16 October 2024
7 min read
#Transport, Shipping & Logistics
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The Federal Court has confirmed that the limitation regime under the Convention on Limitation of Liability for Maritime Claims (1976) (LLMC) can apply to certain claims for wreck removal in Australia; interestingly, this is despite Australia choosing to opt out of limiting liability with respect to “the raising, removal, destruction or the rendering harmless of a ship” that is wrecked at the time of becoming a party to the LLMC.
The decision comes as unwelcome news for owners of ships wrecked at the hands of another party. Going forward, such owners will likely find that their claims for wreck removal against a wrongdoing ship can be limited, where those claims can be characterised as “loss of or damage to property” or “consequential loss”. However, innocent owners will remain liable in full to the authorities whose prerogative it is to clean up the mess.
The decision in CSL Australia Pty Ltd v Tasmanian Ports Corporation Pty Ltd (The Goliath) [2024] FCA 824 (CSL v TasPorts) arose from the allision, in early 2022, of the vessel Goliath with two tugs and a wharf owned by the Tasmanian Ports Corporation Pty Ltd (TasPorts) while berthing in the Port of Devonport, Tasmania. The allision caused the tugs to sink, releasing fuel and other hydrocarbons into the Mersey River.
The LLMC is given force of law in Australia by section 6 of the Limitation of Liability for Maritime Claims Act 1989 (Cth). Article 2(1) of the LLMC provides that shipowners and operators may limit their liability in relation to various maritime claims, including property damage and consequential loss arising (para (a)) and wreck removal (para (d)). At the time of becoming a party to the LLMC, Australia chose to opt out of permitting limitation of liability in relation to wreck removal.
In CSL v TasPorts, TasPorts claimed, amongst other heads of damages, $17.2 million for “costs of and associated with the containment, removal and disposal of hydrocarbons, and the removal and disposal of the Tugs” from the owners of the Goliath (Owners).
The primary issue was whether the Owners could limit their liability for such claims under Article 2(1) of the LLMC. The Owners contended that “TasPorts’ wreck removal claims come within Art 2(1)(a) as consequential loss claims arising from damage to or loss of property… and are therefore subject to limitation regardless of whether they also come within Art 2(1)(d)”.
In contrast, TasPorts contended that such an interpretation would render Article 2(1)(d) and Australia’s reservation meaningless. They argued that “Art 2(1)(d), which deals specifically with wreck removal claims, qualifies the earlier paragraphs” so that any claims characterised as ‘wreck removal’ cannot also be characterised as property damage or consequential loss, thereby falling within the scope of claims subject to limitation under the LLMC.
The Court ultimately sided with the Owners in holding that limitation of liability for wreck claims is available, despite Australia opting out of limiting liability with respect to “the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned”. Rather, it is only where such claims are made by public authorities that Australia’s reservation holds firm and limitation in respect of wreck removal claims is not allowed.
The Court’s conclusion may at first appear an odd one, insofar as Australia’s reservation purported to exclude the ability to limit claims for “wreck removal”. In analysing the text and purpose of the LLMC, the Court came to a number of important conclusions in justifying its outcome.
Firstly, the Court concluded that the clear language of the LLMC supports the limitation of liability in respect of TasPorts’ claims, being in essence, claims by ‘innocent’ shipowners against the owners of the wreck-causing ship. In a statement which focused squarely on the purpose of the language, and which downplayed the importance of Australia’s reservation, the Court held that:
“[L]imitation should be available in respect of all claims reasonably within the language of the Convention… That purpose would be frustrated by excluding from paras (a) and (c) claims which obviously come within their language simply because they also come within the language of para (d) which has not been implemented in Australia”.
Importantly, the Court did clarify that Australia’s reservation in relation to paragraph (d) wreck removal claims could still be given effect, noting that “there are claims in (d) [i.e. wreck removal] that would not be in (a) and/or (c) [e.g. damage to property and consequential loss]”. The Court gave as an example of these types of claims, “statutory strict liability (ie no-fault) claims of public authorities for the costs and expenses of wreck removal against the owners of the sunken ship”.
The Court further explained that the LLMC’s history and purpose supported the limitation of liability for the claims of innocent shipowners against a wrongdoing ship. In doing so, the Court considered that the history of the various limitation conventions supported the view that reservations regarding wreck removal claims were motivated only:
“by a concern that shipowners should not be able to limit their liability to port and other authorities for the expenses incurred in the removal of their own wrecks… In none of the debates is there any discernible concern with regard to limiting a shipowner’s liability for claims against it in respect of the removal of some other shipowner’s wreck”.
Wreck removal is an expensive game. As early as 2014, Lloyds, the English maritime insurance giant, predicted the rising costs of wreck removal, noting that over the preceding decade, the total cost of the 20 most expensive wreck removals alone exceeded US$2 billion.
Where shipowners can limit their liability for wreck removal, the costs will often fall on the relevant public authority, whose interest and duty it is to maintain clean and navigable marine environments. The decision in CSL v TasPorts confirms Australia’s position that limitation of liability cannot be used to allow the owner of a wrecked vessel to neglect paying the authorities for removing the wreck. As the Court concluded, this was the very purpose of Australia’s reservation from Article 2(1)(d).
The same cannot be said for innocent shipowners whose vessels have been wrecked by others. Following CSL v TasPorts, such owners are left in the uncomfortable position of being unable to limit their liability to authorities for wreck removal, while simultaneously being unable pursue claims in full against the owners of the wrongdoing ship who are entitled to claim applicable limitations. The Court’s conclusion that Protection and Indemnity insurance will cover the difference may provide small comfort for aggrieved shipowners.
The Federal Court’s conclusion also expressly departs from recent Hong Kong authority on the issue. In Perusahaan Perseroan (Persero) PT Pertamina v Trevaskis Ltd [2023] HKCFA 20 (The Star Centurion), the Hong Kong Court of Final Appeal concluded that a reservation from permitting limitation for wreck removal claims “can be achieved only if reservation by a Contracting State is effective… even though the expenses of wreck removal might also fall within the language” of Article 2(1). Accordingly, all wreck claims were held to be without limitation. Thus, while resolute in its reasoning, the Federal Court’s decision comes at the expense of international consensus. According to the Federal Court, the reason for not following The Star Centurion was that the reasoning in that case drove “a coach and horses through the international limitation regime and substantially undermine[ing] its intended uniformity”.
The position in Australia is now clear – civil claims against a wrongdoing ship for property damage and consequential losses and the costs of wreck removal are subject to limitation while regulatory claims for wreck removal are not.
If you have been involved in a maritime incident and require assistance in managing your liability, please contact Nathan Cecil or Geoff Farnsworth from our Transport, Shipping and Logistics team.
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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