The plaintiff, Mount Isa Mines Ltd (Mount Isa), was the owner of cargo comprising of 3,044 bundles of altonorte copper anodes valued at USD 63,178,742.45. MarShip GmbH & Co KG MS 'Sinus Aestuum' (MarShip) was the owner of the ship, the Thor Commander, which carried the cargo under a bill of lading governed by the amended Hague Rules as set out in sch 1A of the Carriage of Goods by Sea Act 1991 (Cth). The Thor Commander came to carry the cargo after it was substituted for another vessel under the recap of a voyage charter agreed between the plaintiff and a Danish fleet operator group controlled by Thorco Shipping A/S. The cargo was to be transported from Angamos, Chile to a copper refinery in Townsville, Australia. However, the main engine of the Thor Commander failed on the North Eastern coast of Australia prior to reaching its destination. Here, the vessel began drifting towards the Great Barrier Reef which led to the owners arranging a tug, the Smit Leopard, to tow the vessel. Owing to uncertainty as to the tug’s timely arrival, the Australian Maritime Safety Authority (AMSA) issued an international alert requesting nearby vessels to assist the Thor Commander. The ship was towed away from the Reef by the Xinfai Hai, a capesize ship, until the Smit Leopard arrived and towed the ship to Gladstone on 13 January 2015. On the same day, the Thor Commander declared general average for the breakdown of its main engine.

The issues arising from these events included, among others:

1. Whether the amended Hague Rules applied to the carriage;

2. Whether the breakdown of the main engine was a result of the defendant’s fault or negligence;

3. The Xinfai Hai’s entitlement to a salvage reward and the quantum of that reward; and

4. Mount Isa’s liability to contribute to general average.

Held:

The amended Hague Rules

The bill of lading which governed the transport of the cargo on the Thor Commander, evidenced the contract of carriage agreed between Mount Isa and MarShip. The amended Hague Rules have the force of law in Australia and are set out in sch 1A of the Carriage of Goods by Sea Act 1991 (Cth). Because there was no enactment of the Rules in the country of shipment and clauses 2(a) and (b) of the bill of lading provided that the amended Hague Rules applied, they governed the voyage pursuant to arts 7, 10.1.b.i, 10.1.b.iii and 10.2.b.iii of the Rules.

Article 10.7 of the amended Hague Rules applies the Rules to a sea carriage document issued under a charterparty only if the document is negotiable and regulates the relationship between the holder of the document and the carrier of the goods.

The bill of lading was not issued under the charterparty but pursuant to the obligation of the master to issue the shipper with evidence of the contract of carriage. The purpose of the articles are to recognise the charterparty as the contract of carriage unless a bill of lading or other sea carriage document is used to transfer the interest in the goods to a third party. Here, Rares J found that the straight bill was a sea carriage document within the meaning of the amended Hague Rules and that the shipper had transferred its rights to Mount Isa under it. Mt Isa had the right to take delivery of the cargo on presentation of the bill of lading. Therefore, the bill of lading was the contract of carriage and the amended Hague Rules applied.

Causation

The Thor Commander’s main engine, manufactured by Rolls-Royce, failed on 11 January 2015. The chief engineer had the responsibility to create and approve records and reports on the ship’s performance and maintenance. On 6 November 2014 Rolls Royce issued a service letter to MarShip setting out a revised maintenance schedule including an adjustment for fuel injection valves which required their cleaning every 4,000 hours. The service letter was emailed to the chief engineer.

Rares J found that the breakdown of the main engine was caused by a failure to replace the fuel injection nozzle in one of the engine’s cylinders. The nozzle was faulty when the vessel commenced its voyage on 13 December 2014. His Honour found that the nozzles would have been replaced by a reasonable technical superintendent and chief engineer exercising due diligence. However, both, in this case, failed to replace the nozzle prior to the commencement of the voyage, and even after the issue of Rolls Royce’s service letter. This was a breach of art 3.1.a and 3.1.b of the amended Hague Rules which require the exercise of due diligence to ensure a vessel is seaworthy before and at the beginning of a voyage and to properly equip and supply her. MarShip did not make out a defence under art 4.1.

Salvage

The Navigation Regulation 2013 (Cth) gives force to the International Convention on Salvage 1989 (Savage Convention 1989). Pursuant to article 8.1.b of the Salvage Convention 1989, a salvor has a duty to exercise due care to prevent or minimise damage to the environment. Under 8.2.a, a vessel’s owner and master must cooperate. Article 12.1 entitles a salvor to a reward for a successful salvage operation. The definition of salvage operations in s 14(1) of the Navigation Act determines that a salvor need not be a volunteer but be engaged in an act or activity to assist a vessel in danger.

The question of whether there was danger to the vessel after the breakdown of the main engine was an objective one.

The Thor Commander was in danger within the meaning of the expression salvage operations because the ship was drifting towards the Reef at risk of grounding and needed to be towed to a place where it could be repaired. Emails sent by the captain showed that he perceived this risk and was uncertain whether the Smit Leopard would arrive on time.

Article 13.1.b of the Salvage Convention 1989 requires the prevention of damage to marine life and resources. Referring to Tamberlin J’s reasoning in United Salvage Pty Ltd v Louis Dreyfus Armateurs SNC [2006] FCA 1141, (2006) 163 FCR 151, his Honour considered the prospect of damage, whether the risk was avoided by the skill of the salvor and the weight to be given to these circumstances in determining the quantum of an award. Although art 13 sets out matters for consideration, the determination of the quantum of an award is discretionary. There is no fixed percentage of the total property that can be used, especially where it is out of proportion to the services rendered.

Rares J noted that carrying out salvage activities under the direction of a governmental authority did not prevent the bringing of a claim because salvage operations did not have to be voluntary. In any event, the act was voluntary as between the salvor and the ship and there was no contractual agreement between the parties.

The relevant criteria under art 13.1 of the Salvage Convention 1989 included the following:

• The skill and effort of the Xinfa Hiai in preventing and minimising damage to the environment (13.1.b). Here, the master and crew of the Xinfa Hai, who were not professional salvors, safely established a tow using a vessel not equipped for that purpose.

• The salvor’s success (13.1.c). The Thor Commander was successfully towed away from the Reef.

• The nature of the danger (13.1.d). There was a risk the ship would ground on the Reef and sustain hull or other damage, the vessel and cargo could have sunk, and the bunkers could have polluted the water with delayed delivery. However, whether the vessel would have actually grounded is uncertain given the Smit Leopard may have arrived on time.

• The skill and effort exercised in salving the vessel and cargo (13.1.e).

• The cost of bunkers and the prolongation of the salvor’s existing voyage (13.1.f). The Xinfa Hai spent 25.5 hours in salvage operations.

• The risk of collision or mishap (13.1.g). Owing to the Xinfa Hai’s inexperience, there was a risk of collision or mishap.

• The response to issued directions (13.1.g). The Xinfa Hai responded promptly to AMSA’s alert.

• The availability of an appropriate vessel (13.1.h). The Xinfa Hai was not adapted for towing services and no other vessel, including the Smit Leopard, was available to assist at the time.

Rares J stated that the reward should be based on the total value of the salved property because the entirety was salved. The quantum would be paid rateably by the property owners including Mount Isa. His Honour also noted that where a shipowner created danger by failing to exercise due diligence to make a ship seaworthy, the cargo owners should be able to recover any salvage award they were liable to pay from the shipowner.

Rares J found that USD 1 million was an appropriate salvage award and Mount Isa was entitled to damages against MarShip for USD 909,000 that it paid to the salvors.

General average

Clause 3 of the bill of lading required general average to be adjusted in accordance with the York-Antwerp Rules 1994 (as amended). The plaintiff denied its liability to contribute to general average on the basis that the defendant was at actionable fault, pursuant to rule D of the York-Antwerp Rules, for its failure to maintain the ship’s main engine.

Rares J discussed art 3.8 of the amended Hague Rules. His Honour found that this article rendered cl 3(2) null and void because it attempted to lessen the carrier’s liability in circumstances where they had breached art 3.1, requiring the exercise of due diligence.

His Honour stated that Rule D initially required the adjustment and settlement of general average without consideration being given to any fault of a party to the adventure. The final part of Rule D then preserves the right of a contributor to recover the amount payable from a shipowner where it was the reason that the sacrifice was needed.

His Honour found that, because the Thor Commander and MarShip were liable for their breach of art 3.1.a and art 3.1.b of the amended Hague Rules, Mount Isa could rely on the exception in Rule D to recover the amount of its general average contribution.