Insights

1. Strengthening the CBP Transport and Logistics team

Since the last issue we have welcomed Andrew Tulloch, who joined the partnership in March this year. He is working alongside Andrew Probert in the Melbourne office and has added a great deal of maritime and aviation legal experience to the Transport and Logistics team.

Greg McCann has also joined the firm as a partner with particular expertise in work health and safety.

The firm now has a Brisbane office following the recent merger with Hemming+Hart.

2. Federal government legislation

The Maritime Labour Convention came into force on 20 August 2013 and is implemented in Australia by the Navigation Act 2012, which commenced operation on 1 July 2013. (It is substantially regulated by Marine Orders). The Marine Safety (Domestic Commercial Vessels) National Law Act 2012 commenced on the same day.

3. New South Wales

On 12 April 2013 the NSW government announced the long term lease of Port Botany and Port Kembla to a consortium made up of industry funds manager Australian Super and Tawreed Investments Limited. Since then, in the state budget on 18 June 2013, the NSW government has announced its intention to enter into similar arrangements in relation to Newcastle Port.

4. Liner shipping: conference agreements

It was reported in Lloyds List Australia on 7 November 2013 that in New Zealand the Commerce (Cartels and Other Matters) Amendment Bill will amend the Commerce Act 1986 and will remove the liner shipping anti-trust exemptions in trades serving that country. It seems to be anticipated that New Zealand's new pro-competition regime will come into effect from late 2015 or 2016, following a two year transition period. Meanwhile the alliances (known as P3) between Maersk, MSC and CMA, CGM and the other alliance (known as G6) between APL, Hapag Lloyd, Hyundai Merchant Marine, Mitsui OSK, NYK and OOCL have come into being.

5. Federal government

There was a change of government at the federal level in Australia on 7 September 2013. On his election the new Prime Minister Tony Abbott described Australia as being "open for business". However, the recent return of the "APL Turquoise" to Southeast Asia without discharging any of its container cargo, due to alleged breaches of Marine Order 32, may cause some to question the correctness of that statement.

The federal treasurer Joe Hockey has recently announced his decision to block the proposed takeover of Graincorp by US agribusiness giant Archer Daniels Midland. The takeover was opposed by the National Party.

The new Deputy Prime Minister and Minister for Infrastructure and Regional Development, the Hon Warren Truss MP, speaking after the election at the Pacship 2013 Shipping & Export Leaders' Summit, said as follows:

It is in Australia's interest to ensure that exporters have access to safe, reliable and cost effective shipping services. With all of that in mind, I want to look at Australia's current regulatory arrangements and work with the industry to ensure that we remove unnecessary burden and red tape and that our regulatory arrangements facilitate rather than hinder competition and productivity. This is part of our broader election commitment to reduce the cost of red tape to the Australian economy by $1 billion each year. At the time the shipping reform package was introduced over 12 months ago I was concerned at the increased red tape imposed on vessels, especially foreign-flagged vessels, trading in Australian coastal waters. During the parliamentary committee processes many shipping companies raised concerns about increasing red tape under the new requirements and I am determined to put the current system under the microscope to streamline processes and foster a vibrant and sustainable shipping industry in Australia. This will include looking at the eligibility requirements around the Temporary Licence application process and applications for a variation to a permit. I know the current system has caused problems for local manufacturers and for the movement of bulk goods around our coast... To put it bluntly there is no point in artificially propping up our coastal shipping industry if it is unable to compete - it will have an impact on our broader economy... I want vessels to be Australian flagged, but most of all I want an industry that is efficient, reliable, safe and doing the job that its customers expect.

The shipping industry will no doubt be watching with interest to see:

• what changes will be made to the coastal shipping regime. (Lloyds List DCN reported on 29 August 2013 that between 2007/08 and 2011/12 there had been a drop of 2.5 million MT of cargo carried around the Australian coast); and

• whether the anomalous intrusion of the Fair Work Act into coastal shipping will be removed and whether the surcharge levied by the previous government under the Protection of the Sea Levy (Shipping Act 1981) which was extended beyond the period originally announced by former Minister Albanese, will now be removed.

6. Shipping cases

Since our last issue in February 2013, on 23 September 2013 we published a case note, Foreign arbitration awards on voyage charterparties enforceable under Australian law, on the Full Court's decision in the Dampskibsselskabet Norden A/S v Gladstone Civil Group Pty Ltd [2013] FCAFC 107, 18 September 2013.

The first instance decision in Dampskibsselskabet Norden A/S v Beach Building & Civil Group Pty Ltd 2012 FCA 696 was discussed in our earlier case note Foreign arbitration clauses in voyage charter parties held not to be effective, published on 20 July 2013.

We have also published a case note since our last issue on the case ACN 055 378 240 Pty Ltd (formerly Marine & Civil Construction Company Pty Ltd) v SGS Australia Pty Ltd [2013] FCAFC 46, 16 May 2013.

On 12 August 2013 we published the case note Charterers entitled to withhold hire due to underperformance of vessel, discussing the case Bulkship Union SA v Clipper Bulk Shipping Limited (the "Pearl Sea") [2012] 2 Lloyds Rep 533.

Federal Court of Australia

Matthew Edward Thomas v APL Co Pte Ltd t/as APL Lines (Australia) [2013] FCA 911

In a judgment delivered on 30 August 2013, Rares J refused an application for an extension of time within which to file a notice of appeal. The then named Federal Magistrates Court had given judgment in favour of APL Co Pte Ltd against Mr Thomas in respect of his failure to return a 40 foot container.

The claim had relied upon contractual rates contained in the electronic input delivery order agreement, which had contained a provision requiring the container to be returned within 60 days of the commencement of the period of free time, being the first 10 days after the first day of availability for collection at the terminal of the discharged cargo.

In refusing the application, Rares J expressed the opinion that Mr Thomas had suffered an erroneous entry of judgment in an excessive sum that had no legally justifiable basis, but he was not satisfied that Mr Thomas had a sufficiently arguable case that he was not liable at all for any damages for the wrongful detention, or failure to cause the return, of the container.

Yu v STX Pan Ocean Co Ltd (South Korea) [2013] FCA 680, 11 July 2013

The plaintiff, who was appointed receiver of STX Pan Ocean Co Ltd on 17 June 2013, applied for recognition as a "foreign representative" of STX and for recognition of proceedings commenced in Korea as a "foreign proceeding" under the Cross-Border Insolvency Act 2008, which gives effect, from 1 July 2008, to the Model Law on Cross-Border Insolvency of UNCITRAL.

The judgment sets out all the relevant provisions of the Model Law. Orders were made that the rehabilitation proceedings by which the plaintiff was appointed should be recognised as a foreign proceeding, that the plaintiff should be recognised as a foreign representative and a further order that "any application for the issue of a warrant of arrest in Australia of any vessel owned or chartered by the defendant be dealt with by a judge of this court and these reasons for judgment be drawn to the attention of the court at the time any such application is made".

Orders had been sought pursuant to Article 21 of the Model Law to the effect that "no proceeding in any court against the defendant, or in relation to any of its property, may be begun or proceeded with" and that "no enforcement process in relation to property of the defendant may be begun or proceeded with." Such orders would clearly have precluded any arrest of any of the defendant's ships visiting Australian ports. In his judgment his Honour said (at paragraph 39):

A criticism has been made of the terms of the Model Law by reason of its failure to recognise and take appropriate account of international maritime law and the operation in Australian jurisdictions of the Admiralty Act. I do not propose to take up those matters in the present Judgment, but those criticisms draw attention to the fact that, for centuries, international maritime law developed its own security regimes for reasons which remain generally observed around the world, including in Australia.

In paragraphs 41 and 42 he continued:

41. I can see no reason at present why an action in rem to enforce a maritime lien would not fall within the operation of s471C (s471C provides that s471A and B did not affect a secured creditor's right to realise or deal with a security. S471A prevents persons exercising the functions or powers as an officer of a company which is being wound up and s471B precludes the commencement of proceedings or enforcement process in relation to such a company's property without leave of the Court when it is being wound up under the Corporations Act, as contemplated by Article 20(4) of the Model Law.) I can see no basis, either, for extinguishing or modifying at the present time any recourse to s471B of the Corporations Act. Those potential rights may require assessment according to the circumstances of particular cases but, to take a simple example, there may be a very good reason why a claim for seamen's wages, normally enforceable as a maritime lien, should not be affected by recognition of the foreign main proceedings.

42. I see no reason at present either to curtail or foreclose the exercise of rights which are recognised by the model law itself. The terms of Article 20 of the Model Law will take effect automatically, but I see no reason why the arrest of a ship owned or operated by the defendant which is in Australian waters could not be sought in appropriate circumstances, without having to overcome an order such as proposed order 5. Whether an arrest warrant would issue would depend on the circumstances, the reason why the arrest was sought and the interests sought to be vindicated by the action in rem. Such an application could be made to a Judge of the Court rather than to a Registrar. Full disclosure should be made to the Court that the foreign proceedings have been recognised under the Cross-Border Insolvency Act 2008 (Cth) and the terms of this judgment should be drawn to the attention of the Judge at the time any such application is made.

High Court of New Zealand

Svitzer Salvage BV (Svitzer) and Z Energy Limited (Z Energy) and Sea Fuels (Sea Fuels) Limited: judgment of Goddard J dated 4 October 2013.

This judgment deals with applications for summary judgment sought by the defendants and/or a strike out of the causes of action by Sea Fuels Limited or a review of the earlier interlocutory decision by Associate Judge Gendall (20 July 2012), which was summarised in the February 2013 edition of Shipping News.

The facts which give rise to this claim are the grounding of the MV "Rena" on the Astrolabe Reef off the Port of Tauranga in the Bay of Plenty. Svitzer, as salvor of the vessel, had entered into a charter party to hire a bunker tanker to which it could pump the fuel oil from the "Rena" with Sea Fuels (Sea Fuels having negotiated a temporary release of the vessel from its charter with Z Energy).

As between Svitzer and Sea Fuels, Svitzer sought in the proceedings to have the charter party set aside on the basis that it had been entered into under duress; that it was manifestly unjust, inequitable and exorbitant; that it was entered into under the influence of danger, such that its terms were inequitable or the payment made is excessive for the services rendered.

Sea Fuels argued that there was no duress, that the Admiralty Court does not have jurisdiction to set aside an agreement between a salvor and a third party for the hire of a vessel, and if that is incorrect, the jurisdiction has been lost since the Salvage Convention was incorporated into New Zealand law and the Salvage Convention does not apply to a charter party. As between Svitzer and Z Energy, Svitzer argued that if the charter party with Sea Fuels was set aside and Z Energy had actual constructive knowledge of the circumstances giving rise to its being set aside or annulled, Z Energy will be obliged to return all sums paid by Svitzer to Sea Fuels and subsequently passed on to Z Energy by Sea Fuels.

Svitzer argued that the global daily charter rate of $200,000 plus GST which it was required to pay for the charter was exorbitant. Z Energy responded to the effect that there was no cause of action against it, it did not own the vessel and was not a party to the charter party and that Sea Fuels' separate contractual arrangement with Z Energy was of no relevance, and Z Energy was not involved in the negotiations between Svitzer and Sea Fuels.

Sea Fuels was successful in its application for summary judgment in relation to the duress issue in so far as it was sought by Svitzer to have the charter party set aside. However, Sea Fuels was unsuccessful in obtaining summary judgment in relation to the Admiralty jurisdiction and the Salvage Convention arguments.

Z Energy was successful in respect of all three causes of action.

That therefore leaves open for another court hearing the interesting arguments as to whether the court in the exercise of its admiralty jurisdiction could open up the charter party between Svitzer and Sea Fuels if its terms are "manifestly unjust and unfair" and whether Article 7 of the Salvage Convention which allows a contract or terms of a contract to be annulled or modified applies to agreements such as the charter party, or is limited to salvage contracts.

English cases

Kuwait Rocks Co v AMN Bulkcarriers Inc (the "Astra") [2013] 2 Lloyds Rep 69

Clause 5 of the NYPE form of charter in this case provided:

Payment of said hire to be made in London in cash in United States currency, 30 days in advance, and for the last 30 days or part of same, the approximate amount of hire, hire is to be paid for the balance day by day as it becomes due, if so required by Owners, otherwise failing the punctual and regular payment of the hire, or bank guarantee, or any breach of this Charter Party, the Owners shall be at liberty to withdraw the vessel from the service of the Charterers, without prejudice to any claim they (the Owners) may otherwise have on the Charterers.

In this case the charter party also contained an anti-technicality clause, requiring owners to notify the charterers of the non-payment and providing them with two further banking days to remedy the position. After a number of defaults and renegotiations, a notice was sent by owners. Payment not having been made, the owners withdrew the vessel, terminating the charter party.

The owners claimed unpaid hire due up to the time of withdrawal and damages for loss of earnings from the date of withdrawal until the earliest date when the vessel might have been redelivered, but allowing for the earnings received under the substitute charter which it had entered into for the balance of the charter period with the charterer, but at a reduced rate of hire.

Flaux J upheld the arbitrator's decision that the charterer's failure to pay amounted to a repudiation of the charter and entitled the owners to terminate the contract and claim damages.

Kairos Shipping Limited v Enka & Co LLC (the "Atlantic Confidence") [2013] 1 Lloyds Rep 82

In this case, the question was whether a limitation fund under the Limitation of Liability for Maritime Claims 1976 (LLMC) Convention could be established by a letter of undertaking supplied by the P&I Club instead of a payment into court. It was held by Simon J that although the LLMC provides in Article 11 that a fund could be constituted "either by depositing the sum, or by producing a guarantee acceptable under the legislation of the State Party, where the fund is constituted and considered to be adequate by the Court or other competent authority", there was nothing in the United Kingdom which permitted a guarantee to be issued instead of cash.

In reaching that conclusion, the judge referred to the Federal Court of Australia decision of Sheppard J in Barde AS v ABB Power Systems (the Barde Team) [1995] FCA 1602, where Sheppard J pointed out that there was no such legislation in force in Australia either.

Yuzhny Zavoid Metall Profil v Eems Berheerder BV (the "Eems Solar") [2013] 1 Lloyds Rep 7

This decision of the Admiralty Court in England related to a cargo of steel coils shipped from China to Russia. They were shipped on a small vessel with a crew of only five, but the cargo was stowed by charterer's stevedores and although the master was not entirely satisfied with the way the cargo was secured without locking coils in the single tier rows, he had little alternative but to instruct the stevedores to double lash the coils. The bill of lading holders alleged that the damage to the coils was caused by the fact that the vessel did not carry sufficient lashing material and the crew had failed to carry out cargo inspections during the voyage and/or to resecure the cargo properly. The court held that the proximate cause of the damage was the failure to use locking coils and the receiver's claim failed as the owners were not contractually responsible for loading and stowing the cargo. Clause 5 of the charter party (which was incorporated into the bill of lading) provided that:

(a) Costs/risks

The cargo should be brought into the holds, loaded, stowed and/or trimmed, tallied, lashed and/or secured by the Charterer free of any risk, liability and expense whatsoever to the Owners. The Charterer should provide and lay all dunnage material as required for the stowage and protection of the cargo onboard, the Owners allowing the use of all dunnage available onboard.

Jervis Kay QC, the Admiralty Registrar, held that the charter party clauses which excluded the shipowners' responsibility for stowage were effective, provided that the shipowner had not intervened in the cargo operations, which he held that it had not in the circumstances of this matter.

Standard Chartered Bank v Dorchester LNG (2) Ltd (the "Erin Schulte") [2013] 2 Lloyds Rep 338

The bank claimed against a shipowner for misdelivery and conversion of cargo which had been delivered without production of bills of lading. The cargo of 18,000 MT of gas oil had been sold under letter of credit terms. The plaintiff bank had confirmed the prime letter of credit. The gas oil had been shipped in two parcels onboard two different vessels. The receivers rejected the cargo on quality grounds on both vessels.

One of the consignees agreed to buy the cargo at a reduced price on one of the vessels. The cargo on the first vessel was delivered against letters of indemnity and not against production of a bill of lading. The plaintiff bank asserted that it was the holder of the bills of lading pursuant to the UK's Carriage of Goods by Sea Act 1992 (the "Act"), on the basis that it accepted delivery of the endorsed bills of lading on 4 June 2010, or alternatively it became the lawful holder of the bills on 7 July 2010 at latest, when it paid the sum due under the letter of credit.

It argued that, although the bills had become spent once discharge commenced on 15 June 2010, the plaintiff had become the holder of the bills pursuant to the Act, by virtue of the transaction effected in pursuance of the transfer letter of credit which was a contract made before the bills had been spent; it was therefore entitled to sue on the contract contained in or evidenced by the bills of lading and in discharging the cargo, otherwise than on presentation of the bills, the shipowner was in breach of that contract.

Teare J accepted that the plaintiff received the bills into its possession and accepted delivery as the endorsee of the bills on 4 June 2010, and rejected a submission made by the shipowners that there could be no delivery until the plaintiff had decided to honour the letter of credit. It was also accepted by the court that even if the delivery of the bills of lading did not occur until the plaintiff had decided to honour the letter of credit, it must have occurred on 7 July 2010 and although the bills had become spent once discharge commenced on 15 June, the plaintiff had become the holder of the bills pursuant to the Act by virtue of the transaction effected in pursuance of the transfer letter of credit, which was a contract made before the bills had been spent. Accordingly the plaintiff had title to sue.

Versloot Dredging BV v HDI-Gerling Industrie Versicherung AG (the "DC Merwestone") [2013] 2 Lloyds Rep 131

In November 2013 we published a case note by Andrew Tulloch about this case, Court rejects insurance claim of ship owners because of "fraudulent device" used in making claim. This decision provides a salutary lesson regarding the dangers of supporting a claim with a "reckless untruth", as the insured was deprived of an otherwise valid claim of some €3.2 million as a result. The insured had falsely alleged that the bilge alarm on the vessel had gone off but was ignored.

Breffka and Henhke GMBH & Co KG and Ors v Navire Shipping Co Ltd & Ors (the "Saga Explorer") [2013] 1 Lloyds Rep 401

A cargo of steel pipes was found to be rust damaged on arrival and the issue was whether fraudulent representations as to the order and condition of the cargo had been made on the bill of lading and whether the cargo owner was entitled to damages.

A load port survey had noted that the cargo was "in apparent good order and condition with the following damage/exception" and had then annexed 16 pages of descriptions of the cargo such as "partly rust stained", "wetted before shipment by rain and partly rust stained and slightly scratched on surface" and "wetted before shipment by rain and partly rust stained in white oxidation on surface". These exceptions were noted on the mate's receipt. The bills of lading made no reference to the exceptions but contained a RETLA clause.

The evidence in the case was that the shipper had requested that the bills of lading be issued un-claused, against letters of indemnity. Mr Justice Simon held that the decision to issue and sign clean bills of lading involved false representations by the owners which were known to be untrue and intended to be relied on. The claimant as the holder of the bills of lading had relied on the representation to their detriment and had suffered loss and damage to the extent of USD $458,655.69. The judge rejected a submission that on the basis of US authority, the RETLA clause applied to all rust of whatever severity.

Dry Bulk Handy Holding Inc v Fayette International Holdings Limited & Anor ("the Bulk Chile") [2013] 2 Lloyds Rep 38

The Court of Appeal in England has held that a shipowner was entitled to rely on a charter party lien on sub-freights.

The facts were that Dry Bulk Handy Holding Inc (DBHH), the owner of the vessel, had chartered it to an undisclosed principal (CSAV) and had then sub chartered it to Korea Line Corporation (KLC). KLC then entered into a trip charter party with Fayette International Holdings Limited (Fayette), (both on NYPE terms which provided owners with a lien on all cargoes and sub-freights), which had then entered into a voyage charter party with Metinvest International SA for the carriage of steel products from Russian ports to Indonesia and Malaysia.

Owners' bills of lading were issued, evidencing contracts between the owners and Metinvest. KLC failed to pay two hire invoices, so DBHH sent to Fayette and Metinvest a notice of lien requiring them to pay freight and/or hire to the owners and a further notice purporting to exercise a lien on the cargo. Owners' bills of lading were issued noting "freight payable as per the voyage charter party". The vessel was withdrawn from KLC's service.

The first question for the Court of Appeal's decision was whether or not the shipowner was entitled to demand payment for itself for freight under its bill of lading when that contract stipulated for payment to another party, provided that it makes the demand before the freight has been paid to the other party.

The second issue was whether or not the two notices given by the shipowners to the shippers and bill of lading holders were effective to require payment of bill of lading freight to the shipowners, rather than to the disponent owners from whom the shippers had voyage chartered the vessel. This therefore required the court to determine the proper construction to be given to the two notices. The third question on appeal related to the construction to be given to two messages from the disponent owners, one addressed to the shipowners and one addressed to the master of the vessel and whether they amounted to an express or an implied request to the shipowners to complete the voyage, thereby generating in the disponent owners an obligation to pay the reasonable remuneration to the shipowners for so doing. The Court of Appeal answered all those questions in favour of the owners.

Bank of Scotland PLC v The Owners of the M/V "Union Gold", "Union Silver", "Union Emerald" and "Union Pluto" [2013] EWHC 1696.

Mr Justice Teare ordered that four vessels be sold, prior to judgment, and dealt with an application for an order that the Admiralty Marshal, instead of appraising and selling the vessels to the highest bidder in accordance with his usual practice, should sell the vessels at a certain price to a certain buyer. His Lordship declined to make the latter order in relation to three of the vessels but granted it in relation to one of them.

In essence, the mortgagee bank wanted the Marshal to sell the vessels to buyers found by the bank and at prices which the bank considered were not below the market value. There were two particular concerns expressed by the court in relation to the proposed sales by the bank. The first was that there was no clear evidence that the valuations obtained by the bank took into account that a sale by the court is one which is free of encumbrances and might therefore be thought to be of more value than a sale by the bank pursuant to its rights under the mortgage. If there was no appraisement by the court, there was no certainty that that aspect would be taken into account in the valuation and any such appraisement by the court is treated confidentially.

The other concern of the court was that the bank's proposal would not allow the Marshal to advertise the sale and invite offers to buy the vessel. Accordingly the court reached the conclusion that it would be wrong in principle for the court to depart from the usual order that the Marshal sell the vessel by appraisement, advertisement and inviting bids to purchase the vessel. However, there were special circumstances applying to one of the vessels, essentially that it required a prompt sale for commercial reasons, and was an elderly vessel.

Great Elephant Corporation v Trafigura Beheer BV ("the Crudesky") [2013] 1 Lloyds Rep 77

This case involved a number of different parties, but essentially a consistent legal issue arose under their various contractual agreements. The claims involved the chartering of the vessel "Crudesky" to load a quantity of crude oil from the AKPO FPSO terminal, where the Nigerian authorities required an official from the Department of Petroleum Resources to be present during the loading of vessels.

At the time when the vessel arrived, that official was not present. The terminal operator's supervisor sought approval from a superior to sever the padlock on the export valve in its loading operations. The next day the government official arrived. After completion of loading, the vessel was prevented from leaving for some weeks. A fine was levied by the government and paid by the terminal operator.

Demurrage was claimed, but the charterer claimed that it was only liable to pay half-rate demurrage by reason of the force majeure clause in the charter party, which provided that where there was "arrest or restraint of princes", one-half lay time or one-half of the demurrage rate would be payable, "provided always that the cause of the delay(s) was not within the reasonable control of charterers".

The charterer sought to pass on its liability to the sellers to it under its sale contract, which also contained a force majeure clause containing the words "which is beyond the reasonable control of either party". That seller also sought to pass on any liability to the company which had sold the oil to it. Their contract was also subject to a force majeure clause, which also made reference to causes of reason beyond the control of the party seeking to rely on it.

As the terminal was found to be a servant or agent of the charterer, it could not rely on the force majeure clause and say that it was not within its reasonable control or that of its "servants or agents". By parity of reasoning, the seller to the charterer was unable to rely on the force majeure clause in the sale contract. The original seller was in the same difficulty in relation to its obligations under the sale contract. It was the FOB seller's obligation to place the cargo "free on board" the vessel.

The Court of Appeal also rejected the argument that the alleged "abuse or arbitrary exercise of power" by the government was an intervening cause, thus the owner's claim for demurrage succeeded and the claim could be passed on down the line to the original seller.

Sea Dory Maritime Co and Swedish Management Co SA v AL Sher National Insurance Co (MV) "Nancy" [2013] EWHC 2116 (Comm)

This was a claim for a total loss of the vessel arising from a fire which occurred at a Russian port. The claim was defended, unsuccessfully, on the basis of misrepresentation/non-disclosure in relation to the management of the vessel, non-disclosure in relation to port state controlled detentions, non-disclosure in relation to an alleged conflict of interest on the part of one of the claimants, the "designated person ashore" for ISM purposes, breach of the ISM warranty on the policy and illegality under United States law in connection with trading with Iran.

The court rejected the representation and non-disclosure defences, largely on factual grounds and expert evidence. It is not proposed in this summary to deal with those aspects of the decision. In relation to the warranty, which read "Vessels ISM compliant", the insurers had argued that that was a warranty of compliance with the ISM code at the inception of the policy and throughout the period of the policy, or at least compliant with the ISM code by reason of there being no "outstanding major non-conformity". The plaintiff argued that simply documentary compliance was sufficient. The judge held that the insurers' construction "would be difficult to apply, difficult to evaluate, and would give rise to commercial uncertainty".

Of considerable interest is the defence of illegality under US law. The factual circumstances giving rise to this allegation was the issuance of freight invoices in respect of sulphur shipped from Iran to China, which caused a New York correspondent bank nominated by the plaintiff to process freight payments in US dollars, which it was argued by the insurers was unlawful as a matter of US law. The judge queried why the lawfulness or otherwise under US law for the payment of freight in respect of the charter of the vessel should have any legal impact on the insurer's liability to indemnify under the policy when US law did not govern the policy. It was also common ground that trading with Iran was covered by the policy.

The judgment contains a detailed description of the US sanctions against Iran. The court found that the processing of freight did constitute a violation of US law and that the plaintiff committed a civil violation in so doing. The warranty of legality contained in section 41 of the Marine Insurance Act 1906 relates to the "marine adventure". The "adventure" insured in a hull policy such as that in question was, the court found, "that the ship is exposed to maritime perils". The fact that the payment of freight was the illegality complained about was within the insured "adventure" and caused the defendants' reliance on illegality to fail.

NYK Bulkship (Atlantic) MV v Cargill International SA (the "Global Santosh") [2013] 1 Lloyds Rep 455

NYK, the owners, chartered the vessel to the defendant (Cargill) on an amended NYPE form. The vessel was sub-voyage chartered. Under the sale terms for the cement which was being carried, the receiver was liable to pay the seller demurrage if unloading was delayed. Delays occurred and the sub-charterer under the Voyage Charter sought an arrest from the Federal High Court of Nigeria of the cargo to secure a claim for demurrage against the receiver by reason of the lengthy delays which occurred. Cargill withheld hire in respect of the period that unloading was prohibited by the arrest order, in reliance on clause 49 of the charter party, which provided:

Should the vessel be captured or seizured (sic) or detained or arrested by any authority or by any legal process during the currency of this charter party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the charterers or their agents...

The question for the arbitrators and the court was therefore whether the proviso in clause 49 relating to the acts or omissions of the charterers or their agents had occasioned the arrest. Clearly Cargill had not been directly involved in procuring the arrest order, but Mr Justice Field of the High Court in London held that failure to unload was an act, omission or default that occurred in the course of the performance of the obligation to discharge as delegated to the receiver by Cargill. Cargill, he said, had "set in train the process of delegation and gave delegating parties a free hand to agree terms with delegates."

Field J then identified the final issue which needed to be determined as follows:

Did the failures to unload within the lay days and to pay the resulting demurrage or provide security "occasion" the arrest of Global Santosh? In my judgment, the words "occasioned by" imported a notion of causation which is broader than the concept of "the effective cause" but is not so broad as to include "but for" causation. Instead, the causal relationship between the act, omission or default with the postulated clause 49 event (seizure, detention etc) has to be such that it can be said as a matter of commercial common sense that the latter was caused by or brought about by the former.

He remitted back to the arbitrators for their determination the question of causation, that is whether the failures to unload and to pay the resulting demurrage or provide security "occasioned" the arrest of the vessel.

Bunge SA v Nidera BV [2013] 1 Lloyds Rep 621

An interesting question arose in this case under the GAFTA Prohibition Clause. A quantity of wheat had been agreed to be sold FOB Novorossiysk. The contract delivery period was 23 to 30 August 2010. Buyers nominated a vessel to take delivery on 5 August 2010. On the same day the Russian government prohibited the export of wheat between 15 August and 31 December 2010. On 9 August 2010 the sellers declared the contract cancelled pursuant to the GAFTA Prohibition Clause which provided:

Prohibition

In the case of... any executive or legislative act done by or on behalf of the government of the country of origin of the goods, or of the country from which the goods are to be shipped, restricting export, whether partially or otherwise, any such restriction shall be deemed by both parties to apply to this contract and to the extent of such total or partial restriction to prevent fulfilment whether by shipment or by any other means whatsoever and to that extent this contract or any unfulfilled portion thereof shall be cancelled. Sellers shall advise buyers without delay with the reasons therefore and, if required, sellers must produce proof to justify the cancellation.

The GAFTA Board of Appeal had found that it was "always possible" that the export ban might be revoked or modified so as to permit performance before the delivery period under the contract expired. Accordingly the Prohibition Clause did not operate to cancel the contract and the sellers' claim of cancellation was therefore repudiatory.

On appeal Hamblen J held that a causal connection had to be proved between the prohibition and the inability to perform the contract. By reason of the GAFTA Board's findings, he held, it could not be said on 9 August 2010, when the sellers purported to declare the contract cancelled, that there was a prohibition restricting such export.

The GAFTA Board of Appeal had said: "We accept that the ban was temporary, in the sense that it was of defined rather than indefinite duration but this does not assist sellers since it was always possible that before the delivery period under the contract expired, the export ban might be revoked or modified in some material way so as to permit performance. That this was a possibility is borne out by what has happened with export bans in the past." Reference was then made to a United States soybean meal embargo.

Mr Justice Hamblen also upheld the GAFTA Board of Appeal's decision on the question of damages to which the buyers were entitled and gave effect to the GAFTA Default Clause.

Minerva Navigation Inc v Oceana Shipping AG [2013] EWCA Civ 1273, 23 October 2013

There were two charter party disputes heard at the same time involving the vessel "Athena", which was chartered by Minerva Navigation Inc (Minerva) to Oceana Shipping AG (Oceana) and sub-chartered by Oceana to Transatlantica Commodities SA, both charters being on amended NYPE forms.

The issue arose as to whether the vessel was off hire during the 11 day period in January 2010 when the vessel ceased to comply with an order to proceed to Benghazi and drifted off the Libyan coast instead.

This occurred in circumstances in which a cargo of milling wheat which had been carried from Russia to Syria had not been allowed to be discharged when the Syrian authorities purported to find the cargo had been contaminated and forbade its importation.

The owners had been reluctant to accept instructions to proceed to Libya because of the terms of the bill of lading and the provisions of Syrian law which required the cargo to be returned to the original shipment port. The arbitrators had found that the vessel was obliged to continue to Benghazi but had wrongfully failed to do so until the end of the drifting period. Accordingly the hire which had been paid in advance by the charterers during that period was repayable to them.

Clause 15 in the charter parties relevantly provided:

...in the event of loss of time from default of master... or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost... and all extra expenses directly incurred, including bunkers consumed during period of suspended hire, shall be for owners account.

The question therefore for the arbitrators and the court had been whether the vessel was off hire under clause 15 merely because the vessel was not efficient for the services then required or whether the charterers had to further show a net loss of time resulting thereby. Charterers had also claimed damages against the owners for breach of the obligations under clause 8 to "prosecute the ordered voyage with the utmost despatch."

The arbitrators had found that there was a breach of that clause by the owners, but they also held that no damages were payable for the breach. They did find that there had been an immediate loss of time - thus engaging clause 15 - but not an overall loss of time because the cargo would not, in their view, have been discharged and the vessel redelivered any earlier.

The Court of Appeal accepted the arbitrators' views, which were based on the earlier Court of Appeal decision in the "Berge Sund" [1993] 2 Lloyds Rep 453, contrary to the opinion of the first instance Judge, who had overturned the arbitrators' decision.

The principle relied upon by the arbitrators and the Court of Appeal is set out in the arbitrators' decision, where it is said:

As is made clear in paragraph 25.2 of "Time Charters" (by Wilford, Coughlin et al) the ship must render the service immediately required of her, in which event hire is payable continuously, but if she cannot or does not, hire is not payable for the time so lost. As is also made clear in that paragraph the off-hire clause operates entirely independently of any breach of contract by the owners, and a claim under the off-hire clause may lead to a different answer than would ensue in the case of a claim for damages for breach of contract.

Canadian case

The British Columbia Court of Appeal - Prism Sulphur Corporation (Prism) v Byatt International SA (Byatt), Canworld Shipping Company Limited and MUR Shipping BV [2013] BCCA 427, 16 October 2013

Byatt, the owner of the vessel "Loyalty", had time chartered the ship to Korea Line Corporation, which had time chartered to MUR Shipping BV, which had, in turn, voyage chartered the vessel to Prism. During the time charter Korea Line became insolvent and Byatt issued a notice of lien to Prism for freight payable under the sub-charter. The Court of Appeal, following Wehner v Dene Steamshipping Company [1095] 2 KB 92 and the "Cebu" [1983] 1 Lloyds Rep 302, held that the lien had been appropriately exercised, as long as it had not already been paid by Prism, which was the case.

7. Cruise shipping

• The 2002 Protocol to the Athens Convention on the Carriage of Passengers and their Luggage by Sea 1974 has now been ratified by a 10th state, which means that it will enter into force in 2014. This substantially raises the limits of liability from 46,666 SDRs to 250,000 SDR per passenger in respect of death of or personal injury to a passenger, which limit could be lost where there has been intentional or reckless conduct. In the circumstances in which a loss exceeds the new limit, there is the possibility of the carrier being liable up to 400,000 SDR per passenger, unless it is able to prove that the incident which caused the loss occurred without its fault or neglect. Increases in the limits in respect of luggage have also been imposed.

• The 100th Meeting of the IMO Legal Committee in April 2013 agreed a set of Guidelines which was prepared for submission to the Assembly at its 28th Session dealing with the collation and preservation of evidence following an allegation of a serious crime having taken place on board a ship or following a report of a missing person from a ship, and pastoral care of the victims. The guidelines are to be found in Leg 100/WP.8.

• On 24 June 2013 the House of Representatives Standing Committee on Social Policy and Legal Affairs tabled its report into Arrangements Surrounding Crimes Committed at Sea, containing 11 recommendations for change.

8. Aviation cases

NSW District Court - Campbell v Hay

The case Noel Campbell v Rodney Victor Hay [2013] NSWDC 11 is discussed in Ross Donaldson's article Civil liability for personal harm - dangerous recreational activity and obvious risk.

NSW Court of Appeal - Bootle v Barclay

The case Bootle v Barclay [2013] NSWCA 142 is discussed in Andrew Tulloch's article Aerial spraying company found liable for damage to crops on neighbouring property.

Queensland Supreme Court - Nguyen v Qantas

The case Nguyen v Qantas Airways Limited (2013) QSC 286 is discussed in Andrew Tulloch's article Cramped airline seat not a compensable "accident".

Victorian Civil and Administrative Tribunal - Lustig v Qantas

The case Lustig v Qantas Airways Ltd (Civil Claims) [2013] VCAT 1012 is discussed in Andrew Tulloch's article Air rage incident leads to Victorian Civil and Administrative Tribunal (VCAT).

Court of Appeal, England

Ford v Malaysian Airline Systems Berhad [2013] EWCA 1163 - UK

The Court of Appeal in England has found that the administering of a diuretic by a doctor during a flight from London to Melbourne, which exacerbated rather than relieved the passenger's medical discomfort, did not amount to an "accident" for the purposes of Article 17.1 of the Montreal Convention 1999 and could not be characterised as "unusual". Lord Justice Aikens noted that the simple fact that the injection was administered in mid-flight rather than elsewhere cannot provide the circumstances with the necessary "unusual" characteristics so that the event constitutes an "accident" within the meaning of Article 17.1 of the Convention.

Buckley v Monarch Air Lines Ltd [2013] 2 Lloyds Rep 235

The plaintiff who was injured on a flight when a cup of hot chocolate was spilt into her lap, scalding the top of her leg, failed to recover against the airline in this court decision in England.

Article 17.1 of the Montreal Convention 1999 provides that a "carrier is liable for damage sustained in the case of death or personal injury of a passenger upon condition only that the accident which caused the death or personal injury took place on board the aircraft or in the course of any of the operations of embarking or disembarking".

The airline in this case admitted that the plaintiff had sustained injury during the course of the flight, and that its cause was the spillage of the hot liquid, but denied that the events which resulted in injury constituted an "accident" within Article 17. The Judge accepted the defendant's evidence that hot water had been supplied to the plaintiff in a lidded polystyrene flight-deck cup and the lid must have been removed by the plaintiff in order to add the chocolate powder which she had brought with her, and that was the most likely explanation for the accidental dislodgement of the cup.

It was held that in order to constitute an "accident" there had to be an unexpected or unusual event which "was external to the claimant in the sense of having happened independently of anything done" by the claimant.

Espada Sanchez & Ors v Iberia Lineas Aereas de Espana S.A. [2013] 1 Lloyds Rep 411

The European Court of Justice determined that where the possessions of four persons (a family of two adults and two children) were packed as luggage into two suitcases, the air carrier was liable to pay a passenger compensation to the extent that that passenger had sustained damage in the form of loss of items belonging to him, even where those items were placed in baggage checked in by someone else.

It followed that both the right to compensation and the limit to a carrier's liability applies to the passenger under the Montreal Convention, which provides under Article 17(2) that the carrier is strictly liable for loss and under Article 22(2) that there is a limit of 1,000 SDRs for each passenger.

9. Land transport

Transport contracts made readable and useful - kiss legalese goodbye

By Andrew Tulloch

Australia’s toughest anti-hoon laws came into effect in Queensland on 1 November 2013

By Simone Farrugia

Freight truck driver unable to claim "reasonable steps" defence after breach of chain of responsibility law

By Andrew Tulloch

Victorian taxi industry reforms to benefit consumers, taxi drivers and people with a disability

By Andrew Tulloch

10. Conferences and seminars

• Shortly after Andrew Tulloch joined CBP in March 2013, he, Stuart Hetherington and Andrew Probert presented seminars to clients in both Sydney and Melbourne on recent developments in the marine transport sector, at which the following were discussed:

• The decision of Siopsis J in the Federal Court of Australia on 22 February 2013 in Alstom Limited v Liberty Mutual Insurance Company and Ors (No. 2).

• The current situation in relation to the Rotterdam Rules.

• The first instance decision of Foster J in Dampskibsselskabet Norden A/S v Beach Building and Civil Group Pty Ltd [2012] FCA 696 (see item 6 above for a report on the Full Court's decision on appeal).

• The decision of Rares J in Atlasnavios Navegazao LDA v The Ship "Xing Tai Hai" [2012] FCA 1497, 24 December 2012.

Daebo Shipping Co Ltd v The Ship "Go Star" [2012] FCAFC 156, 7 November 2012.

• The Navigation Act 2012.

• The Maritime Safety (Domestic Commercial Vessel) National Law Act 2012.

• The Maritime Powers Act 2013.

• Stuart Hetherington gave a presentation on recent developments in the maritime area in Australia at an international seminar in London organised by our partners in the worldwide ADVOC organisation on 9 April 2013. The seminar was chaired by Nigel Cooper QC of Quadrant Chambers. Other presentations made included John Sharp of Ashfords LLP, England: The Marine Insurance Act - Proposals for Reform; Henrik Kleis of Delacour Dania, Denmark: Arrest of Vessels in Denmark - Pitfalls to Avoid; Danny Chua of Joseph Tan Jude Benny, Singapore: Maritime Arbitrations in Singapore; Charles Hattersley: Ashfords LLP, England: Recent Developments in British Maritime Law; Nadya Price of Patton, Moreno & Asvat of Panama: Registration and Naval Mortgages of Panamanian Vessels - Latest Rules and Trends.

• Stuart Hetherington also spoke at the Workshop on Marine Insurance held at the time of the International AIDA Insurance Conference in Sydney on the topic of subrogation.

• On 18 September 2013 Stuart Hetherington gave the annual AMTAC address at the Federal Court, in which he gave a paper entitled The Elusive Panacea of Uniformity: Is It Worth Pursuing?

• Stuart Hetherington and Andrew Tulloch both presented papers at the Maritime Law Association of Australia and New Zealand Annual Conference held in Sydney on 19 and 20 September 2013. Stuart Hetherington spoke on the topic: International Law: Current Issues at the CMI and Andrew Tulloch on Marine Insurance Reform in Australia - Whither, Whether, Wither?

Other papers presented:

• FS Dethridge Memorial Address: Justice Steven Rares: The Far from Halcyon Isle Maritime Liens, Renvoi and Conflicts of Law

• Andrew Colgan: Exclusion Clauses in Insurance Law

• Dr Bevan Marten: Third Party Agreements in the Salvage Context

• Geoff Farnsworth: The New AusGrain Charter Party

• Jesper Martens: The PPSA and Liens

• Angus Stewart: Ship Arrest in South Africa: 30 Years of the "Associated Ship"

• Dr Damian Cremean: The Early History of Admiralty Jurisdiction

• Greg Nell SC: The Duty of Disclosure in Arresting a Ship

• Pat Saraceni: Conflict of Interest in Discovery

• Matthew Harvey: Dealing with Expert Witnesses

• Ashwin Nair: Significant Recent Decisions in Australia

• Nichola Reid: Verena's Cautionary Tale: Limitations of Liability and Marine Claims in New Zealand

• Chris Edwards: Current Issues in Arbitration in Singapore

• Clinton McKenzie: The New Navigation Act and National System - The First 100 Days (Nearly)

• Robert Wilson: Coastal Trading - Tensions and Trade-offs

• Christopher Keane: Foreign Corrupt Practices - The Facilitation Payment Defence

• Dr Sarah Derrington: Australia's Position on IMO Conventions

• Andrew Chen: Financial Resilience in Torrid Economic Times

11. Comité Maritime International (CMI)

The CMI held a symposium jointly with the Irish Maritime Law Association, at which the latter celebrated its 50th Anniversary in late September/early October 2013. Over the weekend prior to the commencement of the symposium, two international sub-committees met, where great progress was made in the Review of the Rules on General Average and Judicial Sale of Ships.

Newly created Maritime Law Associations in Poland and India were welcomed as members of the CMI at the meeting. Dieter Schwampe and Alexander Von Ziegler joined the Executive Council; Chris Davis was appointed Vice President and on the retirement of Nigel Frawley as Secretary-General, John Hare was appointed interim Secretary-General. Shortly after the conclusion of the conference, Richard Shaw, known to maritime lawyers around the world, passed away. As Stuart Hetherington said in the announcement to maritime lawyers worldwide, Richard Shaw was one of the most great foot soldiers of the CMI and will be greatly missed.

Papers given at the symposium included:

The Response to a Major Spillage/Casualty in Irish Waters and New Powers introduced by European Legislation by Chris Reynolds, Director of the Irish Coastguard

The Erika Decision and its Impact by Jean-Serge Rohart

The Commune de Mesquer Case by Dr Vincent Power

Reino de Espana v ABS Classification Society by Carlos Llorente

Criminalisation of Seafarers - Recent Developments by Olivia Murray

Is there a Place for Regulation of Off-shore Platforms within International Maritime Law? If not, then Where? by Dr Rosalie Balkin

Limited or Unlimited Liability? The Liability Regime Governing Offshore Drilling in the North Sea contrasted with Exploitation and Extraction of Hydro-carbons in other parts of the World by Ben Browne

Insuring the Uninsurable: the Need for a Liability Convention from an Insurer's Perspective by Rob Dorey

Introduction to the Cruise Industry in Ireland, and its Importance and Role in Port Development by Michael McCarthy

The Broker's Role in a Major Casualty by Ann Waite

The "Prestige" in the US Courts by Carlos Llorente

The Need for Regulatory Changes Bought to Light by Incidents such as the Costa Concordia by Colm O hOisin SC.

Challenges for P&I Insurers of Passenger Vessels by David Baker

An Overview of the Athens Convention and its Protocols by Hugh Kennedy

Changes introduced in the European Union by the "Athens Regulation", the implications of the European Council Decision Directing Accession to the 2002 Protocol and its Significance for International Maritime Law by Henrik Ringbom

A New Regime of Passenger Rights introduced for the Carriage of Passengers by Sea by the Passenger Rights Regulation by Tim Reardon

Guidelines for Mandatory Insurance by Dieter Schwampe

An Update on Replies to the Questionnaire on Cross-Border Insolvencies, Work of the IWG and Proposal for the Way Forward by Sarah Derrington

Continued Depressed Freight Market and Over Capacity Difficulties, and Problems associated with the Existing Legal Framework by Olaf Hartenstein

Parallel proceedings for Limitation of Liability and Insolvency by Martin Davies

The Need for Action in Conjunction with the IMO and ICS in relation to Implementation of Maritime Conventions by Deucalion Rediadis

The prospective reform of Marine Insurance in the UK by Professor Rhodium Thomas

Salvors Liability for Professional Negligence by Miso Mudric

Limitation of Liability of Classification Societies by Denise Micallef

Limitation of Liability by Helen Noble

The Maritime Labour Convention 2006 and its Implications for Modern Shipping by Darren Lehane

Costa Concordia and Breaking Limitation by David Kavanagh

In Rem Liability in Spanish Law by Javier Zabala

Exploring the Comparative Provisions relating to In Rem Liability in Irish Law by Edmond Sweetman.

12. Aviation Law Association of Australia and New Zealand 2013 Annual Conference

This was held in Sydney in May 2013 and was attended by Andrew Tulloch, Michael Russell and Helen Tieu. Andrew Tulloch attended the Council meeting in his capacity as Victorian Branch chairman. The Conference was opened by the Honourable TF Bathurst, Chief Justice of New South Wales. Amongst others, the following papers were given:

• Steven Byron, the Managing Director of Canberra Airport on the possibility that Canberra will, by default, become Sydney's second airport.

• Dr Rebecca Johnson of the Australian Museum on bird strike and the work done by the Museum in assisting on identification.

• Greg Rector of Aerosure Asia Pacific Pty Ltd on the state of the aviation insurance market.

• Kirsty Rogers of Gates & Partners, Singapore on various legal issues.

• Michael McNamara of QBE Aviation gave an underwriter's perspective in relation to unmanned aerial vehicles.

• Nick Humphrey of Emirates on changes to the Standard Ground Handling Agreement.

• Kevin Sutherland of Clyde & Co, San Francisco on dealing with attempted child abduction claims by air in the US.

• Richard Davis of HWL Ebsworth on the current state of the Australian commercial aviation market.

• General Counsel at Air Canada on passenger rights.

• Kate Eastman SC on discrimination issues and aviation in Australia.

There was also an aircraft casualty mock mediation.

13. Aviation Law Association Conference 2014 - 5-7 May 2014 in Melbourne

Andrew Tulloch is chairing the Organising Committee for the 2014 ALAANZ Conference.

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal advice. Please seek your own legal advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.​

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