Strong Wise Limited v Esso Australia Resources Pty Ltd
[2010] FCA 240
•18 March 2010
FEDERAL COURT OF AUSTRALIA
Strong Wise Limited v Esso Australia Resources Pty Ltd
[2010] FCA 240
Citation: Strong Wise Limited v Esso Australia Resources Pty Ltd [2010] FCA 240 Parties: STRONG WISE LIMITED v ESSO AUSTRALIA RESOURCES PTY LTD (ACN 091 829 819), BHP BILLITON PETROLEUM (BASS STRAIT) PTY LTD (ACN 004 228 004) and PERSONS WHO MAY HAVE A CLAIM WITHIN THE MEANING OF ARTICLE 2 OF CONVENTION ON LIMITATION OF LIABILITY FOR MARITIME CLAIMS 1976 (AS AMENDED BY THE 1996 PROTOCOL TO AMEND CONVENTION OF LIMITATION OF LIABILITY FOR MARITIME CLAIMS 1976) AS GIVEN FORCE OF LAW BY THE LIMITATION OF LIABILITY FOR MARITIME CLAIMS ACT (1989) (AS AMENDED) IN RESPECT OF LOSS SUFFERED OR DAMAGE CAUSED BY AN ANCHOR OR ANCHOR CABLE OF THE VESSEL "APL SYDNEY" IN PORT PHILLIP BAY, VICTORIA ON OR ABOUT 13 DECEMBER 2008 File number: VID 1060 of 2008 Judge: RARES J Date of judgment: 18 March 2010 Date of Corrigendum: 18 May 2010 Catchwords: ADMIRALTY – LIMITATION OF LIABILITY – application under s 25 of the Admiralty Act 1988 (Cth) by shipowner to limit liability under Limitation of Liability for Maritime Claims Act 1989 (Cth) and the Convention on Limitation of Liability for Maritime Claims 1976 as affected by the 1996 Protocol to amend that Convention – meaning of “claims arising on any distinct occasion” in Arts 2(1)(a) and 6(1) of the Convention – Arts 6(1)(b) and 11 of the Convention permitting shipowner to apply to limit liability for all claims arising on a distinct occasion – maritime liens – multiple claims alleged to arise from ship’s anchor fouling submarine gas pipeline, ship then going astern, ship later moving ahead, pipeline then fractured, later ship moving astern and further bending pipeline – claims by pipeline’s owners for repairs, loss of gas and economic loss – consumers of gas claiming economic losses – longer repair period because of further bending – whether the different events causing damage to the pipeline on one or more distinct occasions
ADMIRALTY – STATUTORY INTERPRETATION – construction of international convention given force of law by an Act of the Parliament – construction of Convention on Limitation of Liability for Maritime Claims 1976 as affected by the 1996 Protocol to amend that Convention – construction of international conventions – application of principles in Vienna Convention on the Law of Treaties of 1969 – purpose of limitation Convention to protect shipowner from financial ruin, encourage investment in shipbuilding, international trade and commerce and provide for limited and certain insurable risks – unbreakable limitation – purpose only to limit the liability of shipowner for each separate act, neglect or default from which claims arise – history of limitation of maritime claims laws and conventions – use of domestic law precedents
PRACTICE AND PROCEDURE – EVIDENCE – concurrent evidence – direction that experts in each relevant discipline confer together, without the parties or their lawyers to prepare joint report setting out issues on which they agree and disagree, giving brief reasons for their differences
Held: Whether one occasion is distinct from another will depend upon whether the causes of the claims that arise from each act, neglect or default are sufficiently discrete that, as a matter of commonsense, they can be said to be distinct from one another. Claims arose on two distinct occasions.
Legislation: Admiralty Act 1988 (Cth) s 25
Civil Aviation (Carriers Liability) Act 1959 (Cth)
International Convention on Civil Liability for Oil Pollution Damage (CLC), 1969
Convention on Limitation of Liability for Maritime Claims 1976 as affected by the 1996 Protocol to amend Convention on Limitation of Liability for Maritime Claims of 19 November 1976
International Convention relating to the Limitation of the Liability of Owners of Sea-Going Ships, and Protocol of Signature (Brussels, 10 October 1957)
International Convention for the Unification of Certain Rules Relating to the Limitation of Liability of Owners of Sea-Going Vessels, 1924
Limitation of Liability for Maritime Claims Act 1989 (Cth)
Merchant Shipping (Liability of Shipowners & Others) Act 1900 (Imp.) (63 & 64 Vict. c. 32)
Merchant Shipping Act 1894 (Imp.) (57 & 58 Vict. c. 60), ss 503, 504
Navigation Act 1912 (Cth) s 410
Protocol to Amend the Convention for the Unification of Certain Rules Relating to International Carriage by Air, signed at Warsaw on 12 October 1929, done at the Hague on 28 September 1955 (The Hague Protocol to the Warsaw Convention 1955)
Transport Safety Investigation Act 2003 (Cth)
Vienna Convention on the Law of Treaties of 1969 [1974] ATS 2Cases cited: Ballast Trailing NV v Decca Survey Australia Ltd (NSWCA, unreported, 29 September 1981) considered
Banque Commerciale SA (In liq) v Akhil Holdings Ltd (1990) 169 CLR 279 applied
Barde AS v ABB Power Sytems (1995) 69 FCR 277 referred to
Braverus Maritime Inc v Port Kembla Coal Terminal Ltd (2005) 148 FCR 68 applied
British Transport Commission v United States 354 US 129 (1956) referred to
Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 considered
Chapman v Hearse (1961) 106 CLR 112 distinguished
China Ocean Shipping Co v South Australia (1979) 145 CLR 172 applied
Chiropedic Bedding Pty Ltd v Radberg Pty Ltd (2008) 170 FCR 560 referred to
Distillers Co Biochemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 considered
Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 distinguished
Exxon Shipping Company v Cailletau 960 F. 2d 843 (1989: CA5) considered
Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52 referred to
Forney v Dominion Insurance Co Ltd [1969] 1 WLR 928 referred to
Fothergill v Monarch Airlines Ltd [1981] AC 251 referred to
Gulf Air Company GSC v Fattouch (2008) 251 ALR 183 referred to
Hughes v Lord Advocate [1963] AC 837 distinguished
Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 (2006) 231 CLR 1 applied
James Patrick & Co Ltd v Union Steamship Co of New Zealand Ltd (1938) 60 CLR 650 cited
Jones v Dunkel (1959) 101 CLR 298 applied
Lewis v Lewis & Clarke Marine Inc 531 US 438 (2000) referred to
LK v Director-General, Department of Community Services (2009) 237 CLR 582 applied
Luke v Lyde (1750) 2 Burr 882 cited
Mahony v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522 distinguished
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 applied
Norwich Company v Wright 80 US 108 (1871) followed
Pilkington (Australia) Ltd v Minister for Justice and Customs (2002) 127 FCR 92 referred to
Povey v Qantas Airways Ltd (2005) 233 CLR 189 applied
Qenos Pty Ltd v Ship “APL Sydney” (2009) 260 ALR 692 considered
SS Pharmaceutical Co Ltd v Qantas Airways [1991] 1 Lloyd’s Rep 288 considered
Tasman Orient Line Ov v New Zealand China Clays Ltd [2009] 3 NZLR 58 disapproved
The Bramley Moore [1964] P 200 followed
The Creadon (1886) 5 Asp. M.C. 585 considered
The Leerort [2001] 2 Lloyd’s Rep 291 considered
The Lucullite (1929) 33 Lloyd’s List Rep 186 considered
The Rajah (1872) LR 3 A&E 539 considered
The Schwan [1892] P 419 considered
The Scotland 105 US 24 (1882) considered
The ‘Saint Jacques II’ [2003] 1 Lloyd’s Rep 203 referred to
The Stream Fisher [1927] P 73 cited
The Tolten [1946] P 135 followed
Vale v Sutherland (2009) 237 CLR 638 applied
Victrawl Pty Ltd v AOTC Limited (1993) 45 FCR 302 considered
Victrawl Pty Ltd v Telstra Corporation Ltd (1995) 183 CLR 595 appliedREFERENCES
Cleton, R., Limitation of Liability for Maritime Claims in Essays on International & Comparative Law in Honour of Judge Erades: Maritime Niihoff 1983
Conférence Diplomatique de Droit Maritime, Dixième Session, Bruxelles 1957, Doc. No. 10. Royame de Belgique Ministere Des Affaires Etrangeres Et Du Commerce Exterieur (1958)
DVD: Concurrent Evidence – New methods with experts (2005): Produced by the Judicial Commission of New South Wales and the Australian Institute of Judicial Administration
F Berlingieri, Unification and Harmonisation of Maritime Law Revisited, (2006) 59 Revue Hellenique de Droit International 603
Gortius, H., Law of War and Peace (1625) Book 2 c. 11 §13
Griggs, P., Limitation of Liability for maritime claims: the search for international uniformity [1997] LMCLQ 369
Griggs, Williams and Farr, Limitation of Liability from Maritime Claims, 4th Edition (2005)
Hare, J., Shipping for the Best Admiralty Bargain in Jurisdiction and Forum Selection in International Maritime Law, M Davies ed Kluwer Law Int. 2005
Holmes, Oliver Wendell, The Common Law, 1881 Lecture 1 Dover, NY
Lilar, A. and van den Bosch, C.: Le Comité Maritime Intérnational 1897 - 1972
Limitation of Liability for Maritime Claims Act 1989 (Hansard, 12 April 1989 at pp 1482 – 1483)
Marden’s Collisions at Sea, 6th Edition Stevens & Sons London 1910
Meeson, N., Admiralty Jurisdiction and Practice, 3rd edition, LLP London 2003
Ordinance de la Marine of 1681
Rares, Steven, Expert Evidence in Copyright Cases – Concurrent Expert Evidence and the “Hot Tub” 15 October 2009, Sydney, 4th Biennial Copyright Law and Practice Symposium
Selvig, Prof E., An Introduction to the 1976 Convention; published in The Limitation of Shipowners’ Liability: The New Law, London, Sweet & Maxwell, Institute of Maritime Law (1986)
The Travaux Préparatories of the LLMC Convention 1976 and of the Protocol of 1996, Published by CMI Headquarters: Antwerpen, Belgium, November 2000Dates of hearing: 3-6, 10-14, 17-21, 24, 27 & 28 August 2009 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 364 Counsel for the Plaintiff: Dr G Griffith QC, Mr S Horgan SC and Mr M Scott Solicitor for the Plaintiff: Holman Fenwick Willan Counsel for the First and Second Defendants: Mr P Murdoch QC and Dr AP Trichardt Solicitor for the First and Second Defendants: Blake Dawson
IN THE FEDERAL COURT OF AUSTRALIA
in admiralty
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
VID 1060 of 2008
BETWEEN: STRONG WISE LIMITED
PlaintiffAND: ESSO AUSTRALIA RESOURCES PTY LTD (ACN 091 829 819)
First DefendantBHP BILLITON PETROLEUM (BASS STRAIT) PTY LTD (ACN 004 228 004)
Second DefendantPERSONS WHO MAY HAVE A CLAIM WITHIN THE MEANING OF ARTICLE 2 OF CONVENTION ON LIMITATION OF LIABILITY FOR MARITIME CLAIMS 1976 (AS AMENDED BY THE 1996 PROTOCOL TO AMEND CONVENTION OF LIMITATION OF LIABILITY FOR MARITIME CLAIMS 1976) AS GIVEN FORCE OF LAW BY THE LIMITATION OF LIABILITY FOR MARITIME CLAIMS ACT (1989) (AS AMENDED) IN RESPECT OF LOSS SUFFERED OR DAMAGE CAUSED BY AN ANCHOR OR ANCHOR CABLE OF THE VESSEL "APL SYDNEY" IN PORT PHILLIP BAY, VICTORIA ON OR ABOUT 13 DECEMBER 2008
Third Defendant
JUDGE:
RARES J
DATE OF CORRIGENDUM:
18 MAY 2010
CORRIGENDUM
1.On page 26 paragraph 66, first line, insert the word “Convention” before the word “operated”.
2.On page 31 paragraph 80, second line, insert the word “a” before the word “question”.
3.On page 31 paragraph 83, fourth line, the word “proceeding” should read “preceding”.
4.On page 35 paragraph 97, under Structural Engineers, “Director of Braemar Staege Ltd” should read “Director of Braemar Steege Ltd”.
5.On page 38 paragraph 105, second last line, the word “were” should read “where”.
6.On page 40 paragraph 114, “s 410” should read “s 410B”.
7.On page 49 paragraph 140, sixth line, the word “date” should read “data”.
8.On page 50 paragraph 143, delete the word “of” after “15:43:09”.
9.On page 57 paragraph 162, first line, the word “ot” should read “not”.
10.On page 76 in the heading above paragraph 225, the word “ESSSO” should read “ESSO”.
I certify that the preceding ten (10) numbered paragraphs are a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Rares. Associate:
Dated: 18 May 2010
IN THE FEDERAL COURT OF AUSTRALIA
in admiralty
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
VID 1060 of 2008
BETWEEN: STRONG WISE LIMITED
PlaintiffAND: ESSO AUSTRALIA RESOURCES PTY LTD (ACN 091 829 819)
First DefendantBHP BILLITON PETROLEUM (BASS STRAIT) PTY LTD (ACN 004 228 004)
Second DefendantPERSONS WHO MAY HAVE A CLAIM WITHIN THE MEANING OF ARTICLE 2 OF CONVENTION ON LIMITATION OF LIABILITY FOR MARITIME CLAIMS 1976 (AS AMENDED BY THE 1996 PROTOCOL TO AMEND CONVENTION OF LIMITATION OF LIABILITY FOR MARITIME CLAIMS 1976) AS GIVEN FORCE OF LAW BY THE LIMITATION OF LIABILITY FOR MARITIME CLAIMS ACT (1989) (AS AMENDED) IN RESPECT OF LOSS SUFFERED OR DAMAGE CAUSED BY AN ANCHOR OR ANCHOR CABLE OF THE VESSEL "APL SYDNEY" IN PORT PHILLIP BAY, VICTORIA ON OR ABOUT 13 DECEMBER 2008
Third Defendant
JUDGE:
RARES J
DATE OF ORDER:
18 MARCH 2010
WHERE MADE:
MELBOURNE
THE COURT ORDERS BY CONSENT THAT:
1.The Plaintiff file and serve an outline of submissions and any statements of evidence by 4.00pm on 16 April 2010.
2.The First and Second Defendants file and serve an outline of submissions in reply and any statements of evidence in reply by 4.00pm on 3 May 2010.
3.The Plaintiff file and serve an outline of submissions in reply and any statements of evidence in reply by 4.00pm on 10 May 2010.
4.The proceedings be listed for further hearing on 13 and 14 May 2010.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
in admiralty
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
VID 1060 of 2008
BETWEEN: STRONG WISE LIMITED
PlaintiffAND: ESSO AUSTRALIA RESOURCES PTY LTD (ACN 091 829 819)
First DefendantBHP BILLITON PETROLEUM (BASS STRAIT) PTY LTD (ACN 004 228 004)
Second DefendantPERSONS WHO MAY HAVE A CLAIM WITHIN THE MEANING OF ARTICLE 2 OF CONVENTION ON LIMITATION OF LIABILITY FOR MARITIME CLAIMS 1976 (AS AMENDED BY THE 1996 PROTOCOL TO AMEND CONVENTION OF LIMITATION OF LIABILITY FOR MARITIME CLAIMS 1976) AS GIVEN FORCE OF LAW BY THE LIMITATION OF LIABILITY FOR MARITIME CLAIMS ACT (1989) (AS AMENDED) IN RESPECT OF LOSS SUFFERED OR DAMAGE CAUSED BY AN ANCHOR OR ANCHOR CABLE OF THE VESSEL "APL SYDNEY" IN PORT PHILLIP BAY, VICTORIA ON OR ABOUT 13 DECEMBER 2008
Third Defendant
JUDGE:
RARES J
DATE:
18 MARCH 2010
PLACE:
MELBOURNE
TABLE OF CONTENTS
Introduction........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .
[1]
The scheme of the Convention........ ........ ........ ........ ........ ........ ........ ........ ...
[11]
History of limitation provisions........ ........ ........ ........ ........ ........ ........ ....
[22]
Policy considerations........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....
[43]
The construction of the Convention........ ........ ........ ........ ........ ........ ...
[46]
The use of Judicial Decisions on other Legislation in construing the Convention........ ........ ........ ........ ........ ........ ........ ........ ........
[53]
Previous consideration of “arising on a distinct occasion”........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .
[58]
Use of common law concepts to characterise what is a distinct occasion........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........
[66]
What is a distinct occasion?........ ........ ........ ........ ........ ........ ........ ........ .......
[77]
Some of the primary sources of what happened........ ........ ........ ..
[89]
Concurrent expert evidence........ ........ ........ ........ ........ ........ ........ ........ .....
[93]
The anchoring system on the ship........ ........ ........ ........ ........ ........ ........ ..
[98]
Anchoring........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........
[103]
The overall context of the four asserted distinct occasions........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..
[112]
Dropping Anchor........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .
[118]
The Ship Drags Its Anchor........ ........ ........ ........ ........ ........ ........ ........ ........ .....
[124]
The Cable Leads Out 90°........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....
[134]
The manoeuvres immediately preceding the anchor fouling the pipeline........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .
[143]
The anchor fouls the pipeline........ ........ ........ ........ ........ ........ ........ ........ ..
[152]
The impact damage to the pipeline........ ........ ........ ........ ........ ........ ........
[156]
The consequences of the dead slow astern order at 15:46:01........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .
[175]
The effect of the dead slow astern order at 15:46:01........ ........
[182]
The windlass fails........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......
[201]
The events from 15:48 to 16:18:51........ ........ ........ ........ ........ ........ ........ ........ ..
[208]
Effect of Essso and BHP not pleading that the cable should have been slipped from the bitter end........ ........ ........ ......
[225]
The nautical experts’ contended courses of action........ ........
[229]
(a) Use of the Engine........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....
[231]
(b) Use of a gas axe........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........
[232]
(c) Release from the bitter end........ ........ ........ ........ ........ ........ ........ ........ ........ .....
[239]
The pipeline ruptures........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......
[260]
What caused the pipeline to rupture?........ ........ ........ ........ ........ ........ .
[263]
Was the decision to order the engine to go ahead seamanlike?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....
[279]
Claims arising from the rupture of the pipeline........ ........ ........
[285]
Claim for lost gas and other potential claims........ ........ ........ ...
[292]
How long was the anchor chain at the time of the rupture........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .
[295]
The events after the pipeline ruptured – The fourth alleged distinct occasion........ ........ ........ ........ ........ ........ ........ ........ ........ ...
[303]
Was the astern movement a distinct occasion?........ ........ ........ ...
[324]
The subsequent damage to the Mordialloc end Of The pipeline........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......
[329]
The aetiology of the missing fractured pipeline........ ........ .......
[332]
Conclusion........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......
[361]
REASONS FOR JUDGMENT
Introduction
On the afternoon of Saturday 13 December 2008 the MV “APL Sydney” dragged at anchor during a gale in Port Phillip Bay, Melbourne. The “APL Sydney” was a two year old 231 metre l.o.a. (length overall), fully cellular container ship with a carrying capacity of 3,534 TEU (i.e. twenty foot equivalent units or containers). She was then displacing 38,069 tonnes and carrying about 23,000 tonnes of cargo. The outer and inner anchorages of the Bay are separated by an area through which a submarine pipeline ran. The pipeline carried ethane gas at high pressure from Mordialloc on the eastern side to Altona on the western side. These three areas were marked on the Admiralty chart for Melbourne. The chart carried a warning of the location of the pipeline. I have reproduced below the part of the chart showing the locale (Figure 1).
Figure 1
Location of the pipeline between the inner and outer anchorages in Port Phillip Bay
The ship dragged her anchor to the north east from her original position west of the Fawkner Beacon in the outer anchorage in the Bay. Between 15:44 and 15:45 the vessel’s starboard anchor fouled the pipeline. This arrested the movement of the ship. The pipeline was a 10 inch thick steel pipe coated with concrete and tar. It was buried about 3 metres below the seabed. Shortly after the fouling, at about 15:46, the vessel’s engine was put astern and about one and a half minutes, later, stopped. “APL Sydney” then yawed from side to side in the wind and waves for about 35 minutes before her engine was put ahead at about 16:20. Soon after this, the pipeline ruptured and, then, the engine was stopped. About six minutes later, the engine was put astern. One end of the ruptured pipeline was pulled back towards Mordialloc, dragging it further out of its trench and bending it almost to a right angle before a piece of the pipe broke off, freeing the anchor.
On 19 December 2008, the owner of the “APL Sydney”, Strong Wise Limited, began these proceedings under s 25 of the Admiralty Act 1988 (Cth). The shipowner claimed that it was entitled to limit its liability pursuant to the Limitation of Liability for Maritime Claims Act 1989 (Cth). The latter gives the force of law in Australia to the Convention on Limitation of Liability for Maritime Claims 1976 as affected by the 1996 Protocol to amend that Convention (s 6). I will refer to the Convention as affected by the protocol simply as “the Convention” in these reasons.
The pipeline was owned by Esso Australia Resources Pty Ltd and BHP Billiton Petroleum (Bass Strait) Pty Ltd. Esso and BHP are the first and second defendants. The third defendants have been nominated as persons who may have a claim within the meaning of Art 2 of the Convention. No-one has appeared or been appointed to represent those persons. However, the parties agreed that in four other proceedings in this court other plaintiffs have made claims presently estimated at a total of over $66 million.
Article 6(1)(b) of the Convention entitles a shipowner to limit its liability for claims “arising on any distinct occasion”. This case is essentially about the meaning of that expression as used in the Convention. The shipowner argues that the whole episode beginning with the initial fouling and ending on the final separation of the anchor from the pipeline was a single “distinct occasion”. If the shipowner is correct, then it will be entitled to establish one limitation fund, comprised of the value of “APL Sydney”, of about $32 million calculated in accordance with the Convention.
Esso and BHP argue against that result. They assert that there was more than one distinct occasion in respect of which claims may be made. They assert that this is because there was more than one act, neglect or default giving rise to entitlements of persons to bring claims against the ship and shipowner. They contend that in addition to the claims that arose on the occasion of the initial fouling, there were at least three further “distinct occasions” on which additional claims arose. The four instances on which Esso and BHP rely are:
(1)the navigational errors leading to the initial fouling of the pipeline by the anchor around 15:44 to 15:45;
(2)the order at 15:46:01 that the ship’s engine go astern. That allegedly caused the pipeline to be pulled further out of its trench for an appreciable distance and bent more;
(3)the order at about 16:19:51 that the engine go ahead. That allegedly caused the pipeline to rupture and to further deform together with the loss of a volume of ethane gas; and
(4)the order at 16:27:59 that the engine go astern. That allegedly caused the anchor to re-engage with a portion of the severed pipeline on the eastern side, drag it further out of its trench, bending it to almost a right angle before severing about 6 to 7 metres of pipe.
Esso and BHP argue that each of the last three engine movements caused new and separate, additional damage to the pipeline that was not inevitable or a necessary consequence of the initial fouling by the anchor or, in the case of each later engine movement, the immediately preceding engine movement. If they are correct, then if the shipowner wishes to limit its liability, it will have to establish two or more separate limitation funds, one in respect of each “distinct occasion”.
Thus, the central issue in these proceedings is whether there was a single distinct occasion, or more than one, that gave rise to all claims, within the meaning of Art 2(1)(a) of the Convention, in respect of damaged property in direct connection with the operation of the ship and consequential loss resulting therefrom. The shipowner accepted that it bore the onus of proving that it was entitled to obtain substantive relief under the Convention.
In separate proceedings in this Court, Esso and BHP have sued the shipowner for damages in respect of the cost of repair of the pipeline and other alleged losses estimated to exceed $27 million. The cost of repair of the pipeline alone is said to amount to nearly the whole of the value of the ship. Two other plaintiffs, Huntsman Chemical Corporation Pty Ltd and Qenos Pty Ltd, both large consumers of ethane gas supplied from the Altona end of the pipeline, have each begun other proceedings in this Court against the shipowner claiming damages for pure economic loss estimated at $12 million and $27.6 million respectively. A trial of a separate question in the latter proceedings was ordered to determine whether the gas customers’ claims were capable of being made subject to a limitation of liability under Art 2 of the Convention. Finkelstein J has found that they are: Qenos Pty Ltd v Ship “APL Sydney” (2009) 260 ALR 692. And the Port of Melbourne Corporation has sued for damages, or indemnity or contribution but has not yet given an estimate of its claim.
The trial of these proceedings took nearly four weeks. Regrettably, its outcome will not resolve any of the various claims for damages, although it may decide the potential sum recoverable. The splitting of the several proceedings and the long trial in these limitation proceedings is not a necessarily efficient way of conducting such litigation. However, the fragmentation of limitation from liability actions is an available, and perhaps necessary, consequence of the provisions of the Convention: see N Meeson Admiralty Jurisdiction and Practice (3rd ed; LLP London 2003) at 268-269 [8.83]-[8.85]. Inevitably, there will be appeals from the decisions on the construction of the Convention before any trial on liability and damages can occur. The question of construction of the Convention raised in these proceedings has not been decided by any court anywhere in the world so far as the researches of the parties or myself have revealed. At the trial the parties tendered a considerable body of factual and technical evidence requiring analysis. I will consider first the construction of the Convention before turning to the facts.
The scheme of the Convention
A person who apprehends that a claim for compensation under the Limitation of Liability for Maritime Claims Act may be made against that person by some other person may apply to this Court under s 25 of the Admiralty Act to determine the question whether the liability of the first person in respect of the claim may be limited under the Convention. (The Supreme Courts of the States and Territories are given a similar jurisdiction under s 9 of the Limitation of Liability for Maritime Claims Act).
When an application has been made under s 25(1), the Court may determine whether the applicant’s liability may be limited in accordance with the Convention. If it does, the Court may determine the limit of that liability, order the constitution of a limitation fund for the payment of claims in respect of which the applicant is entitled to limit its liability and make such orders as are just with respect to the administration and distribution of the fund (s 25(3)). A shipowner is entitled under s 25(4) to claim a right to have a limitation fund constituted as a matter of defence to an action against it.
The Convention provides that shipowners (including charterers, managers and operators) of a seagoing ship may limit their liability in accordance with the rules of the Convention for claims set out in Art 2. In addition, Art 1(4) provides that if any claim set out in Art 2 is made against “any person for whose act, neglect or default the shipowner … is responsible”, such a person shall be entitled to avail himself of the limitation of liability provided for in the Convention. And, the liability of a shipowner includes liability in an action brought against the vessel herself; i.e. an action in rem (Art 1(5)). In addition, an insurer of liability for claims subject to limitation in accordance with rules of the Convention is entitled to the benefits of the Convention to the same extent as the assured (Art 1(6)). Importantly, by force of Art 1(7), the act of invoking limitation of liability is not to constitute an admission of liability.
Article 2 relevantly provides:
“(1)Subject to Articles 3 and 4 the following claims, whatever the basis of liability may be, shall be subject to limitation of liability:
(a)claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring on board or in direct connexion with the operation of the ship or with salvage operations, and consequential loss resulting therefrom.” (emphasis added)
Article 2(1) sets outs five other categories of claim, none of which are presently relevant. Claims set out in Art 2(1) are subject to limitation of liability even if brought by way of recourse or for indemnity under a contract or otherwise, with certain exceptions not relevant here (Art 2(2)). Article 3 provides that the rules of the Convention do not apply to certain classes of claim, such as salvage claims, under other conventions for oil pollution, nuclear damage and contribution in general average. Importantly, Art 4 provides:
“A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.” (emphasis added)
Persons entitled to limitation of liability can set off claims made by claimants “arising out of the same occurrence” under Art 5. Article 6 sets out the quantum of limitation of liability commencing with the following important expression:
“1.The limits of liability for claims other than those mentioned in Article 7, arising on any distinct occasion, shall be calculated as follows .…” (emphasis added)
Article 7 commences “In respect of claims arising on any distinct occasion …” and provides for quantification of the amount of limitation of claims in respect of loss of life or personal injury. Article 8 deals with the use of special drawing rights to determine quantification of the limitation fund. Importantly, Art 9 provides:
“1.The limits of liability determined in accordance with Article 6 shall apply to the aggregate of all claims which arise on any distinct occasion:
(a)against the person or persons mentioned in paragraph 2 of Article 1 and any person for whose act, neglect or default he or they are responsible;” (emphasis added)
A limitation fund may be constituted in accordance with Art 11. That provides that a fund shall be constituted in the sum of such amounts set out in Arts 6 and 7 as are applicable to claims for which that person may be liable together with interest thereon:
“… from the date of the occurrence giving rise to the liability until the date of the constitution of the fund. Any fund thus constituted shall be available only for the payment of claims in respect of which limitation of liability can be invoked.” (emphasis added) (Art 11(1))
Where a fund has been constituted by any person named in Art 1(2) or that person’s insurer or a salvor, the fund then is deemed to have been constituted by all persons identified in Art 9 as entitled to constitute it (Art 11(3)). The fund is then available for distribution among claimants in proportion to their established claims, subject to any priority established in Arts 6 and 7 (Art 12(1)).
Once a limitation fund has been constituted under the Convention, a shipowner and other persons on whose behalf the fund was constituted, such as an insurer or protection and indemnity (P&I) club gain significant protection by force of Art 13. I will refer to all these persons for simplicity’s sake, as “a limiting shipowner” when describing the Convention’s operation. First, any person who has made a claim against the fund is barred from exercising any right in respect of such a claim against any other assets of a limiting shipowner (Art 13(1)). Secondly, after a limitation fund has been constituted in accordance with Art 11, if a ship or other property belonging to a limiting shipowner is arrested or attached within the jurisdiction of a State party for a claim that could be raised against the fund (or any security that that limiting shipowner had given) a court of that jurisdiction may order its release. And such a court must order the release of the ship or other property if the limitation fund was constituted at the port where the occurrence took place (Art 13(2)(a)) or at some other place nominated in Art 13(2).
Article 15 provides that the Convention shall apply whenever any person, such as a shipowner, referred to in Art 1 seeks to limit its liability before the Court of a State Party or seeks to procure the release of a ship or other property or discharge of any security given within the jurisdiction of any such State.
History of limitation provisions
The Convention was negotiated against a long history of earlier regimes providing some protection to shipowners by permitting them to limit their liabilities. The development of modern limitation principles can be traced from a number of sources of law: see the erudite exposition of Scott LJ in The Tolten [1946] P 135 at 149-154; Marsden’s Collisions at Sea (6th ed Stevens & Sons London 1910) at 147-148; Prof Erling Selvig, (a Norwegian delegate to negotiations for the 1976 Convention) An Introduction to the 1976 Convention published in: The Limitation of Shipowners’ Liability: The New Law (London, Sweet & Maxwell, Institute of Maritime Law (1986) at 15: see too Robert Cleton (a Dutch delegate to the 1976 Convention) Limitation of Liability for Maritime Claims in Essays on International & Comparative Law in Honour of Judge Erades: (Maritime Niihoff 1983) at 17-22.
Mr Cleton traced its development to Spain whence it spread to Italy and then France before spreading to Northern Europe at the beginning of the fourteenth century: Cleton op cit at 17; see too Marsden op cit at 147. Mr Cleton noted that previously German and Scandinavian law provided that a shipowner had no personal liability for limitable claims. In those systems, claims were enforceable only against the ship and freight. However, a claimant was entitled to a maritime lien conferring priority rights of recovery from those assets. He described that system as the “execution” system. In other countries, such as France, and later the United States, limitation of liability was implemented by what Prof Selvig termed the “abandonment” system. There, the shipowner was personally liable for limitable claims, but was entitled to avoid, and thus limit, liability by abandoning the ship and freight to the claimants. The consequence was that the claimants were only entitled to recover by enforcing their maritime liens against those assets. Both those systems provided that the limitation amount could be distributed among the claimants according to priority rules applicable to maritime liens. Those systems also provided that the limitable liability applied to the aggregate amount of claims accrued up to the time when limitation was invoked.
Thus, in the eighteenth and nineteenth centuries, the predominant European approach to limitation involved a principle of abandonment in natura. That required the owner to limit by reference to the actual value of the ship plus freight after the accident: see too Patrick Griggs (President of the Comité Maritime Intérnational (CMI)): Limitation of Liability for Maritime Claims: The Search for International Uniformity [1997] LMCLQ 369 at 372.
In contrast, England had developed quite a different system of limitation during the eighteenth and nineteenth centuries. This began with an English Act of 1734 (7 Geo 2 c15). That Act recognised the value of the ship and freight as the limit of liability, but contrary to the law of other countries, that value was arrived at before the accident. And, to achieve this, the English system used a monetary value for the ship based on an amount per tonne. It also gave a separate right to recover for personal claims, in addition to rights to recover for property damage. In general, only the latter class of claims was subject to limitation. The limitation fund was to be distributed among the claimants in proportion to their claims, not according to the priorities of maritime liens.
Prof Selvig noted that English legislation provided for a separate limitation fund that would be available for claims arising on “any distinct occasion” concluding that:
“… thus, the extent of aggregation of claims for limitation purposes was restricted accordingly.”
In The Tolten [1946] P at 149-154 Scott LJ explained the historical interconnection between maritime liens (or “privilège” or “créance privilégiée”; in the Continental European legal lexicon a “créance” is a debt or liability) and limitation of liability. He described “… an integral – almost organic – connexion between the two in the history of our own admiralty law, and that connexion comes from the ancient law of the sea in which it is deep-rooted”: The Tolten [1946] P at 149. The expression “creances privilégiées” described the secured right of the sea creditors which are relevantly the same as the Anglo-Australian concept of maritime liens. He explained that the principle of limitation was given operative effect by the “droit de l’abandon” that permitted the shipowner to acquit himself of all the “créances du voyage” by abandoning his ship to his creditors with a view to it being realised by the Court and the proceeds distributed rateably among the creditors in accordance with the several priorities of their “privileges”: The Tolten [1946] P at 150.
Scott LJ related this history to the scope and function of the action in rem. He explained that when the Court sells the res or ship, first, such a sale passes a clear title to the purchaser that extinguishes all pre-existing maritime liens and, secondly, enforces distribution of the proceeds among the lien creditors in order of their priorities, and subject to those, rateably: The Tolten [1946] P at 145-146. He discussed the 1924 Convention saying (The Tolten [1946] P at 153):
“On the Limitation Convention, agreement was achieved by combining the economic effect of the Continental (and original) system of allowing the shipowner to clear his liabilities by abandoning his ship and freight to his creditors (privileged and unprivileged) with the English system of a maximum money liability dependent on the size of the ship, substituting in effect a conventional value of ship and freight for abandonment; but it is an essential principle of the international concordat that the existing correlation of limitation of liability with maritime liens, inherent in the general law of the sea, should be preserved, so as to ensure that the proceeds of ship and freight, or the fund coming from the statutory payment, should be distributed by the court in strict accord with the rights and priorities of the lien creditors. Adherence to the principle of correlation appears in art. 6 which provides for distribution of the limited fund in strict accordance with the order of ranking of all liens on the ship. Likewise in the requirement of art. 8, namely, that if proceedings are taken against the same ship in courts of different states, its owner shall be entitled to bring to the notice of any such court all the claims, whether "privilégiés" or not, already lodged against him or his ship in all the other courts, so as to ensure that through proceedings being taken in more courts than one, the total limit of his liability shall not be exceeded. In this convention there is again manifest the tacit assumption that the law of the seas shall prevail whatever the national court, and whatever the secured claim (créance privilégiée), and whatever the country where the claim originated.”
In Norwich Company v Wright 80 US 108 (1871) Bradley J gave the unanimous opinion of the Supreme Court of the United States. He traced the history of limitation in maritime law in a learned opinion that has been approved by that Court on subsequent occasions: Lewis v Lewis & Clarke Marine Inc 531 US 438 (2000) at 446-447 per O’Connor J for the Court: British Transport Commission v United States 354 US 129 (1956) at 133 per Clark J. Bradley J referred to Hugo Grotius’ observation in his Law of War and Peace (1625) Book 2 c. 11 §13, that Holland had rejected Roman Law and had applied a regulation that shipowners should be bound for acts of the master no further than the value of their ship and freight. His Honor then noted that the French Ordinance de la Marine of 1681 had also provided that the shipowner was responsible for the acts of the master but would be discharged by abandoning the ship and freight: Norwich 80 US at 116.
Bradley J identified the policy reason behind these laws as being the need to protect shipowners so as to encourage investment in trading ships: Norwich 80 US at 116-117. He then traced the development of English legislation from 1734 to Congress’ enactment in 1851 of the United States law for limitation (formerly 9 Stat. at Large 635 and now included in the 2006 revision as 46 USC §30501-30512). He saw the Congressional purpose as informed by the prism offered by the law maritime, together with European and British limitation legislation (Norwich 80 US at 121), finding that:
“The great object of the law was to encourage ship-building and to induce capitalists to invest money in this branch of industry. Unless they can be induced to do so, the shipping interests of the country must flag and decline.”
Lord Denning MR once said that limitation of liability was not a matter of justice but “… a rule of public policy that had its origin in history and its justification in convenience”: The Bramley Moore [1964] P 200 at 220, Donovan and Danckwerts LJJ agreed; see too Cleton op cit at 15. In China Ocean Shipping Co v South Australia (1979) 145 CLR 172 at 185 Barwick CJ observed of ss 503 and 504 of the Merchant Shipping Act 1894 (Imp) (see too at 200 per Gibbs J):
“The policy, evident in these sections is the protection of the owner engaged in the maritime carrying trade from financial ruin where his vessel causes damage of the described kind.”
I am of opinion that this purpose still informs the policy reasoning that underlies the present Convention.
The first international convention providing for limitation was the International Convention for the Unification of Certain Rules Relating to the Limitation of Liability 1924 (the 1924 Convention). It gave shipowners an option of limiting their liability to the value of the ship and freight or an amount of £8 per tonne. Article 6 of the 1924 Convention provided that the “… various claims connected with a single accident …” would rank equally with one another against the limitation amount having regard to the order of any maritime liens. This was described by Albert Lilar (the Belgian Minister for Justice and his country’s representative at the 1957 Brussels Conference) as being “… the result of a laborious compromise between the traditional limitation system applied on the European Continent … and the system in force in Great Britain”: Griggs [1997] LMCLQ at 372 quoting from A. Lilar and C. van den Bosch: Le Comité Maritime Intérnational 1897-1972 at 1. Mr Griggs concluded that the 1924 Convention was not much of a compromise because it had effectively adopted s 503 of the Merchant Shipping Act 1894 (Imp), so much so, that Great Britain did not amend that Act. Perhaps more charitably, Prof Selvig said that the 1924 Convention “was a most unhappy compromise between the existing systems”. The CMI regarded the 1924 Convention as a failure, having attracted only 15 States Party: Griggs [1997] LMCLQ at 372; see too Cleton op cit at 19.
Next, the Convention Relating to the Limitation of Liability of Owners of Seagoing Ships done at Brussels in 1957 (“the Brussels Convention”) was agreed in 1957. Article 2(1) of the Brussels Convention provided that the limitation of liability applied to the aggregate of personal and property claims “… which arise on any distinct occasion without regard to any claims which have arisen or may arise on any other distinct occasion”. Ultimately, it attracted 46 States Party. Prof Selvig concluded that it had the result that “… the English system for limitation of liability received full international recognition” (Selvig op cit at pp 3-5). He noted that the Brussels Convention had made a few changes to refine that system. And other commentators also have observed that the Brussels Convention had adopted the basic principles of the British limitation system: Cleton op cit at 19; J Hare: Shipping for the Best Admiralty Bargain in Jurisdiction and Forum Selection in International Maritime Law: M Davies ed Kluwer Law Int. 2005 at 142 [1.2.2].
Revision of the Brussels Convention began after the negotiation of the Convention on Civil Liability for Oil Pollution Damage in 1969. Prof Selvig observed that the 1976 Convention introduced Art 4 to close what he described as “an escape route” that was present in the Brussells Convention. He said (Selvig op. cit p 15) that the overall purpose of Art 4:
“… is to prevent the right of limitation granted to shipowners, and enjoyed indirectly by P & I Insurers, being frustrated one way or the other.
The net effect for injured parties, however, is that the limitation amounts become the only source of compensation available from the persons responsible for the various aspects of the operation of the ship causing the damage.” (emphasis in original)
The travaux préparatories for the Convention suggest that the capacity of the insurance market to provide cover was an important consideration when new limits of liability were selected in the negotiation of Arts 6 and 7: The Travaux Préparatories of the LLMC Convention 1976 and of the Protocol of 1996 (CMI Antwerp November 2000; F, Berlingieri ed) pp 151-153. The counterpoint in the delegates’ considerations was that, as a general rule, the new limits would be “unbreakable”, in contrast to the experience under the Brussels Convention. Thus, the IMCO legal committee (until 1982 the International Maritime Organisation or IMO was called the Inter-Governmental Maritime Consultative Organisation or IMCO) reported after its 28th session in December 1975 (op cit at XIII: 151, 153 [72]):
“The consensus in the Committee was that, in choosing the figures for eventual insertion in the Convention, the Conference should recognize that the capacity of the insurance market was an important consideration to be taken into account, having regard to the fact that other liabilities would also have to be covered within the same capacity. It was also generally recognized that as a general rule the more “unbreakable” the limits of liability were in the Convention, the higher these limits could be while a provision making it relatively easy to “break” the limitation levels would entail a corresponding decrease in the limits to be provided.” (emphasis added)
Prof Selvig reasoned that the Convention’s adoption of a global, “unbreakable” limitation regime ensured its overall purpose being achieved. He identified that purpose as preventing “… the right of limitation granted to shipowners, and enjoyed indirectly by P&I insurers, being frustrated one way or the other” (Selvig: op cit p 15).
Neither the travaux préparatories nor the learned commentary on the evolution and sources of each of the three international limitation conventions examined the concept behind the criteria of “any distinct occasion” or “an occurrence” (or, for that matter, the French text’s single usage of the words “l’évenment”).
One significant difference between the British and two other systems of limitation was that the former involved the use of a pre-determinable valuation of the ship, unaffected by the circumstances in which the claims arose. In contrast, the Continental and United States systems valued the ship and freight as they were, following those circumstances and allowed the owners to abandon that property in its then state so as to constitute the sole means of satisfying all their liabilities.
This difference entailed two consequences. First, under the British system, the owners were fixed with an ascertainable, readily insurable, maximum liability. That liability responded to claims made on one distinct occasion and it refreshed or revived in full for claims made on a second or subsequent distinct occasion.
Secondly, under the other systems, the owners’ liability varied from the British system according to how damaged the ship was and what the value of her freight was after the circumstances from which the claims arose. And that liability was not apparently refreshed or revived for claims arising on a second or subsequent distinct occasion. Claimants’ maritime liens would take priority in respect of the ship and her freight in accordance with the substantive law in those systems. Thus, once abandoned, the ship and freight either ceased to be available to respond to claims arising on a later occasion beyond what, if anything, was left of their value after it had satisfied the earlier maritime liens of claimants from the first occasion. This balance constituted the only property or fund to which claimants on all subsequent occasions could resort. At least from the materials to which I was referred by the parties, there did not appear to be any means of refreshing or reviving the amount available beyond the single total value of the, by now, damaged ship and freight. Thus, if the ship were totally lost, the liability of the shipowner was at an end, since the ship (and unless it were still payable, her freight) then had no value: The Scotland 105 US 24 (1882) at 28 per Bradley J giving the opinion of the Court. Under the then provisions of the United States statute Bradley J explained (The Scotland 105 US at 29, see too at 34) that:
“… our law adopts the maritime rule of graduating the liability by the value of the ship after the injury, as she comes back into port, and the freight actually earned; and enables the owners to avoid all responsibility by giving up ship and freight, if still in existence, in whatever condition the ship may be; and, without such surrender, subjects them only to a responsibility equivalent to the value of the ship and freight as rescued from the disaster.”
Subsequently, as a result of the decision in The Scotland 105 US 24, the Congress enacted a new measure, now reflected in 46 USC §30506(c) that prevented a shipowner from limiting its liability for all losses of life or personal injuries on one voyage to a single fund. For that purpose it adopted the British discrimen of allowing limitation for any distinct occasion as the Fifth Circuit Court of Appeals explained in Exxon Shipping Company v Cailletau 869 F. 2d 843 (1989: CA5) at 846-847.
In the negotiations for the Convention, the delegates realised that the level and availability of insurance were related to the degree to which the ability of claimants to “break” limitation, could be constrained beyond the relative freedom they had had under the Brussels Convention. Hence, the Convention used the severe restriction in Art 4 to create a virtually “unbreakable” limit of liability on any distinct occasion. Insurers (including P&I clubs – although they are not technically insurers) could then provide higher levels of protection based on the notional value of a ship fixed in accordance with the valuation rules in the Convention. Insurers, of course, insure against casualties, or events or “distinct occasions”. The Convention and its predecessors had used the concept of claims arising on a distinct occasion, drawn from the British system. That usage did not import the British jurisprudence, however instructive it may have been to common lawyers. But the States Party understood that the use of the concepts from the British system involved employing a theoretical pre-incident valuation of the ship and having that valuation as the basis for establishing limitation for each and every occasion on which claims arose.
Policy considerations
The Minister said in the second reading speech when introducing into the House of Representatives the Bill for what became the Limitation of Liability of Maritime Claims Act 1989 (Hansard, 12 April 1989 at pp 1482-1483):
“As a trade-off for the vastly increased amounts of compensation available, the Convention provides for a virtually unbreakable system of limiting liability. It declares that a person will be deprived of his ability to limit liability only if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such a loss or recklessly and with knowledge that such loss would probably result.” (emphasis added)
This was cited with approval by Gummow J in Victrawl Pty Ltd v AOTC Limited (1993) 45 FCR 302 at 306, Lockhart and Cooper JJ agreeing; see also Barde AS v ABB Power Sytems (1995) 69 FCR 277 at 290E per Sheppard J; Griggs, Williams and Farr Limitation of Liability from Maritime Claims 4th ed; (2005) at pp 1-2).
The concept of the “virtually unbreakable” system is reflected in the provisions of Art 4. Lord Phillips of Worth Matravers MR appositely, in my opinion, referred to the “very heavy burden” that Art 4 imposed, namely, identifying an act or omission of the shipowner committed with the intent to cause the loss complained of or recklessly with knowledge that such a loss would probably result: The Leerort [2001] 2 Lloyd’s Rep 291 at 294 [10]-[13] Henry and Brooke LJJ agreed: see too Hare op cit at 147 and The ‘Saint Jacques II’ [2003] 1 Lloyd’s Rep 203 at 207-209 [16] per Gross J. That burden is similar to the one imposed by Art 25 of the Warsaw Convention as amended at The Hague 1955 with respect to the right of an air carrier to limit its liability (cp: Civil Aviation (Carriers Liability) Act 1959 and SS Pharmaceutical Co Ltd v Qantas Airways [1991] 1 Lloyd’s Rep 288 at 290-291 per Gleeson CJ and Handley JA.
The construction of the Convention
The Vienna Convention on the Law of Treaties of 1969 [1974] ATS 2 (“the Vienna Convention”) is an authoritative statement of customary international law for the purposes of construing the Convention: Victrawl Pty Ltd v Telstra Corporation Ltd (1995) 183 CLR 595. There, Deane, Dawson, Toohey and Gaudron JJ used the Vienna Convention to construe the Convention even though the Vienna Convention had not entered into force until 1980 and, by Art 4, it did not apply directly to treaties concluded (as the Convention was) before it came into force: see too Qenos 260 ALR at 695-696 [11]-[13].
The Convention should be construed by reference to the principles stated in the Vienna Convention even though the latter has not been enacted as part of the law of Australia: Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 (2006) 231 CLR 1 at 15-16 [34] per Gummow A-CJ, Callinan, Heydon and Crennan JJ: Povey v Qantas Airways Ltd (2005) 223 CLR 189 at 202 [24]-[25] per Gleeson CJ, Gummow, Hayne and Heydon JJ; see too Chiropedic Bedding Pty Ltd v Radberg Pty Ltd (2008) 170 FCR 560 at 568 [34]-[35] per French, Rares and Besanko JJ: Pilkington (Australia) Ltd v Minister for Justice and Customs (2002) 127 FCR 92 at 100-101 [26]-[27] per Mansfield, Conti and Allsop JJ; Fothergill v Monarch Airlines Ltd [1981] AC 251 at 276D-278E per Lord Wilberforce; see also at 282B-283D per Lord Diplock 294A-295D per Lord Scarman, 302A-B per Lord Roskill; Gulf Air Company GSC v Fattouch (2008) 251 ALR 183 at 190-191 [24]-[26] per Allsop P, Hodgson and Campbell JJA agreeing; F Berlingieri, 'Unification and Harmonisation of Maritime Law Revisited' (2006) 59 Revue Hellenique de Droit International 603 at 613-615. Recently a majority of the New Zealand Court of Appeal, without referring to the Vienna Convention (esp Art 31(2)(a)), has taken a different approach rejecting the relevance of the history and travaux préparatories: Tasman Orient Line Ov v New Zealand China Clays Ltd [2009] 3 NZLR 58 at 68-69 [31] per Baragwanarth J, 76-77 [69] per Chambers J, contra 83-84 [106]-[108] per Fogarty J. (The Supreme Court of New Zealand granted leave to appeal on 1 July 2009). The Vienna Convention provides in Arts 31 and 32:
“Article 31
General rule of interpretation1.A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
2.The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:
(a) any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty;
(b)any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.
3. There shall be taken into account, together with the context:
(a)any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;
(b)any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;
(c)any relevant rules of international law applicable in the relations between the parties.
4.A special meaning shall be given to a term if it is established that the parties so intended.
Article 32
Supplementary means of interpretationRecourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:
(a) leaves the meaning ambiguous or obscure; or
(b) leads to a result which is manifestly absurd or unreasonable.”
The right of a shipowner to limit liability conferred by the Convention is a substantive right enforceable by independent proceedings: Victrawl 183 CLR at 622 at 619 per Deane, Dawson, Toohey and Gaudron JJ; see too at 616-617. Their Honours held that the overriding limitation imposed by the Convention “attaches to”, limits and confines the rights of affected claimants to recover compensation through the international regime which the Convention establishes. Their Honours held that the Convention involved a significant alteration of substantive domestic law. Additionally, it had imposed a new regime that replaced that in the 1924 Convention. The Brussells Convention had been given the force of law by previous provisions in the Navigation Act 1912 (Cth): Victrawl 183 CLR at 618.
Deane, Dawson, Toohey and Gaudron JJ said that subject to specific exceptions or exclusions, the Convention effectively transformed claims against a shipowner and the shipowner’s property into claims against a limited fund established under the Convention: Victrawl 183 CLR at 617. The ability to limit liability in this way is an exceptional right of a shipowner and other persons who are entitled to invoke the provisions of the rules under the Convention for their protection. Once a limiting shipowner has constituted a limitation fund under the Convention, then subject to any specific exceptions or exemptions, that shipowner is relieved of any further liability for claims. And, the fund assumes a status, in effect, in rem to answer all claims arising from the one occurrence, whether or not they have already passed into judgment: cp James Patrick & Co Ltd v Union Steamship Co of New Zealand Ltd (1938) 60 CLR 650 at 673 per Dixon J who explained how a right to establish a limitation fund operated under ss 503 and 504 of the Merchant Shipping Act 1894 (Imp); see too The Tolten [1946] P at 149. This is given effect by the provisions of Arts 13 and 15.
A significant purpose of the Convention is to protect international trade and commerce conducted through the operation of seagoing ships. Because ships may be arrested or attached in most maritime States, unless the international community provided a regime limiting shipowners’ liabilities a ship, or sister ship, could be arrested at every port in each jurisdiction at which she called. The shipowner would be required to put up security each time his ship was arrested for the full amount claimed. A shipowner, demise charterer, insurer or P&I club ordinarily will be required to pay up to the value of the ship into court as security for any claim that might be made against her in order to arrange for her release.
The general law of the sea that has for centuries informed the exercise of Admiralty jurisdiction has recognised that absent a means for limitation of claims, a ship would be susceptible to an unlimited number of arrests arising from one casualty, or attachments arising out of one occurrence: Luke v Lyde (1750) 2 Burr 882 at 887 per Lord Mansfield CJ; The Tolten [1946] P at 155-156 per Scott LJ; The Stream Fisher [1927] P 73 at 80-81 per Bateson J. The consequence would be that claimants could obtain security up to the total value of their claims on each arrest or attachment. The security so obtained may far exceed the monetary limits fixed in the Convention or the value of the ship. If this were readily permitted it would be likely that once the ship was first arrested or attached, the shipowner may have little practical choice but to leave her where she lay. In the absence of the protection to a ship and those interested in her offered by the Convention, substantive insurance and protection and indemnity arrangements would also be discouraged. These have proved vital in the conduct of international maritime trade and commerce.
The Convention ensures that a globally recognised and enforceable cap will be placed on the liability to which a shipowner is exposed in respect of all claims arising “on any distinct occasion”. The critical question is, what is a “distinct occasion” or “occurrence”? (The French text uses only one noun, “l’êvenment”, for the English text’s use of two, namely “occasion” and “occurrence”. This, too, suggests that the differing expressions in the English text should be read cognately.) The language of the Convention connotes that an occasion is where some act, neglect or default, of the shipowner, or a person for whom the shipowner is responsible, gives rise to the claims.
The use of Judicial Decisions on other Legislation in construing the Convention
The parties in these proceedings urged that the meaning of “distinct occasion” in the Convention should be treated as if it were governed by judicial decisions, principally in the United Kingdom, based on the use of that expression in that nation’s domestic legislation, such as the Imperial Merchant Shipping Acts of the 19th Century. While those decisions may assist in cases where there is ambiguity or be illustrative of the circumstances in which there may be a separation between different acts, neglects or default giving rise to different maritime claims, I am of opinion that that the meaning of the Convention must be arrived at from an examination of its text and structure: cf LK v Director-General, Department of Community Services (2009) 237 CLR 582 at 596 [36] per French CJ, Gummow, Hayne, Heydon and Kiefel JJ: see too Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52 at 75 [62]-[64] per Gleeson CJ, Gummow, Hayne and Crennan JJ. Each of the 1924, 1957 and present Conventions has used a different form of expression to address the aggregation of claims and a particular factual circumstance.
The Convention uses the concepts of an individual “distinct occasion” (Arts 6(1), 7(1), 9(1)), “occurrence” (Art 5), “occurrence giving rise to the liability” (see Art 11(1)) and an “act, neglect or default” of a person for whom a shipowner is responsible (Art 9(1)(a), (c)). The expressions “claims arising on any distinct occasion” (see e.g. Art 9(1)), “the same occurrence” (Art 5), and “the occurrence giving rise to the liability” (Art 11(1)) focus on a particular act, neglect or default of the shipowner or person for whom the shipowner is responsible. I am of opinion that the natural and ordinary meaning of those expressions as used in the Convention is substantially the same.
Although these are different expressions, their use in an international convention, should not be construed narrowly as in a domestic statute. The purpose of the Convention is clear. It is to allow the shipowner to limit his liability for claims arising out of a particular, identifiable act, neglect or default that gives rise to claims of the kind described in Art 2(1). Such claims will often have attached to the ship as maritime liens at the moment they arose; e.g. on a collision (Art 2(1)(a)). If the shipowner’s conduct involves more than one act, neglect or default, each of which would entitle a person to bring a separate claim under Art 2(1), the shipowner cannot limit his liability in one fund for all the claims arising from the second or subsequent act, neglect or default. The shipowner must constitute, if he wishes to limit his liability under the Convention, separate funds for each such individual act, neglect or default.
This construction is reinforced by the exception provided to a shipowner’s entitlement to limitation in Art 4. That disables a person liable from limiting his liability where it is proved that the loss resulted from “his personal act or omission” committed with the intent to cause that loss or recklessly with knowledge that the loss would probably result. Once again, the focus of that exception is upon an act or omission. An “omission” is similar to or connotes the concept of “neglect or default” used elsewhere in the Convention.
The Convention allows the shipowner to limit his liability in respect of each particular, distinct occasion. A shipowner who commits more than one distinct navigational error, even within a short period of time, each of which causes damage to third parties or even to the same third party, ordinarily will not be entitled to assert that all of the acts, neglects or defaults amount to a cognate “distinct occasion”. As a matter of commonsense, usually, they do not. There is more than one “distinct occasion”, and the shipowner is liable for each. The ordinary and natural meaning of the Convention accords with the commonsense meaning. The shipowner cannot use the Convention as a shield to escape that second source or occasion of his liability. However, there may be instances where the occasions will not be “distinct”. This will depend upon all of the circumstances, but, in particular the existence of some connection or lack of distinctiveness. I will discuss these concepts in more detail under the heading “What is a distinct occasion?”
Previous consideration of “arising on a distinct occasion”
In Ballast Trailing NV v Decca Survey Australia Ltd (New South Wales Court of Appeal, unreported, 29 September 1981) Hope JA, with whom Hutley and Mahoney JJA agreed, considered whether the owners of the dredge “Willemstad” could invoke the right to limit their liability under s 3 of the Merchant Shipping (Liability of Shipowners & Others) Act 1900 (Imp). That provided that the limitation of liability afforded under that Act related to the whole of any losses and damages “which may arise upon any one distinct occasion”. The same dredge had caused similar damage that had led to the High Court’s decision in Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529.
There, a track plotter chart had been prepared for the dredging operation using a device that incorrectly marked the location of four pipelines. However, the dredge struck the pipelines on each of the nine passages across a stretch of water that had been separated by intervals of approximately an hour and a quarter. The striking occurred because of the error in the perceived location of the pipelines in relation to the dredge’s intended course. Hope JA held that the master and pilot of the dredge had had an opportunity before each passage to make use of conventional navigational methods to determine the position of the dredge in relation to the pipelines but had failed to do so. He concluded that there were nine separate occasions each of which produced damage in respect of which a liability arose. That was because an action could have been brought in respect of each occasion based on a separate cause of action. He observed that:
“No doubt incidents may be so close to one another that, as a matter of degree, it may be possible and proper to regard them as involving one distinct occasion.”
Hope JA applied the leading decision of the English Court of Appeal in The Schwan [1892] P 419. There, the master of The Schwan manoeuvred her in a river so that she collided with two different vessels. However, each collision was avoidable had the master not acted negligently. And, the first collision was not the cause of the second, despite the short interval between the two. Lord Esher MR said that in such a case, the ship could not limit its liability to one fund, but was liable to each of the two plaintiffs to the full extent of her statutory liability ([1892] P at 438). He found that there were two mistakes of bad seamanship that had caused accidents to two ships. Lord Esher MR had posited the following test (The Schwan [1892] P at 439):
“So if you run into one ship half an hour before you run into another, what difference does it make? It is not the time which is the substantial thing; but whether both are the result of the same act of want of seamanship, and, if they are not, the [Merchant Shipping] Act does not apply, except as to each of them separately.”
And Bowen LJ added (The Schwan [1892] P at 441):
“It is clear that you must examine the section in each case to see what particular damage is caused by the same act of improper seamanship; that if you find two acts which are distinguished one from another, which lead to loss or damage, then the double loss or damage is not entirely due to the same act. It is due to two acts instead of to one act. Otherwise, as has been pointed out, a ship might after making one blunder go blundering up the whole river. It is quite impossible to take that view. The question is, what unseamanlike act of the person in charge of the ship has caused a particular accident?” (emphasis added)
Their Lordships applied the decision of Butt J in The Creadon (1886) 5 Asp. M.C. 585 at 586. He held in that case that a second collision was inevitable after the first had occurred. Butt J allowed the owners to limit their liability to one fund. He found that the two collisions were so close together that
“…: the first was the substantial and efficacious cause of the second, and that there was no separate act of negligence on the part of those in charge of The Creadon in respect of the second collision.”
That approach harked back to the similar reasoning of Sir Robert Phillimore in The Rajah (1872) LR 3 A&E 539 at 542. He held that although the Rajah had collided with two ships, each collision had taken place “… if not at the same moment in time, yet substantially at the same time and on the same occasion; and the whole damage done seems to have been caused by the one act of improper navigation on the part of the Rajah”.
The Scottish Court of Session followed The Schwan [1892] P 419 in The Lucullite (1929) 33 Lloyd’s List Rep 186 at 187 per the Lord Justice-Clerk (Lord Alness), 188 per Lord Ormidale agreeing, Lord Hunter and 189 per Lord Anderson). There, Lord Anderson identified the tests as being first, whether distinct acts of negligence had caused damage to each of the two ships or, secondly, whether the later act of negligence causing the damage to the second ship had not been necessitated or rendered inevitable by the earlier.
In Exxon 869 F 2d at 846-847, the Fifth Circuit Court of Appeals noted that the law for limitation of liability in the United States of America (then contained in 46 USC App §185 and now in 46 USC §30506(c): the United States has not ratified the 1976 Convention) had devolved from British law based on the “distinct occasion” rule. They held that where successive collisions had occurred as a result of the same negligent act or constituted one “distinct occasion” but added “… if there is time and opportunity after the first collision to take action which would avoid the second collision, each is a ‘distinct occasion’”: Exxon 869 F 2d at 847-848.
In Distillers Co Biochemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 at 19 Stephen J (with whom Gibbs J at 10 agreed on this aspect) discussed the meaning of a clause in an insurance policy limiting the insurer’s liability to the insured, the distributor of the drug “thalidomide”. The policy wording limited the insurer’s liability for all compensation payable to all claimants “… in respect of or arising out of any one occurrence”. Stephen J observed that because the policy contemplated that a number of claims could arise out of the one occurrence, this indicated that the word “occurrence” there meant the mishap, not its consequences, following a similar construction on another insurance policy made by Donaldson J in Forney v Dominion Insurance Co Ltd [1969] 1 WLR 928 at 934. Gibbs and Stephen JJ held that the occurrence was the injury to the plaintiff, not the original distribution of the drug: Distillers 130 CLR at 10, 20. Menzies J came to the same conclusion: Distillers 130 CLR at 6.
Use of common law concepts to characterise what is a distinct occasion
The shipowner argued that the question for determination was whether, after the fouling, there was any act, neglect or default which gave rise to a claim distinct from any claim that had by then arisen by reason of the fouling. It argued that this formulation of the test derived from the terminology and concepts employed in the Convention and recognised an assumption that the fouling was attributable to some act, neglect or default. It contended that because the purpose of the Convention was to limit the liability of a shipowner, the concept of claims arising “on any distinct occasion” as used in Arts 6 and 9 of the operated so that “… if a particular act, neglect or default is sufficient to give rise to a claim (notwithstanding subsequent acts, neglects or defaults) then it can be said to arise on one distinct occasion.”
I am of opinion that this argument distorts the proper approach to the construction of the Convention. The degree of connection between events or circumstances is often examined in order to ascertain whether one is a cause of another. The Convention uses the concept of all claims arising on any distinct occasion to identify the degree of connection between an act, neglect or default and the causation of the class of claims for which a shipowner may limit its liability. The determination of whether a claim arises on a particular occasion, involves the application of a test for causation and the formation of a judgment about the existence or absence of the fact of a sufficient connection between the two. That judgment is arrived at after a balancing of fact and degree. Its formation involves the selection, consciously or unconsciously, of values used to establish the presence or absence of a sufficient degree of connection between the claim and the occasion.
In one sense, the law of the forum (lex fori) will be relevant in ascertaining whether a claim arises on the asserted occasion. But, because the Convention applies internationally, the determination whether something is a claim at all may be affected by the law of the places where the act, neglect or default occurred or it may be affected by the law of the place where the person making the claim asserts that he, she or it has suffered a loss.
The means of classification of whether a particular assertion of a right to sue a shipowner amounts to a claim for the purposes of the Convention must be flexible enough to allow for variations between the laws of any State Party at which the ship may be arrested or attached. This flexibility or extensive reach of the word “claims” serves the purposes of the Convention, because the establishment of a limitation fund in accordance with Arts 11 and 13 will create a fund as a substitute for the res as a means of satisfying those claims. This is complemented by Art 14 which provides that the rules relating to the constitution and distribution of a fund and all rules of procedure in connection therewith are governed by the law of the place (i.e. of the State Party) where the fund is constituted.
The right to make a claim on the fund may be a matter of substantive, not procedural, law. If a ship were arrested and then established a fund under the Convention in a jurisdiction that did not have a substantive law equivalent of liability for many claims that arose in the place where the casualty occurred, the procedural law of the place of the fund could not be used to frustrate claimants’ substantive legal rights to recover in the place of the occurrence. Obviously, if the law of the places of each of the occurrence and the fund are those of the same State Party to the Convention, as in these proceedings to establish a fund here, then the substantive and procedural law to determine whether a claim has been caused by an act, neglect or default should be the same as the test in the Convention for a claim arising on a distinct occasion.
The shipowner contended that the factual or temporal limit of an occasion could not be less than what was sufficient to give rise to a claim. It argued that the words “arise” or “arising” in Arts 6 and 9 embodied the key concept in the Convention. Thus, the shipowner argued that all the claims that have been made, or are capable of being made, by Esso, BHP and third parties based on what occurred on 13 December 2008 arose from the one occasion of the initial fouling of the pipeline. It argued that this was the occasion that gave rise to all possible bases of its liability including the subsequent engine movements, the rupture of the pipeline and its further deformation. To support this argument the shipowner relied on common law decisions on the tort of negligence which held the original tortfeasor liable, first, for independent, but reasonably foreseeable, actions of third parties as in cases such as Chapman v Hearse (1961) 106 CLR 112 at 120-122; Mahony v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522 and Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 at 336 [60] per Gummow J or, secondly, an unforeseeable consequence of a reasonably foreseeable breach of a duty of care: Hughes v Lord Advocate [1963] AC 837 at 855-856 per Lord Guest. The shipowner argued that these cases supported the characteristics of the three subsequent engine manoeuvres from 15:46:01 on which BHP and Esso relied as distinct occasions separate from the initial fouling, as merely a consequence of, and so assimilated into, the occasion of the initial fouling.
Esso and BHP contended that the real issues were whether the subsequent acts, neglects or defaults on which they relied were the inevitable consequence of the initial fouling or whether the ship, her master and the pilot had the time and opportunity to avoid each of them. They relied on the common law authorities on “a distinct occasion” set out above. They argued that questions of causation and the application of the domestic law of negligence were matters that would need to be decided in proceedings seeking to establish the liability of the shipowner. Esso and BHP argued that the common law cases had considered whether the ship could have taken a different course of action as being determinative of whether the subsequent claims were part of the original occasion or arose on a distinct occasion, that was distinct because the master or pilot had committed a new error or had failed to take a step that he could have, and should have, taken to avoid the second or subsequent casualty.
Looking through the fractured exhibit from its Altona facing end, one can also see the point of first impact, where the shank of the anchor first arrested the north easterly drift of the ship, as Dr Price pointed out in evidence. This impact occurred when the vessel, and so the anchor, was travelling at about 1 metre per second. The impact was very powerful. It caused the pipeline to ovalise, not in a vertical plane, as it would otherwise, but in a horizontal plane. The pipeline was gripped on its south west side between the anchor’s shank on top and flukes below and pulled out of its trench towards the north east. The normal process of ovalisation when a pipe is struck is simply demonstrated by rolling up a piece of paper and striking it in the middle, on the face opposite the direction in which the striking object is heading. The paper, like the pipe, kinks vertically in the middle around the impact point. The fractured exhibit could not react in this way because of the force to which it was subjected. The shank made an impression rising up at an angle of about 35º from where it met the flukes and pipe on its south west face. This is the point of upper damage on the fractured exhibit furtherest from the site of the fracture (about 30 centimetres). Underneath and further away from the fracture is a flatter but also distinct impression caused by the starboard (or right or north western) facing fluke (if one is oriented looking toward the anchor from the vessel). The surface of the pipeline was not gripped by the anchor further to the north-west on the recovered sections of pipeline.
Dr Price’s view was that the small amount of metal to metal contact on the fractured exhibit indicated that the weight coat or pieces of it had been held in place by the shank and flukes while they remained engaged over the pipeline. This protected the surface of the fractured exhibit from the metal to metal scraping that would have occurred as the anchor partly rotated with the yaws of the ship. Mr Gartner considered that all the gouge marks from metal to metal contact would have been on the missing section of pipe. I reject Mr Gartner’s view. First, it did not explain how the actual state of the fractured exhibit could have been caused, especially the significant ovalisation of the fractured exhibit and obvious points of compression by the shank and flukes. Secondly, Mr Gartner’s theory did not explain how the anchor having had its first impact on the point of the fractured exhibit identified by Dr Price, moved further to the south east without leaving gouging marks on the exposed metal. Thirdly, as Dr Price noted, no calculations had been put forward to explain how Mr Gartner’s postulated movement could have occurred. The very gouging that Mr Gartner asserted was missing because it was on the fractured exhibit, was necessary to support his theory that the anchor, during the yaws, moved south east and generally, but not completely, off the fractured exhibit.
When the pipe fractured, each end recoiled away from the other in a partly elastic response to the release of tension. Dr Price used classical stress wave analysis to calculate that at the moment of rupture, the initial velocity of the longitudinal recoil of each end of the severed pipe was 54.6 kph (kilometres per hour). This was a sudden and powerful release of energy. He said that it was hard to estimate the distance of the recoil (which released the elastic strain on the pipe that the vessel was exerting through the pull of the attached anchor). This was because the stress wave was both reflected (by breaks in the concrete weight coat) and absorbed (from coatings on the pipe). He considered that the effect of each of those factors was poorly known. He said that there was no indication that the sideways movement of the pipe was significantly affected by the escape of the gas it carried under pressure. Overall, Dr Price estimated that the gap that opened up between the two pieces of pipe was approximately 2 metres. However, he said this recoil distance was very difficult to estimate and it could have been greater. The other experts generally accepted this result and Dr Price’s methodology. Although Mr Kelle also calculated a slightly lesser velocity of separation, nothing turns on that and I accept Dr Price’s analysis.
During the concurrent evidence of Drs Lyngberg and Price, the former explained his theory of how the anchor slid along the pipeline towards the south-east of the point of fracture. They agreed that the key difference between their opinions was whether the anchor remained engaged (as Dr Lyngberg contended) or disengaged (as Dr Price argued) from the pipeline at the time of the initial rupture. Dr Lyngberg based his analysis on his understanding of the sonar image. He used his mechanical engineering expertise, acknowledging that Dr Price had both that and expertise in metallurgy. They agreed that on the initial impact the pipeline’s uniform stiffness in all directions was changed. The action of the shank and flukes flattened the pipe at the area of contact increasing its stiffness in the direction of the upwards and north-easterly pull caused by the vessel and significantly decreased its stiffness in the vertical direction.
Dr Price explained, based on Mr Kelle’s calculations, that the loads applied to the pipeline by the anchor varied between about 10 and 100 tonnes, depending on the position of the vessel as it yawed and reacted to the environmental forces. Dr Lyngberg, Dr Price and Mr Kelle agreed that a significant force, somewhere around 100 tonnes, was applied to the pipeline at the time of rupture although none of them regarded the exact amount as making a relevant difference. So, after initially hitting the pipe, in a basically vertical plane, the anchor squashed and flattened it as it pulled it sideways out of its trench from about three metres below the seabed. As it was dragged upwards towards the vessel the pipe was in very high tension. It exhibited some elasticity (i.e. its ability to return to its previous shape; in this case when the fracture occurred the ruptured pipe ends moved longitudinally back whence they had originated but to a smaller degree) and some plasticity (i.e. its inability to return to its previous shape because the forces that had been applied to it had caused it to deform permanently) – the movement back being the elasticity; the extent to which the pipe did not resume its previous shape before impact, being its plasticity. The pipe ultimately buckled and failed while still gripped by the anchor. The experts differed as to the anchor’s position as shown in the following illustration agreed between Dr Price and Mr Gartner.
Figure 5
The Altona end fracture mechanism: Altona is on the left hand side. Mr Gartner’s initials (BG) and Dr Price’s (JP) indicate where each says the anchor gripped the pipe at the time of the initial fracture.
Dr Lynberg’s theory for the anchor’s position at the time of the initial fracture involved it sliding or working its way from the Altona side of the fracture to crimp in a “W” shape on the missing section of pipe immediately to the south east of the fracture; i.e. for him, the fracture occurred at the point marked “BG” in Figure 5. That is once the anchor moved to this position, it wedged the missing pipeline on the Mordiallic side of the initial fracture, by indenting portions of the pipe to correspond with the converging upwards and downwards actions of the shank bearing down on the pipe as the flukes pushed upwards. This resulted in indentations like a “W”, although perhaps not as pronounced. Dr Price drew a rough sketch of what he understood Dr Lyngberg contended was the result of the indentation action by the anchor on the Mordiallic side of the initial fracture showing a “W” shape in the pipe as it was crushed between the anchor’s parts. First Dr Lyngberg, and later Mr Gartner agreed that the sketch correctly conveyed the concept behind their explanations of the position of the anchor at the time of and immediately after the initial fracture.
In his first report, Mr Gartner described the Altona and Mordialloc ends of the recovered pipe as though they had separated from one another as part of the same event. Mr Gartner realised, after his first report, that the two fractured ends of pipe at the Altona and Mordialloc blow holes were unrelated and that over 4.6 metres of pipe was missing, that had originally been between the two existing ends of Altona and Mordialloc. Nor had he even considered in his first report whether there would have been any longitudinal recoil of either end of the pipe after the initial break. And Mr Gartner did not attempt such a calculation when he saw Dr Price’s approach, even though he accepted that the effect of any longitudinal recoil was critical to his theory that the anchor retained a grip on the Mordialloc section of the pipe after the initial rupture.
I found Mr Gartner’s evidence to be less persuasive and less well reasoned than Dr Price’s. First, I consider that it is telling that Mr Gartner initially failed to identify that the mechanisms which produced the two fractures at the Altona and Mordialloc ends could not have been the same. One was an ovalised horizontal fracture and the other an ovalised vertical fracture. While Mr Gartner was not mechanical engineer, he was a metallurgist. The physical deformation evident on each piece of existing pipe should have alerted him to the difference in the origin of the two very different fractures he was examining. Secondly, after he realised that his initial report (which he described in evidence as “very preliminary”, relying on his assertion in it that he needed to get microscopic and chemical analyses of the surfaces of the two fractures) he developed a second theory that involved the anchor remaining engaged with the pipe after the initial fracture. In order for that theory to work the anchor had to be sufficiently engaged with the pipe to withstand the forces of the initial rupture. Thus, having worked its way across the site of the rupture towards the south west, the anchor had to grip the pipeline so as to create the “W” crimp. When giving concurrent evidence, Mr Gartner advanced, for the first time, his explanation as to how, while the anchor was so engaged, the Mordialloc end came to fracture. He asserted that the anchor pulled the Mordialloc side of the ruptured pipe initially towards the south east in the general direction of the ship. That was a clockwise movement. But in order to create the vertical ovalisation and fracture of the Mordialloc end of the pipe that was recovered, an anticlockwise movement of the missing pipe had to occur. In addition, Mr Gartner maintained that this anticlockwise movement occurred with the anchor remaining wedged in the “W” crimp some four to five metres away from the Mordialloc end fracture.
I accept Dr Price’s opinion that Mr Gartner’s suggested mechanism is impossible. First, the postulated mechanism confused, and did not account for, the two necessary forces of movement, clockwise and anticlockwise T. Secondly, it was contrary to the joint view of Dr Lyngberg and Dr Price that the anchor had to be very close to the Mordialloc end for that second fracture to occur. As Dr Price pointed out, if Mr Gartner’s latest theory were correct, as soon as the anticlockwise movement occurred the pipeline would snap, not where it did four or five metres away from the anchor, but next to the anchor, as he and Dr Lyngberg agreed. I had the impression that Mr Gartner was arguing from a conclusion, rather than trying to explore what the conclusion, based on evaluation, ought to have been.
Dr Lyngberg’s theory was equally unsatisfactory. His involved the proposition that shortly after the rupture, at sometime between about 16:22 and 16:24, the anchor managed to move slightly to the south east (towards Mordialloc) while still remaining engaged with the pipe but leaving itself enough room to be able to slide out of the “W” crimp and proceed the next four to five metres along the pipe to be sufficiently adjacent to the Mordialloc end fracture. He then said that the second fracture occurred when the anchor was dragged upwards in a shear-like fashion as he had understood Mr Gartner’s written report to describe.
Again, I accept Dr Price’s evidence that the strength necessary for the anchor to be engaged with the missing piece of pipe in the “W” crimp was inconsistent with its suggested ability to move south east by sliding along the pipe. The latter movement does not seem logical. Dr Price thought it was not possible that the anchor could have moved south east a very small distance from the Altona end fracture while remaining engaged with the pipe, so as to disengage itself from the “W” crimp yet be able to slide along the pipe to be adjacent to the second fracture site.
The weights of the anchor and the pipe would be likely to have caused both to fall onto the sea bed and into the Altona blow hole area. The subtlety of movement of the anchor necessary to give effect to Dr Lyngberg’s theory however is, as he recognised, important. He said that there was no evidence that the anchor had fallen onto the seabed after the initial fracture until it left the Mordialloc end fracture showing its drag mark, as recorded on the sonar image in Figures 2 and 3 to the east. So Dr Lyngberg postulated that the anchor moved out of the “W” crimp while it was somehow keeping the pipe in the water above the seabed. Like Dr Price, I have difficulty envisaging how an 8.325 tonne anchor, its heavy chain, and the fractured pipe all remained above seabed level while the anchor moved back, however many centimetres it needed to, in a south westerly direction (so that it loosened its grip) then disengaged itself from the constraint of the “W” crimp, yet remained in contact with the pipeline and was able to slide about 6 metres along it to the south east.
This explanation suggested that the anchor had the dexterity of a ballerina performing a pirouette. I cannot accept that it is a logical explanation. Moreover, neither Dr Lyngberg nor Mr Gartner had performed any calculations to see whether their theories could be justified. While I accept that there were a large number of assumptions that would be necessary in any such calculations and that a great deal was unknown, given the extraordinary nature of the mechanisms that were being propounded, some test based on assumptions should have been performed. It was reasonable for Dr Lyngberg to say that the value of such a calculation may not have been great. However, he had observed that he would have liked to have seen more detail and calculation for some of Mr Kelle’s theories, but was not being critical of them. Despite this, Dr Lyngberg himself had not performed any scientific analysis to support the dexterous movements he asserted the anchor made along the pipeline.
The Altona blow hole is quite wide. Dr Price estimated that the two ends of the pipe recoiled after the initial rupture leaving a space of about two metres, although in his oral evidence he suggested that it was two metres either side. I accept his evidence that the precise distance of the recoil was very difficult to estimate. I find that once the rupture occurred, the two ends of the pipeline separated at high speed leaving sufficient space for the 360 millimetre wide shank to fall between them. The base of the anchor with the flukes was nearly 3 metres wide, but was below the pipe it had been gripping from the south west side (away from the ship). When the anchor disengaged at the Altona blowhole it is likely to have fallen somewhere in the middle of the blow hole immediately to the north east of its prominent drag mark. The vessel headed south west following the ahead movements commencing at 16:19:51, it is likely that the catenary of the cable created one of the anchor chain marks heading towards the east.
I accept as more logical, and better reasoned, Dr Price’s analysis of how the initial fracture occurred. By reference to the diagram in Figure 5, the Altona end of the pipe was the longer piece in the anchor’s grip immediately before the fracture. I am satisfied by Dr Price’s evidence that the Mordialloc end moved far enough away at the moment of fracture to disengage entirely from the anchor, as did the Altona end. Once the pipe fractured and its two ends separated at 54.6 kph, the anchor and chain would have dropped to the seabed at about the point below where the fracture had occurred. I accept Dr Price’s explanation that the chain could not recoil towards the ship and that the anchor would not move far once the pipe separated from where it had gripped the pipeline before the fracture.
Capt Third marked up Mr Kelle’s inaccurate plot of the starboard hawse pipe and AIS transmitter positions of APL Sydney at relevant times in Figure 6 below.
Figure 6
Extract of Starboard Hawse Pipe Movement Plot
The yellow line represents the approximate (and possibly inaccurate) position of the ship’s starboard hawse pipe after the pipeline ruptured. However, the yellow line is useful to enable a rough visualisation of what happened to the point on the ship from since the cable led out the anchor as the vessel moved south west, even though it is not a precise or accurate representation of the exact path. The cable led from the hawse pipe to the Altona blowhole as indicated on the red dotted line.
As the ship moved south west and away from the blowhole, the chain would have been taut. The further south west the ship moved the more likely that the anchor was dragged below (i.e. south west of) the Mordialloc end in the disturbed area of seabed on Figures 2 and 3 that appears below the blowhole under the superimposed marking of 11 metres. The ship began moving north east before the engine movement of slow astern was ordered at 16:27:59. At some point, once the ship’s movement had changed to head towards the north east, either before or after the slow astern order, Mr Kelle and Dr Price considered, and I accept, that it is likely that the anchor dragged north east across the Altona blow hole and re-engaged there with the Mordialloc end of the pipe. It may have done so after re-passing the trench line about four or five metres away from the fracture.
The water and the seabed were very disturbed during these events. Both the Altona and Mordialloc ends of the pipe initially were emitting gas into the Altona blow hole until the anchor re-engaged with the pipe and moved the Mordialloc side away. Thus, evidence of where the anchor had fallen into the Altona blow hole at this time is likely to have been obscured by the force of the gas disturbing the seabed in that area. Later, after the Mordialloc end, held above the seabed, had retreated with the astern movement of the vessel, the Altona end continued to emit the gas that it still contained, but with decreasing pressure. That emission of gas on the Altona side is likely to have continued for some time but under less pressure than from the Mordialloc side. However, the gas from the Altona side is likely to have covered up any disturbance of the seabed that would otherwise have been evident as a result of the re-emergence of the anchor from the Altona blow hole.
I am not able to accept the shipowner’s contention that the heavy anchor and chain could have remained attached to the missing piece of pipe (then supposedly connected by the “W” crimp to the rest of the Mordialloc side of the pipeline) as it remained suspended above the seabed in the water for several minutes between the rupture and the astern movement. Dr Lyngberg argued that the “W” crimp kept the anchor engaged with the pipe during the rupture. But, he did not explain satisfactorily how the anchor loosened itself just enough to perform his postulated ballet-like or acrobatic movement along the pipe while it remained suspended above the seabed and thus under tension from the vessel. The Mordialloc end of the pipe could not support the 8.325 tonne anchor and the chain above the seabed if it had slackened to allow the anchor to move out of the “W” crimp following the initial rupture.
Thus, I am satisfied that the mechanism proposed by Mr Kelle and Dr Price of a re-engagement of the anchor following the initial rupture is, more probably than not, what occurred. Each of them attempted to verify that what they were postulating was possible by using calculations. Neither Mr Gartner nor Dr Lyngberg made any such attempt. The competing theories are not supported by any evidence from the sonar images that any of the experts was able to identify. Nonetheless, something happened and, I am satisfied that the anchor disengaged from the pipeline and fell into the area of the Altona blow hole immediately after the initial rupture.
Oliver Wendell Holmes once observed: “The life of the law has not been logic: it has been experience”: The Common Law (1881; Lecture 1 Dover: NY) at 1. Here, there are missing pieces of the jigsaw, the lack of a sonar image identifying the movement of the anchor, the missing piece of pipe and the dispute about the amount of anchor chain in the water. Nonetheless, the objective facts left behind on the seabed floor after the rupture and two fractures demonstrate that the Mordialloc end must have been pulled back by the vessel as she either drifted astern or after the engine movement commenced at 16:27:59. Whichever way the re-engagement occurred, the astern engine manoeuvre certainly pulled the Mordialloc end of the pipeline back to almost a right angle from its trench before fracturing it as Dr Price explained. This pulled and damaged significantly more of the pipeline on that side than the initial fouling.
I accept the upper range of Mr Kelle’s evidence that about 30 metres more pipe had to be replaced than would have been if nothing further had occurred to damage the Mordialloc end after the initial rupture. This would have resulted in the repair cost being increased, based on Mr Vines’ estimates, by about $1,080,000. He estimated that this would have extended the repair work by about three days, which could also affect the claims by Qenos and Huntsman in respect of their loss of gas supply for that additional period. I am not satisfied that the anchor remained engaged with the pipeline after the initial rupture. I find that the anchor re-engaged with the pipeline as a result of the ship moving astern after the south westerly momentum of the dead slow ahead movements ceased or after the slow astern order took effect. I am of opinion that this re-engagement was inseverably connected to and part of the distinct occasion that arose when the ship’s engine was ordered ahead after 16:19:51 in the ensuing emergency as those in command of the ship sought safety from the escaping gas.
Conclusion
I am satisfied that there were two distinct occasions that occurred in direct connection with the operation of APL Sydney on the afternoon of 13 December 2008 that gave rise to claims for loss of or damage to property and consequential loss resulting therefrom within the meaning of Arts 2(1)(a) and 6(1) of the Convention. The first distinct occasion was the chain of events leading to and immediately following the anchor fouling the pipeline at about 15:44-15:45. The second distinct occasion was the chain of events leading to and immediately following the rupture of the pipeline at about 16:20-16:21.
The parties asked that they be allowed the opportunity to consider these reasons before addressing on the relief that should be ordered as a result. As it may be of assistance to them, I will indicate tentatively a very preliminary view of the consequences of my findings. However, that is not a view that I have formed after assistance from argument and is merely a very tentative indication.
My preliminary view is that the shipowner is entitled to limit its liability for:
·the first occasion by establishing a limitation fund in the maximum amount calculated using the formula in Arts 6 and 11 of the Convention. That fund would be available to pay all claims other than those for which claims arose on the second distinct occasion;
·the second occasion by establishing another limitation fund. That fund would be available to pay all claims that arose because of the additional damage done to the pipeline by the ship’s movements ahead causing the rupture and astern after it, the extra time for repair of the pipeline, including additional consequential loss claimed by Qenos, Huntsman and other parties, and the loss of escaped gas.
I will fix a further hearing to determine the relief that should be ordered.
I certify that the preceding three hundred and sixty-four (364) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate:
Dated: 18 March 2010
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