Insights

In this issue we cover local and overseas transport and logistics news and summarise some interesting cases from Australia and around the world which have been handed down in the last year.

Colin Biggers & Paisley news

Appointments

We congratulate Stuart Hetherington on his re-election as President of the Comité Maritime International (CMI) for his second term of three years. Stuart was re-elected during the recent CMI Congress in Istanbul on 9 June 2015.

Andrew Tulloch has also been re-appointed for a further year as President of the Aviation Law Association of Australia and New Zealand.

Carolyn Wait has rejoined the firm as a senior associate working in the Melbourne Transport and Logistics team, and Julian Peake has joined as a solicitor in the Sydney office.

Recognition of our expertise

Stuart Hetherington and Andrew Tulloch have been recognised by Who's Who Legal for their expertise in Shipping law and Andrew Tulloch has also been recognised for his expertise in Aviation law.

Stuart Hetherington and Andrew Tulloch are also recognised for their expertise in Shipping in the Euromoney Expert Guides to International Trade & Shipping and Andrew Tulloch is also recognised in the Euromoney Expert Guide to Aviation.

The firm is also recognised for its transport expertise in the Legal 500 with Andrew Tulloch listed as a leading individual in this area.

Finally, Andrew Tulloch was recognised by Best Lawyers as both an Aviation and Shipping & Maritime and Transportation lawyer and the leading Trade Lawyer in Melbourne, while Stuart Hetherington was recognised for his expertise in Shipping & Maritime Law and Transportation Law, and Andrew Probert in Insurance law.

The nomination of all our partners as amongst the world's leading experts in these fields is an immense achievement and we congratulate them on this professional recognition.

Shipping

Australian news

Coastal shipping reforms

On 14 November 2014, the Australian Maritime Safety Authority (AMSA) held the first national shipping and domestic commercial vessel conference in Melbourne. This was the first time since the commencement of the Navigation Act 2012 and the National System for Domestic Commercial Vessels that representatives of government, business and industry came together to discuss the issues, challenges and opportunities of Australia’s maritime industry during the inaugural Maritime 2014 Ship to Shore conference.

Stuart Hetherington spoke at this conference on the topic of "Places of Refuge - The Legal Perspective".

The Deputy Prime Minister and Minister for Infrastructure and Regional Development, Warren Truss, was one of the speakers at the conference. As reported in our earlier bulletins, Mr Truss had been an open critic of the controversial coastal shipping regime having promised changes to the current Coastal Trading (Revitalising Australian Shipping) Act 2012 (Coastal Act) which would minimise industry burden and costs. During his speech he criticised the Coastal Act again as being "very detrimental" and "failing industry".

As promised in the ministerial speech, the Australian government has now moved ahead with coastal shipping reforms. On 20 May 2015, Warren Truss announced the plan for the Coastal Act reforms at the Shipping Australia luncheon. Under a new name The Coastal Shipping Act is to ensure efficient and reliable costal shipping services as part of the national transport system. The key features of the amended Act are:

  • built-in protections for Australian workers such as the requirement that each vessel undertaking more than 183 days of coastal trading in a permit period has two senior Australian crew on board the vessel (including a person with rights to work in Australia as a master, chief mate, chief engineer or first engineer)
  • protections for wages and conditions for all seafarers on foreign ships operating primarily in the Australian coasting trade, for example all crew on vessels engaging in more than 183 days of costal trade must be paid wages as set out in Part B of the Seagoing Industry Award 2010 and be subject to domestic workplace relations arrangements
  • a greatly simplified single permit system for all vessel types in lieu of the current complicated licensing system, with the aim to reduce costs to business and enhance access to competitive international shipping services. A coastal Shipping Permit will:
    • provide unrestricted access to coastal shipping for all vessels for up to 12 months
    • protect vessels from importation under the Customs Act 1901 when entering dry-dock or being moored at port with the purpose of undertaking scheduled maintenance with the aim to promote Australian dry-docking facilities and grow jobs in the ship repair industry
    • ​enable vessels to undertake unrestricted voyages around the coast for the approved period
    • require compliance with the new simplified reporting system
  • an improved Australian International Shipping Register which removes:
    • the requirement for a collective agreement prior to registering
    • the requirement for a vessel to be predominantly engaged in international trading (51%). It will be sufficient to undertake a minimum of 90 days of international trading in the financial year
The government expects that the new reforms will make the industry much more competitive and will also reduce the numbers of trucks on roads. A recent Senate Committee public hearing in relation to the proposed legislation raised a number of issues that suggests passage of the legislation will not be straight forward. We look forward to reporting in detail on the reforms once implemented.

For more information see "Setting the course - The Australian Government's plan for coastal shipping"

Read the full speech of Warren Truss from the Ship to Shore Conference.

Eighty-seven submissions have been received by the Department and most can be viewed on the www.infrastructure.gov.au website.

Competition Policy Review Panel's Final Report on Part X of the Australian Competition and Consumer Act

As previously reported, a review of the competition policy, including Part X of the Australian Competition and Consumer Act 2010 (which contains the protections for the Liner Conference agreements entered into by the shipping industry) was announced by the Prime Minister and Minister for Small Business on 4 December 2013.

The Competition Policy Review Panel has now issued its final report, which disappointingly completely ignored the submissions of the two largest industry bodies, the Australian Peak Shippers Association and Shipping Australia Limited. In their submissions, they had expressed their concerns that the initial draft report did not contain any "consideration whatsoever of the implications of removing Part X from the CCA."

In the article Shipping Conferences - the end of the line? published on 27 May 2015, Stuart Hetherington explains the Review Panel's recommendations and their effect, if accepted by the government, on liner operators.

Since publication, Stuart Hetherington has been interviewed by members of the Department of Infrastructure, the Attorney-General's Department and the Australian Competition and Consumer Commission (ACCC) who are advising the government on its response to the Harper report.

Changes to Seafarers legislation

On 26 May 2015, the Seafarers Rehabilitation and Compensation Act 1992 (Seafarers Act) and the Occupational Health and Safety (Maritime Industry) Act 1993 were amended, bringing about a return of the status quo affected by two recent legal decisions, namely AATA's decision of Aucote v Samson Maritime Pty Ltd [2014] AATA 296 and the Federal Court's appeal of Samson Maritime Pty Ltd v Aucote [2014] FCAFC 182 (Aucote decisions).

The Aucote decisions unexpectedly broadened the class of persons to whom the Commonwealth Seacare Scheme (scheme) applies. The scheme is a national scheme of occupational health and safety (OHS), rehabilitation and workers' compensation arrangements which applies to defined seafaring employees and, in respect of OHS, defined third parties. The Aucote decisions expanded the coverage of the scheme to seafarers who are employed on prescribed ships which are owned by a constitutional corporation, including those engaged in intrastate trade (e.g. harbour tugs, ferries and small work boats engaged solely in the waters of one state). This had the following effects:
  • affecting the existing insurance arrangements
  • increasing coverage costs of shipowners as suddenly maritime employers became responsible for levy contributions to the Seafarers Safety Net Fund and for having insurance policies under the Seafarers Act, which are more expensive than the policies under the state or territory workers' compensation schemes
  • State/territory workers' compensation regulators lost their statutory powers in respect of seafarers
  • increasing employers' risk by exposing them to claims for which they have no insurance
  • increasing the risk of the Seafarers Safety Net Fund being exhausted by new claims not previously accounted for
There have been some concerns raised in respect of the Seafarers Rehabilitation and Compensation and Other Legislation Amendment Bill 2015 with fears that the tightening amendments may leave certain members of the maritime workforce without any coverage at all. As the Bill has now received its assent, any uncertainty will need to be tested by the appropriate legal forum.   

Amendments to the Offence of Bribing a Foreign Official

On 15 March 2015, the Crimes Legislation Amendment (Powers, Offences and other Measures) Bill 2015 was presented to Parliament. The proposed amendment to the Criminal Code Act 1995 makes it unnecessary for a successful prosecution to establish that there was an intention to "influence a particular foreign public official", or that a "business, or a business advantage, does not need to be actually obtained or retained".

Limitation of Liability for Maritime Claims

Australia is taking steps to denounce the Convention on Limitation of Liability for Maritime Claims 1976 so as to sever Australia's treaty obligations with those countries that are only parties to the Convention and not to its Protocol, to which Australia is a party.

On 8 June 2015, new limits of liability came into effect as a result of the International Maritime Organisation's (IMO) amendments to the 1976 Limitation Conventions Protocol of 1996 which were adopted in 2012. The new limits are:
  • 3.02 million (raised from 2 million) special drawing rights (SDR) for claims for loss of life or personal injury on ships having a tonnage less than 2,000 and for ships having a tonnage between 2,001 and 30,000 tons an amount of 1208 SDR (raised from 800) for each ton over 2000; between 30,001 and 70,000 tons 906 SDR for each ton (raised from 600) and for each ton in excess of 70,000 604 SDR (raised from 400);
  • 1.51 million (raised from 1 million) SDR for any other claims, usually referred to as property claims, for ships having a tonnage of less than 2,000, for ships having a tonnage between 2,001 and 30,000 604 SDR (raised from 400) for other claims.
The increased liability limits have been given effect in Australia by the Limitation of Liability for Maritime Claims Amendment Act 2015. The increased limits are contained in Schedule 2 of the Limitation of Liability for Maritime Claims Act 1989.

For how to calculate the limitation amount for larger ships and the daily conversation rates for SDR, go to www.imo.org.

New South Wales

In March 2015, the Baird Government was returned to office. The former Minister of Transport Gladys Berejikian has become Treasurer. Duncan Gay remains Minister for Roads, Maritime and Freight, and Andrew Constance has become Minister for Transport and Infrastructure.

Marine Pollution Act

In September 2014, the new Marine Pollution Act 2012 (NSW) came into operation replacing the old Marine Pollution Act 1987 (NSW). The new Act gives effect to The International Convention for the Prevention of Pollution from Ships (MARPOL) 1973, to which Australia is a signatory. MARPOL deals with pollution from ships and has already been implemented at the Federal level.

Apart from re-enacting existing pollution offences for the discharge of oil and noxious liquid substances (Part 4), the new Act introduces new offences with significant penalties for corporations (up to $10 million) in:
  • Part 5 - Prevention of pollution by harmful substances in packaged form
  • Part 6 - Prevention of pollution by sewage
  • Part 7 - Prevention of pollution by garbage
  • Part 8 - Prevention of pollution from transfer operations
Ship masters and owners must also be aware of the new marine pollution reporting regime and the requirement for more extensive emergency planning as introduced in:
  • Part 9 - Reporting of pollution incidents (where a reportable incident includes jettisoning of harmful substances in package form or in relation to a large ship "any damage, failure or breakdown of the ship’s sewage treatment system that could result in the discharge of untreated or inadequately treated sewage". Under the Act, a large ship means a ship that has a gross tonnage of 400 tons or, if less or not measured, is certified to carry more than 15 persons.)
  • Part 10 - Emergency plans and other plans (including the requirement for large ships to carry a shipboard garbage management plan).
Under Part 16 of the Act, the Minister is authorised to issue a range of marine environment protection notices similar to those issued under the Protection of the Environment Operations Act 1997

The new Act extends the scope of persons liable for certain pollution incidents to anyone responsible, as well as to those reasonably suspected of causing them.

Overall, it is expected that the number of reported pollution incidents, investigations and prosecutions will increase due to a wider application of the new Act.

(See, for example, the decision below in relation to the recent prosecution for a diesel spill at Newcastle.)

Low-sulphur fuel regulation

On 2 June 2015, the NSW Parliament issued draft regulations providing for the use of low sulphur fuel (0.1%) by all cruise ships using Sydney Harbour after 1 October 2015.

The proposal introduces a new low sulphur fuel surcharge in response to an amendment in the International MARPOL rules which aim at reducing the amount of sulphuric fuel emissions being burned by cargo vessels near ports and populated coastlines from 1% to only 0.1%.

Since 1 January 2015, vessels travelling through the Emission Control Areas (including the Baltic Sea, English Channel, North Sea and 200 nautical miles off the US and Canadian coasts) are required to switch to fuel with sulphur content of .01%.

The State draft regulations have been long anticipated, especially by the residents of Balmain and the Leichhardt Council concerned with the high level of emissions from cruise ships at the White Bay Terminal. In May 2015, the NSW Port Authority suspended overnight ship berthing at the terminal due to diesel fumes and invasive noise. The action has been taken following complaints by the residents and the findings of a NSW Upper House parliamentary inquiry into the performance of the NSW Environmental Protection Authority (EPA) released in February 2015. The inquiry has found that the decision to build the terminal at White Bay was a "serious error", recommending changes to the terminal's operation in order to mitigate its environmental impact. It is anticipated that the overnight stay resumes at White Bay by early 2016.

Moorebank Intermodal Terminal

The Moorebank International Company (MIC) has signed an agreement with the Sydney Intermodal Terminal Alliance (SIMTA) pursuant to which the latter will build and operate an intermodal freight precinct at Moorebank. It is predicted that the site will be able to handle 250,000 import-export containers a year from 2017 and eventually up to 1.05 million a year. There is to be up to 850,000m² of warehouse space, and a rail connection to the Southern Sydney freight line. (see MIC's website www.micl.com.au).

Shipping charges under threat

Following its privatisation last year, Port of Newcastle has been accused of hiking some shipping charges up to 60%. The Port introduced new prices at the beginning of the year, increasing charges such as navigation service charges levied on vessels at the time of port entry, which is expected to bring in at least $20 million extra a year. There have been calls for the Port's prices to be regulated by national competition authorities. Similar calls have been recently raised by the industry for Port of Melbourne as reported below.

Port of Melbourne sale and Victorian shipping charges

The Victorian Government introduced its Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Bill 2015 to Parliament in June. The State Opposition and Greens opposed the sale.

The Port of Melbourne Corporation abandoned plans to raise rent increases for DP World by as much as 75%.

Western Australian port assets

In its 2015-16 Budget, the State Government has announced the sale by way of long-term lease of Fremantle Port.

Following its review, the ACCC has announced that it will not oppose a takeover of a long-term lease for the Automotive and RoRo Terminal at the Port of Fremantle by Australian Amalgamated Terminals Pty Ltd (AAT) if AAT is the successful bidder. AAT had been required to accept a court-enforceable undertaking (under Part IIIA of the Competition and Consumer Act).

International news

Crewless vessels

The idea of having remote-control crewless vessels transporting tons of goods across the seas may sound fictional, but it could be a reality within the near future. At the recent EmTech 2015, Annual Global Emerging Technologies Conference in Singapore, Oskar Levander, vice president of maritime invocation, engineering and technology at Rolls-Royce, confirmed that trials involving ferries and coastal cargo carriers are likely to take place within the next three years. For Levander the biggest obstacle seems to be maritime safety regulations. He hopes that a review of the SOLAS Convention anticipated on its 50th anniversary in 2024 will take into consideration the operation of crewless ships.

Rolls-Royce is not the only one exploring the concept of unmanned vessels. In 2012, the European Union co-founded the MUNIN (Maritime Unmanned Navigation through Intelligence in Networks) research project, which was set up to develop and validate the vision and required technology for autonomous ships. The prototype testing is well underway.

For more information go to the MUNIN website.

The CMI has appointed an International Working Group to consider the ramifications of these developments and in particular how international conventions will need to take them into account. An excellent paper by Belgian lawyer and Professor Eric Van Hooydonk in the Journal of International Maritime Law (2014) 20 JIML 403 examines these issues.

Nairobi International Convention on the Removal of Wrecks

The Nairobi International Convention on the Removal of Wrecks 2007 (convention) entered into force on 14 April 2015. Fifteen "State Parties" which ratified the convention (not including Australia) now have legal grounds to:
  • remove from their exclusive economic zones (or their territorial sea if it is elected to be included in the scope) wrecks that constitute a hazard to navigation or the marine environment
  • seek compensation from the owners of the ships or their insurers as long as the measures taken are proportionate to the actual hazard (placing some limitation on shipowners' liability)
The strict liability imposed by the convention is excluded in cases of:
  • acts of war (which does not include terrorism)
  • natural phenomena of "exceptional inevitable and irresistible character"
  • intentional acts and omissions of a third party
  • negligence of the authorities responsible for lights and other navigational aids
The convention introduces a compulsory insurance regime. The owners of ships of 300 gross tons and who are registered in a state party or enter or leave a port in the territory of a state party, will need to ensure that:
  • they hold an insurance policy meeting the convention requirements
  • they obtain and carry on board at all times a certificate from a state party confirming the right insurance in place (if the vessel is registered in one of a state party it must receive a certificate from that state party and such a certificate will be valid in any other state party's port or terminal).  
It has been agreed recently that the International Protection & Indemnity Clubs will provide "Blue Cards" to their members as evidence of the cover which is required by the convention in order for the members to obtain the certificates.

Although Australia has not ratified the Convention, under section 229 of the Navigation Act 2012, the Australian Maritime Safety Authority (AMSA) has power to request the legal owner of a wreck to remove it or provide financial security for costs of its removal. The Navigation Act does not, however, provide for a compulsory insurance regime. The liability and insurance requirements for oil tankers are still governed by the Civil Liability Convention and the Bunkers Convention provides similar regulation for bulk ships.

The Convention is a significant step towards the global unification of the shipwreck laws and practices. The Convention is also expected to lessen the instances of a State Party turning away a ship, which could otherwise suffer a maritime casualty at sea, as the State Party has an avenue to seek redress.

Read the Marine Notice on the Application of the Convention issued by the AMSA.

Athens Convention relating to the Carriage of Passengers and their Luggage by Sea

The protocol of 2002 to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974 entered into force on 23 April 2014. It introduces compulsory insurance to cover passengers on ships and raises the limits of liability. It also introduces other mechanisms to assist passengers in obtaining compensation. Australia is not a party to this convention.

For more information go to the IMO website.

The Maritime Law Association of Australia and New Zealand has made submissions to the Australian Government in favour of ratifying the Convention.

New Standard Bunker Contract

In December 2014, BIMCO published its new Standard Bunker Contract (known as "BIMCO Terms 2015"). Read the BIMCO's explanatory note on the new contract.

Revised Himalaya Clause for Bills of Lading and other contracts

Following recent law suits against ship managers in the US, the existing Himalaya clause wording has been amended to expressly include vessel managers within its scope.

Under the US Carriage of Goods by Sea Act 1936, shipowners can rely on certain defences/limitations which protect them from lawsuits. As the previous version of the Himalaya clause did not expressly extend to the vessel managers, they became a target of US claimants in lieu of the shipowners due to a narrow interpretation of the parties protected by the clause.

Read the amended Himalaya clause.

New Polar Code

In November 2014, the IMO adopted the International Code for Ships Operating in Polar Waters (Polar Code) and related amendments. The aim of the new regulations is to protect ships, their seafarers and passengers while travelling through the harsh environment of the two polar regions as the traffic increases, especially around the North Pole due to melting sea ice. The mandatory safety and environmental protection regulations of the Polar Code were adopted through the International Convention for the Safety of Life at Sea (SOLAS) in November 2014 and the International Convention for the Prevention of Pollution from Ships (MARPOL) in May 2015.

The Polar Code is expected to enter into force on 1 January 2017.

The CMI has an International Working Group doing work on this topic.

New requirements for plans and procedures for recovery of persons from the water

From July 2014, all ships are required to have plans and procedures for recovery of persons from the water in place in accordance with the SOLAS Regulation III/I7-1 adopted by the IMO. The plans and procedures must identify the equipment intended to be used for recovery purposes and measures to be taken to minimise the risk to shipboard personnel involved in recovery operations.

Read the AMSA's marine notice on the recovery of persons from the water.

Read the Guidelines for the Development of Plans and Procedures published by International Chamber of Shipping.

The Insurance Act 2015 (UK)

In August 2016, the UK Insurance Act 2015 will come into effect. The new legislation will introduce significant changes to the current statutory framework with the aim to efficiently and effectively govern the modern UK insurance market. It replaces the Marine Insurance Act 1906 (UK), upon which the Australian Marine Insurance Act 1909 is based. In 2001, the Australian Law Reform Commission (ALRC) made certain recommendations for amendments of the Australian legislation but nothing has happened since. It may be that the UK changes will prompt the Federal Government to reconsider some of the ALRC's recommendations, particularly those dealing with non-disclosure and breach of warranties. 

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Australian decisions  

Reiter Petroleum Inc v "Sam Hawk" [2015] FCA 1005
 
This is a very recent and significant decision in response to an application to set aside the arrest of the "Sam Hawk" (or alternatively summary judgment for the vessel) as McKerracher J declined to make either order and in so doing declined to follow the decision of the Privy Council in Bankers Trust International Ltd v Todd Shipyards Corporation (The "Halcyon Isle") (1981) AC 221.
 
The basis for the claim against the ship was that the plaintiff was contracted by time charterers, Egyptian Bulk Carriers, to supply bunkers to the vessel in Istanbul.
 
The plaintiff relied on its terms and conditions of sale to assert that its contract was subject to the laws of Canada and/or the USA, and the State of Florida and that it had a maritime lien against the vessel in accordance with the laws of the USA and Florida and Canada for the supply of "necessaries", which includes bunkers. It accordingly asserted that it was entitled to arrest the vessel in Australia pursuant to section 15 of the Admiralty Act 1988, it being a claim on a maritime lien or under section 17 as a general maritime claim, (that is, for the supply of goods, materials or services). It also asserted that the time charterer contracted with it as agent for the vessel owner.
 
Expert evidence was provided as to the law in both Canada and the United States concerning the existence of the maritime lien, the proper law to be applied and the status of the plaintiff's claim against the vessel. The vessel owner argued that there was no contractual relationship between it and the bunker supplier.
 
McKerracher J, in reaching his decision on this interlocutory application, held that the only question for consideration was "whether Australian rules of private international law would recognise a maritime lien in the circumstances of this case". He then turned to consider the "Halcyon Isle" decision of the Privy Council which he described as "standing for the proposition that questions of the existence of an asserted maritime lien are to be determined in accordance with the laws of the forum. This has been accepted by this Court as being the state of Australian law: Morlines Maritime Agency Ltd & Ors v "Skulptor Vuchetich" (1997) FCA 432 per Sheppard J. His Honour declined to follow those authorities and preferred the minority decision in the Privy Council as according "with the substantive nature of a maritime lien as identified by the High Court of Australia in John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503".
 
He therefore found that the plaintiff's claim was a "proceeding on a maritime lien, and therefore jurisdiction has been conferred on this court", by applying the lex loci contractus as giving rise to a maritime lien, by section 15 of the Admiralty Act, although that Act, the lex fori, did not recognise the supply of necessaries.
 
Maritime Officers Union v Assistance Minister for Immigration and Border Protection [2015] FCAFC 45 (26 March 2015)

This decision of the Full Federal Court, in overturning the first instance decision was (as explained in the joint judgment) of significance to the "regulation of work carried out in the Australian Offshore Resources industry and affects whether foreign workers participating in offshore resources activities are required to have an appropriate visa under the Migration Act 1958".

The court declared the legislative instruments were invalid and ultra vires the legislation. In order to overcome the decision, the Federal Government has deemed offshore resources workers to hold Special Purpose Visas.

British Marine PLC v Wollongong Coal Ltd and Ors [2015] FCA 403

Buchanan J held that the various claims made by the plaintiff against the defendant all failed. The facts giving rise to the claims stemmed from a contract of affreightment (COA) entered into by British Marine PLC with Gujarat NRE Coke Limited of India, in respect of which freight was allegedly due. It was asserted that Wollongong Coal Ltd had guaranteed certain of the contractual obligations owed under the COA. An alternative claim was made for misleading and deceptive conduct under section 18 of the Competition and Consumer Act 2010, Schedule 2.

Virtu Fast Ferries Ltd v "Cape Leveque" [2015] FCA 324

This appeal to the Full Court of the Federal Court from the first instance decision of Rares J was dismissed.
The appellant had filed a writ in rem against the ship "Cape Leveque", which had been under construction at the shipyard of Austal Ships Pty Ltd in Western Australia. That ship was alleged to be the surrogate (sister ship) for "Jean de la Vallette" which had been launched in April 2010. There had been arbitration proceedings in London under the ship building contract for "Jean de la Vallette".

"Cape Leveque" was one of eight cape class patrol boats built, or being constructed, at Austal Ships for the Australian Customs and Border Protection Services.

By the date of the filing of the writ (18 February 2015) the "Cape Leveque" was 90% completed, the Commonwealth Government having paid out about two-thirds of the total sum payable. At first instance Rares J had held that at the time of the filing of the writ, the Commonwealth was and Austal was not the owner of "Cape Leveque". He also held that pursuant to section 8(2) of the Admiralty Act, the appellant was precluded from proceeding against "Cape Leveque" because it was a government ship. The word "ship" is defined in section 3 of the Admiralty Act so as to exclude a vessel under construction and before it is launched.

Accordingly it was held that section 19, which permits the arrest of surrogate ships, cannot be interpreted as permitting the arrest of a surrogate ship in respect of a cause of action which has arisen during the construction of a ship.

Fuk Hing Steamship Co Ltd v Shagang Shipping Co Limited [2015] FCA 682

This was an application for default judgment on a claim in which the plaintiff sought damages under section 34(1) of the Admiralty Act for wrongful arrest of the vessel "Bulk Peace". The circumstances of the arrest and release of the "Bulk Peace" are set out in the judgments of Allsop CJ, Rares and McKerracher JJ in Shagang Shipping Co Ltd v "Bulk Peace as Surrogate for Dong-A Astrea", [2014] 314 ALR 230. (See Transport and Logistics News 20/8/2014).

The plaintiff alleged that the registered owner of "Bulk Peace" was Well Fair Ltd, which had bareboat chartered her to Congo Shipping Limited and the plaintiff was the time charterer of her. The plaintiff had sub-chartered her to Rio Tinto Shipping (Asia) Pte Limited. The defendant had arrested the ship in respect of a contract of guarantee it had entered into with HNA Group Ltd. The Full Court had held that it was not prepared to hold that HNA Group Ltd was the owner of the "Bulk Peace" in the earlier litigation. Accordingly, the plaintiff asserted in these proceedings (which were undefended, the defendant having gone into liquidation) that the claim against HNA Group Ltd was unreasonable and without good cause and that the plaintiff was thereby entitled to damages for wrongful arrest. This is the first claim that has been pursued under section 34 of the Admiralty Act. Rares J identified three questions for determination:
  1. What is the test for determining whether a party "unreasonably and without good cause" obtained the arrest of a ship?
  2. Is a time charterer a person "who has an interest in the ship?"
  3. Whether the loss and damage claimed for was suffered "as a direct result of" the arrest that had been obtained "unreasonably and without good cause". Rares J queried whether a mere economic interest as opposed to a proprietary or possessory interest was sufficient to enable the plaintiff to sue for damages under this section. He also commented that in light of the Full Court's observations, the court would now have to determine whether the defendant obtained the arrest unreasonably and without good cause. He also commented that there will be real questions as to whether all the losses claimed can be said to have arisen from the arrest of the vessel, as distinct from loss of hire and expenses of operating the vessel, such as bunkers. His Honour declined to accede to the plaintiff's application for a default judgment in view of the consequences of doing so in the absence of a defendant in liquidation and because of the precedent setting which could be involved in an untested area of the law in Australia.
Mooney v MS Magdalene Schiffahrtsgesellschaft mbH (2014) NSWC 1277

This was an application made for the separate determination of questions by the first and third defendants which was refused by Rein J. The case raised novel issues and was brought by an oyster grower who sued the owner of the ship "MS Magdalene", the master of the ship, and the North of England P&I Club, in respect of damage to his oyster business following the discharge of water contaminated by fuel oil from the ship's ballast on 25 August 2010. The damages claim was in the vicinity of $200,000. The claim was made under section 8 of the Marine Pollution Act 1987 (NSW); for breach of statutory duty; for negligence; and was also brought against the master for negligence, and the owners for their vicarious liability for the master's negligence, in nuisance and under the Bunker Convention as enacted pursuant to the Protection of the Sea (Civil Liability for Bunker Oil Pollution Damage) Act 2008.

The defendants raised issues including inconsistency between the Marine Pollution Act of New South Wales and the bunker legislation, whether the negligence and breach of duty claims could be pursued in light of the Bunker Convention, and whether the claim was statute barred under the three-year time limitation under Article 8 of the Bunker Convention.

International decisions

Fish & Fish Ltd v Sea Shepherd UK & Others

The issue in this case was whether the UK charity, Sea Shepherd UK (SSUK) was legally responsible for the attack made against the plaintiff's fish farm off Malta by the vessel "Steve Irwin", which was under the command of Mr Watson, which mounted an attack on tuna cages and the tugs towing them from Libyan waters to Malta. The claimant sought to argue that the attack was part of the Sea Shepherd Conservation Society (SSCS) campaign and the campaign was conducted by SSUK, SSCS and Watson, who was a director of SSUK. The first instance judge had held that SSUK was not legally liable, but that had been overturned by the Court of Appeal. By a majority of 3-2 the Court of Appeal's decision was also overturned by the Supreme Court and the first instance decision reinstated, it being held that the first instance judge had correctly held that the extent to which SSUK had assisted SSCS was too trivial to bring it within the scope of accessory liability in tort.

Volcafe Ltd & Ors v Compania Sud Americana de Vapores SA (trading as CSAV) (2015) 1 Lloyd Rep 639

This case concerned a cargo claim for condensate damage to nine consignments of washed Columbian green coffee. The carriage had involved transhipment in Panama with North Germany being the ultimate destination for the sea carriage, some consignments having been shipped to Rotterdam and then Hamburg.
It is clear from the judgment that the case was essentially contested as a test case, the damages claimed being relatively minor.

There was no suggestion that the beans were unusual or atypical as to their moisture content. The carriage was on LCL/FCL shipment terms. The principal factual issue was whether the carrier's agents in stuffing the containers had adequately protected the cargo from condensation damage. The case was heard by Donaldson QC (a Deputy Judge of the High Court) who held that the carrier's reliance on provisions in the bill of lading excluding the carrier's liability in respect of the care, handling or stowage or packaging of the goods could not avail it and that notwithstanding that the Hague Rules regime applied to the carriage (i.e. from loading to discharge under Article 1(e)) he held that the carrier's responsibilities commenced with the stuffing of the containers, that being part of "a single loading process".

Considerable evidence was given by experts concerning the adequacy of the Kraft paper lining used by the carrier for the containers, inherent vice and the inevitability of some damage occurring. The court held that the carrier had failed to establish that it had adopted a "sound system in lining the containers".

Kassiopi Maritime Co Ltd v FAL Shipping Co Ltd ("The Adventure") (2015) 1 Lloyds Rep 473

This case is a timely reminder of the need to comply with charterparty terms when making a claim for demurrage. The arbitrators had found that the owners' claim was time barred under clause 20 of an amended BPVOY4 form, as the owners had failed to provide "all supporting documentation substantiating each and every constituent part of the claim within ninety (90) days of the completion of discharge of the cargo carried hereunder". An appeal to the High Court by the owners was also unsuccessful.

Trafigura Baheer BV v Navigazione Montanari SPA (the "Valle Di Cordoba") (2015) 1 Lloyds Rep 529

We reported on the first instance decision of Andrew Smith J in Transport and Logistics News 20/8/2014. The appeal was dismissed and it was held that the words "in transit loss" in clause 4 of the BPVOY3 form referred to loss incidental to the carriage of the cargo and only applied to shortage claims arising from a normal voyage and not to a loss occasioned by the activities of pirates.

Carlos Soto San and Anor v AP Moller-Maersk AS (the "SFL Hawk") (2015) 1 Lloyds Rep 537

This case raised an interesting question as to the ownership of a cargo of frozen swordfish rejected as unfit for human consumption. The cargo had been sold cfr Vigo, Spain by PT Awindo International to Fishco BV, which had on-sold to the plaintiff. The court held that although RT Awindo had endorsed and tendered the bill of lading to Fishco's bank on 14 November 2012, property in the cargo had not passed on that date. The court was entitled to infer that that was not the intention from the facts, principally, that Fishco had the right to reject the goods and cancel the letter of credit. However, notwithstanding that, the plaintiff had obtained good title under section 25(1) of the Sale of Goods Act 1979, having received the bill of lading in good faith and without notice of the right of the seller in the goods, on 13 December 2012.

St Maximus Shipping Co Ltd v AP Moller-Maersk A/S (the "Maersk Neuchatel") (2014) 2 Lloyds Rep 372

The demise charterers of the vessel obtained a letter of undertaking (LOU) from AP Moller-Maersk, its time charterer, to pay the proper proportion of general average payable by cargo owners following the grounding of the vessel. Maersk argued that its liability under the LOU was only to pay a "proper proportion" of the sum ascertained to be due, that is, a sum which is "properly and legally due". The owners contended that the liability of Maersk was to "pay" such amount as may be "ascertained to be due" under the adjustment, and that was the interpretation favoured by the court.

Navig8 Inc v South Vigour Shipping Inc (2015) 1 Lloyds Rep 436

The identity of the counter party to a charter was in issue in this case. That party was identified in the charter as "Disponent owners signatory in Contract": Star Maritime Management Company Pte Ltd. The claimant charterers asserted that the named entity fixed the charters on behalf of the registered owners of the four Aframax vessels, the vessels having been withdrawn from service, and against whom they sought damages for breach of the charterparties.

It was held by Teare J that although the expression "disponent owner" usually referred to a person who was himself a charterer from the registered owner, it was capable of being used in the sense of a manager of a vessel. It was held that it could not have been intended that the demise charterer be liable as owner, so it had to be regarded as having been signed by the manager as disponent owner as manager. On the evidence it did not have authority to act on behalf of the owners, so the claims against the owners were dismissed. The manager was accordingly liable in damages for breach of an implied warranty of authority.

Swiss Marine Services SA v Gupta Coal India Private Ltd (2015) 1 Lloyds Rep 456

This case involved a contract of affreightment (COA) for six shipments of coal from South Africa to India. The owner brought the proceedings (which were not defended) against the charterer for its failure to nominate the last four shipments. The claimant's entitlement was held to be the profit it would have made on the last four shipments had they been performed, less any profit which would have been made on replacement shipments at market rates. It was found that there was no available market.

MSC Mediterranean Shipping Co SA v Cottonex Anstalt (2015) 1 Lloyds Rep 359

This case raised a question as to the nature and duration of an obligation to pay demurrage on containers. The brief facts were that a total of 35 containers of raw cotton had been shipped from the Middle East to Bangladesh. The defendant had sold the cotton to a company in Bangladesh which never collected the goods, the market price of raw cotton having collapsed shortly after sale. Despite attempts to stop payments being made, under the contract the defendant had been paid for the goods and argued that it had no power to take delivery of the goods. The defendant was held to be in breach of its obligation to return the containers within the 14 day "free time" period and demurrage was thereafter payable.

It was also held that the "mitigation principle did not apply. It was held that as at 27 September 2011 (three months after the last discharge of the consignments had taken place) the defendant was in repudiatory breach of the contract. The claimant's right to keep the contracts of carriage in force solely in order to claim demurrage, rather than to claim for unliquidated damages, depended on whether it had any legitimate interest in doing so. It was held that it would have had a legitimate interest, if its inability to use the containers was causing it to suffer ongoing financial loss, but no evidence in that regard had been produced. As it had no legitimate interest to keep the contracts of carriage in force after that date, it was held that its election to do so was wholly unreasonable. Accordingly Leggatt J held that owners were only entitled to demurrage up to that date. He likened the development of the law in this area of "legitimate interest" to the "increasing recognition in the common law world of the need for good faith in contractual dealings". Consideration was also given to the question as to whether the provision for payment of demurrage was a penalty and therefore unenforceable. It was held: "if clause 14.8 of the bill of lading terms gave the carrier an unfettered right to ignore the fact that the shipper had repudiated the contract and to carry on claiming demurrage indefinitely, I would hold that the clause is a penalty".

San Evans Maritime Inc & Ors v AIGAION Insurance Co SA ("The St Efrem") (2014) 2 Lloyds Rep 265

This claim arose under two hull policies from the grounding of the vessel. Fifty per cent of the risk was insured by three Lloyds syndicates (Catlin, Ark and Brit). Thirty per cent was insured by the defendant. Its policy contained a "follow clause" which read: "Agreed to follow London's Catlin and Brit syndicate in claims excluding ex gratia payments". The claim was settled by the three Lloyds syndicates. The assured asserted that the defendant was obliged to pay 30% of an agreed loss of US$1,500,000 and Teare J found that the defendant was indeed obliged to follow the Lloyds settlement.

Fulton Shipping Inc of Panama v Globalio Business Travel Sau of Spain (the "New Flamenco") (2014) 2 Lloyds Rep 230

After the early redelivery of a small cruise ship which had been time chartered, the owners sold the vessel and obtained a significantly larger price than would have been obtained had they sold it two years later when the charter was due to end. The owners claimed damages for the loss of profits in the period from the early delivery to when the charter should have ended and the charterer argued that it should be credited with the increased value owners obtained by reason of the early sale, which had preceded the global financial crisis. Redelivery had taken place on 28 October 2007 compared with 2 November 2009, which had been the prescribed end of the charter period.

Popplewell J held that the charterer was not entitled to the credit it sought on the basis that the benefit was not caused by the breach of the charter, but by the fall in the market.

Geden Operations Ltd v Dry Bulk Handy Holdings Inc (the M/V "Bulk Uruguay") (2014) 2 Lloyds Rep 66

This appeal, from the decision of arbitrators, was dismissed by Popplewell J. The maiden voyage of this vessel which was to be conducted from the Philippines was to be, at charterers' request, via the Gulf of Aden. The disponent owner, from which the vessel was being chartered, was required, pursuant to its charter, to obtain the consent of the head owner for such a transit. Permission was granted by the head owner but only in terms that it was not to be treated as a precedent for future voyages. The charterer treated the disponent owner's insistence that prior consent would have to be obtained from the head owner on each occasion as a repudiatory breach which it purported to accept as terminating the charter. Both the majority of the arbitrators and Popplewell J held that the disponent owner's conduct did not amount to an intention not to perform its obligations.

Gard Marine & Energy Ltd v China National Chartering Co Ltd and China National Chartering Ltd v Daiichi Chuo Kisen Kaisha (The "Ocean Victory") (2015) 1 Lloyds Rep 315

We referred to the first instance decision of Teare J in Transport and Logistics News 20/8/2014.

At first instance Teare J had held that there was a breach of the safe port warranty when the vessel had become a total loss after the master decided to leave the berth at Kashima, Japan when due to strong winds, heavy rain and considerable swell, he left the berth for open water but lost control of the vessel and was driven onto the breakwater wall.

The appeal was allowed, the Court of Appeal holding that there was no breach of the safe port warranty and the charterer did not assume responsibility for unexpected and abnormal events which occurred suddenly. He held that the concept of "safety" was not an absolute one. It was necessary to consider whether "the particular event was sufficiently likely to occur to have become an attribute of the port". He went on to hold "in light of the evidence that no vessel in the port's history had been dangerously trapped at the Raw Materials Quay, with a risk of damage or mooring breakout at the same time as the Kashima Channel was not navigable because of gale force winds". There was therefore no breach of the safe port obligation.

Another issue of importance in insurance law which the Court of Appeal decided was whether the fact that Gard Marine and Energy Ltd, one of the insuring companies of the vessel, having taken an assignment of both the owners' and demise charterers' rights in respect of the grounding and total loss of the vessel could pass on, pursuant to its rights of subrogation or otherwise, down the chartering chain the loss which, under the bareboat charterer, the demise charterer had been insured against. For the charterers it was argued that clause 12 of the Barecon 89 Standard bareboat charter comprised a complete code for the treatment of insured losses in the event of a total loss and there was no room for a claim by owners against demise charterers for a breach of the safe port warranty. In the leading judgment in the Court of Appeal, Longmore LJ affirmed the "prima facie position where a contract requires a party to that contract to insure should be that the parties have agreed to look to the insurers for indemnification rather than each other. That will be all the more so if it is agreed that the insurance is to be in joint names for the parties' joint interest…".

Amlin Corporate Member Ltd & Ors v Oriental Assurance Corporation (The "Princess of the Stars") (2014) 2 Lloyds Rep 561

The appeal from Field J's decision (see Transport and Logistics News 20/8/2014) was dismissed. The facts were that the defendant, Oriental Assurance Corporation, insured Sulpicio Lines Inc in respect of loss or damage to cargo in respect of 22 vessels within Philippine territorial limits". It was reinsured by Amlin in a reinsurance contract containing a warranty: "that the carrying vessel shall not sail or put out of sheltered port where there is a typhoon or storm warning at that port nor when her destination or intended route may be within the possible path of the typhoon or storm announced at the port of sailing, port of destination or any intervening point. Violation of this warranty shall render this policy void."

The reinsurers sought a declaration that there had been breaches of the warranty so that they had no liability. The declaration was granted at first instance and the appeal was dismissed.

Interestingly, the Court of Appeal considered the only two reported cases dealing with such a warranty and they were decided in the Victorian Supreme Court in the cases of the "Biyayang Ginto" and Vlasons Shipping Inc v Neuchatel Swiss General Insurance Co Ltd ("The Aquarius Bright") (2002) USE 549. The Court of Appeal commented that one of the critical issues in those cases was whether the master had knowledge of the relevant typhoon warning, which was not in issue in this case.

American Overseas Marine Corp v Golar Commodities Ltd (the "LNG Gemini") (2014) 2 Lloyds Rep 113

The claim by owners that charterers had shipped a cargo, in breach of clause 30 of the charterparty (which was in the terms of clause 28 of the Shelltime form) which provided that it was not to ship "acids, explosives or cargoes injurious to the vessel" failed. It had been alleged that an LNG cargo contained debris, in particular, metal particles, that was injurious to the vessel. Andrew Smith J held that in the context of the clause "injurious" was to be interpreted as meaning physical damage, but accepted that it could also mean "having a tendency to cause damage", and the owners had failed to prove that charterers were in breach.

Spar Shipping AS and Grand China Logistics Holding (Group) Co. Ltd (2015) EWHC 718 (Comm)

Justice Popplewell has declined in this decision to follow the decision of Flaux J in Kuwait Rocks Co v AMN Bulkcarriers Inc (the "Astra") (2013) 2 Lloyds Rep 69, in which he held that payment of hire in a time charter is a condition of the contract. Popplewell J said: "the commentary following the decision in the "Astra" suggests that Flaux J's decision has not been universally welcomed or treated as settling the position". The importance of this aspect of the decision flows from the principle that any breach of a condition entitles the innocent party to terminate the contract. Breach of an innominate term (something less than a condition) will only entitle an innocent party to terminate the contract if it is a sufficiently serious breach, (i.e. one that goes to the root of the contract or one which deprives the innocent party of substantially the whole benefit of the contract).

Aston FFI (Suisse) SA v Louis Dreyfus Commodities Suisse SA (2015) 1 Lloyds Rep 413

This dispute arose from the sale of Russian milling wheat by Louis Dreyfus to Aston FFI (Suisse) SA under GAFTA forms 49, 124 and 125. The issue was whether the buyers were entitled to reject the cargo. The hearing in the High Court was an appeal from a GAFTA Appeal Award, which raised two questions:
  1. Can an FOB buyer only reject goods in reliance on a certificate which complies with the documentary requirements set down in the payment terms of the contract?
  2. Was the Board of Appeal wrong to ignore the totality of the evidence bearing on the question of whether the cargo was contractually compliant and not to find for the buyers on liability?
Eder J answered both questions in favour of the buyers. He held in relation to the argument that the nomination of non-GAFTA approved surveyors was non-compliant, that there was no such requirement under the contract for the first surveyor appointed to be GAFTA approved. As to the second point, it was held that a compliant certificate was one of the documents which the sellers under the contract had to present to obtain "cash". The question was, however, whether the buyer was entitled to reject the cargo under the contract absent a contractually compliant certificate. Eder J considered this question in the context of an FOB buyer having two separate rights of rejection: to reject the documents and to reject the goods.

In the absence of clear words in the contract he held that the buyer's independent right to reject the cargo could not be challenged. He held that there was nothing in the contract: "which provides expressly or impliedly that the issuance of an inspection certificate compliant with sub-clause (5) of the payment section of the GTT is determinative of the quality of the goods such that the absence of such contractually compliant certificate would, in effect, preclude buyers from rejecting the goods for relevant disconformity". It was accepted that the independent right of the buyer to reject the goods may be modified or even excluded by agreement, but it had not been in this contract.

Soufflet Negoce SA v Fedcominvest Europe SARL (2014) 2 Lloyds Rep 537

This commodity dispute concerned the proper interpretation to be given to a Notice provision under GAFTA form 64. The contract involved was for the sale of 38,000mt of feed barley. The contractual delivery under clause 8 could be extended by not more than 21 days "provided that buyers serve notice claiming extension not later than the next business day following the last day of the delivery period". Clause 19 dealt with "Notices". It contained the following:

In case of resales/repurchases all notices shall be served without delay by sellers on their respective buyers or vice versa and any notice received after 1600 hours on a business day shall be deemed to have been received in the business day following (the deemed notice period)

The buyer's notice in this case had been received after 1600 hours on that day and the seller sought to rely on the deemed notice period. Both the GAFTA Board of Appeal and Eder J held that the deemed notice period did not apply as this was not a "resale or repurchase" and the buyer's notice extending time was valid.

Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd (2014) 2 Lloyds Rep 457

This was an appeal from a decision of arbitrators arising from a failure of the defendant purchasers to acquire certain quantities of iron ore under a long-term contract. The only issue in the reported case was whether the vendor had complied with the dispute resolution clause which had required the parties to: "first seek to resolve the dispute or claim by friendly discussion… If no solution can be arrived at in (sic) between the parties for a continuous period of 4 (four) weeks then the non-defaulting party can invoke the arbitration clause and refer the dispute to arbitration".

The arbitrators found that that provision was not an enforceable condition precedent to arbitration, but if it did, it had been complied with. Teare J found that it did create a condition precedent and it had been satisfied. Interestingly, however, he found that an agreement to negotiate was unenforceable, unlike Justice Allsop (now Chief Justice of the Federal Court), whose judgment when he was President of the New South Wales Court of Appeal in United Group Rail Services v Rail Corporation of New South Wales (2009) 127 Con. LR. 202, is discussed at length by Teare J. However Teare J did find that a dispute resolution clause which required the parties to seek to resolve disputes before arbitration in good faith and in a limited point of time was enforceable. He found that the parties in this case had complied with those obligations.

Public Company Rise v 108 Nibulon SA (2015) 2 Lloyds Rep

Hamblen J held in this case that the GAFTA Board of Appeal had wrongly found that the obligation on the sellers of 158,000mt of Ukrainian feed corn to obtain export licences under clause 11.3 of GAFTA 78 was an absolute one and overrode the GAFTA prohibition clause. He held that there was no inconsistency between the two clauses and that the absolute obligation was qualified by the prohibition clause, and the sellers were relieved of their obligation not only where there was a total ban if they could identify a relevant event which was "restricting" export, rather than "preventing" export. The matter was remitted to the Board.

Bunge SA v Nidera BV (2015) UKSC 43

This case involved a contract for 25000mt of Russian milling wheat, which incorporated GAFTA Form 49. We have previously reported on the first instance decision (December 2013 Transport & Logistics News) and the Court of Appeal decision (20 August 2014 Transport & Logistics News) in which both courts had held that the prospective prohibition of the export of wheat by the Russian government did not automatically cancel the contract.

The essential facts of the case were that on 5 August 2010 Russia had introduced a legislative embargo on exports of wheat - to run from 15 August to 31 December 2010. On 9 August the sellers purported to cancel the contract. The buyers did not accept that the sellers were entitled to cancel but treated the purported cancellation as a repudiation which they accepted on 11 August 2010. The buyers brought a claim for damages of US$3,062,500. GAFTA's first tier arbitration had held that although the sellers were in breach of the contract, the buyers had suffered no damage because the embargo was not lifted. All subsequent intermediate tribunals and courts disagreed and awarded the buyers damages by reason of Clause 20 of GAFTA 49.

Lord Sumption, with whom other members of the court agreed, albeit Lord Toulson writing a separate judgment, held that Clause 20 sets out a methodology for assessing the damage suffered by one of the parties where the contract is not fulfilled, but does not shut out the possibility of a successful act of mitigation by the innocent party, nor does it exclude the possibility of supervening events (other than price movements) which reduce or extinguish the loss. Accordingly, the compensatory principle established in the case of the "Golden Victory" (2007) 2 AC 353 is not limited to instalment contracts.

Hua Tyan Development Ltd v Zurich Insurance Co Ltd and Anor (The "Ho Feg7") (2014) 2 Lloyds Rep 637

The Court of Appeal's decision was reported in Transport and Logistics News 20/8/14. The facts were that a cargo of round logs had been insured by the plaintiff with the defendant. The cover note issued by the broker contained the following: "Warranted DWT not less than 10,000". The cargo was totally lost on a voyage in the "Ho Feng 7" which had a DWT of 8,960.13. The insurers denied liability in reliance on that breach of warranty. The Court of Final Appeal upheld the decision of the Court of Appeal (which had reversed the first instance decision) in holding that insurers were entitled to decline indemnity in reliance on that warranty.

Peracomo Inc and Ors v TELUS Communications Co and Ors ("The Realice") (2014) 2 Lloyds Rep 315

The question in this case was whether the actions of Mr Vallee, a fisherman, whose fishing boat's nets had become entangled with a fibre optic submarine, in raising the cable and cutting it with an electric saw, came within the description "committed with the intent to cause such a loss, or recklessly and with knowledge that such loss would probably result", within Article 4 of the Limitation of Liability for Maritime Claims Convention 1976. If it did, the right to limit his liability and that of his company would have been vitiated.

Both at first instance and on appeal, Mr Vallee, his company and his vessel were found liable. The ultimate Canadian appellate court, the Supreme Court, found that although Mr Vallee was personally liable, the appellants were all entitled to limit their liability, although the loss was excluded from their insurance coverage because of his wilful misconduct. The court relied on the fact that the Limitation Convention limits were designed to be almost unbreakable and the mere fact that Mr Vallee's knowledge that he was cutting the very cable for the loss of which he was sued did not establish the necessary element of intent. The "intent", it was held, is directed to one which causes the loss, that is the consequence of the conduct. The majority held that the test of wilful misconduct under the Marine Insurance Act was different from that relating to the Limitation Convention and therefore found that Mr Vallee's actions did amount to wilful misconduct, entitling the insurer to avoid having a liability for the loss.

Deepwater Horizon

The Supreme Court of Texas handed down its decision in the Deepwater Horizon case earlier this year. BP sought to obtain an indemnity under the drilling contractor's insurance, in which it was a co-insured. It failed because it was held that the drilling contract had been incorporated into the insurance cover and it allocated risk to below the surface events to BP, and BP was only insured against liabilities assumed by Transocean.

Involnert Management Inc. v Aprilgrange Limited & ors [2015] EWHC 2225 (Comm)

This decision of My Justice Leggatt involved a claim under a marine policy following the destruction by fire of a luxury yacht. The vessel had been insured for an agreed value of £13 million despite being valued at and on the market for a considerably lower sum. Insurers sought to avoid liability on grounds, amongst others, of non-disclosure and misrepresentation as to the vessel's value. The insured's producing and placing brokers were also joined by the underwriters as third parties in the proceedings.

Following an extensive analysis of the factual background and of the law, the judge held that there had been material non-disclosure of the value of the vessel which, if disclosed, insurers would not have agreed to insure the yacht at the sum for which it was insured and as such they were entitled to avoid the policy. The judge further held that, as a result of the failure of the insured to give a valid notice of abandonment, the insured was prevented from treating the vessel as a total loss. The producing broker had also breached its duty of care to ensure that the proposal form correctly stated the market value and that breach caused loss to the insured.

Aviation

Australian news

Without doubt the most significant development in Australia in recent times has been the decision in the Supreme Court of New South Wales in the case of Casey v Pel-Air Aviation Pty Ltd; Helm v Pel-Air Aviation Pty Ltd [2015] NSWSC 566 [2015] NSWSC 566 which considered whether the plaintiff's post-traumatic stress disorder was compensable as a "bodily injury". Our case note below provides an analysis of the decision. This decision has caused consternation internationally owing to its possible flow-on effects for international airlines and similar claims for compensation under the Montreal Convention 1999.

The Australian Transport Safety Bureau continues its efforts to search the Indian Ocean floor for missing Malaysia Airlines flight MH370.

The Minister for Infrastructure and Regional Development announced on 26 August 2015 that Badgerys Creek has been officially declared as Western Sydney's airport site.

The Civil Aviation Safety Authority released the final draft of the proposed new general operating and flight rules for review. The proposed rules are in Civil Aviation Safety Regulations Part 91, along with a supporting manual of standards.

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Australian decisions

Casey v Pel-Air Aviation Pty Ltd; Helm v Pel-Air Aviation Pty Ltd [2015] NSWSC 566

Read about this case in our article Post-traumatic stress disorder (PTSD) leads to compensation following aviation accident.

Lambert Leasing Inc v QBE Insurance Ltd [2015] NSWSC 750

This case, which arose out of the tragic Lockhart River Metro 23 crash in 2005 which killed two pilots and 13 passengers, concerned issues of dual insurance, the insurer's duty of utmost good faith and the implications for liability of certain indemnity provisions in the contract of sale of the aircraft.

QBE Insurance was found not to have breached its obligation of utmost good faith and it was also found that, while there was dual insurance in respect of certain claims, the claimant could not recover from QBE for the costs which had been incurred in proceedings which had been pursued in the United States.

Moorabbin Airport Corporation Pty Ltd v Minister for Infrastructure and Regional Development & ors [2015] AATA 77

In a decision of Justice Kenny in the Australian Administrative Appeals Tribunal, a decision by the minister to refuse to approve a draft major development plan submitted by Moorabbin Airport Corporation involving construction of a retail shopping complex adjacent to the Moorabbin Airport was affirmed. The extensive reasons for the decision provide both a thorough review of the facts but also of the applicable law.

Qantas Airways Limited v Lustig & Ors [2015] FCA 253

Qantas sought a declaration, writ of prohibition and injunction in relation to proceedings before the Victorian Civil and Administrative Tribunal (VCAT) brought by Peter Lustig and Giuseppe De Simone for relief under the Australian Consumer Law and Fair Trading Act 2012 arising from their verbal altercation with a flight attendant over the use of a coat locker on an aircraft, which led to them being directed to disembark and refused future travel with Qantas.

VCAT was found to lack jurisdiction to determine the dispute as it is not a court of a state. Accordingly, a writ of prohibition should be issued directing that VCAT take no further steps in the proceedings, save for making orders for dismissal of the proceedings.

The judgment of Justice Perry includes a detailed analysis of the applicable law regarding jurisdiction.

Mulligan v Virgin Australia Airlines Pty Ltd [2015] FCAFC 130

This appeal to the Full Court of the Federal Court overturned a previous decision of Judge Street in the Federal Circuit Court in relation to an application by a person who suffered from cerebral palsy and who sought to travel with an assistance dog, Willow, in the aircraft cabin. Judge Street had dismissed the application made pursuant to the Disability Discrimination Act 1992 but on appeal it was found that the trial judge had erred in various respects and Virgin was found to have committed unlawful discrimination in refusing carriage of the assistance dog in all the circumstances. The applicant was entitled to compensatory damages in the amount of $10,000 and previous costs orders against him were set aside.

Dibbs v Emirates [2015] NSWSC 1332
 
The recent decision of Justice Wilson in the New South Wales Supreme Court dismissed a claim brought by a passenger who claimed to have sustained a back injury on a flight from Sydney to Dubai when a cup of hot tea was spilled on her leg. She alleged that this spill caused her to jump from her seat and twist her back sharply and this was an "accident" to which "bodily injury" under the Montreal Convention 1999 was attributable.
 
In circumstances where the plaintiff gave evidence that she was wearing a seat belt loosely fastened around her waist and she made no complaint of back pain at the time, the judge did not accept the reliability of her evidence or that of her husband and concluded that she had failed to discharge the evidentiary burden. While he accepted that she had suffered a significant back injury, he did not accept that she had sustained that injury or even aggravated a pre-existing injury during the flight.

International decisions

Stott v Thomas Cook Operators Ltd (2014) 2 Lloyds Report 207

The plaintiff was a disabled airline passenger who sought damages for injured feelings, caused by the fact that on a return flight from Zante to England he and his wife were not able to sit next to each other. It appears from the judgment that the plaintiff had suffered ill treatment and considerable distress as a result of the treatment afforded to them. Lady Hale had said that Mr Stott and his wife had been "treated disgracefully".

The Supreme Court held that compensation for injured feelings was not, however, available under the Montreal Convention. The court indicated that it was "time for the Montreal Convention to be amended to take account of the development of equality rights, whether in relation to race or access to the disabled".

Dawson v Thomson Airways Ltd (2014) 2 Lloyds Rep 399

This was a claim for damages against an airline caused by delays. It was brought just before the expiry of a six-year time limitation under European Union law. The airline argued that it was out of time under Article 35 of the Montreal Convention (which also applied under European law) and which set a two-year limitation. Both the trial judge and the Court of Appeal held that the claim was covered by European Council Regulation (EC) number 261/2004 rather than the Montreal Convention. The European Council Regulation, as it had been held by the European Court, applied to claims for loss and damage that were common to all passengers when a flight was cancelled or delayed, which meant that the six-year time limitation applied and the plaintiff was not time barred.

Land transport

Road

News

NHRV cuts paperwork for primary produce transporters

The National Heavy Vehicle Regulator (NHRV) has announced that heavy vehicle drivers transporting primary produce to or from "the farm gate" will no longer have to keep a National Driver Work Diary if travelling or working less than 160km from their base. This exemption will come into force from 5 October 2015.

Improving heavy vehicle industry maintenance standards

The NHRV has organised a training program for heavy vehicle auditors to sharpen their skills and processes to strengthen the National Heavy Vehicle Accreditation Scheme (NHVAS) and improve the safety and credibility of the industry.

Major Cape York road upgrade announced

The Department of Infrastructure and Regional Development announced on the 26 August 2015 that work will start on upgrading a 29 kilometre section of the Peninsula Developmental Road north of Coen on Cape York Peninsula. The aim of the upgrade is to improve accessibility to Cape York Peninsula for the local community and benefit local industries.

High-level bridges for NT's Victoria Highway

The Department of Infrastructure and Regional Development has announced that construction of two new bridges will start in September 2015 at the crossing of the Northern Territory's Victoria Highway and Saddle Creek. The completed works are expected to reduce the average time Saddle Creek crossing is closed each year from 18 hours to less than one hour, and improve the safety and efficiency of the upgraded sections of the Victoria Highway, particularly for freight vehicles and road trains that make up a significant portion of vehicles using Northern Territory highways.

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Rail

News

In August 2015, the Inland Rail Implementation Group delivered its report to the Australian government on the benefits, need and implementation of a 10-year plan to deliver an inland rail route linking Melbourne and Brisbane.

Conferences

The 41st Annual Maritime Law Association of Australia and New Zealand Conference was held in Queenstown, New Zealand from 10 to 12 September 2014.

The 42nd Annual Maritime Law Association of Australia and New Zealand Conference was held in Perth, Australia between 16 and 18 September 2015.

The CMI held a conference in Istanbul from 7 to 9 June 2015. The conference's main focus was on the Review of the Rules of General Average and on Offshore Activities and Trans Boundary Oil Pollution, but with considerable local and international input on a variety of other topics. Presentations at CMI meetings are available at www.comitemaritime.org.

The next CMI conference is to be held in New York from 3 to 6 May 2016.

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 or financial advice. Please seek your own legal or financial 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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