest, in particular so as to permit that caveator to apply for the sale of the ship in the proceeding in which it is then under arrest. Whilst a caveator against release is entitled to notice of a pending release of a ship from arrest or even an application for its sale, it is not merely by reason of the lodgement of its caveat a party to any proceeding, let alone the in rem proceeding in which the ship against which he caveator has a claim was arrested. In this regard, the use of the phrase "a party to a proceeding" in rule 69 is to be contrasted with the use elsewhere in the Rules of the words "an interested person" which admittedly does encompass a wider category of persons than just the parties to an in rem proceeding and could potentially include a caveator against release.
18. Accordingly, for a caveator against release or other in rem claimant to obtain an order for the sale of a ship, it would have to either:
a) apply to intervene and be joined as a party to the in rem proceeding in which the ship is under arrest, in order that it may then apply for the sale of that ship in that proceeding; or
b) commence its own action in rem against that ship and apply for the arrest and then sale of the ship in that proceeding.
19. In relation to the first of these two options, the Court undoubtedly has power to permit (in appropriate circumstances) some who is or claims to be interested in the ship under arrest to intervene in an in rem proceeding against that ship and has on occasions done so. Further, where a party has been permitted to intervene in a proceeding, the intervener becomes or may be treated as a party to that proceeding. To that extent, rule 69(1) may be satisfied by this first option.
20. However, I doubt that it would ever be appropriate for the Court to accede to an application by another in rem claimant to be added as an additional plaintiff to an existing in rem proceeding just for the purposes of seeking an order for sale. This is especially where the claim of that other in rem claimant is unrelated to the claim that is the subject of the existing proceeding and may be disputed by those representing the ship and would need to proceed to a hearing and judgment unrelated to any hearing involving the original claim. Rather, as a practical matter, an application for intervention is more likely to be made in opposition to the exercise of the Court's power to sell the ship, rather than in favour of its exercise.
21. In my opinion, the latter of the two options suggested above is the more appropriate course for the caveator against release or supporting in rem claimant to take it if wishes to apply for an order for the sale of the ship. This is consistent with advice given in paragraph 6.1 of the Admiralty Marshal's Manual:
If the applicant for sale has not commenced in rem proceedings against the ship then the Court will require that they do so before an order for valuation and sale is made
Although it also follows from my earlier comments that, strictly speaking, the terms of rule 69(1) require the caveator to apply to have the ship arrested in its proceeding before the order for sale can be made. This is also the position in England.
22. If the ship under arrest is deteriorating in value the Court may order its sale under rule 69(5) "with or without an application". In other words, the Court can of its own motion order the sale of the ship if necessary to forestall a deterioration in the value of the security afforded by the ship to the plaintiff and other in rem claimants.
23. In Australia, the position appears to be that the Admiralty Marshal may not apply for an order for sale:
a) the Marshal is not "a party to a proceeding" and does not thereby fall within the class of persons contemplated by rule 69(1);
b) whilst the Marshal is under a primary obligation under rule 47(2) of the Rules to "take all appropriate steps to retain safe custody of, and to preserve, the ship or property" under arrest and may seek from the Court pursuant to rule 48(1) "directions with respect to the ship" (including for the purposes of fulfilling the above duty), it is perhaps doubtful that those "directions" could include an order that the Marshal sell the ship. This is at least in circumstances where the Court is not otherwise able to make such an order under rule 69. It is also doubtful that an order for the sale of a ship could be made pursuant to rule 50 of the Rules;
c) however if the Marshal is concerned that the ship under arrest is "deteriorating in value" and / or with the possible impact of such deterioration, the Marshal may draw this to the attention of the Court and an order for sale might be made under rule 69(5), even without any formal application being made.
24. Where an application is made for an order for sale, it must be in accordance with Form 26 of the Rules.
What property is comprised in the sale
25. The arrest and sale of a "ship" traditionally extends to the ship and her "appurtenances" – the ordinary meaning of which is a mechanical accessory or some apparatus or gear which appertains or belongs to the ship – and thereby includes all of that ship's tackle, apparel and furniture where carried.
26. The practice in England as to what is removed prior to the sale of the ship and what is sold as part of the ship by the Marshal is set out by Sheen J. at p. 535 of his judgment in the Silia. The same practice has to date been followed in Australia.
27. In the Silia, Sheen J. stated that where an order for sale of a ship is made in the context of an in rem proceeding, the "ship" to be sold "includes all property aboard the ship other than that which is owned by someone other than the owner of the ship". It therefore does not include, for example:
- the crew's personal belongings and effects;
- equipment leased to the ship or her owner; and
- a time charterer's equipment; etc.
28. It also does not include property belonging to the shipowner which just happens to be on board the ship at the time of its arrest and sale and which itself is not part of the ship in the sense described above.
29. In Morelines Maritime Agency Ltd -v- the ship "Skulptor Vuchetich" (1996) 136 ALR 206 Sheppard J. found (applying the Silia) that fork lift trucks and fork hoists on board the mv "Skulptor Vuchetich" at the time of her arrest and used to assist in the loading and unloading of cargo formed part of that ship for the purposes of both her arrest and the order for the sale of that ship.
30. It is also unlikely to include any containers on board the ship at the time of arrest or her sale. This is especially if they are not owned by the shipowner but third parties or where they are leased by the shipowner from third parties. But even if containers on board the ship were owned by the shipowner, it may be doubtful that they would be found to sufficiently form part of the ship to be "the ship" for the purposes of the judicial sale. This is especially if the shipowner owns and operates a number of ships, the containers are used from time to time across all of those ships and at the time of arrest and the sale of the ship the containers on board are empty and being transported for the purposes of carrying cargo on another voyage and possibly another ship. It would also not include any containers belonging to the shipowner but which were not on board the ship at the time of its arrest or sale. Although such containers may be available to meet other claims, including non in rem claims.
31. More usually, competing claims arise in connection with the bunkers on board the ship at the time it is sold and whether those bunkers and the proceeds of their sale are available (along with the proceeds of sale of the ship itself) to the plaintiff and any other in rem claimants.
32. Whilst the bunkers on board a ship may not amount to an "appurtenance" of a ship in the sense described above, if they belong to the shipowner at the time of the ship's sale, then the proceeds of their sale form part of the proceeds of the sale of the res and are available to meet the claims of the in rem claimants. This is the position under English law. It is also the position in Australia and the practice that has been applied here under the Act.
33. However, if the bunkers are owned by a charterer of the ship at the time of its sale then, when the order for sale is made, the bunkers will be included in the sale and sold along with the ship. This is essentially for practical reasons. But the proceeds of the sale of those bunkers will be accounted for separately from the sale of the ship. The charterer can then apply for (a) a declaration that the bunkers were its property at the time of sale and that it is thereby entitled to the proceeds of their sale and (b) an order that the proceeds of the sale of the bunkers be paid out to it. This application should be made in the existing in rem proceeding in which the order for sale was made. To this end, the charterer can apply to intervene for this purpose in that proceeding. Assuming that the charterer's claim to those bunkers is not challenged or that such a declaration and order for payment are made after an unsuccessful challenge by the ship owner or other in rem claimant, neither the bunkers nor the proceeds of their sale will be available to satisfy the claims of the plaintiff or any other in rem or non in rem claimants of the shipowner.
34. The relevant time for determining who is entitled to the proceeds of the sale of the bunkers is when they are sold, rather than at the time of arrest. The relevant question is who has title to those bunkers at that time.
35. Accordingly, if title to the bunkers on board the ship pass to the shipowner after the arrest but prior to the sale of the ship, then the proceeds of the sale of those bunkers will be available to the plaintiff and other in rem claimants. Further, to the extent that the ship owner may owe the charterer the cost of the bunkers so transferred, the charterer would have to pursue a claim for that amount against the proceeds of sale of the ship along with the other in rem claimants. Depending on the priority of the other claims against the ship (and thereby proceeds of sale), there may be a risk that the charterer may not recover the full amount or any of the monies owing to it in respect of those bunkers.
36. The charterer would, of course, be in a much stronger position if it continued to retain title to those bunkers when the ship is sold and would therefore be fully recompensed for the cost of those bunkers still on board the ship on completion of the sale.
37. Time charters usually provide that when the charter is terminated owners are to take over and pay for the bunkers remaining on board. The effect of such provisions is to transfer property in those bunkers to the owners. If the charter of a ship under arrest is terminated or the ship redelivered in such circumstances, then the effect of such a provision is to transfer the title to the bunkers then on board the ship back to the owner. If however the charterparty is brought to an end in circumstances which do not bring such clauses into play, then title to the bunkers may remain with the charterer despite the charter coming to an end. That being so, the charterer would then be entitled to the proceeds of the sale of those bunkers where they are sold with the ship.
38. Accordingly, if acting for a time charterer of a ship under arrest and there is a prospect that an order for the sale of that ship being made, then whilst there may be an understandable desire on the part of the charterer to bring the charterparty to an end, care should nevertheless be taken in how that charter is brought to an end and in particular so that it is done in a way which does not result in the charterer losing any possible security that it might otherwise have by its ownership of the bunkers.
39. Where the bunkers supplied to the ship were supplied on terms that included a Romalpa clause and have not been paid, then conceivably the bunker supplier may claim ownership in the bunkers supplied to the ship or a proportion of the bunkers on board the ship equivalent to the amount supplied and thereby an entitlement to the proceeds of sale of those bunkers or that proportion. This is especially if they were supplied shortly before the ship's arrest. Although I apprehend that there may be difficulties in such a claim succeeding, especially if the bunkers were supplied to the ship some time ago, have since been intermixed with other bunkers already on board the ship or any bunkers that have been since supplied to the ship and where the enforcement of any such claim may be subject to proof of compliance with the PPSA legislation.
40. Although forming part of the res when owned by the shipowner, bunkers may not fall within the meaning of "ship" or her "appurtenances" where those terms are used in ship mortgages and absent an express inclusion in the terms of the mortgage, the bunkers may not be the subject of the security afforded by that mortgage. The significance of this distinction is that whilst a mortgagee will have priority over other general maritime claimants to the proceeds of sale of the ship itself, in the above circumstances it will not have the same or any priority over that portion of the proceeds of sale that represents the sale of the ship's bunkers when owned by the ship owner. Rather, the proceeds of sale of the bunkers will be available to all the general in rem claimants to share pari passu.
41. Finally, where the bunkers on board the ship at the time of sale are owned by the charterer, issues may arise as to who is liable for the cost of those bunkers consumed during the period in which the vessel is detained whilst it is being sold.
42. Prima facie the use of those bunkers by the ship owner or Marshal would amount to a conversion, at least where the charterparty has been brought to an end and the shipowner does not otherwise have the charterer's permission to continue to use the bunkers. But that is only likely to allow the charterer to bring a claim in damages against the ship or proceeds of the sale of the ship following its sale. Such a claim is likely to share rateably with any other general in rem claims against the ship and open to be defeated by any claims with a higher priority if the proceeds of sale are not sufficient to meet all of the in rem claims. If the charter has not come to an end and the ship is simply off hire, then the charterer may not even have a claim for damages or in conversion.
43. However, the practice that has been adopted in Australia has been to treat the cost of the bunkers consumed as a cost of sale and thereby payable to the charterer from the proceeds of the sale of the ship with the same priority as the other costs of arrest and sale.
The fees and expenses of a judicial sale of a ship
44. Rule 69(4) of the Rules provides that an application under rule 69(1) for an order for valuation sale constitutes an undertaking "by the party who made it" to pay on demand to the Marshal an amount equal to the amount of the fees and expenses of the Marshal in complying with the order. A number of observations may be made in this regard.
45. First, the requirement that such an undertaken be given in conjunction with an application for an order that the ship be sold is similar to both:
a) the undertaking to pay to the Marshal, on demand, an amount equal to the costs and expenses of the Marshal in relation to the arrest of a ship, including costs and expenses in relation to the ship while it is under arrest, imposed by rule 41 of the Rules upon an applicant for the arrest of a ship; and
b) the undertaking to pay to the Marshal, on demand, an amount equal to the Marshal's costs and expenses in connection with the custody of the ship while it was under arrest, including the costs and expenses associated with the release of the ship from arrest, imposed by rule 53 of the Rules upon an applicant for the release of a ship from arrest.
46. However, secondly, the undertaking contemplated by rule 69(4) of the Rules appears to be one given by the actual party to the proceedings who seeks the arrest of the ship and not their legal representative. This is in contrast to the terms of rule 41(1) and the note to Form 12 of the Rules and rule 53(1)(a) and (b) and Form 19 (especially note 3) of the Rules, which contemplate the undertaking being given by the parties' legal representative where the application for the arrest of a ship or its release is filed by the applicant's legal practitioner. Although the prescribed form for an application for an order for sale (Form 26) expressly provides:
4. I undertake to pay on demand to the Marshal an amount equal to the costs and expenses involved
and is signed by the legal representative of the applicant for sale, it nevertheless appears from the terms of paragraphs 2 and 3 of that Form that this undertaking is from the party applying for the order, rather than its legal representative personally. This interpretation of the undertaking in rule 69 is also consistent with both the way in which that undertaking was construed by Cooper J. in Bayside Air Conditioning Pty Ltd v "Cape Don" (unrep'd 15/8/97 at p. 7) and the treatment of the undertaking in paragraph [6.6] of the Marshal's Manual.
47. Thirdly, as with the undertaking in support of the arrest of a ship, the Marshal can make one or more demands for interim payments on account of the fees and expenses covered by the undertaking. This is pursuant to rule 78(b) of the Rules. Moreover, such demands may be made in advance and on account of the fees and expenses to be incurred. Rule 78 is not confined to enabling the Marshal to make demands for interim payments on account of fees and expenses after they have already been incurred.
48. Fourthly, if an order for sale is made pursuant to rule 69(5) "without any application" having been filed or upon the application of the Marshal if that be permitted, one consequence would be that there would be no one subject to the undertaking provided for by rule 69(4). In that situation, the Marshal (Court) would have to fund the fees and expenses of complying with the order for sale itself, at least until those fees and expenses could be recovered from the proceeds of sale upon completion of the sale of the ship. That is unless the Marshal can make a rule 78 demand under the rule 41 undertaking given when the ship was first arrested. Whilst this option may be open in respect of the costs incurred by the Marshal in maintaining the ship whilst it remains under arrest as the sale proceeds, it is doubtful that the costs of arranging for the sale of the ship per se fall within the scope of the rule 41 undertaking. This is especially where the plaintiff who gave that undertaking when the ship was first arrested did not apply for the order for sale.
49. Fifthly, the types of fees and expenses associated with the sale of the ship and covered by the undertaking in rule 69(4) are listed in paragraph [6.5] of the Marshal's Manual. They include inter alia:
- the costs of obtaining advice from a ship broker as to the preferable method of sale;
- any brokerage fee payable to the broker on the sale;
- the costs of advertising the sale of the ship;
- any necessary insurance of the vessel whilst it is being sold;
- the cost of inventory, bunker, lube surveys;
- costs associated with the Marshal's need to attend the ship such as taxi fares, car hire, water taxi or launch hire; and
- costs incurred by the Marshal in retaining solicitors to act on the sale of the ship, as well as (admittedly more unusually) to provide advice on any issues that may arise in the course of the sale or to represent the Marshal on any contentious applications associated with the sale of the ship.
The above list is not intended to be exhaustive.
50. In order to realise the best possible price on sale of the ship it may also be necessary for the Marshal to incur certain expenses in connection with the ship including carrying out any necessary or desirable repairs to the ship; paying any outstanding classification society fees; and / or paying any port and other charges outstanding at the time of the ship's arrest and in respect of which relevant authorities may have a right to detain the ship.
51. In relation to any such expenses that might be incurred by the Marshal, it has been suggested by one commentator that:
the tendency over recent years appears to have been towards a broadening of the proper province of the Admiralty Marshal and recent decisions of the court show that 'where it is for the benefit of all those interested in a ship that the Marshal should incur expenditure on her in order to enable him to sell her to advantage, the Court may authorise him to incur that expenditure' (Queen of the South  P 449 per Brandon J. @ p. 464). As this dictum indicates there are certain items of expenditure which first require the sanction of the Court before they may be cast as a valid charge against the fund in Court.
52. Sixthly, where the party that obtained the order for sale is also the party who first arrested the ship, then as a practical matter it can expect to pay all of the costs of both the arrest of the ship as well as the costs of its sale and to keep the Marshal in funds in respect of those costs until the sale has been completed and the proceeds of sale have been paid into Court.
53. But where the original arresting party is not the applicant for the sale of the ship, then issues may arise as to whether particular expenses incurred or to be incurred by the Marshal are costs of arrest within rule 41 or costs of sale within rule 69, and therefore whether any demand by the Marshal for the payment of those costs should be paid by the original arresting party or the applicant for sale. Clearly this will depend on the nature of the particular expenses. Expenses such as those listed in paragraph 49 above and which are only payable as a result of the making of the order for sale and therefore likely to be referred to the applicant for sale, rather than the arresting party. The position may however be unclear in relation to other expenses, such as ongoing berthing charges, the cost of providing additional bunkers to the vessel or water or provisions to the crew whilst the sale process is underway, and which would also be incurred (or likely to be incurred) by the Marshal even if the order for sale has not been made and for so long as the ship is to remain under arrest.
54. Provided that the ship is sold and the proceeds of sale are sufficient to satisfy all the costs of arrest and sale, then as a practical matter, whoever has to pay these costs to the Marshal in the first instance is likely to be reimbursed that amount from the proceeds of sale and therefore not likely to ultimately be out of pocket (other than during the period it takes to sell the ship). In those circumstances, any dispute as to whether such costs must be borne by the applicant for arrest or applicant for sale is likely to be limited to which of those parties must bear those costs in the first instance and for the time it takes to sell the ship. Although in this regard, that party may be awarded interest on the sums paid to the Marshal over the period in which it was out of pocket, which is recoverable from the proceeds of sale of the ship and enjoys the same priority as the costs of sale.
55. Seventhly, on the question of priority, the costs of complying with the order for the sale of the ship are afforded a priority in recovery from the proceeds of sale ahead of the payment of all of the substantive in rem claims and with the same priority as the costs of arrest. This granting of this priority is said to be "founded on a readily conspicuous equity for the producer of the fund facilitates the functions of the Court and protects the interests of the other claimants". In other words, as these costs of arrest and / or sale were incurred not only for the benefit of the plaintiff / arresting party but for all in rem claimants, they should be recovered ahead of the substantive claims of those claimants.
56. The same applies to any legal costs incurred in obtaining or in relation to the arrest and / or sale of the ship. But it does not apply to any legal costs incurred by that party and associated with establishing its substantive claim (which costs will usually be ranked so as to enjoy a priority equal to that of the claimant's underlying claim).
57. Eighthly, in the "Cape Don" (unrep'd 15 May 1997 at p. 4) Cooper J. held that as the Marshal was not a party to the proceeding but acting as an officer of the Court, the Marshal should be fully indemnified for the costs incurred in the discharge of its duties. Accordingly, the Marshal was entitled to its costs on a solicitor client basis.
58. A similar approach has also been applied to those legal costs incurred by the party who obtained the arrest of the ship or order for sale which are associated with the application for and any matters arising out of the arrest of the ship and / or subsequent order for sale. Those legal costs may also be recoverable on an indemnity basis. But this approach does not apply to that party's legal costs associated with proof of its substantive claim and which would (absent a successful Calderbank letter or Offer of Compromise or special circumstances) usually only be recoverable on a party / party basis.
59. Ninthly, a necessary concomitant of the sale of a ship under arrest is the prior repatriation of the crew. Unless the crew is to be taken over by the new owner of the ship following its judicial sale, it is usually imperative that the crew be paid off and leave the ship before the sale can proceed. In those circumstances, provision must therefore be made for both the cost of the crew's repatriation and payment of any outstanding wages to the crew.
60. Where the repatriation of the crew is not effected by either the shipowner or some organisation on its behalf, then the party who obtained the order for sale should apply to the Court for an order that the crew be repatriated and that the applicant for sale be at liberty to pay the repatriation expenses and outstanding wages of the crew.
61. In this regard, there are two types of expenses to consider. The first is the cost of repatriating the crew. The second is the amounts (if any) payable to the crew by way of wages, including during the period in which the ship was under arrest and being sold.
62. In relation to the former, because the sale of the ship cannot proceed without the crew first being repatriated and because the cost of repatriation is therefore a necessary ingredient in the process of selling the ship, if the costs of repatriation are paid for by the applicant for sale then those costs should be treated as part of its costs of the sale and accorded the same priority. In order to avoid any possible dispute in this regard at some later time after the costs have been paid, if an order for repatriation is made by the Court the party responsible for those costs should seek at the same time an order that the costs of that repatriation be treated as costs of the sale.
63. If the applicant for the sale of the ship is unable (or unwilling) to fund the repatriation of the crew, then that applicant should ask the Court for an order that the Marshal pay the repatriation expenses and make an advance on the crew's wages to allow repatriation to take place. The applicant should also seek an order that such payments form part of the Marshal's costs of sale so as to be a first charge on the proceeds of sale.
64. As to the crew's wages, usually the Court will not insist upon the crew leaving the ship without first being paid off. Where the payment of wages is made by the plaintiff or person who applied for the sale of the ship with leave or pursuant to an order of the Court, the plaintiff will then stand in the shoes of the crew in respect of the sums so paid and be able to claim against the proceeds of sale of the ship with the same priority that the crew would have had had they claimed on the fund. This will be a priority after payment of all the costs and expenses of arrest and sale of both the Marshal and the plaintiff / arresting party and ahead of the general maritime claimants, maritime lien holders and mortgagees. To this extent the payment of the crew's wages are treated differently from the costs of repatriation.
65. However, a party paying the crew's outstanding wages will only be subrogated to the crew's lien and priority in respect of those wages if that payment is made either pursuant to a court order or with the court's leave or approval. There is no right to such subrogation where the payment is made voluntarily.
66. In relation to the crew's claim for wages, although a distinction may be sought to be drawn between (a) those wages due and unpaid for the period prior to the vessel's arrest and (b) those wages payable for the period after arrest, the above principles apply to both categories. In particular, in relation to the latter, the Marshal is not personally liable for the wages of the vessel's original crew during the period of arrest (where the shipowner fails to continue to pay the crew). Those wages therefore do not form part of the costs of arrest or sale. Accordingly, the Marshal cannot demand payment of the amount of these wages due to the crew in respect of the post arrest period or period in which the sale is proceeding from either the arresting party or applicant for sale of the ship under their respective undertakings or as an advance pursuant to rule 78.
67. The position is however different if any members of the ship's original crew leave the ship and are not replaced by the owner of the ship and the Marshal therefore has to employ seafarer(s) to fill the position(s) left vacant by the departing crew. In those circumstances, the Marshal will be liable for the wages of the replacement crew. Moreover, the cost of those wages will form part of the Marshal's costs of arrest and / or sale (where the crew are necessary for the sale to proceed). In those circumstances, the Marshal is entitled to seek reimbursement of the costs associated with the employment of that replacement crew from the arresting party and / or applicant for sale pursuant to their undertakings. Another consequence of the foregoing is to give the reimbursement of these wage costs the higher priority of a costs of arrest, rather than that of the wages lien.
68. Admittedly this difference in priority is perhaps only slight and either way these costs will be recoverable ahead of all but the Marshal's claims and other costs of arrest and sale. It is perhaps only likely to be relevant if the proceeds of sale produce a manifestly inadequate fund. In those circumstances and in order to avoid any doubt in this regard, it may be preferable when obtaining the sanction of the Court to make any payment in respect of the wages paid to the crew of the ship to also obtain an order expressly declaring whether payments to the crew for wages post arrest are to be treated as (and having the priority of) the wages lien or the costs of arrest.
69. Tenthly, where the ship has cargo on board at the time of its arrest, the cargo is not itself under arrest. Irrespective of whether an order for sale has been made, the owner of cargo on board an arrested ship may apply to the Marshal or the Court to have the cargo discharged from the ship. This would be at the cargo owners' expense and would usually include an obligation to indemnify the Marshal in respect of his costs of and associated with that discharge.
70. But if the cargo owner(s) makes no such application and the ship is ordered to be sold, the cargo must first be removed from the ship before the sale can be completed. In those circumstances, the Marshal will advise cargo owners to have the cargo discharged. If it is not discharged the Marshal may proceed to remove and store the cargo pursuant to rule 47(2) or alternatively seek directions from the Court pursuant to rule 48(1) of the Rules.
71. Where cargo is removed in preparation for the sale of the vessel, the costs of doing so do not form part of the costs of either the arrest or sale. An attempt to treat the costs of discharging cargo as analogous to the expenses of the Marshal was rejected by Sheen J. in The Jogoo  1 Lloyd's Rep. 513. In doing so Sheen J. rejected an argument that the costs of removing cargo should be treated as contributing to the fund representing the proceeds of sale by increasing the price at which the ship was sold and should therefore be a first charge on the proceeds. Rather his Honour held that the cargo owners must bear the costs of the removal of the cargo, for which they would have a claim against the shipowner and thereby the proceeds of sale. But that claim would only have the same priority as the other substantive general maritime claims; it would not have the priority of the costs of sale. Those costs would therefore be recoverable from the proceeds of sale only after payment of all of the costs and expenses of arrest and sale, as well as the claims of all priority claimants such as the Master's and crew's wages, mortgagees and maritime liens. In the event that the balance of the proceeds of sale was not sufficient to meet all of the claims of the general maritime claimants, then the owners of the cargo may only recover a pro-rata proportion of these costs from the fund. In Myrto (No. 2)  2 Lloyd's Rep. 341 Sheen J. having been invited to reconsider his decision in the Jogoo nevertheless came to the same conclusion.
72. In Myrto  2 Lloyd's Rep. 243 @ p. 261 Brandon J. suggested that a sale pendente lite may possibly benefit cargo owners by relieving them in whole or part of the costs of discharging the cargo from the ship. Subsequently his Honour made orders to the effect that the Marshal discharge the cargo and that the expenses thereof form part of the Marshal's costs of sale. An appeal was lodged against that part of the orders by the mortgagees on the basis that the effect of the order was to give priority to the recovery of these costs over the claim of the mortgagees. The Court of Appeal upheld the appeal (at  1 Lloyd's Rep. 11) concluding that the costs of discharge were to be borne by cargo owners and that although the discharge should be effected by the Marshal (funded by the mortgagee at first instance), upon taking delivery the cargo owners should provide an undertaking to the Marshal to pay the costs of discharge. Where a claim is subsequently made by the cargo owners for reimbursement from the proceeds of sale of those costs, they do not have the priority of costs of the arrest and sale. If the cargo owners abandon the cargo the Marshal can sell the cargo and recover his expenses from the proceeds of sale.
73. The position is different if both the cargo and vessel are under arrest and to be sold. In those circumstances, the Marshal will take advice from the broker as to whether the cargo should be sold with the vessel or separately. If the latter, the Marshal will need to discharge the cargo from the vessel before the sale can proceed. In those circumstances, the costs of the discharge of the cargo would form part of the Marshal's costs of sale and be recoverable with that priority. Judicial sale of cargoes is rare.
74. Finally, as soon as practicable after the sale of a ship, the Marshal must file a return of sale, pay the proceeds of sale into Court and file an account of sale and documents in support of the account.
75. Unless the Court orders otherwise, the Marshal's costs and expenses are not subject to taxation. A party seeking to displace this prima facie position bears the onus of establishing that there is a sufficient basis for doing so. In this regard, it has been said that the rule contemplates that "some significant reason or to be established to justify the Court otherwise ordering" and that the discretion under this rule must be approached having regard to the provisions of rule 78B(2), which identifies the only costs in and expenses that can be disallowed on the taxation, namely, costs or expenses that the taxing officer considers have been incurred "unreasonably or otherwise than in good faith". This is a high burden to discharge.
76. Nevertheless, in the Bank of China Ltd v the ship "Hai Shi" (No.3)  FCA 660 Rares J noted at :
There may be situations where it is important to order a taxation under r 78B(1) because that is necessary to maintain public confidence in the administration of his or her office by the Marshal in respect of the costs and expenses he or she incurred for what a party is liable under an undertaking or otherwise. The Court must be mindful to ensure that in an appropriate case it is possible for a person affected to seeks to taxation or to maintain the integrity and appearance of integrity in the Court's officer's conduct.
77. In that case, his Honour was "completely satisfied by the evidence of the Marshal and his solicitor that this case raises no concern that costs are expensed have been incurred unreasonably or in a way that would warrant an order that the Marshal's costs and expenses be taxed" and an application for their taxation was accordingly dismissed (with the Marshal's costs of that application to be paid out of the proceeds of sale "as costs of the sale").
Postscript - the procedure following sale
78. The judicial sale of a ship is not an end in itself, but a means to an end. In particular it is a means by which an in rem claimant may satisfy its maritime claim, once it has obtained judgment on that claim.
79. Upon the sale of a ship, all existing claims against that ship are transferred to the proceeds of sale. This includes both claims that are already the subject of in rem proceedings against the ship as well as those maritime claims for which in rem proceedings have not yet been commenced. In the latter regard, the proceeds of sale of a ship or other property may be the subject of an action in rem. Accordingly, any claim that could have been brought as an action in rem against the ship sold may following its sale be brought as an action in rem against the proceeds of sale of that ship (or at least for so long as they remain with the Court).
80. Once the proceeds of sale have been paid into Court, a decision must be made as to how and to whom those proceeds are to be distributed. This will usually entail advertising the receipt of the funds, inviting all claimants with a maritime claim against the ship to bring their claim before the Court if they wish to share in the proceeds and if the net proceeds are insufficient to meet all of the maritime claims made the Court determining the priorities of the various claimants and how the proceeds of sale are to be distributed.
81. These tasks raise further practical considerations for practitioners acting for in rem claimants seeking part of the fund produced by the proceeds of sale – especially where that fund is insufficient to satisfy all claims – but this is a completely other story in itself and best left to another time.
 see for example rule 69 of the Admiralty Rules 1988 (Cth) (the Rules)
 The Wexford (1883) 13 PD 10; see also now Practice Direction 61 (The Law and Practice of Admiralty Matters by Derrington and Turner (2nd ed) (Derrington) at [7.55]
 this is bearing in mind that a ship can only be served with an in rem writ and arrested whilst it is within the Court's jurisdiction (see s.22 of the Act; Elbe Shipping SA v The Ship "Global Peace" (2006) 232 ALR 694 at )
 for instance under their equivalent to ss.4(2)(c) and 16
 for example, having been released from arrest following the provision of security for the plaintiff's claim
 for example, because the security provided turned out to be insufficient or was not honoured
 as to which see Admiralty Jurisdiction Law and Practice by Cremean (4th ed) (Cremean) at pp.227-8
 and in particular the requirement that the vessel be "under arrest" in the proceeding which the application for an order for sale is made
 The Lady Tahilla  1 Lloyd's Rep. 591 @ p. 601
 as in The "James W Elwell  P 351
 see for example Cremean at p.260; Derrington at [7.67] et seq
 Enforcement of Maritime Claims by Jackson (4th ed) (Jackson) at [25.54]
 In Schedule 1 of the FCR the word "party" is simply defined as "a party to the proceeding"
 "Action in rem: parties"
 see definition of "relevant person" in section 3(1) of the Act
 The Westport  1 Lloyd's Rep. 547
 this is in much the same way as the mortgagee of the ship "Beluga Notification" wished to do in Norddeutsche Landesbank Girozentrale v "Beluga Notification" (no.2)  FCA 665
 this is also the position in England (see Derrington at [7.55])
 such as in rule 72
 if not under the Admiralty Rules then pursuant to FCR r.9.12
 for example in Bank of China v the ship "Hai Shi" NSD 141/2013 orders dated 3 May 2013; Fortis Bank (Nederland) NV v the ship "MSC Sumatra"  FCA 524; Broken Bay Slipway Pty Ltd v the yacht "Velsheda II" FCA proceedings NSD 666/2012
 at least to the extent of such rights, privileges and liabilities associated with its intervention
 although in relation to the judicial sales of both the "Skulptor Vuchetich" and "Skulptor Konenkov" once the vessels had been sold, Sheppard J ordered that all maritime claimants wishing to make a claim against the proceeds of sale be joined to the original proceeding in which each vessel was arrested and sold, rather than commencing separate in rem proceedings in respect of their respective claims. Similarly, in relation to the sale of the "Turakina", Tamberlin J consolidated into the in rem action commenced by the original arresting party (Patricks Stevedores) the in rem proceedings and claim that had been subsequently brought by the mortgagee of the vessel who obtained the order for sale
 as in Rae -v- Salvage Pacific Limited  2 Qd R. 580 and The Acrux  1 Lloyd's Rep. 471
 which would be a second arrest of the ship if it is still under arrest in the original in rem proceeding
 where if the ship is under arrest in one proceeding (in which no application for sale is or is to be made) then it should be arrested again in the action to which the person wishing to apply for its sale is a party and the application for an order for sale then made in that proceeding – see Admiralty Practice (Vol 1 British Shipping Laws) by McGuffie, Fugeman and Gray (1964) (McGuffie) at ; Admiralty Jurisdiction and Practice by Meeson & Kimbrell (4th ed) (Meeson) at [4.130]
 Marinis Ship Suppliers (Pty) Limited v the ship "Ionian Mariner" (1995) 59 FCR 245 at 250
 although the position may have been otherwise in England where it is said (by Jackson at [15.126] that the Marshal may apply to the Court for the sale of a ship
 see Bayside Air Conditioning Pty Ltd v the ship "Cape Don" unrep'd 15/05/97 at p. 4 per Cooper J
 for example, for reasons other than associated with the deterioration in the value of the ship and in the absence of any application by a party
 which provides that the Court may, at any stage of a proceeding, make appropriate orders with respect to the "preservation, management or control" of a ship under arrest in a proceeding
 and after the Court has heard from those interested in the ship
 see rule 69(2)
 Derrington at [7.56] citing the Eurosun and Eurostar  1 Lloyd's Rep. 106 at 111 and in which the older cases dealing with amounted to an appurtenance of a ship are reviewed
 see ALRC Report 33 on Civil Admiralty Jurisdiction at ; McGuffie at 
 and extracted in both Meeson at and is extracted in Meeson at [4.109] and Derrington at [7.57]
 The Silia  2 Lloyd's Rep. 534 at 537
 Fortis Bank (Nederland) NV v the "MSC Sumatra"  FCA 524 at  and 
 an argument to this effect although advanced for a different purpose was adverted to but dismissed by in Scandinavian Bunkering AS v the bunkers on board the ship "Taruman" (2006) 151 FCR 126 at 
 presumably even if they had previously been on board and discharged before the ship was arrested or if they were intended to be loaded on board the ship but this had no occurred because of the arrest
 in the sale of the "Skulptor Vuchetich" and "Skulptor Konenkov" following the collapse of Baltic Shipping Line (BSL) in the mid '90's, a non in rem claimant who obtained an in personam judgment against BSL subsequently sought to enforce that judgment by a charging order issued by the Federal Court against BSL's containers throughout Australia and to that extent was able to enforce its judgment ahead of at least those in rem claimants who had not obtained a judgment against either ship or BSL by that time
 The "Silia"  2 Lloyd's Rep. 534 at 538
 Scandinavian Bunkering AS v the bunkers on board the ship "Taruman" (2006) 151 FCR 126
 whether time or demise charterer. In Patrick Stevedores No. 2 Pty Ltd v Turakina unrep'd 17 August (1998) the liquidator of the demise charterer unsuccessfully claimed the value of the bunkers on board the vessel on the basis that they belonged to the insolvent demise charterer
 see clauses 2, 6, 8, 9 and 10 of the Admiralty Marshal's Standard Conditions of Sale (referred to in paragraph [6.12] of the Admiralty Marshal's Manual
 such as those adverted to by Sheen J in the "Silia"  2 Lloyd's Rep. 534 at 537 (RHC)
 Bank of China v the ship "Hai Shi" (No.3)  FCA 660 at - and orders made 25 June 2013; see also the "Saint Anna"  1 Lloyd's Rep. 180 at 181
 the "Saint Anna"  1 Lloyd's Rep. 180 at 181
 Fortis Bank (Nederland) NV v the ship "MSC Sumatra"  FCA 524; Bank of China v the ship "Hai Shi" (No.3)  FCA 660
 or possibly when the order for the sale of the ship is made
 along with any other claim that the charterer may have against the shipowner
 that is unless the charterer is able to offset that amount against any monies it owes to the shipowner
 see for example clauses 3 and four of the New York Produce (NYPE) form; the "Span Terza"  1 Lloyd's Rep.119; and Time Charters by Coghlin et ors (7th ed) at [13.4]
 such as by the charterers' acceptance of owners' repudiation of the charter or under a clause giving the charterer the option to cancel the charter upon the happening of a nominated event or where the charterers are prevented from redelivering the ship in accordance with the terms of the charter because the ship is of higher at the end of the Charter period (see The Eurostar  1 Lloyd's Rep P106
 where it is unable to use the ship as a result of its arrest and especially if under the terms of the charter hire is not suspended by reason of the arrest of the ship or for its duration
 Honshu Gloria (No. 2)  2 Lloyd's Rep. 67 followed in the Pan Oak  2 Lloyd's Rep. 36; see also Eurosun and Eurostar (op cit). In the Pan Oak at p. 139 there is a reconciliation of the apparent inconsistency between this narrower interpretation of the "ship" for the purposes of a mortgage and the wider approach taken in the Silia as to what may be the subject of an in rem action
 along with any other claim for damages the charterer might have; Fraser Shipyard and Industrial Center Ltd v the "Atlantis II" (1999) 170 FTR 1
 in addition to the charterer's entitlement to the proceeds of the bunkers still on board at the time of sale
 Fortis Bank (Nederland) NV v "MSC Sumatra"  FCA 524 at -; Bank of China v the ship "Hai Shi" (No.3)  FCA 660 at - and orders made 25 June 2013; cf Fraser Shipyard and Industrial Center Ltd v the "Atlantis II" (1999) 170 FTR 1 which Lee J distinguished in MSC Sumatra at -
 such as the plaintiff to the proceedings in which the ship was arrested
 whether personally or on behalf of a law practice under rule 75A
 and in particular the statement in that paragraph that "If the party making the application is out of the jurisdiction there may be difficulties in enforcing any undertaking. In this case, expenditure should not be incurred [by the Marshal] unless funds have already been received from the applicant or some other form of acceptable security has been given"
 Waitemata Stevedoring Services Pty Ltd v the ship "Rangitata"  FCA 441
 and in particular the words "costs and expenses of the Marshal in relation to the arrest" or "costs and expenses in relation to the ship … while it is under arrest" covered by that undertaking
 as to the desirability of the Marshal receiving such advice see ???
 especially in circumstances where the shipowner may no longer be maintaining insurance over the ship see Bank of China Limited v the ship "Hai Shi" (no. 3)  FCA 660 at ??
 such as investigating and advising the Marshal on the ship's insurance, matters relating to the repatriation of the crew and even in relation to a claim by charterers in respect of the costs of bunkers supplied: see Bank of China Limited v the ship "Hai Shi" (no. 3)  FCA 660 at –
 as regularly occurred in relation to the proceedings involving the mv "Turakina" (see for example (1999) 161 ALR 587 at -,  FCA 1463 at  et seq
 The Westport (No. 2)  1 Lloyd's Rep. 549 and Meeson at [4.112]
 The Parita  1 Lloyd's Rep. 199; The Honshu Gloria  2 Lloyd's Rep. 63; Meeson [4.113]
 and thereby possibly preventing the purchaser from obtaining possession of the ship upon completion of the sale, at least without having to pay those fees itself (as to which see The Freightline One  1 Lloyd's Rep. 266 @ p. 272)
 see Thomas on Maritime Liens (Thomas) at 
 by meeting the Marshal's demands under rule 78 of the Rules
 as occurred with the sale of the mv "Turakina"
 The "World Star"  1 Lloyd's Rep. 452 at 456
 see Thomas at ; see also Reina (No. 2)  2 Lloyd's Rep. 513 and Patrick Stevedores No 2 Pty Ltd v Ship "Turakina"  FCA 1615 at 
 see the World Star  1 Lloyd's Rep. 452 at 454
 Patrick Stevedores No. 2 Pty Ltd v the ship "Turakina"  FCA 1615
 Patrick Stevedores No. 2 Pty Ltd v the ship "Turakina"  FCA 1615 at
 McGuffie 
 also described in the older cases as viaticum
 such as the ITWF, its P&I Club or the Consul of the country of nationality of the crew
 see World Star (op cit) at p. 455; Patrick Stevedores No. 2 Pty Ltd v Turakina (1998) 154 ALR 514
 see the General Serrett (1925) 23 Ll L Rep. 14 @ p. 15; Meeson at p. 139 and McGuffie 
 World Star (op cit) at p. 455 col 2; Mogileff and freight (1921) 17 Ll. L. Rep. 130
 see Berostar  2 Lloyd's Rep. 403 @ p. 403 citing The Leoborg (No. 2)  1 Lloyd's Rep. 380; that is unless all the parties otherwise agree (the James W Elwell  P. 351 @ p.363)
 Patrick Stevedores No. 2 Pty Ltd v Turakina (1998) 154 ALR 514
 Patrick Stevedoring No. 2 Pty Ltd v the ship "Turakina"  FCA 244 (unrep'd 13 March 1998)
 and as noted in the World Star (op cit) at p. 455
 pursuant to rule 49(1)(2)
 pursuant to rule 49(3)
 see rule 49(2)
 Myrto (No.2) (op cit) at pp. 347-48
 McGuffie at 
 McGuffie (ibid). The James W Elwell  P at p. 363 was an instance where a vessel and cargo were sold together but as the cargo was not under arrest, cargo owners were entitled to that portion of the proceeds of sale that were attributable to it (less a proportion of the costs of sale)
 being all of the proceeds of sale and before deduction of any fees and expenses incurred in connection with valuation or sale of the ship: Alexander Watt and Co Pty Ltd v the ship "Oceania Trader"  FCA six)
 see rule 71 of the Rules
 see rule 78B(1) of the Rules. This replaced the previous rule that had as an ordinary requirement that there would be a taxation of the Marshal's costs and expenses (see Bank of China Ltd v the ship "Hai Shi" (No.3)  FCA 660 at )
 Bank of China Ltd v the ship "Hai Shi" (No.3)  FCA 660 at 
 Bank of China Ltd v the ship "Hai Shi" (No.3)  FCA 660 at , 
 see section 24 of the Act
 in the absence of agreement between the claimants