Australia: Trade and Transport Bulletin: More on Limitation of Liability

Last Updated: 6 April 2010
Article by Ron Salter

In our edition of 22 October 2009, we reported on the decision of Justice Finkelstein in the Federal Court of Australia dealing with certain issues under the Convention on Limitation of Liability for Maritime Claims 1976. These arose from the damage caused in December 2008 in Port Phillip Bay, Melbourne, when the container ship 'APL Sydney' dragged an anchor during heavy weather and damaged a submarine pipeline carrying gas from one side of Port Phillip Bay to the other. In our note, we mentioned that Justice Rares of the Federal Court was considering some other interesting points arising out of the Convention. His Honour has now handed down an 81 page judgment in the case of Strong Wise Limited v Esso Australia Resources Pty Ltd [2010] FCA 240.

The issue before Justice Rares was whether for the purpose of the Convention, the owners of the 'APL Sydney' could limit liability on the basis that there was only one incident (as the ship owners maintained), or whether there were actually four separate incidents (as argued by the owners of the pipeline). In the end, his Honour reached what might be described as a neat compromise by determining that there were actually two separate incidents, thus requiring the ship owners to establish two separate limitation funds.

The four separate incidents asserted by the pipeline owners were as follows:

  • The ship's anchor fouling the pipeline.
  • The order to manoeuvre astern shortly after the fouling.
  • The actual rupturing of the pipeline about half an hour later when the ship sought to move ahead.
  • Further bending of the pipeline some six or eight minutes after the rupture of the pipeline.

Justice Rares observed that under Article 9 of the Convention, the limits of liability were to apply to the aggregate of 'all claims which arise on any distinct occasion'. After going through the background to the Convention and after reviewing much authority, both in the maritime and non maritime areas, he stated:

'I am of opinion that a claim arises on a distinct occasion within the meaning of the Convention in the following way. Where a single act, neglect or default of a shipowner places him in such a relationship that, as a matter of commonsense, it is a cause of loss or damagesuffered by a third party, that third party will have a claim under Art 2 of the Convention. And, such a claim will be caused by an occurrence and, if so, will arise on that distinct occasion for the purposes of Arts 6, 7, 9 and 11.'

Justice Rares continued by stating that where a subsequent act, neglect or default of the same ship owner separately operates to cause different or separately identifiable loss or damage to the same third party or others, then a new claim or claims will arise on that later distinct occasion. This occasion is distinct because firstly, there is a new event, secondly there is new loss or damage and thirdly, the new cause is, as a matter of commonsense, not a necessary or inseparable consequence of the earlier act, negligent or default. He therefore concluded that whether one occasion is distinct from another will depend upon whether the causes of the claims that arise from each act, negligent or default are sufficiently discrete that, as a matter of commonsense,they can be said to be distinct from one another.

After detailed consideration of a substantial body of evidence, including much expert evidence, Justice Rares concluded that while the first distinct occasion was thefouling of the pipeline, the ordering astern of the ship after the fouling was truly part of the first occasion, and therefore did not amount to a distinct occasion. While he then went on to conclude that the fracturing of the pipeline sometime later when the ship began to manoeuvre ahead was indeed a separate occasion, thus amounting to a second incident, he was not satisfied that the further bending of the pipeline a short time after the fracturing was a separate and distinct occasion. His Honour expressed his view by saying that the first distinct occasion was the chain of events leading to and immediately following the anchor fouling the pipeline and that the second distinct occasion was the chain of events leading to and immediately following the rupture of the pipeline.

If we may say so from the sidelines, Justice Rares' decision appears to be a very commonsense one. That having been said, and in view of the apparently substantial sums involved, we will not be surprised if both parties appeal, the ship owners to maintain that there was only one distinct occasion and the pipeline owners to maintain that there were four.

For more information, please contact:
Ron Salter, Consultant

© DLA Phillips Fox

DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.

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