SHIPPING AND NAVIGATION – where main engine breaks down during voyage – whether owners exercised due diligence between and at commencement of voyage under Art 3(1) of amended Hague Rules
ADMIRALTY – carriage of goods by sea – whether charterparty or bill of lading is contract of carriage
ADMIRALTY – charterparty – provision for substitution of vessel – whether substitution clause effects novation of charterparty with owners of substitute vessel
EVIDENCE – where party destroys or fails to preserve real evidence consisting of damaged machinery – where court orders retention – whether all possible adverse inferences should be drawn against party
EVIDENCE – proof of reasonableness of settlement – where cargo owner settles claim by salvor in respect of cargo owner’s liability for salvage – factors to be considered – where shipowner does not explain to cargo owner how event giving rise to salvage occurred
SHIPPING AND NAVIGATION – salvage – 1989 Convention on Salvage – whether vessel was in danger – factors relevant to quantification of salvage award
EVIDENCE – where witness disbelieved – whether positive inference can be drawn to opposite of false story
SHIPPING AND NAVIGATION – transhipment – whether cargo owner entitled to claim transhipment costs of part of cargo while vessel repaired at a port not being the port of discharge – where transhipment costs incurred due to ship owner’s breach of obligation in contract of carriage to exercise due diligence before and at commencement of voyage to make ship seaworthy under Art 3(1) of amended Hague Rules – where cargo owner had signed letter of indemnity – construction of letter of indemnity
ADMIRALTY – general average – York-Antwerp Rules, rule D – whether shipowner at fault can claim contribution to general average expenses where ship unseaworthy
Legislation:
Carriage of Goods by Sea Act 1991 (Cth) Sch 1A, ss 3, 7, 10
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Mount Isa Mines Ltd v The Ship “Thor Commander” [2018] FCA 1326
Case
[2018] FCA 1326
Decision Date
CaseChat Overview and Summary
Mount Isa Mines Ltd initiated legal action against MarShip, the owners of the ship Thor Commander, and Thorco Brazil, the charterer of the vessel, to recover damages and other costs arising from the Thor Commander's voyage from Angamos to Townsville in July 2013. The voyage was disrupted when the ship's main engine broke down, leading to extensive repairs and additional costs for the cargo owner. The central legal issue was whether MarShip exercised due diligence in making the vessel seaworthy, as required under the amended Hague Rules. Other issues included whether the charterparty or bill of lading constituted the contract of carriage, the effect of a substitution clause on the charterparty, and the implications of Thorco Brazil's failure to preserve evidence of the damaged machinery.
The court examined the terms of the charterparty, particularly clauses 2 and 10, and concluded that MarShip, as the original owners, remained liable for the vessel's seaworthiness. The substitution clause did not result in a novation of the charterparty, and thus MarShip could not escape liability by substituting the Thor Commander for the originally agreed vessel. The court also found that Thorco Brazil's failure to preserve evidence of the damaged machinery warranted adverse inferences. Regarding the cargo owner's entitlement to claim transhipment costs, the court held that Mount Isa could recover these costs as the shipowner breached the obligation to exercise due diligence. The court further determined that Mount Isa was entitled to a declaration that it had no liability to contribute to general average expenses, and ordered MarShip to pay damages for the general average bond and other costs incurred by Mount Isa.
In summary, the court ruled in favor of Mount Isa, ordering MarShip to pay damages for the general average bond, transhipment costs, and other expenses. The court dismissed MarShip's cross-claim and ordered MarShip to pay the costs of the proceedings. The court also granted Mount Isa a declaration that it had no liability to contribute to general average expenses, providing clarity and finality to the dispute.
Orders
Orders of the court
2. There be judgment for the Plaintiff against the Defendant and MarShip GmbH & Co. KG MS “Sinus Aestuum” in the sums of:
(a) USD1,010,262.60 (being damages of USD909,000 together with interest thereon of USD101,262.60 pursuant to section 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth)).
(b) £47,492.46 (being damages of £42,660.47 plus £431.99 together with interest thereon of £4,400 pursuant to section 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth)).
(c) AUD175,956.27 (being damages of AUD147,956.27 together with interest thereon of AUD28,000 pursuant to section 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth)).
3. The Cross Claim be dismissed.
4. The Defendant and MarShip GmbH & Co. KG MS “Sinus Aestuum” pay the Plaintiff’s costs of the proceedings (including its costs of and occasioned by the Cross Claim).
5. The Plaintiff’s application for an order for costs on an indemnity basis from 18 June 2017 be stood over for hearing to 26 October 2018 at 2.15pm.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
The fixture of Thorco Challenger in the recap of 27 November 2014 did not proceed and Thor Commander carried the cargo instead. How this occurred, who were the parties to the charterparty, what were its terms and whether Mount Isa can sue MarShip only as the charterer under the recap or as holder of the bill of lading are the questions that arise on the contract issue.4.1 The contract issue – background On 20 March 2008, Mount Isa as buyer entered into a copper anodes/blister purchase and sale agreement with Xstrata Commodities Middle East DMCC (another Glencore subsidiary) as sellers for a term that, originally, was to end on 31 December 2010, but would continue thereafter on a year to year basis until one party gave six months’ notice (cl 2). The agreement was for Mount Isa to purchase between 20,000 to 70,000 MT of copper anodes per annum for delivery to the Townsville refinery. Payment of the provisional invoice value was due no later than 30 days after the bill of lading date (cl 9). Risk passed to the buyer upon delivery of the material over the ship’s rail at the load port (cl 12), and under an amendment agreed on 9 April 2013, delivery would be FOB ST (free on board stowed and trimmed) Antofagasta, Chile. Mount Isa’s shipbroker was OCT Ocean Chartering + Transport Mühle + Sachs (GmbH & Co) in Hamburg. OCT, usually through Jan Uleman, had negotiated several earlier charterparties on behalf of Mount Isa Mines and its parent, Glencore, for the ships to which Mr Dragsbæk referred. The charterparty for the fixture of Thor Glory on 17 July 2013 that I describe below is relevant because it formed the basis of the terms of the recap under which Thor Commander came to be fixed as a substitute vessel to carry the cargo from Angamos to Townsville. On 17 July 2013, OCT, on behalf of Mount Isa, agreed the terms of a recap with Thorco Brazil for Thor Glory to carry a cargo of 9,000 MT of copper anodes from Antofagasta to Townsville. The recap email provided that Mount Isa had the right to assign the charterparty to Glencore “at any moment”. The recap required the owners to perform several specific obligations. The ship was due at Antofagasta on 18 July 2013 and this recap made no reference to any right to substitute another vessel. The recap stated that the owners had to clause bills of lading, in case of any cargo damage, but otherwise would issue clean bills if the charterer provided a letter of indemnity. The recap concluded “[o]therwise as per attached Gencon 94 incl. rider terms”. It attached copies of Thor Glory’s classification certificate, which identified her owners as Eastern Comet Maritime S.A., and the classification society’s register of her lifting appliances. It also attached a copy of the ship’s technical specifications that named Thorco Denmark as her commercial managers. The version of the GENCON 1994 form attached to the 17 July 2013 recap related to a 2011 charter by Glencore. Relevantly, it included cll 2 and 10 in Pt II of the GENCON 1994 form which, it is common ground, were also terms of the charterparty for Thor Commander. Clauses 2 and 10 provided (as amended in the GENCON 1994 form attached to the 17 July 2013 recap):2. Owners’ Responsibility ClauseThe Owners are to be responsible for loss of or damage to the goods or for delay in delivery of the goods only in case the loss, damage or delay has been caused by personal want of due diligence on the part of the Owners or their Manager to make the Vessel in all respects seaworthy and to secure that she is properly manned, equipped and supplied, or by the personal act or default of the Owners or their Manager.And the Owners are not responsible for loss, damage or delay arising from any other cause whatsoever, even from the neglect or default of the Master or crew or some other person employed by the Owners on board or ashore for whose acts they would, but for this Clause, be responsible, or from unseaworthiness of the Vessel on loading or commencement of the voyage or at any time whatsoever.…10. Bills of LadingBills of Lading shall be presented and signed by the Master as per the “Congenbill” Bill of Lading form, Edition 1994, without prejudice to this Charter Party, or by the Owners’ agents provided written authority has been given by Owners to the agents, a copy of which is to be furnished to the Charterers. The Charterers shall indemnify the owners against all consequences or liabilities that may arise from the signing of bills of lading as presented to the extent that the terms or contents of such bills of lading impose or result in the imposition of more onerous liabilities upon the Owners than those assumed by the Owners under this Charter Party. (emphasis added)4.2 How Thor Commander came to perform the voyage
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Such a declaration is directed to determining the legal controversy as to whether, and what, liability Mount Isa has to contribute to general average and, if made, will have the effect of quelling it. Mount Isa is entitled to that remedy in the interests of justice: Plaintiff M61/2010E v Commonwealth (2010) 243 CLR 319 at 359 [101]-[103] per French CJ, Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ, and to prevent multiplicity of proceedings: Thomson Australian 148 CLR at 161. That remedy is preferable to ordering MarShip itself to pay instead, and to indemnify Mount Isa, in respect of any liability that Mount Isa might be found to have in the adjustment of general average. MarShip must also pay damages in the sum of £431.99 in respect of Mount Isa’s having to arrange the general average bond.10. Conclusion I will make orders that MarShip pay Mount Isa the amounts of USD909,000 as its share of the salvage reward I have fixed, together with the sums of £42,660.47 for its costs on that issue, £431.99 as the costs of the bond and AUD147,956.27 for the transhipment costs, together with interest. The parties should seek to agree interest calculations for the foreign currency sums and use the Court rates for the transhipment costs. MarShip’s cross-claim seeking relief in respect of the letter of indemnity must be dismissed. MarShip must pay the costs of the proceeding. I will give the parties the opportunity to prepare draft orders to give effect to these reasons.
Ratio Decidendi
Legal Principle Established
For its part, Mount Isa relevantly contended that the use of the expression “Owners/ Disponent Owner/ commercial manager Thorco” in the recap dated 27 November 2014 and the version of the charterparty that OCT sent to Mr Dragsbæk on 10 December 2014 naming Thorco Brazil as owners of the chartered ship, indicated that Thorco Denmark was intended to be a party to the recap, and hence, the charterparty, and that Thorco Denmark continued as a contractual party whatever the outcome of MarShip’s novation argument.4.5 The contract issue – consideration I reject MarShip’s argument that it became the owner or other party to the recap dated 27 November 2014 or charterparty it evidenced. The substitution clause permitted the owners of the chartered vessel, namely Thorco Challenger, to substitute another vessel that was suitable to perform the voyage. How those owners arranged for the substitute to perform the voyage was a matter for them. They might source her within their own fleet, as an owned or chartered vessel, or enter a subcharter to ensure that they complied with their obligation under the recap to have Thorco Challenger or a suitable substitute ready at Angamos and there in time to perform the voyage. In ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue of the State of New South Wales (2012) 245 CLR 338 at 346 [12], French CJ, Crennan, Kiefel and Bell JJ said:A novation, in its simplest sense, refers to a circumstance where a new contract takes the place of the old [Olsson v Dyson (1969) 120 CLR 365 at 389]. It is not correct to describe novation as involving the succession of a third party to the rights of the purchaser under the original contract. Under the common law such a description comes closer to the effect of a transfer of rights by way of assignment. Nor is it correct to describe a third party undertaking the obligations of the purchaser under the original contract as a novation. The effect of a novation is upon the obligations of both parties to the original, executory, contract. The inquiry in determining whether there has been a novation is whether it has been agreed that a new contract is to be substituted for the old and the obligations of the parties under the old agreement are to be discharged. (emphasis added) Their Honours held that a novation of a contract necessarily involves the rescission of the existing contract (for which the new one is a novation) and a release of any person to the existing one who is not a party to the new one (245 CLR at 349-350 [26]-[28]). They explained that, as Dixon J had held in Vickery v Woods (1952) 85 CLR 336 at 345, rescission and novation ultimately depend on intention, and that such an intention can be express or inferred, including from conduct (245 CLR at 350-351 [31]-[32]). MarShip’s argument, if accepted, did not answer why the original owner under the recap would escape all liability if the vessel that the owners sought to substitute turned out not to be suitable, in accordance with the requirements of the recap (e.g. because it was not fully suitable for Australian trading). MarShip did not offer a reason why the substitution clause in the recap would operate to excuse the original owners from their obligations in that respect when they had chosen to substitute a different vessel from that initially agreed, or how any novation of the contract in the recap came into being between Mount Isa and the owners of the substituted vessel.