On 29 July 2011, the bulk carrier B Oceania sank following a collision with the vessel Xin Tai Hai in the Strait of Malacca. Atlasnavios Navegacao LDA (Atlas) owned the B Oceania, which was carrying 67,453 mt of iron ore fines owned by Hangzhou Cogeneration Import & Export Co Ltd. China Earth Shipping Inc (China Earth) owned the Xin Tai Hai. Subsequently, another vessel ran over the wreck of the B Oceania in the Strait of Malacca.

On 19 August 2011, Atlas filed a writ in the Singapore High Court, but did not serve that writ on the three occasions when the Xin Tai Hai called at Singapore. On 22 August 2011, the cargo owner applied for and obtained an order from the Qingdao Maritime Court of the People's Republic of China (the PRC Court) to collect evidence on the Xin Tai Hai. On 24 August 2011, China Earth began proceedings in the PRC Court to establish a limitation fund of the equivalent of 12,144,430 SDRs (equivalent to USD 18 million) under ch XI of the Maritime Code of the People's Republic of China 1992 (the Maritime Code) and art 102 of the Supreme People's Court Interpretations on the Application of the Special Maritime Procedure Law of the People's Republic of China 2003. On 7 September 2011, the cargo owner obtained an order from the PRC Court for the arrest of the Xin Tai Hai. On 19 September 2011, the cargo owner commenced proceedings against China Earth in the PRC Court claiming USD 12,708,563 in damages. Around this time, the cargo owner arrested the B America, a sister ship of the B Oceania, elsewhere and obtained security for its release. On 31 October 2011, the PRC Court issued a further notice confirming the establishment of a limitation fund of RMB 124,764,867.13, equivalent to 12,144,430 SDRs.

On 4 November 2011, Atlas commenced two proceedings arising from the loss of B Oceania. The first was in the Federal Court of Australia (the Australian Court), where a writ was issued for a maritime lien claim seeking damages against the Xin Tai Hai. The second was an application for registration of a creditor's right in the PRC Court in respect of China Earth's application to establish a limitation fund, seeking to register Atlas's claim for USD 105 million in damages. Both claims included wreck removal costs of about USD 65 million.

China Earth applied to set aside the arrest and stay the proceedings before the Australian Court. China Earth contended that Atlas could not maintain the Australian proceedings for two reasons: (1) the arrest warrant and arrest should be set aside because Atlas did not disclose to the Registrar of the Australian Court, when applying for the warrant, the existence of its proceedings in the PRC Court against China Earth; and (2) the Australian proceedings were vexatious and oppressive because they were in respect of the same subject matter as those in the PRC Court. If the Australian proceedings were not dismissed or stayed, China Earth contended that Atlas' claim for wreck removal costs did not fall within the excepted art 2.1.d of the LLMC 1996, but rather fell under the limitation granted by art 2.1.a of the LLMC 1996, being consequential loss resulting from a direct connection with the operation of the Xin Tai Hai.

Atlas stated that it would withdraw its claim in the PRC Court if it was allowed to continue proceedings in the Australian Court.

Held: Application dismissed.

China Earth's application to set aside the arrest warrant is rejected. The Australian Court has jurisdiction to arrest the Xin Tai Hai and determine Atlas' claim. Proceedings in the PRC Court do not affect such jurisdiction. As such, the plaintiff has a prima facie right to insist upon the exercise of the Court's jurisdiction. The defendant had the onus of establishing that proceedings thus commenced should be stayed on the ground that Australia was a clearly inappropriate forum (Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, 554, 571 (HCA)).

China Earth's argument of non-disclosure of information by Atlas could not have affected Atlas's right under Australian admiralty law to arrest the Xin Tai Hai and was therefore rejected. The Australian Court examined the law as to disclosure in various jurisdictions.

In England, the older position as to the duty to disclose information was as follows. Under O 75 r 5(1) of the English Rules of the Supreme Court 1965 (RSC), the power to order an arrest was discretionary, not mandatory. The Court's exercise of its power could be affected by the manner in which, or the purpose for which, the plaintiff had proceeded. Thus the position then was that in ex parte proceedings seeking the issue of an arrest warrant, the arresting party had a duty to make full and frank disclosure of all material facts known to it (The Andria now renamed Vasso [1984] 1 QB 477, 491G-492B (CA) (The Vasso)). Subsequently, RSC was amended in 1986 to provide for the issue of an arrest warrant as of right; it was no longer a discretionary remedy (The Varna [1993] 2 Lloyd's Rep 253, 255-256 (CA)). Consequently, the requirement for full and frank disclosure mandated by The Vasso was inapplicable.

In both Hong Kong and Singapore, the power to issue an arrest warrant is discretionary, and the arresting party is required to make full and frank disclosure of all material facts in its arrest application: Sin Hua Enterprise Co Ltd v Owners of Motor Ship Harima [1987] HKLR 770, 772D-773B (HKCA); The Rainbow Spring [2003] SGCA 31, [2003] 3 SLR(R) 362 [32]; The Vasiliy Golovnin [2008] SGCA 39, [2008] 4 SLR(R) 994 [83]-[84].

As for Australia, the Australian Admiralty Act and Admiralty Rules do not expressly require an arresting party to disclose matters other than those expressly stated in the Australian Admiralty Rules. It is inappropriate to impose a duty on an arresting party seeking the issue of an arrest warrant that comprises an unqualified obligation to make full and frank disclosure of other material facts beyond those specified in the Australian Admiralty Act and Admiralty Rules as necessary to be established to invoke the exercise of the power to issue a warrant under r 40(1) of the Australian Admiralty Rules. Sea Containers Ltd v Owners of Vessel Seacat 031 [1993] FCA 1080 should not be followed.

Australia has not been shown to be a clearly inappropriate forum. The circumstances in which to assess whether China Earth had established that a stay should be granted must be those that existed at the time of the Xin Tai Hai's arrest and immediately thereafter. At the time of the arrest application, the information then available was insufficient to gauge whether Australia was a clearly inappropriate forum. Even if the PRC Court were not to permit Atlas to withdraw its claim against China Earth, Atlas regularly invoked the Australian Court's jurisdiction and sought the benefit of the legitimate advantages of the greater amount of security for its claim, a larger limitation fund and exclusion from limitation of liability of wreck removal expenses to which it seemed, prima facie, to be entitled.

Despite the availability of expert evidence on Chinese law, it was inappropriate to make findings on whether Atlas would be able to withdraw its claim in the PRC Court to pursue the Australian proceedings. It was inappropriate to predict how the PRC Court would decide this issue.

The difference in the limitation of liability regimes of the PRC, Australia, and Singapore revealed the benefit of arresting in Australia.

The PRC was not a party to, and had not ratified the LLMC 1976. However, the Maritime Code had provisions broadly similar to those of LLMC 1976, and included the right to limit for wreck removal claims. China's procedural law, like that of many maritime nations (and as contemplated by art 14 of the LLMC 1976), provided time limits for persons to claim on a limitation fund.

In contrast, Australia has given the force of law to the LLMC 1996. Australian domestic legislation thus has significantly higher limitation amounts. Therefore, if Atlas is able to maintain the Australian proceedings, any limitation fund established in Australia by China Earth will be about USD 35 million ie more than that in the PRC Court. Also, Atlas might be able to establish that the wreck removal costs for the B Oceania, of about USD 65 million, are not subject to limitation in Australia, unlike the position in China (see s 6 of the Limitation of Liability for Maritime Claims Act 1989 (Cth) which excludes art 2.1.d of the LLMC 1976).

Meanwhile, Singapore appeared to be a party to LLMC 1976, but did not adopt LLMC 1996. Singapore also appears to have allowed persons in China Earth's position, but not salvors, to limit liability for wreck removal, as does China. Thus, there was no incentive for Atlas to serve its writ and arrest in Singapore. Separately, China Earth could not use the possibility of arrest in Singapore to support its case, due to the lack of expert evidence on Singapore law.

China Earth's argument that Atlas had an improper purpose in commencing proceedings in Australia was rejected. Atlas' right to arrest the Xin Tai Hai, and the Xin Tai Hai's presence as a party in proceedings in rem in the Australian court were not available to Atlas in the PRC. Once the limitation fund had been established under the domestic law of the PRC, Atlas could not attain the status of a secured creditor there, nor could Atlas treat the Xin Tai Hai as a party there. Because the PRC has not ratified the LLMC 1976 or LLMC 1996, the existence of the limitation fund in the PRC Court of itself does not stop anyone from arresting the ship in an action in rem anywhere else (unlike the position under art 13 of the LLMC 1976). Of course, Atlas had submitted to the jurisdiction of the PRC Court and so has become subject to the operation of Chinese law, including its provisions to protect the property of the shipowner, or a person in China Earth's position, who had established a limitation fund on which Atlas had sought to make a claim. However, Atlas initiated these proceedings at a time when it appeared that Australia was a possible destination for the Xin Tai Hai in the future. Atlas did so in the knowledge that there was a real possibility that the very large wreck removal expense might not be subject to limitation because of s 6 of the Limitation of Liability for Maritime Claims Act 1989 (Cth) when read together with the right to exclude such claims in art 18.1 of the LLMC 1976. If Atlas could achieve that result and escape any substantial finding of fault on its part, it could recover judgment for a substantial part of its loss. That would be a far cry from what the same findings would produce in the PRC Court because of the lower amount of the limitation fund and the inclusion of wreck removal expenses in the limitable claims. For this reason, Atlas' arrest of Xin Tai Hai was a proper and legitimate use of the Australian Court's process.

Finally, it was inappropriate to determine at this stage whether China Earth's argument that the damage suffered by paying for wreck removal was consequential loss resulting from the operation of the B Oceania and so within art 2.1.a of the LLMC 1976. Such a construction would give art 2.1.d of the LLMC 1976 very little work to do when it expressly relates to claims in respect of wreck removal. Parties to the LLMC 1976 thought that there could be good policy reasons to allow a State Party to exclude claims under art 2.1.d of the LLMC 1976 from being subject to limitation, as Australia has done, and for that exclusion to mean what it said.