Australia: Transport & Logistics News - March 2017: part 5

This article is part of a series: Click Transport & Logistics News - March 2017: part 4 for the previous article.

Star Polaris LLC v HHIC-PHIL Inc (2016) EWHC 2941

This was a judgment of Sir Jeremy Cooke, being an appeal from an award from three arbitrators which included two QCs and Sir David Steele, a retired admiralty judge from the High Court in England. The appeal raised two questions:

  1. what is the correct construction of the phrase "consequential or special losses, damages or expenses" in Article IX.4(a) of the ship building contract in issue, and in particular, does that phrase mean such losses, damages or expenses as fall within the second limb of Hadley v Baxendale (1854) 9 Ex 341? Alternatively, does the phrase have a "cause and effect" meaning, as held by the tribunal? and
  2. if the tribunal is right as to the meaning of "consequential or special losses, damages or expenses", on a proper construction of Article IX.4(a) does diminution in value constitute a "consequential or special loss"?

The facts giving rise to those questions were that the "Star Polaris" had been built by the defendant yard and delivered to the buyer on 14 November 2011. On 29 June 2012, it suffered a serious engine failure. The buyer commenced arbitration proceedings against the yard and apart from the cost of repairs and other expenses incurred, it sought to make a claim for diminution in value of the vessel. The tribunal determined that such a claim would fail if made.

In their award, the tribunal had accepted that, on the authorities, the meaning of "consequential loss" in an exemption clause, usually meant the exclusion of losses falling within the second limb of Hadley v Baxendale. But unless the particular contractual provision with which they were concerned had been the subject of special judicial consideration, they were not bound to follow such decisions. In the circumstance, the clause had to be construed on its own wording in the context of the particular agreement as a whole and its particular factual background. In essence, as explained by Cooke J, the arbitrators reached their decision on the basis that the yard's obligations in respect of the guarantee, were only to repair or replace defective items of the kind described in the Article and the physical damage caused thereby with all other financial consequences falling on the buyer. They concluded that, "on a proper reading of paragraph 4, it is clear that the extent of the yard's liability is governed not just by paragraph 4 but by Article IX as a whole".

Article IX sets out the 12 month guarantee of material and workmanship which represented the warranty of quality to which the heading of the Article referred. Paragraph 3 set out the positive obligations of the yard under the guarantee of defects.

As explained by Flaux J, the arbitrators had held in the context of this contract "where the only positive obligations assumed under the guarantee were the repair or replacement of defects and physical damage caused by such defects, that consequential or special losses had a wider meaning than the second limb of Hadley v Baxendale."

Cooke J agreed with the arbitrators therefore that "consequential or special losses, damages or expenses" does not mean such losses, damages or expenses as fall within the second limb of Hadley v Baxendale but does have the wider meaning of financial losses caused by guaranteed defects, above and beyond the cost of replacement and repair of civil damage".

Simon Rainey QC, in a recent article, has commented that this decision "illustrates that the fact that the wording has a well-settled meaning will not always provide the answer. One cannot simply fall back on the way in which the phrase has previously been interpreted in standalone contexts and expect to arrive at the same result."

The well-settled meaning to which he referred was that the concept of "consequential loss" being construed "as not covering loss which directly and naturally results in the ordinary course of events from the breach and which would be ordinarily foreseeable and which would be recoverable only if the special circumstances out of which it arises were known to the parties when contracting." In lawyer speak, it covers Hadley v Baxendale "limb 2" but not "limb 1".


Changes at Civil Aviation Safety Authority

Following the resignation of Mark Skidmore, Shane Carmody has been appointed as Acting Director of Aviation Safety and Chief Executive Officer of CASA.

Drones regulation

New regulations came into force on 29 September 2016 to govern the use of Remotely Piloted Aircraft (RPAs), with different requirements for RPAs of different weight classifications.

Micro RPAs (100g or less) are automatically excluded from the regulatory framework.

Very Small RPAs (100g-2kg) are excluded if operated for sport or recreation or within the Standard RPA Operating Conditions - which require operators to:

  • fly during daylight hours within visual line of sight
  • not fly higher than 120 metres
  • keep 30 metres away from other people
  • keep at least 5.5km away from an aerodrome
  • not fly over populous areas
  • not fly over prohibited or restricted areas or where emergency operations are under way
  • only fly one RPA at a time

Small (2kg-25kg), Medium (25kg-150kg) and Large (150kg and above) RPAs have greater restrictions, particularly where being used for commercial purposes.

In response to industry concerns, Minister Darren Chester announced in October 2016 that a safety review of the new regulations will be conducted.

Second Sydney Airport

Having completed an Environmental Impact Statement in September 2016, progress is now being made on the implementation of the Australian government's decision to build a new airport in western Sydney at Badgerys Creek. On 20 December 2016, the government issued a Notice of Intention to the owners of Sydney airport, setting out the contractual terms for developing and operating the Western Sydney Airport. The owners of Sydney Airport have the right of first refusal to build and operate the new airport. AU$115 million was committed in the 2016 Federal budget for initial planning and preparation work.

MH370 search suspended

In mid-January, the underwater search for the wreckage of Malaysian Airlines flight MH370 was suspended after it was not located in the 120,000 square kilometre search zone in the southern Indian Ocean.

Australian decisions

Lam v Rolls Royce PLC (No 5) [2016] NSWSC 1332

Justice Beech-Jones in the New South Wales Supreme Court has dismissed the claims of various group members who had failed to take steps to register their claims as part of a class action arising from the Qantas A380 flight from Singapore that experienced an engine failure on 4 November 2010. They had failed to meet a deadline of 3 June 2015 to register their interest and a later deadline of 1 August 2016, and Rolls Royce sought orders to dismiss any such claims.

Reliance was placed on section 183 of the Civil Procedure Act 2005 (NSW), which permits the making of orders "appropriate or necessary to ensure that justice is done in the proceedings" and section 182, which related to suspension of limitation periods.

Bartlett v Weatherill [2017] NSWSC 31

This case concerned a claim made by the purchaser of a Cessna 400 aircraft by Dr Weatherill who sought to recover damages from a licensed aircraft maintenance engineer who had provided him with an estimate of $52,395 to bring an aircraft which Dr Weatherill had decided to purchase in the United States to Australia. When the cost actually incurred in bringing it to Australia amounted to $120,000, Dr Weatherill claimed damages for misleading and deceptive conduct in breach of section 18 of the Australian Consumer Law.

He succeeded in the Local Court, the Magistrate finding the estimate was misleading or deceptive or likely to mislead or deceive and a reasonable estimate would have been $86,000. However, the Magistrate rejected a claim for the difference between the costs actually incurred and the estimate, as he said that Dr Weatherill now had a valuable asset and the only compensation should be for the loss of use of money over time while taking into account the increasing value of the asset.

On appeal, Justice Adamson of the New South Wales Supreme Court found that Dr Weatherill was obliged to prove he had suffered actual loss by the purchase in reliance on the estimate of costs and in this case he had spent less than the value of the aircraft in Australia and so was better off. He had accordingly suffered no recoverable loss.

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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This article is part of a series: Click Transport & Logistics News - March 2017: part 4 for the previous article.
This article is part of a series: Click Transport & Logistics News - March 2017: part 6 for the next article.
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