Possessory Lien versus Maritime Lien - Assignment Example

MARITIME LAW NAME COURSE TUTORS NAME DATE Word Count 2726 Table of Contents Table of Contents 2 Question 1 3 “Possessory lien” versus “Maritime lien” 3 Hypothetical Description 3 Question 2 4 Actual loss versus Constructive total loss in Marine insurance 4 Question 3 5 Bill of lading versus a sea way bill 5 Question 4 7 The Himalaya Clause 7 Question 5 9 Difference between Salvage Convention regime and Australia’s modified international salvage regime 9 Justification for Australia adopting a modified International salvage regime 10 LIST OF REFERENCES 12 Question 1 “Possessory lien” versus “Maritime lien” A Possessory lien has priority over mortgages and accruing maritime liens, while a maritime lien (The Tolten [1946] P 135) is a privileged and secured claim against a ship in respect of services provided and gives rise to a right in rem against the thing (Admiralty Act 1988). This makes a maritime lien a substantive right in the property derived from general maritime law (Nell, 2009). In comparison with maritime lien, a possessory lien survives conventional sale, and it remains inchoate from the moment it attaches until it is enforced by an action in rem (Wiswall, 2008). In Halcyon Isle ([1981] AC 221), a contrast was drawn stating that maritime lien is not dependent on possession as a possessory lien, it attaches notwithstanding a change in ownership, even to a bonafide purchaser without notice (Cremean 2008). Hypothetical Description “The Garana II” was obtained via a mortgage agreement through Bank of Eanter. The agreement stated in part, “Mr. Anderson to pay $20,000 quarterly interest on money advanced for purchase of “The Garana II”, within 10 months”. Mr. Garana entered into a contract with Fears Repairs in which the ship was to be repaired at the cost of $2000 even though they both new that the repairs would only cost $500. The intention for this was to give the differentiated amount in order to advance it for the repayment of the loan. In the 9th Month the Bank of Eanter petitioned for the arrest of the “Garana II” because Mr. Anderson failed to pay the instalment (Yang 1999). Question 2 Actual loss versus Constructive total loss in Marine insurance Actual loss and Constructive loss falls under the category of total loss as provided under the Marine Insurance Act 1909. Actual total loss is concerned with the material and also physical loss while on the other hand constructive loss falls under the category of commercial loss as it is determined by arithmetic calculations (Ivamy, 1976). In Berger and Light Diffusers Pty Ltd v Polluck it was stated that actual loss had accrued though it had no any given value in its damage state. A constructive loss is treated as partial loss, hence one can abandon the subject-matter insured to the insurer and treat the loss as if it were an actual total loss, but requires due notice (Norwich Union Fire Insurance Society v Wm H Price [1934] AC 455). Generally, actual loss is common where the damages or the given cost of repair does equal or exceeds the value of the property (Turner, 1981). However constructive loss is experienced when the costs of repairs and the cost of salvage equal or exceeds the value. The Marine Insurance Act (1909) section 66(2) provides for instances where constructive total loss occurs and it also includes in cases of damage to goods, the cost of the repair and forwarding the goods to their destination would exceed their value. Section 63(1) of the same Act provides that the subject matter ceases to exist or one is irretrievably deprived of it gives rise to actual total loss (Francis, 2004). An insurance policy can give express provisions as to when a constructive loss can occur at Section 66 (1) of the Marine Insurance Act 1909, but in the absence of any express provision where the subject matter is abandoned on the account of total loss appearing to be unavoidable, or because it is preserved from actual total loss which would exceed the value. This provision hence provides that constructive loss does not give rise to a new ship but would only repair it. Thus actual total loss would require a person to be fully indemnified for the loss as opposed to having it repaired (Roover 1945). It can be thus deduced that the two terms are used in marine insurance to calculate the amount of that can be spent in indemnifying a person for the loss one suffers based on the goods and services one has lost. However their applications are different based on different situations. Question 3 Bill of lading versus a sea way bill A bill of lading is a sea carriage document as per section 2 of Carriage of Goods by Sea Act (COGSA) and it states the conditions and quality of goods when transferred from the custody of a carrier. A sea way bill is a non-negotiable form of a bill of lading where delivery is to be made to the named consignee without need for the production of the original way bill (The Chitrall [2000] 1 Loyds Rep 529). A sea way bill as per COGSA, 1992 is considered an evidential document as a consignee is given a right to sue a carrier in contract based on the terms of the sea way bill (Cain P, 2011). However a major contrast is drawn from that of a bill of lading and a sea way bill because a sea way bill does not transfer neither title nor constructive possession to the goods described in it. It has been long settled in law, in the case of Lickbarrow v Mason ([1768] 5 TR 683) that a bill of lading not only transfers possessory rights but also the rights of ownership. Despite this, a bill of lading is limited in terms of its operation because when goods reach the port of discharge before arrival of a bill of lading, the goods title cannot pass, without a guarantee to indemnify the ship owner against misdelivery claims. This is unlike sea way bills that as long as the consignees are named, delivery can be made without the original documents. Once a bill of lading has been transferred, a shipper cannot retain any rights under it but it cannot affect his liabilities under it as per Section 2(2) of COGSA. However a sea way bill is only an evidential document and the shipper retains all rights under it until a bill of lading or an original document is transferred only a proof of delivery (Canada Steamship Lines Ltd v Desgagne [1967] 2 Ex C.R 234) (Bundock, 2007). Shipping documents such as a bill of lading and a sea way bill gives liability to any shippers based on given circumstances. A sea way bill since it is a proof of delivery gives that carrier no liability whatsoever as long as the consignee makes the delivery but liability is retained by the carrier for any damage. A bill of lading however transfers liability of the goods to the consignee and when in good condition and carrier has no obligations over the goods. A bill of lading has various exemption clauses such as the jurisdiction, liberty and paramount clauses that give various rights to a shipper. For instance the jurisdiction clause determines the correct place of filing a suit (Baughen, 2009). This then gives one an opportunity to conclude that a bill of lading is a contractual agreement and sets out the terms. A sea way bill is not a contractual agreement, but it is only a proof of delivery. In this instance one can positively assert that a sea way bill and bill of lading are all shipping documents but a bill of lading has a high priority over a sea way bill. COGSA identifies that a bill of lading should not include any document that is incapable of transfer of property, and can be endorsed by a bearer bill (Grant v Norway (1851) 10 CB 665) (Mandraka-Sheppard, 2007). A sea way bill however does not need to be endorsed. Question 4 The Himalaya Clause The clause is usually described as a document that seeks include independent contractors, servants and agents of the carrier the benefits of exceptions and limitations available to a carrier under a bill of lading. This was based on the holdings in Alder v. Dickson [1954] 2 Loyds Rep. 267 (C.A), (The HIMALAYA) that ticket exception clause did not exempt Mr. Dickson. The Himalaya clause ideally provide that third parties seeking benefits of carrier’s exemptions and limitations had not contracted with the shippers or consignees this having a detrimental effect on the privity of contract (Dunlop Pneumatic Tyre v Selfridge & Co Ltd (1915) A.C. 845-853) In Australia it has been applied in the case of Godina v Patrick Operationa Pty Ltd 1Lloyd’s Rep .333 (N.W.C.A). The fact that there is no consideration that passes with the third party is sufficient reason to warrant its existence (Davies & Dickey, 2004, pg 102). Consideration in the law of contract is an essential element in a contract, and without it no valid contact exists. The four tests that are applied for a Himalaya clause to apply to any stevedores must pass the test laid out in (Scruttons Ltd v Midland Silicones Ltd [1962] AC 446) and consideration is one of them. Moreover this clause seeks to thwart intention of the parties that is a Himalaya clause should only seek to operate by deterring the party’s intention and not the provision of the written document. Privity doctrine provides no third party can benefit under contract law either through exclusionary or exemption clauses. It is contended that Himalaya clause can give a stevedore the opportunity to avoid liability (Jervis 2007) in the existence of a non-responsibility clause as per Tetley (1998). This provides that there will be no person responsible for any form of negligence that happens (Butler & Duncun, 1992). This also limits the application of good faith in the making of a contract as contemplated. Additionally, the fact that a Himalaya clause reflects the wishes of the parties, it ensures that the exclusions are there to protect third party interest and that any bill of lading is considered an evidence of the contract. This ensures that each of the parties act independently and also exempt them from any liability. Liability hence is restricted to the carriers and not the workers and this can give rise to negligence by the stevedores. This thus provides that a Himalaya Clause does not provide safe guards for unethical practices. Authority whether ostensible or actual authority determination is necessary as a basis of determining whether a person is exempted by the Himalaya Clause (White 2000). The clause needs to have been given by a person in authority such as a principal and not any other person. Intention of parties though linked to current status of cargo carriage is an important aspect. Force majeure and other perils at sea are capable of causing damage. The need of using vicarious liability as opposed to general liability is important based on the fact the stevedores are outside the main contractual agreement. Their assistance is necessary for the daily cargo handling in port and hence they need an assurance of exemption from liability. A Himalaya clause thus seems to act as a shield and not as a sword in terms of protecting the interest of stevedores. Liability is limited only to the contracting parties and the doctrine of privity does not apply to them. Question 5 Difference between Salvage Convention regime and Australia’s modified international salvage regime Salvage is a concept in maritime law that applies to any given property saved from a wreck or from the sea. Ideally, the Salvage Convention (1989) is considered an International Maritime Organization (IMO) initiative arising out of the Amoco Cardiz casualty (1978) and Australia acceded to it under sections 315 of the Navigation Act 1912. Firstly, the Navigation Act 1912 has reservations on the provision of Article 30 as regards recovery of items that are cultural and historic in nature (Farthing & Brownrigg 1997). The Salvage Convention recognizes the sovereignty of a state and respects its rights as regards salvage. However the Navigation Act at Sections 329 (c ) (1) has some exception as regards salvage done by the crown in that it gives a state or territory or the government of a prescribed country one is entitled to claim payment in respect of those and same rights, and remedies as any other salvour. In the period before in the Salvage Convention was incorporated, Stephen J summarized it in Fisher v The Oceanic Grandeur (1972) CLR 312 at 323) in relation to property salvage a view that was changed by the Convention (Street & Cox, 2011). The definition of a “vessel” in the Salvage Convention is limited to a ship or aircraft, or any structure capable of navigation. However the Navigation Act does exclude definition of ship and one has to determine using the ordinary meaning of the word as well as structures capable of navigation (The Gas Float Whitton [1897] AC 337). Article 2 of the Salvage Convention provides that the convention is to apply in any judicial or arbitral proceedings that relate to the matters mentioned. The Navigation Act however limits the application of the Article 2 of the Salvage Conventions by section 316 (2) and (3) excluding offshore industry fixed structures and mobile units that are used for exploitation of natural resources. Additionally section 396 of the Navigation Act 1912 provides for the limitation periods in which an action may be brought, but this is a departure from the Salvage Convention provision that the court has discretion to extend the hearing as it deems fit. The Salvage Convention gives duration of two years and commences on the day which the salvage operations are terminated (Derrington & White, 2002). This thus gives Australia opportunity to extend the minimum duration of limiting the action and does not provide a limit for which the extension of time can be limited. The salvage convention only provides guiding principles to govern salvage operations within all the waters while the Navigation Act 2012 only deals with where Australia is involved in the salvage operations. That is limiting it to the fact that salvage cannot be conducted within the internal or inland waters of the country. Justification for Australia adopting a modified International salvage regime A modified approach in the way Australia has adopted the provisions of The Salvage Convention 1989 provide a framework in which enforcement of international obligations can be done. It is good to note that International obligations are to be enforced by the state because no international organ is vested with obligations of overseeing them in action in the state (Derrington & White, 2002). Sovereignty of a state is also a factor in domesticating law, because a state is given an opportunity to reserve provisions of the convention that are inconsistent with their laws such as Article 30 of the Salvage Convention. International law at times fails to provide adequate penalties for persons who are liable for breaking rules in a convention. Section 317 A (2) of the Navigation Act provides that a master of a ship is liable for imprisonment for a term not less than ten years for failure of complying with the provisions. This shows that Australia focuses on giving enforcement criteria in dealing with those who contravene the conventions provision (Wisfall 2008). Protection of the judiciary vested with the interpretation of the law is not curtailed. The fact that the courts can interpret the provision of the convention and make necessary amendments that suits the needs of the Australian people is an important factor (Collier 1982). For instance the court can give and increase the duration that a person can bring an action arising out of a salvage claim. Salvage awards as per the Convention is limited to the extent of the Salvage operations and the success. Having a modified Navigation Act would enable Australia to adopt a better approach in giving compensation and rewards that reflects current trends of the economy and value of money. The Salvage Convention gives a country an opportunity to hold various reservations as concerns certain Articles within it (Birkland 2001). Australia exercises this right based on the fact that it failed to adopt certain Articles such as Article 30 of the Convention. This then shows that Australia modification would seek to adopt their own views to reflect those that are being reserved. Clauses added within a modified Act are comprehensive and gives jurisdiction to a court of law on what to use in case a suit arises. It is contended that where there is a conflict between the Salvage Convention and The Navigation Act 1912, the Navigation Act will prevail over the convention. This is because the superiority of laws ranks from Acts then to treaty law. In this case where no local legislation is given, a Convention would tend to prevail over the state laws. LIST OF REFERENCES Baughen, S., 2009, Shipping Law ,4th edn, Routledge-Candevish, Abrington. Bundock, M., 2007, Shipping Law Handbook, 4th edn, Informa Law, London. Cain, P. 2011, Maritime Law Study Guide: Maritime Cargo Claims legal sequence, Australia Maritime College Launceston. Butler, D. A. & Duncun, W. D., 1992, Maritime Law in Australi, Legal Books, Redfern. Birkland, T.A. 2001, An Introduction to the Policy Process: Theories, Concepts, and Models of Public Policy, M.E. Sharpe, Inc, New York. Davies, M. & Dickey, A., 2004, Shiping Law, 3rd edn, LBC, Sydney. Derrington, S. & White, M., 2002, ‘Australian Maritime Law Update: 2001’, Journal of Maritime Law & Commerce, vol. 33, no 3, pp. 275-290. Cremean, D.J.2009, Admiralty Jurisdiction: Law and Practice in Australia, New Zealand Singapore and Hong Kong, 3rd edn, The Federation Press, Annandale. Collier, J. G., 198, ‘Conflict of Laws: Carriage of Goods by Sea-Hague-Visby-rules contracting out’, The Cambridge Law Journal, vol. 41, no 2 pp 44-48. Farthing, B. & Brownrigg, M., 1997, Farthing on International Shipping, 3rd edn, Lloyd’s of London Press, London. Francis, D. R.., 2004, Maritime Insurance Law and Practice, LLP, London. International Convention on Salvage, 1989 [1998] ATS 2 Ivamy, C., 1976, Marine Insurance Act 1906, Butterworths, London. Jervis, B.G. 2007, Reeds Marine Insurance, Informa Law, London. Mandraka-Sheppard, A. 2007, Modern Maritime Law: and Risk Management, 2nd edn, Routledge-Candevish, London. Marine Insurance Act, 1909 (Cth), Available at: http: //www.aust ii.edu.au/au/le is/cth/consolact/mia 1909170/s66.html accessed on 6 June 2012. Nell, G., 2009, ‘The Arrest of Ships-Some legal issues’, Australian and New Zealand Law Journal,vol.39, no 23, pp. 33-44. Roover, F. E. D., 1945, ‘Early Examples of Marine Insurance’, Journal of Economic History, November, vol.5, no 2, pp. 172-200. Street, A. & Cox, E., 2011, ‘Personal Properties Securities Act 2009 and the Admiralty Act 1988’, Australian and New Zealand Law Journal, 126(23), pp. 4-14. Tetley, W., 1998, Maritime Liens and Claims, 2nd edn, Blais, Sydney. Turner, C., 1981, Australian Mercantile Law, Law Book Co, Sydney. White, W.D.M., 2000, Australian Maritime Law, Federation Press, Sydney. Wiswall, F.L., 2008, The Development of Admiralty Jurisdiction and Practice since 1800, Cambridge University press, London. Yang, D., 1998-1999, Comparative Analysis of Maritime Lien Priority Under United States and Chinese Law, Tulane Maritime Law Journal, Hein Online, available at:http://heinonline.org/HOL/LandingPage?collection=journals&handle=hein.journals/tulmar23&div=25&id=&page, Accessed on 5 June 2012. Read More