OZMEN ENTERTAINMENT PTY LTD AND ANOTHER V NEPTUNE HOSPITALITY PTY LTD (THE "SEADECK")

[2019] FCA 721, Federal Court of Australia, Rares J, 3 April 2019

Charterparty (demise) – Construction – Nature of demise charter – Warranty that vessel would be classed and surveyed to carry 800 passengers – Vessel not classed or surveyed at time of entering into charterparty – Whether survey for maximum of 450 passengers breach of charterparty – Notice to remedy breach – Termination – Vessel chartered into joint venture – Effect of failure of joint venture

This litigation arose out of a joint venture agreement to which the claimant had bareboat chartered the motor yacht Seadeck for the purpose of luxury cruises around Sydney Harbour for 800 passengers. Both agreements were concluded on 6 January 2016. The defendant was a party to the joint venture agreement (JVA), together with Kanki, a company associated with the claimant. The JVA stipulated cooperation between the parties, including fortnightly financial statements to Kanki and decisions to be taken jointly. The charterparty provided notably that Kanki and Neptune were to be in full possession and control of the vessel; Neptune was to carry out daily operations; charterers could not make alterations to the ship without OE's agreement; OE warranted that the vessel would need to be fully classed and surveyed for the business and to carry up to 813 passengers; Neptune was to ensure the maintenance of class and licences. Even before the agreements were concluded, things had begun going wrong as the vessel was detained for eight months in Egypt in transit to Australia from Turkey, arriving only in November 2015. Neptune had by then incurred significant expenditure to secure the vessel's release and to ensure repairs, refitting and surveys were performed in Indonesia. Problems continued as classification and a liquor licence could only be secured for 450 passengers. The catering agreement entered into by the joint venture with a party associated with Neptune made no profit for the joint venture. Fortnightly financial statements were not being provided. As business was not going well in Sydney, Neptune unilaterally decided to take the vessel to Brisbane. It also decided to remove 30 cm of the mast to permit passage under a bridge in Brisbane. By September 2018, the business relationship had broken down to such an extent that receivers were appointed. Kanki here claimed that it had terminated the JVA on 25 July 2017 based on Neptune's failure to remedy breaches thereof. OE claimed that it had validly terminated the bareboat charterparty on 4 August 2017 because the termination of the JVA meant the failure of the purpose of the charterparty. In the alternative, Kanki sought equitable relief, pleading that it was just and equitable to now wind up the venture. Neptune disputed these assertions on the facts. It argued that OE was not entitled to equitable relief as it had sought the assistance of a third party in disengaging, apparently intending to go into business with them instead. Neptune also cross-claimed sums based on the JVA. In relation to the charterparty, it argued that it had not been in breach by failing to secure classification for 800 passengers, as its obligation was solely to maintain class.