Lloyd's Maritime and Commercial Law Quarterly


Martin Davies *


1. Bank of New Zealand (as Security Trustee) v Vessel MY Island Escape 1

Admiralty jurisdiction—whether sale pendente lite should be made without prior valuation
The plaintiff bank proceeded in rem against the luxury cruiser Island Escape to foreclose on a mortgage as a result of default by the mortgagee’s failure to make agreed payments under the loan agreement. After Island Escape was arrested in the port of Broome, Western Australia, two other claimants filed caveats against release from arrest, one claiming that it had not been paid for services as ship manager, the other claiming that it had not been paid for the supply of provisions. The relevant persons (the entities that would be liable in personam), two corporations now in receivership, did not enter an appearance. The plaintiff applied for Island Escape to be sold pendente lite without a valuation, a procedure that is permitted by the Admiralty Rules 1988 (Cth), r.69(1)(c).
Decision: Ship to be sold pendente lite but with a valuation if necessary or desirable for the purpose of the sale.
Held: (1) The principles governing the valuation and sale of ships pendente lite while under arrest are well settled.2 Sale pendente lite should be ordered in the present case because: (a) the defendants had not entered an appearance and neither they nor their corporate receivers opposed the sale; (b) the costs of arrest would diminish the plaintiff’s security, the proceeds available to the other claimants, and any residual amounts available for distribution to the companies in receivership, because evidence suggested that Broome is the most remote and expensive port in Australia at which to maintain a vessel under arrest; (c) maintaining the ship under arrest would have an adverse impact on the crew and those managing the ship; (d) there was no apparent prospect of any interested person providing security for the ship’s release.
(2) The plaintiff had asked for sale without prior valuation because the market for Island Escape, a luxury cruise ship, would be small and potential purchasers would probably be located outside Australia. Although the plaintiff had nominated four specialist shipbrokers, one of which had provided its own valuation of Island Escape, the sale pendente lite should be conducted by the Marshal in the manner best calculated to achieve


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