High Court sinks maritime limitation for wreck removal

On 28 January 2022, the MV Goliath, a 11,754 GRT cement carrier then owned and operated by CSL Australia Pty Ltd, collided with two tugs, the York Cove and the Campbell Cove, and the wharf at the Port of Devonport, all owned by the Tasmanian Ports Corporation Pty Ltd (TasPorts). The two tugs sank, emitting diesel fuel and other hydrocarbons.

TasPorts commenced proceedings in the Federal Court of Australia against CSL for breach of contract, negligence, and public nuisance, claiming damages of $22,606,359 comprising:

• $2.17 million for loss of the tugs;

• $114,869 for the loss of hydrocarbons;

• $2,958,595 for the cost of hiring replacement tugs;

• $117,152 for the damage to the wharf; and

• $17,245,743 for the cost of containing, removing and disposing of hydrocarbons (bunker fuel), and removing and disposing of the tugs (Wreck and Fuel Removal).

CSL commenced its own limitation proceedings to constitute a limitation fund of $15,704,201 under the Convention on Limitation of Liability for Maritime Claims (1976) as amended by the Protocol of 1996 (LLMC Convention) enacted in Australia by the Limitation of Liability for Maritime Claims Act 1989 (Cth) (LLMC Act).

The subsequent proceedings before the Federal Court, Full Federal Court and High Court have related only to CSL’s right to limit its liability in relation to the fifth item, the Wreck and Fuel Removal. 

For those unfamiliar with maritime law, the LLMC Convention provides that ship owners, charterers, managers, and operators may collectively limit their liability for certain defined types of claims relating to the operation of the ship by reference to the size of the ship. Article 2 of the convention sets out the various classes of claim. Australia has exercised its option not to enact (d) and (e), reproduced below.

Article 2

Claims subject to limitation

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;

(b) claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;

(c) claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connexion with the operation of the ship or salvage operations;

(d) claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship;

(e) claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship;

(f) claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with this Convention, and further loss caused by such measures.

At first instance before Justice Stewart, CSL argued that it was entitled to limit its liability because the Wreck and Fuel Removal claim came within Article 2(1)(a), as a claim for property damage. 

CSL further submitted that Australia’s decision not to enact Article 2(1)(d) (wreck removal) did not have the effect of carving wreck removal claims out of the scope of Article 2(1)(a). 

TasPorts argued that the Wreck and Fuel Removal claim came within Article 2(1)(d) of the LLMC Convention and therefore the Wreck and Fuel Removal claim came within a class of claims that Australia had decided could not be limited.

Justice Stewart agreed with the ship owners, CSL, and found that because the claims fell within Article 2(1)(a) they were limitable. 

For a detailed discussion of the first instance arguments and decision see our previous article, ‘The Goliath - Can ship downs limit liability for wreck removal costs?’ .

TasPorts appealed and the case was heard by the Full Federal Court bench of Burley, Sarah C Derrington and O’Sullivan JJ. The court allowed the appeal and held that the Wreck and Fuel Removal claim, being a claim within Article 2(1)(d), was not limitable, irrespective of the fact that the claim also fell within Article 2(1)(a). 

Briefly, the basis for this conclusion was that Article 2(1)(d) is a comprehensive category for wreck removal, and Australia had exercised the reservation option provided by Article 18(1) to remove the whole category. Therefore, wreck removal claims cannot be re-introduced as a claim for property damage within Article 2(1)(a).

CSL appealed the Full Federal Court decision to the High Court. The matter was heard by Gageler CJ, Gleeson, Jagot, Gordon, and Edelmen JJ. 

The High Court agreed with the Full Federal Court, and accepted TasPorts’ approach to construction of Articles 2 and 18 of the LLMC. In summary:

• when Australia exercised the choice (provided for by LLMC Article 18(1)) to exclude the application of Article 2(1)(d), it did not remove Article 2(1)(d) from existence. Article 2(1)(d) remained part of Article 2;

• insofar as a claim is within both Art 2(1)(a) and (d), the consequence of the exclusion of the application of Art 2(1)(d) by the exercise of the right under Art 18(1) is that the claim is excluded from Art 2 altogether; or put another way, 

• despite that Article 2(1)(d) is excluded, the intention of the action of excluding Article 2(1)(d) must still be acknowledged.

The High Court considered the two most relevant international decisions, whereby comity between the law of States that are party to a convention is of particular importance in maritime law:

• Although The Flaminia[1], a decision of the Supreme Court of the United Kingdom addressed the inverse of this case, it confirmed that a claim may fall within more than one subparagraph of Article 2(1), and the LLMC must be given its ordinary meaning in context. 

• The Star Centurion[2] concerned a similar legal question to the present where Article 2(1)(d) was disapplied in Hong Kong. The shipowner seeking to limit its liability argued that the costs of the relevant wreck removal fell within Article 2(1)(a) and therefore the shipowner was entitled to limit its liability despite that Article 2(1)(d) was disapplied. The Hong Kong Court of Final Appeal held that the shipowner could not limit its liability because ‘an exercise of the right to disapply Art 2(1)(d) must have the effect of taking all claims within the disapplied Art 2(1)(d) outside of the scope of the ‘rules of this Convention for claims set out in Article 2'[3].

The High Court also considered the Travaux préparatoires[4] for the LLMC Convention and found that they also manifestly supported TasPorts’ case.

Often, the correct answer is the answer most easily explained. This was ever apparent in the two judgments delivered, one by Gageler CJ, Gleeson, Jagot, and the second by Gordon, and Edelmen JJ, all finding for TasPorts with a ready flow of logic.

Incidents of the magnitude where wreck removal costs exceed limitation amounts are thankfully rare in Australia. This decision provides some broader guidance for the maritime industry and its insurers. Applying the High Court’s decision to Article 2 and 18 generally, claims within the scope of Article 2(1)(d) and (e) cannot be limited in Australia. These are:

(d) claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship;

(e) claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship;

But what about claims that arise in contract?

At first instance, TasPorts sought to rely on its standard terms and conditions which it seeks to incorporate with all vessels entering its ports, and specifically clause 26.2, that provides:

To the fullest extent permitted by Law, all rights, representations, guarantees, conditions, warranties, undertakings, remedies or other terms that are not set out in these Terms and Conditions are expressly excluded.

It was common ground between the parties, and established by UK authority, that the right to limit liability under the LLMC Convention can be contractually excluded. 

Justice Stewart held that the TasPorts standard terms were incorporated, but that the wording of clause 26.2 was effective only to exclude all rights, representations, guarantees, conditions, warranties, undertakings, remedies or other terms that would otherwise arise from the contract itself., but rights and remedies arising outside the contract were not excluded by clause 26.2.

This issue was not addressed by the Full Federal Court or High Court. As such, it is now good law in Australia that a general exclusion such as clause 26.2 is not effective to exclude a shipowner’s right to rely on the LLMC Convention. 

Any ports or entities with contractual relationships with shipowners who may be entitled to rely on the LLMC Convention, for example to limit liability for damage to the port, should review their contracts and ensure any clauses seeking to exclude the operation of the LLMC Convention are specifically worded to do so.

By relying on the LLMC Convention to limit its liability, CSL is not admitting liability for the incident or any associated losses. CSL’s liability remains an issue in the ongoing proceedings. 

The Australian Transport Safety Bureau (ATSB) investigated the incident and found that: 

1. In the process of a transfer of manoeuvring controls from Goliath’s bridge to the bridge wing, the correct steering mode was not selected. Consequently, control of the ship’s rudders remained at the wheel, inside the ship’s wheelhouse, while the master attempted to manoeuvre the ship in the swing basin using the bridge wing VecTwin joystick panel. The master’s manoeuvring orders, issued in the belief that the ship was in joystick steering mode, had the effect of increasing the ship’s speed as it closed on the tugs before colliding with them.

2. The Goliath’s master nor the second mate had undertaken the required bridge resource management (BRM) training and so that BRM on board was ineffective. 

3. The design of the ship’s joystick system was also identified as having increased the risk as it was misleading and did not provide a positive visual confirmation that the correct steering mode had been selected.

4. While TasPorts’ risk assessment for Devonport had considered the potential for collisions between ships manoeuvring in the swing basin and smaller vessels in the vicinity, the risk of injury to personnel on board those smaller vessels was not specifically considered. 

Read ATSB’s final report for more information.