Pure economic loss and the 1976 Convention: Qenos Pty Ltd v Ship ?APL Sydney'

• Author: Scott Anthony Adams
• Position: Student editor A&NZMLJ 2009
• Pages: 214-216

Pure economic loss and the 1976 Convention: Qenos Pty Ltd v

Ship ‘APL Sydney’ [2009] FCA 1090

Scott Adams*

Introduction

In Qenos Pty Ltd v Ship ‘APL Sydney’ 1 (Qenos) the Federal Court of Australia was required to decide

whether a claim for pure economic loss in negligence was limited by the Convention on Limitation of

Liability for Maritime Claims 1976 (the 1976 Convention).2 The principal issue was the correct

construction of Articles 2.1(a) and (c) of the 1976 Convention.

The plaintiff, Qenos Pty Ltd, commenced in rem proceedings against the ship ‘APL Sydney’ which had

severed a submarine pipeline owned by a third party. Qenos argued it had suffered consequential loss

which fell outside the limitation clauses mentioned above. On the plaintiff’s construction, Article 2.1(a)

was not triggered unless the plaintiff had suffered ‘concrete loss’. Furthermore Qenos argued the loss

was not captured under Article 2.1(c) as the word ‘rights’ in that clause was limited to statutory or

proprietary rights. Three other negligence actions were brought by other parties against the shipowner

on similar grounds, including by Huntsman Chemical Co. Australia Pty Ltd which argued for the same

construction of the 1976 Convention as Qenos. The parties agreed the question should be decided by

way of determination of a preliminary point of law.

Australia has a long history of decisions allowing recovery for pure economic loss, which makes the

issues in Qenos significant. Ironically the landmark decision in this area also involved a ship severing a

submarine pipeline.3

Facts

On 13 December 2008 the ship ‘APL Sydney’ was anchored in Port Phillip Bay awaiting berth when

the ship drifted and dragged her anchor. The anchor struck a submarine pipeline jointly owned by Esso

Australia Resources Pty Ltd and BHP Billiton Petroleum (Bass Strait) Pty Ltd. The pipeline transported

ethane gas to the plaintiffs who in turn used it to manufacture polyethylene. They contended the

shipowner by its servants or agents negligently caused the pipeline to rupture which in turn resulted in

economic loss to their respective companies’.4

In general the plaintiffs’ loss was said to result from: a) switching to alternative inputs, at higher cost,

for polyethylene production; b) the need to find alternative means to meet customer demand; and c) in

some cases, loss of customers because of inability to meet demand. The Huntsman claim totalled

$AUD7 million dollars. The exact amount of Qenos’ claim was not revealed at the hearing save that it

was in excess of $AUD30 million dollars. The limitation fund set up by the defendant to meet the

claims arising from the collision was approximately $AUD32.2 million dollars.5 If the plaintiffs’

claims fell outside the ambit of the 1976 Convention, as they alleged, then the shipowner’s liability

would not fall within the fund. Essentially this would mean the plaintiffs’ claims would be unlimited.

(2009) 23 A&NZ Mar LJ

* Student editor A&NZMLJ 2009.

1 [2009] FCA 1090. The decision was concurrent with: Huntsman Chemical Co. Australia Pty Ltd v The Ship “APL Sydney”

QUD 431 of 2008.

2 Qenos Pty Ltd v Ship ‘APL Sydney’ [2009] FCA 1090: Order of Finkelstein J delivered 28/10/09 [2].

3 See: Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1977) 11 ALR 227 (Caltex). The case is only superficially

similar to Qenos. In Caltex, The Dredge “Willemstad” severed the submarine oil pipeline nine times. The plaintiff did not own

the pipeline and it sustained only economic loss. It was subsequently held in Ballast Trailing NV v Decca Survey Australia Ltd

(unrep. NSW Sup Ct 1980 and affirmed on appeal unrep NSW Sup Ct CA, 1981) the owners of The Dredge “Willemstad” were

not entitled to limit their liability under the relevant statutory scheme as each time the pipeline was cut was held to be a distinct

occasion. As the damages amount claimed did not exceed nine times the limitation amount the claims were under the limitation

and allowed. See Martin Davies and Anthony Dickey, Shipping Law. (3rd ed. 2004) 471-2.

4 Qenos Pty Ltd v Ship ‘APL Sydney’ [2009] FCA 1090 [1].

5 Ibid [3]-[6].

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