Dalrymple Marine Services Pty Ltd & Anor v PNSL Berhad

[2008] HCATrans 246

[2008] HCATrans 246

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B1 of 2008

B e t w e e n -

DALRYMPLE MARINE SERVICES PTY LTD

Applicant

and

PNSL BERHAD

Respondent

Office of the Registry
  Brisbane  No B2 of 2008

B e t w e e n -

THE OWNERS OF THE SHIP “KOUMALA”

Applicant

and

PNSL BERHAD

Respondent

Applications for special leave to appeal

GUMMOW ACJ
HAYNE J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 18 JUNE 2008, AT 10.19 AM

Copyright in the High Court of Australia

__________________

MR G.A. THOMPSON, SC:   If the Court pleases, I appear with my learned friend, MR C. WILSON, for the applicant.  (instructed by Allens Arthur Robinson)

MR J.E. SEXTON, SC:   If the Court pleases, I appear with my learned friend, MR G.K.J. RICH, for the respondent.  (instructed by Thynne & Macartney)

GUMMOW ACJ:   Yes, Mr Thompson.

MR THOMPSON:   Thank you.  May it please the Court, can I make two preliminary points before developing several of the points in our written outline.  The first preliminary point is this.  We recognise immediately that the applicant must succeed on both the trade practices point and the construction of the UK Standard Conditions, the “whilst towing” point, for the Court of Appeal’s decision to be reversed.  The second preliminary point ‑ ‑ ‑

GUMMOW ACJ:   Say that again?

MR THOMPSON:  We must succeed on both the TPA point and the “whilst towing” construction point in order to reverse the Court of Appeal’s decision. The second point is this. The respondents make a submission that there are factual issues which are to be resolved or unresolved. The appeal does not raise any factual issues. The application and the appeal proceeds on the basis that the applicant accepts the factual findings by the trial judge.

The point made by the respondent goes to the precise time at which an order to make fast was given by the pilot and there is a possible inconsistency in the primary judge’s reasons about that.  But, for the reasons which I will develop, the question of whether the collision occurred within the period encompassed by the term “whilst towing” does not depend on the precise time at which the pilot had given the order to make fast

Having said that, may I then develop, firstly, the section 74 trade practices point. Your Honours, the towage contract was a commercial agreement, both parties are corporations and there was no element of unequal bargaining. The respondent is deemed to be a consumer solely in consequence of the price of the towing service as being less than $40,000 within the definition of “consumer” in section 4B(2)(a) of the Trade Practices Act. It is improbable, in our submission, that such contracts were intended by the legislation to be the subject of consumer warranties of the kind imposed by section 74 of the Trade Practices Act.  Indeed, in this Court Justices Toohey and Gaudron in the case of Wallis v Downard‑Pickford said, “exclusion from protection of these commercial services accords with the scheme of the Act”.

The approach of the Court of Appeal to interpretation of Section 74(3) was to focus on the relationship, association or connection between the contract to provide the services and the transportation of goods required by the words “for or in relation to” and to import a limitation as to the directness or closeness required by those words. The same approach is evident in the decision of the Full Federal Court in obiter comments in a case called Braverus Maritime Inc v Port Kembla Coal Terminal Ltd and, in our submission, that is the wrong approach to the interpretation of the exclusion in section 74(3).

There is no express indication within the section that any such limitation on the words “for or in relation to” should be imported.  The words “in relation to” are elastic and, subject to context, in our submission, are wide enough to cover every conceivable connection.  In our submission, the relevant approach is the approach of focusing on the purpose of the transportation.

GUMMOW ACJ:  What is the critical passage in the Court of Appeal on section 74(3) which you say highlights the error?

MR THOMPSON:  Your Honour, if I can take you first to the reasons of his Honour Justice Williams, justice of appeal. His Honour begins to address it at a passage which begins at paragraph [31] on application book 43. His Honour Mr Justice Williams does not analyse, in our submission, the question of the appropriate approach to section 74(3), except in paragraph [33] of the reasons where his Honour says:

In my view it is critical to note that the subsection (as does the whole of s 74) focuses on the contract. 

He is referring there to the contract of towage –

The question is whether or not the contract between the parties can be categorised as a contract “for or in relation to the transportation of goods”.

GUMMOW ACJ:   Well, it is at paragraph [34] is it not: 

it would be, in my view, fanciful to conclude that this contract was in relation to the future transportation of the goods to be loaded onto the Pernas Arang.

MR THOMPSON:   Your Honour, that embodies an error in his Honour’s reasoning because his Honour has failed to recognise that the towage contract not only related to the berthing of the ship, but also to removal of the ship from the berth when it sailed after loading.  So his reference to future transportation of goods is a misconception, with the greatest of respect.  That emerges clearly in the reasons of his Honour Mr Justice Muir where his Honour sets out the terms of the towage contract on page 45 of the application book in paragraphs [45] and [46] of his Honour’s reasons.  Your Honours will see in paragraph [46] there is reference to a letter of 24 February 1995 in which it is clear that the towage contract relates not only to berthing the ship, but also removing the ship from the berth after it has loaded.  So the reference to future transportation of goods, we would submit, involves a misconception of the case.

In relation to Mr Justice Williams, there is no further analysis beyond what is then said in paragraph [35] on application book 44 where his Honour adopts the reasoning of the Full Federal Court in Braverus in the obiter passage which is set out more fully in the reasons of his Honour Mr Justice Muir.  That passage, your Honours, is set out at the bottom of page 55 of the application book and on to page 56.  The reasoning of his Honour Mr Justice Muir appears principally to be contained ‑ ‑ ‑

GUMMOW ACJ:   Have we got a copy of Braverus?

MR THOMPSON:   Yes, it is in the applicant’s bundle behind tab 3.  May it please the Court, the relevant page of the reasons of the Full Federal Court is page 118 and it commences at paragraph 194 of the reasons where their Honours say “it is unnecessary to reach a final view on the matter” because the court had already concluded that there was no contract ‑ ‑ ‑

GUMMOW ACJ:   Paragraph 195, is it not?

MR THOMPSON:   Yes, that is the critical paragraph, may it please the Court.

HAYNE J:   What is wrong with what is said in the last half dozen lines of that paragraph?

MR THOMPSON:   What we say, your Honour, is this, that that simply imposes an unprincipled and somewhat artificial limitation on the words “in relation to” and that a proper and principled approach would be to look in the first instance at the purpose of the transportation, that is, the purpose of transporting the coal or transporting the ship, because, if one goes to the observations of Justices Deane and Dawson ‑ ‑ ‑

HAYNE J:   You have said “transporting the ship”, are you identifying the towage contract as itself a contract for transporting goods?

MR THOMPSON:   We certainly put it that way before the Court of Appeal and in the first instance.  Before this Court we rely on the words “in relation to” rather than a contract for transportation.

HAYNE J:   Yes.  So, in relation to the transportation of which goods?

MR THOMPSON:   We put it in both ways, if it please, your Honour.  We put it in terms of the ship being goods and we put it in terms of the coal which was loaded on to the ship and which is contained within the ship as being goods as well.

GUMMOW ACJ:   All right.  Now, what is the other principal point?

MR THOMPSON:   Can I develop that one point one step further in response to his Honour Justice Hayne’s comment before I move to that, if it pleases, your Honour?

GUMMOW ACJ:   Yes.

MR THOMPSON:   If one was to test this by reference solely to the proposition, is the towage contract services in relation to the transportation of goods, we would ask this question.  If one postulates a position where one has a dumb barge being towed up the Brisbane River, is that a contract in relation to the transportation of goods, being either the barge or its contents?  We would say clearly it is.  So, we would pose this question, what is the difference between that position of a dumb barge being towed by a tug and the position where the tug is assisting a ship to move from a position offshore to the berth and then assisting a ship from the berth to sea again?  We would say there is only really one difference between the two scenarios.  One is clearly, in our submission, a contract in relation to transportation of goods.  The other, in our submission, is only distinguishable because in that case the ship is providing some power itself as is the tug.  There is a combination of power.

So, if it comes to distinguishing the analysis which appears in the decision of the Full Federal Court which was adopted in the Court of Appeal, we would say that there are a number of significant differences between a towage contract providing towage services and, for example, a repairer or a refueler.  There is a physical connection between the tow and the ship.  There is also a connection by reason of the fact that the tug is providing some motive assistance to the passage of the goods, being either the ship or the coal.  Now, if I can come back then to ‑ ‑ ‑

GUMMOW ACJ:   Whilst towing.

MR THOMPSON:   Whilst towing, yes.  I am sorry to digress, your Honour.  There are three points that I would like to develop in relation to the “whilst towing” point.  Whilst towing turns, in our submission, on a construction of the clause in towage conditions and it plainly extends to a period before a line is passed to the tug.  It extends to the period when the tug is in a position to receive orders direct from the ‑ ‑ ‑

GUMMOW ACJ:   It says, “in a position to receive”.

MR THOMPSON:   Yes, your Honour.  Can I firstly say, why we say at a time the order was given by the pilot does not matter is because it is not a prerequisite in terms of interpretation of the clause that there has been an order given to make fast.  All that demonstrates is that both the ship and the tug anticipated a tow occurring and both were ready for the tow to proceed.

In terms of the question of an analysing when the position to receive orders direct from the hirer’s vessel to pick up ropes or lines commences, in our submission, the tug had to make two turns to starboard to come alongside the ship to pick up the tow line.  When the tug made its first turn, which was at a point about 150 metres off the starboard side of the ship, at that point the tug was attending the ship in the sense that it was responding to the pilot’s instruction or order and that was the only reason it was in that position of proximity to the ship, and it was then heading towards the ship on a collision course and because of this, it was then in a position of risk of damage to the tug by contact with the ship, by collision.  That is evident from the fact that the collision occurred.

That is the very kind of risk, in our submission, which the UK Standard Conditions are directed to.  One can see it further in the clause because the period of towage continues until the ship is safely clear.  The relevant time to make some assessment about whether the ship is in the position as defined by the clause is to look at or analyse the negligent act which caused the ship to be in a position where it could not complete the second turn, not at the time it lost its steering, because the trial judge found that the cause of negligence was the delay by the engineer, Mr Smith, in failing to promptly reinstate power to the tug as it approached the ship and but for that delay, the tug would have made its second turn to starboard and come alongside the ship, as it had intended to do.

Now, his Honour found that the steering control could have been restored in a period less than a minute and so the final time at which the negligent act had a causative effect was at some point when the tug was within that distance of time or that period of time, that is, within the period when a correction by Mr Smith, the engineer, of the problem would no longer have avoided the collision.  Until that moment, the tug was in a position to receive orders, in our submission, direct from the hirer’s vessel to pick up the ropes and lines and it had, in fact, received those orders from the pilot some time previously.

The Court of Appeal found against the applicant essentially on two bases.  Justice Williams construed the clause as requiring that the tug also be in a position to carry out the order to pick up the ropes and lines.  We submit that as a matter of construction clause 1 contained no requirement that the tug be in a position to carry out the order.  There is, in our submission, a conflict between the most recent UK decisions, which include The Apollon and The Impetus on the one hand, and a decision of the Chief Justice in Victoria in Australian Steamships Pty Ltd v Koninklijke ‑ ‑ ‑

GUMMOW ACJ:   What does The Apollon [1971] 1 Lloyd’s Rep 476 say about this?

MR THOMPSON:   The Apollon, your Honour, in a passage at page 481 in the judgment of Mr Justice Brandon, as he then was is this: 

I would just say that I do not think that the fact that the tug has to perform a manoeuvre of this kind shows that she is not ready to receive an order.  It does, of course, indicate that she is not ready to take a line, but that is not the point.

In our submission, that is the correct analysis.  The second point upon which we failed, your Honour, in the Court of Appeal was the hailing distance point.  Mr Justice Muir found against us on that point at paragraph [69] of his reasons at application book 52.  We say in relation to that as a matter of construction the clause makes no mention of hailing distance.  That seems to be a relic from the past.  The question is whether it is in a position to receive an order direct from the ship, and it did receive an order direct from the ship by radio.  Hailing distance has no magic about it and, in fact, in the decision called The Baltyk Mr Justice Pilcher referred to the distance as being hailing or signalling distance, rather than hailing distance.

GUMMOW ACJ:   This passage from Lord Brandon, was that referred to in the Court of Appeal here?

MR THOMPSON:   It is referred to at the outset in Mr Justice Williams’ reasons, but he then does not refer to it again in his analysis.  Yes, at application book 38 at paragraph [11] of his Honour’s reasons.

HAYNE J:   That is to be read in light of what is also quoted from his own judgment in paragraph [9]?

MR THOMPSON:   Yes, your Honour, but they are capable of being read satisfactorily together. 

HAYNE J:   But what his Lordship is directing attention to in the passage quoted at paragraph [11] is the second of the conditions his Lordship identified “ready to respond to such orders if given”, is that right?

MR THOMPSON:   Yes, your Honour, there is a question about what “respond” means in that context.  The tug was responding to the order that had been given by the pilot in this case because it was sailing across the bow of the ship, it was making two starboard turns and it was going to come alongside.  It had been ordered to make fast.  But it does not follow from that that it needs to be ready to take a line at the relevant time. 

Can I just, in view of the time, your Honours, make a couple of points about the importance of this appeal. In our submission, it has public importance, it has a wider application in terms of section 74(3) than to towage contracts and it identifies an evident difference in approach between the Justices in the High Court in Wallis v Downard‑Pickford.  Justices Gaudron and Toohey, on the one hand, and Justices Deane and Dawson on the other.

GUMMOW ACJ:   Just explain to me again how you must succeed on both the trade practices and the shipping arguments?

MR THOMPSON:  Well, your Honour, we lost on the “whilst towing” point and that would be the end of the case if that were the position which prevailed. If we succeed on the “whilst towing” point, then the question of section 74(3) remains alive and that is as to whether there are implied warranties under section 74 which impact upon the contract. If they do,

then they would eviscerate those provisions of the UK Standard Conditions which contain releases in favour of the tug owner, and also those provisions which contain indemnities in favour of the tug owner in relation to loss or damage to the tug. 

Can I say in relation to that, that that is one of the reasons why we submit this is an important case which should be dealt with by this Court, because the consequence of section 74(3) is inevitably to increase towage costs. It also may have the effect that tug operators will be less inclined to put their tugs at risk in situations of salvage or towage. It seems, in our submission, somewhat incongruous legislation may have the effect that Australia, which is a nation of non‑ship owners, should confer the benefits of the consumer protection provision on foreign ship owners at the expense of its own tug operators, which is a consequence of section 74(3)(b) construed in the way in which it was construed by the Court of Appeal.

Those UK Standard Conditions have been in force since around about 1930.  There were described by Lord Justice Scott as standard conditions which are obviously of great importance because of their general use in the decision of The Glenaffric in 1948.  They are arrangements about which ship owners, tug owners, PI clubs and insurers conduct their affairs and so we would submit that those provisions ought not be swept away, as it were, by the provisions of the Trade Practices Act.  May it please the Court.

GUMMOW ACJ:   Yes, Mr Sexton.

MR SEXTON:  May it please the Court. Your Honours, the last point made by my learned friend in relation to the application of the towage conditions is relevant to both the section 74 point and the construction of the towing conditions, and it is this. As your Honours will see from the towing conditions which are set out at pages 48 and 49 of the application book, the expression “whilst towing” which is defined in clause 1(b)(iv) applies not only to exclusion type clauses – the relevant one for this case being set out at the top of page 49 in the application book in subparagraph (a)(i) – but also for the indemnity clauses which are set out at the same place, and also in clause 3 which also contains a vicarious liability provision.

So that the significance of that is that, when construing the expression “whilst towing”, the point that was raised in this case was that the tug was not close enough to the ship in order to satisfy the third of the conditions identified by Lord Justice Brandon as set out in paragraph [9] of the Court of Appeal’s judgment.  That was the issue in this case.  The issue that Justice Brandon was dealing with was condition 2 which was whether the tug was ready to receive the orders.

Now, the three criteria which have been identified in the cases that are referred to in the judgements and in the written submissions are, firstly, that the ship must be ready for the tug to provide the services referred to, secondly, that the tug must be ready in an operational sense to do so and, thirdly, that the tug must be close enough to the ship to satisfy the third criteria. 

The factual findings which, in our submission, the applicant or the appellant has to overcome in this case in order to succeed even if their point of construction is correct, is that both at first instance and in the Court of Appeal the factual finding was that the tug was not close enough to the vessel to satisfy the third requirement.  That is most clearly seen in paragraph [29] of Justice Williams’ reasons at application book 43 in the first two sentences:

the Koumala was proceeding to a point where she would have been able to accept orders directly . . . But she never reached that point.

So that the point that Justice Brandon is dealing with in the paragraphs that my learned friend took your Honours to at page 38 of the application book deal with two different things.  The first is, he deals with the three criteria, but what he is dealing with in paragraph [11] is the situation when the tug has reached the position, when it is close enough, then the question is, is it then able to satisfy criteria 2, namely, is it operationally ready?  The decision in The Apollon turned on a different point and is not inconsistent with the reasoning of the Court of Appeal in this case.

KIEFEL J:   Did the reasons of Justice Muir really go to both conditions 2 and 3?

MR SEXTON:   Yes, your Honour.

KIEFEL J:   The state of readiness, as well as the distance?

MR SEXTON:  Yes, your Honour. It is almost double obiter because the trial judge said that because of section 74 the towage conditions do not apply. He then, however, construed them and said that the tug was not close enough to the vessel and then said, but even that is wrong, the tug was not ready because one of the crewmen on the tug was not on the foredeck. So that is another factual finding which the appellant would have to overcome in order to achieve success on the appeal.

Can I turn now to section 74. The point of general principle, as stated previously in this Court, is not in doubt, which is that words such as “for or in relation to” require a relevant nexus or connection between two

things. What we are dealing with in this case is a particular factual situation which may or may not supply the sufficient nexus or connection required by section 74. So that, in our submission, this is just an application of the detail of particular factual circumstance to an uncontroversial application of the general principle that there must be a sufficient connection. It does not raise any particular interesting point of general application.

The second submission, of course, is that it is clearly correct.  This was not a contract which was in relation to the transportation of goods, it was a contract which was for the provision of towage services.  The point that my learned friend makes about the error in Justice Williams’ reasons, in our submission, misstates what it is that his Honour was saying.  When he talks about the future transportation of goods, he is talking about the transportation of the coal, not about the future transportation of the ship away from the wharf.  So there is no error in the reasons or in his Honour’s understanding of the principle that he was applying.  May it please the Court.

GUMMOW ACJ:   Thank you.  Yes, Mr Thompson, anything in reply?

MR THOMPSON:   Yes, just one matter in reply, if it please the Court.  If I can take your Honours to application book 51, paragraph [64] and the reasons of his Honour Mr Justice Muir.  My learned friend made a point that I had to overcome a finding about the deckhand on the foredeck.  If your Honours go to the last two lines on page 51, his Honour Mr Justice Muir, in fact, found in favour of my client in relation to that.  He says:

In this regard I do not consider that it assists the respondent –

that is my learned friend’s client –

that only one deckhand was observed on the foredeck of the Koumala as it approached the Pernas Arang; Captain Eisen had ordered the deckhands aft after the steering failure.  This evidence is relevant therefore only to the Koumala’s state of unreadiness between the time of the engine failure and the collision.

Those are the only matters in reply, if it please the Court.

GUMMOW ACJ:   We will take a short adjournment.

AT 10.52 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.55 AM:

GUMMOW ACJ:  The actual decision of the Queensland Court of Appeal on question of whether a section 74(3) of the Trade Practices Act 1974 was engaged is not attended by doubt. That being so, the matter does not provide a suitable vehicle to explore questions of construction and application of the United Kingdom Standard Conditions for Towage and Other Services (Revised 1974) that would otherwise arise. The applications are dismissed with costs.

AT 10.56 AM THE MATTER WAS CONCLUDED