In brief - Latest news and cases from the world of shipping
Our transport and logistics team covers recent local shipping news and summarises some interesting maritime cases from Australia and around the world which have been handed down in recent months.
The partners and solicitors in our team take this opportunity to wish all our clients a happy Christmas and enjoyable holiday season.
The Australian Federal Government introduced the Coastal Trading (Revitalising Australian Shipping) Amendment Bill 2017
into parliament on 13 September 2017. It seeks to simplify and make more flexible the arrangements for the carriage of cargo around the Australian coast. The Bill has been referred to the Senate Rural and Regional Affairs and Transport Legislation Committee for report by 4 December 2017.
The reforms were contained in a discussion paper released earlier in the year. They include:
- removing the five-voyage minimum requirement for issuing Temporary Licences (TL) for single voyages
- streamlining the licensing process where no General Licence vessels are available
- streamlining the TL variation process
- amending the voyage notification requirements and the tolerance limits on cargo volume and loading date variations
- extending the geographical reach of the act by amending the definition of "Coastal Trading" to include voyages to and from other defined places in Australian waters, such as offshore installations
On 24 February 2017, Jagot J in the Federal Court determined that the Maritime Union of Australia (MUA) had, as had been found by the Fair Work Ombudsman, organised and been involved in conduct of employees at the Sydney and Brisbane terminals of Hutchison Ports, which was unlawful industrial action, thereby contravening section 417(1)
of the Fair Work Act 2009
, making itself liable to the imposition of a pecuniary penalty.
In reaching her decision her Honour, contrary to submissions made on behalf of the Union, took evidence contained in MUA correspondence and press releases at "face value"; such evidence included statements that the Union would "unleash every tool available, legal, political and industrial", would be using every "lever at our disposal to ensure that this anti-union attack is repelled", and "it's imperative we throw everything including the kitchen sink at Hutchison…".
The plaintiff chartered the vessel "Eye-Spy" to replace its own vessel which was a catamaran and was unavailable to operate in the passenger ferry service, the charter was necessary to cover a two-week period. The vessel was bareboat chartered but soon after its delivery to the plaintiff it suffered a failure of her starboard stern tube assembly due to inadequate cooling water supply, the cause of which was the principal issue in the proceedings. The defendant sought to argue that there had been human intervention on the part of the plaintiff. Justice McKerracher accepted the evidence of the plaintiff's witnesses on this issue and found that there was most probably a latent defect in the vessel and he was not satisfied that that part of the vessel had been properly maintained by the defendant. As a result the plaintiff recovered most of the damages which it claimed and the cross-claim against it failed.
For admiralty lawyers the more interesting aspect of the claim, however, relates to the claim made by the defendant for damages for unjustified arrest. That aspect of the claim was not pursued but they did, however, seek damages for the plaintiff's demand for excessive security. The plaintiff had originally demanded $316,000 for its claim plus $50,000 costs and $11,000 for interest as security for the release of the vessel. His Honour found that the plaintiff's claim was at least $100,000 too much and was therefore excessive. The entitlement for compensation of the defendant in that regard was the interest charged for the provision of the security monies which the defendant had to fund. McKerracher J found that the appropriate calculation was the commercial rate of interest that the company was obliged to pay the funder less any amount which it received on the funds deposited.
SUK v Hanjin Shipping Co Ltd  FCA 404
Jagot J made orders in November 2016 recognising the rehabilitation proceedings in Korea concerning Hanjin, pursuant to the Model Law enacted in the Cross-Border Insolvency Act 2008 (Cth)
and recognising Mr Suk, the plaintiff, as a "foreign representative" within the meaning of the Model Law, as well as granting further consequential relief. In these subsequent proceedings her Honour noted that Article 18 of the Model Law requires a foreign representative to "inform the court promptly of:
(a) any substantial change in the status of the recognised foreign proceeding or the status of the foreign representative's appointment;
(b) any other foreign proceeding regarding the same debtor that becomes known to the foreign representative."
As her Honour explained, the obligation is important because it enables the court, when it is made aware of any substantial change in the status of the foreign proceeding, to revisit its orders or make new orders. The plaintiff failed to comply with Article 18.
The changes were identified by her Honour as being that on 2 February 2017 the Seoul Central District Court terminated the rehabilitation proceedings and declared Hanjin bankrupt. When her Honour became aware of the circumstances, she vacated the orders she had previously made.
The plaintiff was the owner of the vessel "Seadeck" which had entered into a charter and licence agreement with the second plaintiff, Kanki Sea Tourism Hospitality & Entertainment Limited (Kanki) and the defendant. The relationship between Kanki and the defendant was governed by a joint venture agreement (JVA) entered into at the same time. Kanki terminated the JVA on 25 July 2017 and the plaintiff asserted that it was entitled to terminate the charter agreement by reason of the same breaches relied upon by Kanki in terminating the charter.
In the present application, the plaintiffs sought interlocutory relief for the appointment of a receiver and manager to take control of the vessel and any business operated on it.
The defendant denied that it was in breach of the agreements and the entitlement for the charter and the JVA to be terminated. It contested the appointment of any receiver.
Burley J, in the Federal Court, declined to appoint a receiver. His Honour discussed the principles applicable to the grant of interlocutory injunctive relief such as that sought in these proceedings. In particular, the plaintiff needs to show that it would suffer irreparable injury for which damages would not be an adequate compensation unless the injunction is granted.
During the course of the hearing, the defendant offered undertakings to the court until the final determination of the proceedings that it would not make any additions or alterations to the vessel without the consent of the first plaintiff, that it would keep the vessel in the same condition and state of repair as at the date of filing of the originating application, and would allow the first plaintiff's representatives to inspect the vessel on three days' notice.
For the detailed reasons he outlined, Burley J did not consider that the plaintiffs had established that the interlocutory relief sought would be appropriate. The plaintiffs' application was therefore dismissed, although the court noted the undertakings given by the defendant to the court.
The Chief Justice of the Federal Court sat as a first instance Judge in determining in this case that the insured was not entitled to an indemnity under a marine insurance policy for the cost of replacing the starboard engine of a motor yacht.
The case has interest as the parties and the court sought to determine the issue, utilising as little court time as possible. To that end, technical questions about the cause of the engine breakdown were referred to a surveyor as a court appointed referee, in particular the technical factual issues around the engine failure which occurred when the insured's Tiger, a 2009 model Sunseeker Manhattan, starboard engine shut down within five minutes of the vessel's departure from its marina.
The hearing before Chief Justice Allsop took place over one day and involved cross-examination of the insured, whose evidence Chief Justice Allsop accepted.
The referee found that the insured had not complied with the operating manual and did not switch off the engine as was indicated in the operating manual when an alarm was activated. The referee also found that there was a faulty design of the sealing arrangement between the lube oil cooler and the engine block.
The questions for the court were whether or not the damage was due to accidental loss and if so whether any relevant exclusions applied. One such exclusion related to faulty design. Chief Justice Allsop referred to a number of authorities in insurance law relating to the meaning of the word "accident". He found that the claim was prima facie covered by reason of an accident, rejecting the suggestion that the insured had "courted the risk" of damage to the engine.
His Honour then turned his attention to identify the proximate cause of the loss and discussed some of the leading authorities on that difficult question. He found that the proximate cause of the damage to the starboard engine "was the rapid and massive evacuation within a short number of minutes of the engine lube oil, which was referrable directly to the gasket that was defective due to its faulty design". Accordingly, the faulty design exclusion operated to prevent the insured having an entitlement to recovery under the policy. This case is a good example of how parties can minimise the costs of insurance litigation by sensible use of alternative dispute resolution processes and have one of the country's leading justices determine difficult questions of law.
Offshore Marine Services Alliance Pty Ltd v Leighton Contractors Pty Ltd and Anor (2017) 2 Lloyds Rep 79
Offshore Marine Services Alliance Pty Ltd claimed contribution in general average from Leighton Contractors Pty Ltd and Thiess Pty Ltd arising from a casualty during the towage by its tug of a barge carrying a cargo of construction materials from Henderson in Western Australia to Barrow Island, off the West Australian coast, pursuant to a contract which it had with Chevron Australia Pty Ltd. The materials had been supplied by Leighton and Thiess pursuant to contracts with Chevron.
The issue was whether they had a liability notwithstanding that ownership in the materials had passed to Chevron.
It was held by Justice McKerracher in the Federal Court of Australia that the liability to contributing in general average only attached to the owner of the cargo who had benefitted from the general average sacrifice and expense or from someone who was contractually liable to contribute.
of the Marine Insurance Act 1909 (Cth)
(which is in identical terms to section 66 of the Marine Insurance Act 1906 (UK)
) refers to those who are liable to pay general average as "the other parties interested". The plaintiff in this case sought to argue that by reason of the contractual arrangements between Leighton and Thiess on the one hand and Chevron on the other, they were parties interested as having the responsibility for the cargo at the relevant time.
McKerracher J did not accept those arguments and relied on authorities which supported the view that it was the owner of the cargo at the relevant time who has the liability to contribute in general average.
Mitsui & Co Ltd and Ors v Beteiligungsgesellschaft LBG Tankerflotte MBH and Co KG and Anor (The "Longchamp") - UK Supreme Court, 25 October 2017
Gard Marine and Energy Ltd v China National Chartering Co Ltd and Anor (2017) 1 Lloyds Rep 521
Transgrain Shipping (Singapore) Pte Limited v Yangtze Navigation (Hong Kong) Co Ltd (The "Yangtze Xing Hua")
This claim was made by a time charterer in respect of soya bean meal which had been carried from South America to Iran pursuant to a New York Produce Exchange form of charter which incorporated the Inter-Club Agreement 1996
(ICA). The charterer, not having been paid for the cargo by its buyers, ordered the vessel to wait off the port for four months. The vessel was essentially used as floating storage at the receiver's expense. Unfortunately, the cargo started to overheat and a claim was made for €5 million.
The issue in the proceedings was whether under clause 8(d) of the ICA the word "act" bore its ordinary and natural meaning of any act without regard to questions of fault. Clause 8(d) apportioned liability for cargo claims for all situations not otherwise dealt with in clause 8 on a 50/50 basis "unless there is clear and irrefutable evidence that the claim arose out of the act or neglect of the one or the other (including their servants or sub-contractors) in which case that party shall then bear 100% of the claim". The arbitrators found that the charterer's decisions were an "act" and thus it bore 100% of the consequences. Its appeal was unsuccessful, Teare J holding that the word "act" did bear its ordinary and natural meaning without regard to any questions of fault.
Star Polaris LLC v HHIC-Phil Inc ("The Star Polaris") (2017) 1 Lloyds Rep 203
The vessel had been built by the defendant but suffered a serious engine failure and included within its claim before the arbitrators its wish to make a claim for diminution in value of the vessel. The question for the court was whether or not an exclusion in the ship building contract in respect of "consequential and special losses" prevented such a claim being made.
It was held by Sir Jeremy Cooke, in agreeing with the arbitrators, that those words do not mean "such losses, damages or expenses as fall within the second limb of Hadley v Baxendale but does have the wider meaning of financial losses caused by guaranteed defects, above and beyond the cost of replacement and repair of physical damage. The obligation of the yard was only to replace or repair".
Fulton Shipping Inc of the Panama v Globalia Business Travel SAU (formerly Travel Plan SAU) of Spain ("The New Flamenco")
We have previously reported on this case which has now been finally determined in the Supreme Court in the UK (See Transport and Logistics News: September 2015
, June 2016
and September 2016
). The Court of Appeal had held that the owners had acquired a benefit when deciding to mitigate their loss arising from the charterer's early redelivery of the vessel, and had held that the owners had to give credit for that benefit.
The Supreme Court allowed the appeal. The leading judgment was given by Lord Clarke with whom Lords Neuberger, Mance, Sumption and Hodge agreed. The first instance Judge's decision was restored, their Lordships holding that "the benefit to be brought into account must have been caused either by the breach of the charter party or by a successful act of mitigation". The benefit which the charterer was seeking to have brought into account was the benefit to the owner of "having avoided a loss of just under about US$17 million by selling the vessel in October 2007 for US$23,765,000 by comparison with the value of the vessel in November 2009 of US$7 million". Their Lordships held that that difference or loss was not caused by the repudiation of the charter party. The decision by the owners was a commercial decision made at their own risk which was not part of the subject matter of the charter party and had nothing to do with the charterers. The "premature termination is the occasion for selling the vessel. It is not the legal cause of it."
An issue that has seldom troubled the law courts since the 1970s has again found its way into the law reports and provides a salutary reminder to those involved in the chartering of ships of the legal issues that arise in relation to the arrival of ships and the giving of notices of readiness.
The "Arundel Castle" had been chartered to load a cargo at the Port of Krishnapatnam and proceeded to that port, which on its arrival was congested. She anchored at a location directed by the Port Authority.
Clause 15 of the charter fixture recap provided that:
Notice of readiness to be tendered … on vessels arrival at load/disch ports within port limits. The notice of readiness not to be tendered before commencement of laydays.
Clause 35 of the fixture recap provided:
Otherwise Gencon 94 printed form charter-party with logical amendments on basis the terms as per fixture recap.
Clause 6(c) of Gencon 94 provided:
If the loading/discharging berth is not available on the Vessel's arrival at or off the port of loading/discharging, the vessel shall be entitled to give notice of readiness within ordinary office hours on arrival there.
Notice of readiness was given from the anchoring position to which the vessel had been directed by the port authority.
Arbitrators held that the notice of readiness was invalid as it had been given outside "port limits" The arbitrators identified the "port limits" with reference to the relevant admiralty chart. There was no issue that the vessel had anchored outside the "port limits" as shown on that chart.
An appeal was made to the High Court in London where the owners submitted that "port limits" included any area within which vessels were customarily asked to wait by the port authorities and over which the port authorities exercised authority or control over the movement of shipping. Alternatively, they relied on the definition of "port" in the Laytime Definitions for Charter Parties 2013
and that "port limits" included places outside the legal, fiscal or administrative area where vessels were ordered to wait for their turn no matter the distance from that area.
Justice Knowles dismissed the appeal and in doing so relied heavily on what the House of Lords had said in the Joanna Oldendorff (1973) 2 Lloyds Rep 285, and the further elaboration of that judgment in the House of Lords in the Maratha Envoy (1977) 2 Lloyds Rep 301.
In the former case, Lord Reid set out what has become the classic description of what constitutes an arrived ship when he said:
I think it ought to be made clear that the essential factor is that before a ship can be treated as an arrived ship she must be within the port and at the immediate and effective disposition of the charterer and that her geographical position is of secondary importance. But for practical purposes it is so much easier to establish that, if the ship is at a usual waiting place within the port, it can generally be presumed that she is there fully at the charterer's disposal.
I would therefore state what I would hope to be the true legal position in this way. Before a ship can be said to have arrived at a port she must, if she cannot proceed immediately to a berth, have reached a position within the port where she is at the immediate and effective disposition of the charterer. If she is at a place where waiting ships usually lie, she will be in such a position unless in some extraordinary circumstances, proof of which would lie on the charterer…
If the ship is waiting at some other place in the port, then it will be for the owner to prove that she is as fully at the disposition of the charterer as she would have been if in the vicinity of the berth for loading or storage.
In the latter case, Lord Diplock explained that the purpose of the House of Lords in the Joanna Oldendorff "was to give legal certainty to the way in which the risk of delay from congestion at the discharging port was allocated between charterer and shipowner under a port charter which contained no special clause expressly dealing with this matter".
Lord Diplock had also referred to the time lost clause and the standard clauses which deal specifically with the individual ports where a usual waiting place for vessels waiting for a berth lies outside the limits of the port.
The issue in this case was whether the plaintiff was entitled to make a claim under a liability policy in respect of a cruise ship. The head charterers Marco Polo Chartering Ltd had time chartered the vessel to Transocean Tours Toristik GmbH and it entered into a "general sales agency agreement" with the plaintiff. It was named as a co-insured under the policy, described as a charterer's liability policy.
There was an outbreak of norovirus and passengers were paid an ex gratia payment from the claimant which it sought to recover under the policy.
The question was whether it was a "contracting carrier" which had a liability under the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974
. Article 1(i)(a) of the Convention defined a "carrier" as being "a person by or on behalf of whom a contract of carriage has been concluded, whether the carriage is actually performed by him or by a performing character", and Article 1(ii) defined a "contract of carriage" as "a contract made by or on behalf the carrier for the carriage by sea of a passenger or of a passenger and his luggage".
Knowles J dismissed the claim as the plaintiff was not a contracting carrier. The passengers had all contracted with a number of different tour operators and their claim lay against those operators. Furthermore, the plaintiff was not a charterer of the vessel. It had no liability to the passengers.
Smith v All other persons claiming to be interested in the MV "Ross Revenge" (2017) 2 Lloyds Rep 288
The "Ross Revenge" was a fishing trawler built in 1960 which had been converted to act as a pirate radio station. Between August 1983 and November 1990, she was used as a base for "Radio Caroline" and "Radio Monique". She had been owned by Grothan Steamship Lines, which is registered in Panama.
Since 1985 the plaintiff had acted as a volunteer providing food and necessaries to the vessel and raising funds for her maintenance. The vessel had grounded in 1991 and he had raised funds to pay for her salvage. Thereafter the plaintiff had effectively been the manager and custodian of the vessel and had raised considerable sums in that regard. He had attempted to make contact with the owners and the then mortgagee of the vessel with no success.
In these proceedings he sought a declaration that he was the legal owner of the vessel and was entitled to be registered as such under the Merchant Shipping Act 1995
The Admiralty Registrar in the United Kingdom, Jervis Kay QC, determined that the court had jurisdiction to determine the claim and had the power to grant a declaration and that ownership of the property could be abandoned by the owner, the lapse of time capable of being evidence of such an intention. Accordingly, he drew an inference that the previous owner had abandoned the vessel and the plaintiff had taken on ownership.
The "Posidon" and Anor (2017) 2 Lloyds Rep 390
This was an interesting decision in the Singapore High Court of Belinda Ang Saw Ean J. The brief facts were that the vessel was arrested by the mortgagee bank when the owners failed to pay instalments due on its loan. Default judgment was obtained by the bank and the vessel subsequently sold by judicial sale.
Three bunker suppliers challenged the order of priorities sought by the mortgagee. Her Honour reviewed a number of decisions in England, Hong Kong, Canada, New Zealand and Australia but held that the usual priority given to a mortgagee's claim over that of a supplier of necessaries would apply. The bunker suppliers had not been able to show, firstly, that the mortgagee knew that the mortgagor was insolvent at the time of the bunker supply; secondly, that the mortgagee had not been shown to be fully aware, in advance, of the nature and extent of the expenditure incurred by the bunker suppliers and thirdly, it had not been shown that such expenditure brought about some benefit to the mortgagee.
Reliance for those propositions rested on the well-known decision in The Pickaninny (1960) 1 Lloyds Rep 533.
Seminars and Conferences
Our Melbourne and Sydney offices held seminars with our Singapore and New Zealand ADVOC colleagues on the topic of "Refresh, Rebuild and Reform". Stephen Thompson
reminded freight forwarders of the problems they can encounter if they are not careful in the manner in which they sign and issue bills of lading; Danny Chua spoke about cross border insolvency and judicial recognition in the context of Singapore law and the Hanjin collapse; Stuart Hetherington
spoke about the reform provisions put before the Federal Attorney-General by MLAANZ for the Marine Insurance Act 1906
; Simon Cartwright spoke about regulatory changes in New Zealand, and Richard Arrage
gave a clear presentation about Blockchain and how it is (and is likely to continue) affecting the shipping industry. Guests were then treated to refreshments of craft beers.
The Comité Maritime International (CMI)* held its Assembly meeting in the beautiful city of Genoa in September. The Italian Maritime Law Association organised a seminar to take place at that time also. The Conference was well attended by about 250 registrants. The opportunity was taken to make a presentation to the doyen of the maritime legal profession, Francesco Berlingieri, who is aged 95.
Mans Jacobsson, the retired director of the IOPC Fund, gave a paper entitled "The Significance of the Torrey Canyon - 50 Years On" which will be published in the CMI Yearbook. Professor Martin Davis then presented on the OW Bunker cases in the United States.
Ann Fenech, who chairs the CMI International Working Group on Ship Financing and Security Practices, gave a presentation on the work that has been done thus far by her group. Professor Lorenzo Schiano di Bepe then gave a presentation entitled "Mind the gap between prevention and liability" in relation to the work being done by the CMI International Working Group on offshore activities.
Professor Sarah Derrington, who chairs the CMI International Working Group on Cross Border Insolvency, then spoke together with Mauricio Dadani about the Hanjin bankruptcy. The seminar concluded with Dr Valeria Eboli giving an Italian perspective on the legal issues arising from refugee migration at sea. Admiral Fred Kenney of the IMO Legal Committee gave a brief commentary on that paper.
The seminar was held in the Palazzo Ducale and the afternoon's assembly meeting was held in the old Stock Exchange building. Both venues being absolutely outstanding, as was the Villa Lo Zerbino where the dinner was held that evening.
Presentations, including videos, can be found on the website at www.cmi2017genoa.org
*Stuart Hetherington is the current President of the Comité Maritime International.
Maritime Law Association of Australia and New Zealand (MLAANZ) Conference
The MLAANZ held its conference in Melbourne in October. The Honourable Sir Bernard Eder gave the annual Frank Stuart Dethridge Memorial address entitled "The MV Good Faith: the Relevance of Good Faith in Shipping Disputes" in a most enlivened and interesting presentation. He was followed by the former Chief Justice of Australia the Honourable Robert French AC who spoke about "Ships that Changed the Common Law". The Honourable Justice Digby of the Supreme Court of Victoria gave a presentation of the development of the Himalaya Clause, and Justice Stephen Rares of the Federal Court gave a fascinating insight into the Torrey Canyon.
Other topics covered at the conference included admiralty law developments in Singapore, New Zealand and Australia; ports and imports; regulation; carriage of goods by sea; and establishing a practice in arbitration. Andrew Tulloch
spoke at the session on insurance and Carolyn Wait
spoke as a member of the panel on ethics of ship arrests.
The concluding dinner was a spectacular success: guests were entertained by a group of opera singers in a most entertaining fashion and the venue was a dining room in the Melbourne Cricket Ground, where a week before the AFL Grand Final had been held.