Australia: Significant penalties imposed on shipowner involved in oil spill in NSW, but master escapes conviction

Shipping newsletter - Legalseas
Last Updated: 31 July 2014
Article by Jacinta Studdert and Mariam Jacob


The New South Wales Land and Environment Court has imposed a fine of $1.2 million on the owner of a ship involved in a serious oil spill in Newcastle harbour, but has shown greater leniency on the ship's master, in Newcastle Port Corporation v MS Magdalene Schiffahrtsgesellschaft MBH; Newcastle Port Corporation v Vazhnenko [2013] NSWLEC 210.

On 25 August 2010, a mixture of oily water containing 72,000 litres of heavy fuel oil was inadvertently discharged into Newcastle harbour from a ballast tank on MS Magdalene (Magdalene). The Court described the spill as the second most serious spill to come before it, after the spill by the Laura D'Amato into Sydney Harbour in 1999.

Both the shipowner and master pleaded guilty to charges under s 8(1) of the Marine Pollution Act 1987 (NSW) (MP Act), which makes it an offence, for both the owner and master of a ship, to discharge "oil" or an "oily mixture" into State waters.

The Court found the offence proven against both the shipowner and the master. The shipowner was convicted and fined $1.2 million, and undertook to pay the prosecutor's costs in both proceedings. The shipowner had already paid a total of $1.7 million in clean-up costs. However, no conviction was recorded against the master under s 10(1)(a) of the Crimes (Sentencing Procedure) Act 1999 (NSW) (CSP Act).

The decision shows the Court's willingness to impose substantial fines for marine pollution offences, and is an useful illustration of the Court's approach to sentencing in such matters.

The spill and its aftermath

At the time of the spill, Magdalene was a Liberian-registered, German-owned and managed, 20-year-old bulk carrier.

The spill occurred on 25 August 2010, in the course of de-ballasting conducted while Magdalene was berthed in the Port of Newcastle to take on coal. The oil had seeped into the ballast tank through a 15 mm hole in the internal transverse bulkhead between the ballast and heavy fuel oil tank over an extended period of time, at some point since the last maintenance/inspection in February 2010.

Oil was observed drifting on the surface of the water by the coal terminal operator some hours into de-ballasting, and orders were given to cease de-ballasting.

Extensive boom containment action commenced shortly afterwards, and clean-up operations commenced the following morning, continuing until 8 October 2010.

As the Court noted, the actual harm caused by the spill consisted of oil contamination of pelicans, oil spotting of protected saltmarsh and mangrove vegetation, contamination of invertebrate animals on mudflats, and the production and disposal of oil contaminated waste. However, the spill's potential harm was minimised by the containment and clean-up operations, and the adverse environmental consequences of the spill had essentially disappeared within less than two months.

Issues before the Court

The parties had largely agreed on the facts prior to the hearing; however a "small ambit" of facts and remained to be determined, such as the adequacy of watch-keeping during de-ballasting given that the crew did not detect the spill; whether more stringent inspection and maintenance was required, particularly given Magdalene's age; and whether perforated sounding pipes (which might have indicated the presence of oil) should have been fitted and used.

How did the Court approach sentencing?

The Court considered the spill to be close to 20% of the theoretical "worst case", meriting a fine of $1.8 million before the application of any aggravating or mitigating factors.

The Court found that the harm caused by the spill was clearly the only aggravating factor, being substantial and significant, though neither long-lasting nor permanent.

However, the Court found a number of mitigating factors in the defendants' favour:

  • the defendants were entitled to the full maximum 25% discount for their very early admission of liability and formal plea of guilty;
  • both defendants were genuinely contrite and remorseful, not merely expressing "smooth apologies";
  • the shipowner paid significant clean-up expenses, and was prepared to pay the legal costs of both proceedings;
  • a "modest discount" was available to the defendants for their significant cooperation and assistance, including the preparedness of the master (and his crew) to participate in the prosecutions. This is because the MP Act imposed very strict obligations on shipowners and crew in respect of frankness and co-operation;
  • the spill was not part of any planned or organised criminal activity, and neither defendant was known to have a criminal record; and
  • neither defendant's character was questioned, both had good prospects of rehabilitation, and neither was likely to reoffend.

The Court ultimately applied a total discount of one-third to the fine, resulting in a total fine of $1.2 million for the shipowner.


Although the offence was also proved against the master, the Court directed that the proceedings against the master be dismissed without conviction under s 10 of the CSP Act. However, the Court noted that s 10 orders are rarely appropriate for environmental offences, and described its decision as "not free from difficulty or doubt".

In coming to this decision, the Court noted:

  • being new to Magdalene (as of May 2010), and having joined just as she underwent a major survey, the master may well have felt entitled to rely on that for not inspecting the tank prior to ballasting it;
  • a master is not necessarily required to be "highly prudent" or maintain a "standard of virtual perfection". Although it was contended that the master's major contribution to the spill was his failure to properly test the ballast tank for contamination, there was no established ship procedure, or clear indication, that this was necessary;
  • as to watch-keeping when de-ballasting and loading cargo, the master's duties did not require him to take personal charge of the port operation of the ship, and he was entitled to rely on his senior officers (whose watch-keeping failures are the vicarious responsibility of the shipowner) in this regard; and
  • matters such as additional hull maintenance, the need for perforated sounding pipes, or procedures to compensate for their absence, are more appropriately matters for a shipowner.

What should you be aware of?

The prosecution conceded that the Magdalene, although 20 years old, was well maintained, and had no record of detentions. There was also no demonstrable human negligence, intentional conduct, or recklessness alleged. However, the case illustrates how a complex web of factors can contribute to inadvertent but serious pollution incidents.

Accordingly, this decision is a reminder of the importance of clear, established procedures for watch-keeping, and inspections and maintenance, so that shipowners, as well as masters, can be alert to when additional precautions may be required to prevent a marine pollution incident.

Shipowners should take particular note of this decision – as the Court observed – the history of marine pollution prosecutions reveals a tendency to blame mostly shipowners, because the majority of incidents involve management failure. For this reason perhaps, the penalty regime provides for far greater fines for shipowners rather than masters. The maximum penalties for an offence under s 8(1) in 2002, increased the maximum penalty from $220,000 for a natural person and $1.1 million for a body corporate, to $500,000 and $10 million respectively. The Court considered that the disproportionate increase in fines was clearly and particularly directed at the deterrence of shipowners.

Greater change is on the way however, and masters and shipowners should also be aware that the Marine Pollution Act 2012 (NSW) is expected to commence later this year, replacing the current MP Act. Although the new Act maintains the maximum penalties available for the offence of discharging oil into state waters, it introduces several significant new offences and obligations. In particular, both masters and shipowners must prepare and carry emergency plans for pollution incidents involving oil and noxious liquid substances; there are new offences relating to pollution by harmful substances in packaged form, garbage and sewage; additional reporting obligations; extensions to liability for certain offences; and a new regime of marine pollution notices.

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Jacinta Studdert
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