Australia: Transport & Logistics News - September 2016

In brief - Local and international news about shipping, aviation, rail and road transport

In this quarterly issue we cover local and overseas transport and logistics news and summarise some interesting cases from Australia and around the world which have been handed down in the last three months.

Colin Biggers & Paisley news

Client seminars were presented in both Sydney and Melbourne on 21 and 27 July at which papers were given by Stuart Hetherington and Stephen Thompson. Stuart spoke on three topics including the York Antwerp Rules 2016, which had been agreed at the CMI Conference in May 2016 and will now form part of most international carriage contracts by way of incorporation into bills of lading and charter parties. He also reported on the two topics of Unmanned Ships and Cybercrime that generated considerable interest at the CMI Conference in New York. A copy of his paper can be found here.

Stephen Thompson explained the much publicised arbitration decision in the case of The Republic of the Philippines v The People's Republic of China (PCA Case Nº 2013-19 in an arbitral tribunal constituted under Annex VII to the 1982 United Nations Convention on the Law of the Sea), which dealt with the PRC's claims to territory in the South China Sea.

At the Melbourne seminar, Andrew Probert also discussed the recent decision in the Supreme Court in the United Kingdom in Versloot Dredging v HDI Gerling Industrie Versicherung AG and Ors [2016] UKSC 45: the DC Merwestone (2014) EWCA CW. 1349 abolishing the fraudulent devices rule. This decision had been handed down in the United Kingdom a couple of days before the Melbourne seminar. (See below for case summary and link to Andrew's paper).

Shipping

International news

Hanjin Shipping collapse

As is well known in the shipping industry worldwide, the world's seventh largest carrier of containers Hanjin Shipping applied for court rehabilitation in South Korea at the end of August and rehabilitation proceedings commenced pursuant to court order on 1 September. The failure of Hanjin Shipping has caused worldwide disruption to liner shipping services.

We have been called upon to advise clients in the freight forwarding, insurance and stevedoring industries. In addition to advising in relation to contractual rights and in the exercise of liens and the like, we are advising clients in relation to pursuing their claims by way of admiralty arrest or lodging claims with the Korean Rehabilitation Court by 4 October 2016.

A number of insurance issues have arisen - principally in relation to the recoverability of losses under the Institute Cargo Clauses (A) 1.1.09 and the effect of the delay and insolvency exclusions. Issues have arisen in relation to additional forwarding costs, but also insurers have been required to deal with demands being made by Hanjin Shipping or its agents for security deposits in relation to containers and how they should advise their insured cargo owners in relation to any such demands. Claims for these costs are being considered in the first instance by cargo insurers but very much on a case-by-case basis.

At the time of publication, the "Hanjin California" was under arrest in Sydney, while the "Hanjin Milano" awaited instructions from owners outside the Port of Melbourne and had done so for over two weeks.

International Conventions

The Nairobi International Convention on the Removal of Wrecks 2007, upon which we reported on 30 September 2015, and which entered into force on 14 April 2015, was the subject of a forum in mid-June 2016, organised at the National Maritime Museum by the Australian Maritime Safety Authority. Stuart Hetherington was a panellist who discussed the pros and cons of Australia's ratification of that treaty.

The Ballast Water Convention 2004

With the recent announcement by Finland that it will ratify the Ballast Water Convention within a matter of weeks, it is likely that this Convention will enter into force during 2017.

Shipping industry after Brexit

Although we are yet to see the full impact of the UK decision to leave the European Union (which will largely depend on the form of the - so called - Brexit and it may take years rather than months), there is no doubt that the UK, which is the EU's biggest trading partner, will want to retain free access to the European single market. The UK could achieve this by becoming a member of the European Economic Area (EEA) as an associate state of the EU (like Norway or Switzerland) or it could enter into new trading agreements with the EU.

Some people consider this is an opportunity to strengthen the UK market but the majority seems to be concerned that operating within the EU may become complex and more expensive for the UK operators, at least initially. Some degree of uncertainty is also expected in dealings with non-EU countries. The UK will most likely lose the benefit of the EU bilateral and multilateral external trade arrangements and it will need to negotiate individual trade agreements with those countries.

Australian news

Federal politics

The Coalition government was returned to office at the 2 July general election, but with a much reduced majority of only one seat. The half Senate election has returned a large number of independents, many of whom may not support some of the government's agenda. The Minister of Infrastructure and Transport remains Darren Chester MP, the member for Gippsland.

Compensation for Great Barrier Reef damage: "Shen Neng 1"

The Australian Government has recently settled a claim brought against the owners of the "Shen Neng 1" for compensation for damage sustained to the Great Barrier Reef when the coal carrier ran aground in April 2010.

The owners have agreed to pay AU$39.3 million, of which $4.3 million was for costs incurred in the immediate aftermath of the grounding, and the balance is to be spent on clean-up of residue, including anti-fouling paint from the reef. The work will commence in mid-2017 as seasonal weather limits the opportunity for this work to be undertaken.

It is believed that the settlement amount is a little more than the limitation sum calculated with reference to the Limitation of Liability for Maritime Claims Protocol of 1996 but it was being litigated, it is understood, on the basis of the decision in the "APL Sydney" case, that more than one limitation fund was payable as the damage was attributable to more than one grounding incident.

Coastal Shipping Reform

The result of the election, particularly in so far as the Senate is concerned, makes it difficult but not impossible for the much needed reforms in the area of coastal shipping (or union reform in the construction industry a trigger for the double dissolution election) to be passed.

Treasury release of exposure draft for a Bill to amend the Competition and Consumer Act 2010

On 5 September 2016, an exposure draft Explanatory Memorandum and an exposure draft Bill was released by Treasury seeking submissions by 30 September 2016. It contains two areas of reform which would be of interest to the shipping community.

The first is that the maximum pecuniary penalty, which currently stands at $750,000 for breach of the secondary boycott provisions, is being brought into line with other penalties for breaches of competition law provisions and which provide for maximum penalties of the greater of $10 million, three times the total value of the benefit obtained from the secondary boycott or 10% of the annual turnover of the corporation for the 12 months leading up to when the secondary boycott occurred.

The second significant change is to grant the commission a "class exemption" power. This is a forerunner to the repeal of Part X as recommended by the Harper Review.

Sale of Port of Melbourne lease

The Victorian Government confirmed this week that the successful bidder for the 50 year lease was the Lonsdale Consortium which comprises the Future Fund, Queensland Investment Corporation, Global Infrastructure Partners and OMERS Private Markets.

National system for domestic commercial vessel safety

In our Shipping News dated 21 December 2011, we reported on the introduction of a single national maritime regulator by which Commonwealth law was to apply to all commercial vessels. This was enacted in the Marine Safety (Domestic Commercial Vessel) National Law Act 2012 (Cth) about which we reported in Transport & Logistics News December 2013 issue.

As part of the unification process, the Queensland Parliament has passed two pieces of legislation in February 2016 for the regulation of all domestic commercial vessels, including non-commercial vessels in Queensland, allowing nation-wide consistency on marine safety.

Queensland's passing of these Acts (The Transport Operations (Marine Safety) and Other Legislation Amendment Act 2016 and the Transport Operations (Marine Safety - Domestic Commercial Vessel National Law Application) Act 2016) ensures the seamless interaction between Commonwealth and Queensland legislation for the regulation of all domestic commercial vessels. The Acts are intended to implement the transfer of all regulatory power for all registration, licensing and certain safety-related matters pertaining to domestic commercial vessels within the jurisdictional limits of Queensland, to the Commonwealth, under the National Law Act.

A recent incident involving a Manly Fast Ferry vessel is a reminder for crew members to take care when moving within the cramped confines of an engine room. Governed by the Marine Safety (Domestic Commercial Vessel) National Law Act 2012 and Work Health and Safety Act 2011 (NSW), marine safety incidents like these have called for changes to marine safety laws.

On 9 June 2016, the Manly Fast Ferry vessel Ocean Wave was travelling from Sydney to Manly Wharf with 13 passengers on board when it experienced an engine fault alarm. The alarm was triggered by the emergency stop button, activated as a result of a crew member unintentionally coming into contact with the button.

The crew's decision to attempt to dock with prevailing environmental conditions and reduced manoeuvrability, rather than immediately anchor, increased the safety risk of crew and persons on board and later reduced the crew's opportunity to explore other recovery options once the vessel was secure. (See eFerry Occurrence: Factual Statement, Ocean Wave Loss Of Control Manly Cove, NSW, The Office of Transport Safety Investigations, 12 August 2016, p. 3.)

The Manly Fast Ferry incident highlights the need for reasonable care to be taken when crew members are moving within the cramped confines of an engine room. Accordingly, when confronted with a loss of control incident, crew must take immediate action to secure the vessel before exploring recovery options, to ensure the safety of crew members and passengers is the top priority. (Ibid., p.3.)

However, laws are currently in place to prevent and mitigate such marine incidents from occurring.

The Marine Safety (Domestic Commercial Vessel) National Law Act (National Law Act) is a national framework for ensuring the safe operation of domestic commercial vessels like the Manly Fast Ferry and facilitating a safety culture that will prevent or mitigate marine incidents. Specifically, Part 3, Division 4 of the National Law Act stipulates that all reasonable care must be taken by a member of the crew for his or her own safety and the safety of persons who may be affected by a crew member's conduct.

The National Law Application Act will ensure nationally consistent regulation and enforcement of safety matters relating to all domestic commercial vessels. Ultimately, it is expected that a more consistent and overarching law will limit the potential for marine accidents, such as the Manly Fast Ferry incident, from occurring due to reformed safety obligations of owners and operators.

The Work Health and Safety Act (NSW) also stipulates similar provisions. The Act provides for workers to, so far as is reasonably practicable, ensure the health and safety of other workers and not put at risk the health and safety of other persons due to a worker's conduct.

It is recommended that owners and operators of all domestic commercial vessels, specifically those in Queensland seek legal advice as to the new provisions and obligations under both the Federal and Queensland Acts to ensure that they are meeting safety standards.

The Federal Government has also introduced the Marine Safety (Domestic Commercial Vessel) National Law Regulation 2013 with a Compilation Number 2, compiled and registered on 1 September 2016. It includes all changes to the Regulations up to 1 September 2016.

Australian decisions

Reiter Petroleum Inc v The Ship "Sam Hawk" [2015] FCA 1005

The much anticipated decision of the Full Court of the Federal Court in the appeal from the first instance decision of McKerracher J in Reiter Petroleum Inc v "Sam Hawk" is still awaited. (The Full Court reserved its decision at the hearing on 25 February 2016). The first instance interlocutory decision in this case was reported in our Transport & Logistics News September 2015 issue. We will report on the decision as soon as it becomes available.

MOL Bulk Carriers Pte Limited v Sin-Tang Development Pte Limited [2016] FCA 619

This was an interlocutory judgment involving an application to set aside or stay proceedings in which Sin-Tang had been served out of the jurisdiction in Singapore on the basis that there had been material non-disclosure; alternatively, there was no prima facie case which had been demonstrated against Sin-Tang or that the proceedings should be stayed on the basis of an arbitration clause in a contract of affreightment. McKerracher J did not find any of the grounds relied upon for non-disclosure to have been made out. Similarly, subject to one matter, his Honour said that there was a prima facie case. The one matter centred upon the third basis upon which a stay was sought, namely the reliance on an arbitration clause in the contract of affreightment.

The difficulty for the applicant, Sin-Tang, was that it sought to argue that it was not a party to the relevant contract but also sought to rely on the arbitration clause for seeking a stay. It had not made an application under section 7 of the International Arbitration Act 1974 which required a copy of the arbitration agreement and an affidavit stating the material facts on which the claim for relief was based. Until such an application was brought his Honour declined to stay the proceedings on that basis. Accordingly the application was dismissed.

Toll Holdings Pty Ltd v Stewart [2016] FCA 256

This case arose out of the financial collapse of Dick Smith Electronics Pty Ltd. In late December 2015 and early January 2016, it had received bills of lading for cargoes of goods shipped from China. On 5 January the shipper instructed Toll Global Forwarding (Hong Kong) Ltd (TGF) to hold delivery of the cargo. TGF was a subsidiary of Toll Holdings Ltd, which had entered into a master services agreement to provide freight forwarding services. Toll issued original "to order" bills to ACFS Port Logistics Pty Ltd, Dick Smith's cartage and container unpacking contractor to enable them to be collected prior to the expiry of the 72 hours free storage period. They were delivered into ACFS's Customs' bonded warehouse.

Toll sought to interplead in these proceedings which it commenced. Dick Smith (through the Administrators and Receivers and Managers) and the Chinese shipper each sought to be entitled to the delivery of the goods.

The questions for determination by Rares J included:

  • the rights of MTC and Toll to be granted leave to pursue Dick Smith
  • had MTC given an effectual Notice of stoppage in transitu to Toll?
  • if so, did Toll still have possession of the cargo or had ACFS taken possession as agent for Dick Smith?
  • could Toll interplead or had it colluded with MTC by issuing the "to order" bills?
  • was Toll liable in conversion to MTC for releasing the cargo?

Rares J considered it appropriate to grant leave to proceed to MTC and Toll. His Honour also accepted that MTC had given an effectual order for stoppage in transit to Toll. However, his Honour also found that the action of Toll in granting an unqualified unconditional electronic delivery order to ACFS had thereby converted the goods by giving up possession to Dick Smith, or its agent, ACFS, thus bringing the transit to an end. He also found that Toll had not complied with the requirement that it remain strictly neutral in order to be entitled to interplead under the Federal Court Rules 18.05. Dick Smith was also found entitled to the delivery of the goods.

International Decisions

Versloot Dredging BV v HDI Gerling & others, The DC Merwestone [2016] UKSC 45

The Supreme Court of the United Kingdom has refined the scope of the fraudulent claims rule in Versloot Dredging BV v HDI Gerling Industrie Versicherung AG by determining that the rule does not apply to collateral lies told by the insured to embellish their claim but which are otherwise immaterial to the insured's right of recovery under the policy. Insurers should consider the effect of the Versloot decision on marine insurance in Australia.

To find out more, see our latest publication " Fraudulent devices rule effectively abolished in UK shipping case" by Andrew Probert and Lachlan Boughton (published on 25 July 2016).

NYK Bulk Ship (Atlantic) NV v Cargill International SA ("the Global Santosh")

In our Transport & Logistics News August 2014 issue, we referred to the English Court of Appeal decision in this case. The charterers, Cargill, who had lost to both first instance and the Court of Appeal were successful in the Supreme Court. The facts in the case were that the cargo on board the vessel had been arrested by a sub-charterer of the vessel to secure payment from the buyer of the cement cargo for demurrage. Hire would have been prevented from being suspended under the charter party if it could have been said that the arrest had been "occasioned by any personal act or omission or default or default of the charterers or their agents" within the meaning of clause 49 of the NYPE form of charter.

The majority of the Court, Lord Clarke JSC dissenting, held that in order for the exclusion to the suspension to apply there had to be a nexus between the occasion of the arrest and the function which Transclear (the seller of the cargo) and IBG (the buyer) were performing as "agent" of Cargill, the charterer from NYK, the owners. As the arrest was occasioned by a dispute between the buyer and seller of the cargo about demurrage, the Supreme Court held that the "incurring or enforcement of a liability for demurrage under a sub-contract could not possibly be regarded as the vicarious exercise of any facility made available to Cargill under the time charter."

Accordingly, the off-hire clause applied. In contrast, Lord Clarke held that the failure to discharge the cargo timeously was a failure by an "agent" of the charterers, whether it was IBG, Transclear or Sigma, the sub-charterer from Cargill, leading to the arrest of the vessel.

PST Energy 7 Shipping Inc v OW Bunker Malta Limited (the "Res Cogitans") [2016] 1 Lloyds Rep 589

The Supreme Court dismissed the appeal from the Court of Appeal's decision, on which we reported in Transport & Logistics News June 2016. In doing so it held, unanimously, that the bunkers contract between OW Bunkers and the shipowner was "sui generis" and not a contract of sale. In reaching that conclusion it identified the liberty given in the contract to the owner to consume the bunkers prior to acquiring property in the bunkers, because of the retention of title clause in the contract, or paying for them, as being the distinguishing factors which took it out of the description of a contract of sale in section 2 of the Sale of Goods Act 1979. This meant that section 49 of the Sale of Goods Act, relied upon by the owners, did not provide a defence to the claim for payment of the price.

Mitsui & Co v Beteilijungsgesellsehaft LPG Tankerflotte (The Longchamp) [2016] EWCA Civ 708

We have reported on the first instance decision in this matter in an article published by Andrew Tulloch titled " Does General Average cover piracy expenses?" (27 January 2015).

The Court of Appeal in England has overturned part of the first instance decision in this case which had allowed operating costs as detention expenses incurred by owners while seeking to negotiate down a ransom demand to be treated as a general average substituted expense within Rule F of the York Antwerp Rules 1974.

The reasoning of the Court of Appeal was that there needed to be a "real choice being made" by the owner and in this case there was no such choice. Payment of the ransom at the commencement of the negotiations or later was going to take place in any event.

Sang Stone Hamoon Jonoub Co Ltd v Baoyue Shipping Co Ltd (The "Bao Yue") (2016) 1 Lloyds Rep 320

The Iranian company, which was the bill of lading holder in respect of a cargo of iron ore carried from Iran to Tianjun, China on the defendant's vessel brought a claim for damages asserting that the carrier had converted the cargo by discharging it into storage in circumstances in which charges would accrue and the warehouse holder would be entitled to a lien. The claimant asserted that the carrier was not authorised to arrange for storage in circumstances which could give rise to a lien. Males J dismissed the claim and found that the claimant had expressly authorised the storage under the charter party which was incorporated into the bill of lading, and in email exchanges after the vessel's arrival at the discharge port and impliedly by reason of the general law of bailment. Furthermore, in accordance with the principles of bailment on terms the claimant had to be taken to have authorised the creation of the lien.

Fulton Shipping Inc of Panama (The "New Flamenco") (2016) 1 Lloyds Rep 383

We reported on the first instance decision in this case in September 2015 in which the judge had held that on an early redelivery of a time chartered vessel the charterer could not obtain a credit from the greater sale price obtained by the owner than it would have obtained had the charter continued for another two years and then sold the vessel in a much more depressed market. This decision has been reversed on appeal, the Court of Appeal holding that where a claimant adopted by way of mitigation a measure which arose out of the consequences of the breach and was in the ordinary course or business and such measure benefited the claimant that benefit was normally to be brought into account in assessing the claimant's loss, unless it was wholly independent of the relationship of the claimant and the defendant.

Nolan & Ors v Tui UK Ltd (2016) 1 Lloyds Rep 211

This was a decision from the Central London County Court dismissing claims by 43 passengers on a cruise ship from Ibiza to Newcastle, UK in which 217 of the 1,700 passengers suffered from gastroenteritis. Of the 43 claimants, 28 sued for personal injuries and 15 sued for damage for disappointment. In relation to the claims for personal injury damage, reliance was placed on Article 3.1 of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, asserting a failure to warn of an incidence of norovirus on the previous cruise.

The Court held that the claimants failed to bring themselves within the confines of Article 3.1. The claimants had to establish an incident on the voyage, which caused the personal injury, and which was the fault of the carrier, or its employees. The Court found that a failure to warn before the voyage would be outside the scope of Article 3.1 and that the outbreak of norovirus on the voyage in question was not caused by the incident on the previous voyage; that the cause was likely to be a new single source, and the carrier had followed its policy in regards to cleaning and food handling.

The Court also held that reliance on Article 3.3 did not assist the passengers. That provides that the fault or neglect of the carrier could be presumed if the injury is caused by a "defect in the ship". It was held that those words were to be interpreted as being limited to the structure of the ship.

Yemgas Fzco & Ors v Superior Pescadores SA Panama (The "Superior Pescadores") (2016) 1 Lloyds Rep 561

In August 2014, we reported on the first instance decision of Justice Males in the English High Court in which it had been held that the Clause Paramount in a bill of lading, which had referred to the "Hague Rules contained in the International Convention for the unification of certain rules relating to bills of lading dated 25 August 1924 as enacted in the country of shipment shall apply to this contract" was to be interpreted in accordance with English law, which the bill of lading was subject to, as being a reference to the Hague Visby Rules. The Court of Appeal has now dismissed the appeal from this decision. Unlike other forms of Clause Paramount which refer to both the Hague Rules and the Hague Visby Rules (as separate and distinct regimes) and also make reference to "as enacted in the country of shipment", the Court of Appeal has clarified the position at least in so far as English law is concerned where only the Hague Rules are referred to.

Aviation

Australian News

Changes are once again under way at the Civil Aviation Safety Authority with the resignation in late August of Mark Skidmore AM as Chief Executive Officer and Director of Aviation Safety.

Shane Carmody, a former CASA employee between 2006 and 2009 and now Deputy Secretary of the Department of Infrastructure and Regional Development, has been appointed to fill the roles in an acting capacity while a domestic and international recruitment process is undertaken.

Australian decisions

Robinson Helicopter Company v Graham James McDermott & Ors [2016] HCA 22

The High Court of Australia's recent decision in Robinson Helicopter Company Incorporated v McDermott [2016] HCA 22 overturned the Court of Appeal's findings and upheld those of the primary judge. Rather than technical legal questions, this case focused on findings of fact and causation concerning a helicopter crash. The High Court found that the primary judge did not err in finding that the maintenance manual provided adequate instruction to detect a defect and that the manufacturer should therefore not be held liable.

In 2004, Mr McDermott was flying as a passenger in a Robinson helicopter when there was a large bang and massive vibration throughout the helicopter before it hit the ground, killing the pilot and seriously injuring Mr McDermott. For further analysis of the primary case, see Andrew Tulloch's April 2014 article Helicopter accidents and the law of negligence.

The undisputed cause of the crash was a failure of the helicopter's forward flex plate, part of the helicopter engine's drive system which transferred torque to the main rotor. One of the four bolts securing the flex plate was not tightened enough, ultimately causing the flex plate to fail. It was accepted that it was most likely a licenced aircraft maintenance engineer (LAME) who neglected to properly secure the bolts.

However, the focus in the primary case McDermott and others v Robinson Helicopter Company [2014] QSC 34 was not about when and how the defect arose. Rather, Mr McDermott's claim in negligence and product liability was based on whether the inspection procedure in Robinson's maintenance manual was inadequate for identifying the defect. Justice Lyons dismissed this claim, finding in Robinson's favour that the manual gave adequate instruction.

Mr McDermott was given leave to appeal. Upon hearing the case, the majority of the Court of Appeal (McMurdo, P and Alan Wilson, J; Holmes JA dissented) reached a different conclusion to Justice Lyons. It found Robinson was liable on the grounds that the manual did not provide adequate instruction to detect the defect.

Robinson's subsequent appeal to the High Court was allowed. Upon hearing the appeal, the High Court found that contrary to the reasoning of the Court of Appeal, the primary judge was correct to infer that:

  • it was likely that the LAME, who had inspected the helicopter at the relevant 100 hourly inspection, had not consulted the manual
  • the manual instructions were not complex, even for a layperson, and therefore
  • had the manual been consulted, it would have been apparent to a LAME that further investigation of the incorrectly assembled bolt was required to ensure it was sufficiently tightened

The High Court referred to its findings in Fox v Percy [2003] HCA 22 that a court of appeal, in rehearing a case on appeal, is bound to conduct a "real review" of the evidence and of the judge's reasoning in a primary case to determine whether the judge erred in fact or law.

The High Court noted that a court of appeal should only interfere with a primary judge's findings of fact if they are demonstrated to be wrong. The findings of fact by Justice Lyons were maintained by the High Court.

The unanimous findings of the High Court were that:

  • the majority of the Court of Appeal erred in overturning the primary judge's findings of fact concerning the cause of a helicopter crash
  • the primary judge's findings of fact accorded to the weight of the lay and expert evidence and the Court of Appeal should not have overturned them
  • the primary judge found that the manual provided adequate instructions to identify the defect, and
  • even if it were accepted that Robinson had breached its duty of care in the manner alleged by Mr McDermott, it was not causative of the crash

Lambert Leasing Inc v QBE Insurance (Australia) Ltd [2016] NSWCA 254

In the recent decision of the New South Wales Court of Appeal in Lambert Leasing Inc v QBE Insurance (Australia) Ltd [2016] NSWCA 254 (handed down on 9 September 2016) the Court decided that when two policies had an "other insurance" clause, the two clauses cancelled each other out and the insured was entitled to elect which policy under which it would pursue its claim.

The decision arose out of the tragic air crash involving an aircraft leased by its owners to Lessbrook Pty Ltd who traded as "Transair", which occurred at Lockhart River in May 2005 and which claimed the lives of 13 passengers and two pilots.

Two policies of insurance were involved:

  • a policy issued by Global Aerospace which insured the aircraft lessors Saab AB and its subsidiaries
  • a policy issued by QBE Insurance which insured the lessee, Lessbrook Pty Ltd

Each policy had a provision which sought to exclude liability in so far as there was cover under another policy of insurance.

A claim was made by the aircraft lessors under the Global Aerospace policy in relation to proceedings brought by relatives of the deceased crew and passengers in the United States arising out of the accident, and only after discovering the existence of the QBE policy some time later was a claim made on that policy.

The Court of Appeal considered five issues:

  1. Were proceedings brought in New South Wales seeking declarations regarding entitlement to indemnity under the QBE policy commenced prematurely?
  2. Did section 45 of the Insurance Contracts Act 1984 (Cth) (ICA) render the QBE "other insurance" clause void?
  3. If not, did the two "other insurance" clauses cancel each other out?
  4. Did payments made under the Global Aerospace policy preclude a claim for indemnity under the QBE policy?
  5. Were the appellant aircraft lessors entitled to indemnity from the aircraft owners arising out of their "use of operation" of the aircraft?

Were proceedings for a declaration premature?

The Court of Appeal upheld the decision at first instance of Rein J ( Lambert Leasing Inc. v QBE Insurance Ltd [2015] NSWSC 750) that in circumstances where disclosure of certain reports to Global Aerospace was required before QBE could be required to define its position on indemnity, the proceedings for a declaration regarding indemnity were premature.

Effect of section 45 of the Insurance Contracts Act and application of "entered into"

Section 45 (1) of the ICA provides

(1) Where a provision included in a contract of general insurance has the effect of limiting or excluding the liability of the insurer under the contract by reason that the insured has entered into some other contract of insurance...the provision is void.

Justice Rein had held that section 45 required that the insured must be a party to both the insurance policies and have "entered into" both contracts.

The question arose on appeal whether the Court was bound by the earlier decision of the High Court in Zurich Australian Insurance Ltd v Metals & Minerals Insurance Pte Ltd [2009] HCA 50 which had held that the words "entered into" did not encompass a non-party insured who was entitled to a benefit under the policy.

The Court of Appeal considered itself bound by that decision and then went on to find that the aircraft lessors had not "entered into" the QBE policy but were merely "additional insureds" under it.

Section 45 did not render the "other insurance" clause in the QBE policy void.

Did the two "other insurance" clauses cancel each other out?

The Court of Appeal concluded the two clauses cancelled each other out, both insurers are liable and the one who pays the claim can claim contribution from the other.

Did payment under the Global Aerospace policy preclude a claim under the QBE policy?

Reliance was placed on the High Court decision in Sydney Turf Club v Crowley (1972) 126 CLR 420 to conclude that QBE was entitled to succeed on the basis that the appellants could not recover the same amounts under the QBE policy as they had already been indemnified under the Global Aerospace policy, even though the indemnity had been documented as a limited recourse loan.

It did not, however, prevent a claim for contribution being made by Global Aerospace against QBE pursuant to section 76 of the ICA. No such claim had been made.

This claim by the lessors against the aircraft owners was based on an indemnity provision in the aircraft Purchase Agreement which was subject to the law of Virginia.

The appeal point focused on the meaning of "use" rather than of "operation". The Court of Appeal found that leasing an aircraft to a third party to operate the aircraft was not a "use" of the aircraft. A greater degree of control was necessary.

In conclusion, the decision is of most interest for its analysis of the "other insurance" provisions and their application in the light of section 45 of the ICA, and the effect of such provisions on named insureds who did not enter into the policy. It is conceivable that it could lead to a reconsideration of whether section 45 requires amendment to broaden its scope.

International decisions

Air Baltic Corporation AS v Lietuvos Respubikos Specialiuju Tyrimu Tarnyba (2016) 1 Lloyds Rep 407

This was a decision of the Court of Justice of the European Union which overturned a decision of the Supreme Court of Lithuania which had held that only passengers could sue an airline under the Montreal Convention for damages occasioned by a flight's delay. The plaintiff in this case was the employer of two passengers which had acquired tickets for them to travel on official business when they missed a connecting flight due to delays. It has been held entitled by this decision of the Court of Justice of the EU to bring the claim.

Road

Legislation is due to be introduced to the Queensland Parliament to implement key policy initiatives relating to chain of responsibility compliance in the heavy vehicle sector.

The reforms follow an extensive review by the National Transport Commission culminating in a report to the COAG Transport and Infrastructure Council.

In its communique issued on 6 November 2015, the TIC announced that it had "agreed to measures designed to extensively modernise the current Heavy Vehicle National Law, including the introduction of primary duty of care provisions on operators, prime contractors and employers to ensure the safety of their road transport operations, and other measures designed to improve safety outcomes and better target risky behaviour. In addition, the Council also agreed to progress consideration of more harmonised and risk-based vehicle inspection regimes."

The NTC describes the changes in this way:

The key change is to restructure the existing prescriptive chain of responsibility obligations as an overarching and positive primary duty of care on all chain of responsibility parties to ensure safety.
The duty is to ensure the safety of road transport operations, including the risks of speed, fatigue and mass, dimension and loading – so far as reasonably practicable.
These changes better align chain of responsibility with work health safety. They will make the law more performance-based rather than prescriptive. This should enable a more flexible, outcomes based approach to compliance and enforcement and lead to better safety outcomes.
These changes also remove the existing prescriptive obligations where these obligations are covered by the primary duty. This should reduce regulatory burden and improve consistency and clarity.

These reforms will bring the chain of responsibility elements of the Heavy Vehicle National Law into line with general national work health and safety legislation, including the Rail Safety National Law.

In determining what is "reasonably practicable", the test will have regard to:

  1. the likelihood of the hazard or the risk concerned occurring, and
  2. the degree of harm that might result from the hazard or the risk, and
  3. what the person concerned knows, or ought reasonably to know, about-
    1. the hazard or the risk, and
    2. ways of eliminating or minimising the risk, and
  1. the availability and suitability of ways to eliminate or minimise the risk, and
  2. after assessing the extent of the risk and the available ways of eliminating or minimising the risk-the cost associated with available ways of eliminating or minimising the risk (including whether the cost is grossly disproportionate to the risk).

While there will be no change to the range of persons covered by chain of responsibility enforcement, there will be significant increases in penalties for breach, again to align with broader national provisions. Penalties will increase to $300,000 or five years' imprisonment for individuals and $3 million for corporations.

The primary responsibility concept is also being extended to the liability of executive officers. The existing 103 chain of responsibility offences will be reformulated as a positive due diligence obligation to ensure that executive officers exercise due diligence to ensure their corporations comply with the primary duty.

In addition, the previous reverse onus of proof for executive officer liability in chain of responsibility offences will be removed, and the onus will now be on the prosecutor to prove a failure to comply with the legislation.

These amendments will be made to the Heavy Vehicle National Law as enacted in the host jurisdiction of Queensland, and will be adopted in the other participating states and territories in due course.

Rail

Aside from undertaking extensive work on removal of level crossings, the Victorian Government has announced that a rail consortium has now been appointed to build 65 new high capacity metropolitan trains, with much of the work to be undertaken in the state.

This is a long-term project with the first train to be delivered in 2018 and all 65 trains to be rolled out as a dedicated fleet for the opening of the Metro Tunnel through the central business district of Melbourne in 2026.

Conferences

On 25 August 2016, the New Zealand branch of the Maritime Law Association of Australia and New Zealand (MLAANZ) held a dinner to celebrate its 40th Anniversary. Stuart Hetherington was in attendance and spoke at the dinner, recalling, inter alia, the conference in Melbourne in 1977 at which the Australian and New Zealand Associations merged into one.

The MLAANZ will hold its 43rd National Conference on the topic of "Resources vs The Reef" in Noosa from September 28-30, 2016.

The 8th Asian Maritime Law Conference will also take place in Singapore on September 29 and 30 providing insights on topics such as insolvency of shipping companies, latest innovations on dispute resolution, ship arrest in relation to bunker claims and judicial sale of vessels. Stuart Hetherington will be delivering the key note address and Stephen Thompson will be on a panel dealing with the topic of "Judicial Sales".

Andrew Tulloch Stuart Hetherington Stephen Thompson
Transport and logistics
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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