Australia: Protection of the sea from pollution by oil from ships: Findings of recent sentencing judgments

There are relatively few criminal prosecutions for marine pollution offences. However, two judgments in December 2013 provide some useful current guidance on sentencing considerations for offences under the Marine Pollution Act 1987.

In Filipowski v Fratelli D'Amato S.r.l and Others (2000) 108 LGERA 88 (D'Amato), Talbot J stated [at 103] that it was axiomatic that the object of the Marine Pollution Act 1987 (MP Act) was to protect the sea from pollution by oil from ships, and that substantial penalties for breaches of the Act are prescribed by Parliament to support this objective. The D'Amato case involved the most significant spill that the Land and Environment Court has had to deal with, being a spill of around 250,000 litres of oil into Sydney Harbour on the night of 3 August 1999, which resulted in significant pollution of Sydney's waterways and the need for extensive clean-up activities.

At the time of the D'Amato oil spill, the maximum penalty for a corporation for the discharge of oil (or oily waters) from a ship was $1.1 million. On 1 November 2002, the maximum penalty for a corporation was increased nine-fold to $10 million.

On 11 December 2013 and 19 December 2013, Sheahan J of the New South Wales Land and Environment Court handed down two judgments involving penalties under the MP Act. They were Newcastle Port Corporation v MS Magdalene Schiffahrtsgesellschaft MBH; Newcastle Port Corporation v Vazhnenko [2013] NSWLEC 210 (MS Magdalene Prosecution) and Newcastle Port Corporation v RN Dredging BV [2013] NSWLEC 217 (RN Dredging Prosecution), respectively. These prosecutions are the first in four years to concern an offence under the MP Act and provide guidance on the penalties for an offence under section 8 of the MP Act, which carries a maximum penalty of $10 million.

THE RN DREDGING PROSECUTION

The incident

The Brage R, being a dredge ship owned by RN Dredging BV, a Netherlands company, was berthed at Throsby Wharf in the Port of Newcastle on 3 May 2011, in preparation for dredging operations in Newcastle Harbour.

While berthed and at approximately 1500-1530 hours, the Chief Engineer commenced an internal transfer of diesel oil to balance the trim of the dredge and reduce the list to one side. He observed and supervised the transfer for 30 minutes. The entire crew (including the Chief Engineer) subsequently departed the ship around 1730 hours (while the transfer operation continued) in order to obtain dinner, due to the absence of a cook on the ship.

The Chief Engineer forgot that the transfer was still continuing and the Master was unaware that it was continuing.

Upon return to the vessel at around 2000 hours, a crew member noticed that diesel oil was overflowing onto the deck of the ship and spilling over the side. The crew member, with the assistance of the Chief Engineer, was able to stop the flow of diesel oil, but not before approximately 200 litres of oil had flowed into Newcastle Harbour.

Approximately 45 minutes after the flow of oil was noticed, the Newcastle Port Authority was notified of the incident.

Cause

The primary cause of the spill was human error, with the leaving of the ship by the Chief Engineer being inherently risky.

In addition, the Defendant had no written specific safety management procedures in place to regulate diesel fuel transfer operations, or to reduce the risk of an oil spill in respect of such a transfer, nor was the transfer pump fitted with any automatic shut off.

Harm

There was no evidence that actual environmental harm occurred from the oil spill and the fairly modest clean-up costs were met by the defendant. The diesel oil itself was less harmful than heavy fuel oil (HFO), its effects on water were minor and transitory, and the majority of the diesel oil from the spill was swept out to sea and evaporated or dissipated. Consequently, the spill was graded as "smaller medium".

However, the spill was not insignificant, it was reasonably foreseeable, and it was readily preventable (by better crewing and management).

Sentencing of RN Dredging

The defendant had not been prosecuted anywhere in the world for a similar offence and it was the first time that any vessel managed by RN Dredging has been the subject of a prosecution.

While no aggravating factors under the Crimes (Sentencing Procedure) Act 1999 were applicable, a number of mitigating factors did apply, such as: the lack of substantial environmental harm; good character of the defendant; lack of prior record; prospects of rehabilitation; subsequent steps taken to prevent reoccurrence; remorse; assistance; and the early guilty plea.

The Court noted that safety management procedures should have been in place to regulate fuel transfer operations and that the foreseeability of risk was clear. Leaving a vessel unattended while oil transfer operations were in process involved a great risk of harm, and it was not sufficient for the owner to expect that its Chief Engineer would remain on the ship during transfer operations without specific instructions to do so.

In the circumstances, a base penalty of $250,000 was warranted, which represented 2.5% of the worst case scenario for an offence under section 8 of the MP Act. A full discount of 25% was granted to the defendant for the utilitarian value of its early guilty plea, and a total discount of 40% was applied, taking into account all additional mitigating factors.

The total fine imposed on the defendant was $150,000.

THE MS MAGDALENE PROSECUTION

The incident

The subject ship in these proceedings was the 20 year old MS (or MV) Magdalene (Magdalene). The Magdalene was a bulk carrier, which berthed at Kooragang Berth No 4 (in Newcastle Harbour) for the purpose of loading coal.

During the course of de-ballasting on 23 August 2010, between approximately 1030 and 1400 hours, an amount of 72,000 litres of HFO and 500 cubic metres of ballast water was discharged into the Hunter River. The oil reached up into the North Arm of the river, affecting mangroves and sand beaches, as well as the Hunter Wetlands National Park, which is a wetland of international significance under the Convention on Wetlands of International Importance (Ramsar Convention).

It was not until around 1500 hours that oil was sighted in the Hunter River by the ship's duty officer, who then reported it to the Master. Orders were given at that time to stop the cargo and de-ballasting operations and extensive boom containment action commenced at 1545 hours. The Newcastle Port Corporation commenced clean-up operations the next morning and continued until 8 October 2010, for which the prosecutor claimed $1,913,197.23 in costs. A total amount of $1.7 million for clean-up costs was eventually paid by the defendants in three instalments, as agreed.

Cause

Oil had come into the ballast tank as a result of a 15mm diameter hole, which occurred in the internal transverse bulkhead between the ballast and HFO tanks, and leaked into the tank prior to the ship's arrival in Australia.

This leakage was likely to have occurred over a period of 6 months, being the time between the last relevant maintenance/inspections of the Magdalene on 27 February 2010 and the ballasting operation on 23 August 2010.

As a result, the de-ballasting of the Magdalene involved the discharge of not just ballast water, but also the HFO which had leaked into the ballast tank.

A significant amount of evidence was adduced on both sides in relation to the risk over time that corrosion holes might develop in the common wall between the ballast and fuel tanks, and what measures may reasonably be taken by a ship's owner to test for and prevent such holes. It was agreed that the solid sounding pipes on the Magdalene, used to test for any leaking of oil into the ballast, would have been more reliable if they were perforated, but that perforated pipes were not recognised as a requirement.

The procedure applicable to de-ballasting on the ship was described as 'correct and reasonable', though it did not provide for the keeping of a good watch nor the mandating of the taking of manual soundings, which were additional measures that could have been implemented to reduce the risk of a pollution incident occurring.

Harm

The oil spill was able to be contained and cleaned up prior to the arrival of international migratory birds to the wetlands, and without causing any permanent harm. However, the spill had the following actual effects on fauna and the local ecosystem:

• 40-50 pelicans were impacted, which were required to be transported to Taronga Zoo for intensive care and rehabilitation;
• light oil spotting was observed on the protected salt-marshes and mangroves in the Hunter Wetlands National Park; and
• invertebrate animals on mudflats were contaminated.

The actual harm was ecologically significant because of the area in which it occurred. However, the spill also had the potential to cause further significant harm to international migratory birds, if it had not been cleaned up by the actions of the NPC prior to the birds' arrival. This harm would have resulted in the birds losing their water proofing and increasing the difficulty for the birds to float, fly or control body temperature.

Sentencing of the Owner

Contamination of ballast water was noted as being rare, but not unknown, and was clearly foreseeable. The development of a hole between the oil and ballast tanks was more likely to occur in "old" ships (such as the Magdalene), despite good maintenance and surveys.

Accordingly, and particularly in the absence of perforated sounding pipes, a proper watch should have been in place to detect any oil flow at an early stage, which would have prevented significant environmental damage.

The Court found that the spill was certainly not a "catastrophic" spill, such as might attract the maximum penalty, nor such a "big" spill as to be truly comparable with that in D'Amato, but it was clearly the second most serious spill that had been prosecuted before the Land and Environment Court. The Court ultimately found that the spill represented 20% of the theoretical worst case scenario.

A discount of 25% was applied by the Court for the defendants' plea of guilty at the earliest opportunity, in accordance with the principles stated in R v Thomson; R v Houlton (2000) 49 NSWLR 383. The genuine contrition shown by the defendants also warranted a further discount.

However, the making of relevant admissions by the defendants and the concession that no defences were available only received a modest discount, as sections 10, 50 and 53 of the MP Act imposed strict obligations on ship owners and crew in respect of frankness and cooperation.

Upon review of all of the considerations in relation to a discount on the sentence imposed on the owner, the Court considered that a total discount of one-third should be applied. The Court had regard to the defendant's early guilty plea, co-operation, remorse, pre-trial payment for clean-up operations and the commitment to pay the prosecutor's costs.

This brought the total fine imposed on the Magdalene to $1.2 million (reduced from $1.8 million).

Sentencing of Master

The Master of the ship applied for an order under section 10 of the Crimes (Sentencing Procedure) Act 1999 (CSP Act) for the Court not to impose a conviction, despite a finding that the person is guilty of an offence. That application was made on the basis that he:

• had never been involved in an oil spill incident during his time at sea over the past 21 years; and
• was concerned that a conviction could restrict his career, which depended on him obtaining visas for entry to international shipping ports.

The prosecution contended that the Master failed to properly test the ballast tank for contamination and should be the subject of a conviction. However, the Court noted that:

• the ship had no established procedures requiring such an inspection;
• this argument went beyond the experts' baseline position;
• such a standard would approach "virtual perfection";
• it could not form the basis of a finding of negligence;
• the Master was entitled to rely on "qualified personnel" to undertake watch-keeping during de-ballasting and cargo loading operations; and
• the offence was more of a "system or command failure" rather than a failure on the part of the Master.

The Court noted that the history of marine pollution prosecutions showed a trend towards management failures being the vicarious responsibility of the owner, as was the case in the present matter.

Accordingly, although noting that such an order was not free from difficulty or doubt, the Court made an order under section 10 of the CSP Act in favour of the Master.

CONCLUSION

These two recent prosecutions under the MP Act provide guidance on three issues:

• the requirement for on board safety management plans;
• the expectations with regard to ship inspection and maintenance (particularly for older ships); and
• the penalty that will be imposed for offences under the MP Act, following the significant increase in penalties on 1 November 2002.

These issues will carry additional relevance once the Marine Pollution Bill 2012 (MP Bill), passed by the NSW Parliament on 7 March 2012 and awaiting commencement*. Amongst other things, the MP Bill extends liability for discharge offences to persons responsible for committing an act that causes a discharge, where that person acts with intent, recklessly and with knowledge that the discharge would probably result, or negligently.

The MP Bill will also require a master and ship owner to prepare and carry shipboard emergency plans for pollution incidents involving oil and noxious liquid substances.

*Note: It is understood that the commencement of the Marine Pollution Bill 2012 will occur once the accompanying regulations have been drafted.

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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