Towage is not transportation

The Queensland Court of Appeal has upheld a decision in favour of a Malaysian shipowner whose vessel was badly damaged when one of the two tug boats helping to berth it collided with it following a steering control failure on the tug.

The incident occurred in February 1995 while the dry bulk coal carrier Pernas Arang was entering the Dalrymple Bay Coal Terminal under pilotage. As the tug was taking up position, it lost steering control and collided with the Pernas Arang, causing substantial damage to the bulk carrier.

The shipowner claimed damages from the tug operator under the ‘due care and skill’ requirements in the Trade Practices Act, which applies to contracts under A$40,000 (S$xx) for the supply of services. The towage contract was worth A$12,500.

The tug operators argued that they were exempted from liability under the UK Standard Conditions (which was incorporated into the towage contract) as the damage was caused ‘while towing’.

A tug is considered to be ‘towing’ when it is ‘in a position to receive orders to commence pushing, holding, moving, escorting, or guiding the vessel or to pick up ropes or lines’.

However, under the Trade Practices Act, any clause in a contract for the supply of services that purported to exclude, restrict, or modify the due care and skill warranty in the Act is void.

But the phrase ‘contract for the supply of services’ in the Act does not apply to a contract that was ‘for or in relation to the transportation of goods’. The word ‘goods’ is defined in the Act to include ‘ships’ and ‘minerals’.

The tug operators therefore argued that the Trade Practices Act did not void the exclusion clause as the towage contract was not for the supply of services but was in relation to the transportation of either the ship or its cargo.

At first instance, the Supreme Court of Queensland found that the tug was negligent for failing to take timely action to stop the tug or manoeuvre it away from Pernas Arang once steering control was lost. (See Admiralty Casebook, May 18, 2007)

The court ruled that the tug did not cause the damage ‘while towing’ because it was about 150 metres away from the vessel when its steering controls failed and once that happened it was not in a position to receive any direct order from the ship or pick up ropes or lines.

Even if the tug was considered to have been towing the vessel, the Trade Practices Act would void the exclusion clause, said the Supreme Court, which rejected the argument that the towage contract was to either transport the vessel or its cargo.

The tug operators appealed but lost. On the question of whether the exclusion clause applied because the collision occurred ‘while towing’, the Court of Appeal ruled categorically that the tug boat never reached a position to commence pushing or moving the bulk carrier or to pick up ropes or lines.

The court pointed out that past decisions have consistently held that to be in a position to receive orders or pick up lines or ropes, a tug not only had to be close enough to a ship at ‘hailing distance’, but must also be ‘ready and able’ to do so.

The tug in this case was proceeding to a point to where it would have been close enough to accept orders directly from the bulk carrier but it never reached that point. Instead, its steering gear failed about 150 metres from the vessel and from that point it was never in a position to accept any direct order, said the Court of Appeal.

As the tug was not ‘towing’ the vessel when the collision occurred, the exclusion clause in the UK Standard Conditions did not apply, which meant that there was no need to consider if the Trade Practices Act voided the exclusion clause.

However, the Court of Appeal went on to rule that the Supreme Court was not wrong when it decided that the Trade Practices Act voided the exclusion clause.

The appellate court flatly rejected the argument that the Trade Practices Act did not apply because the towage contract was not one for services but was in relation to the transportation of the vessel itself or the goods that it was going to load.

To consider a towage contract to be in relation to the transportation of a ship or the goods it was going to carry is as absurd as saying that a contract to refuel or repair a ship is a contract in relation to the transportation of the ship or its goods, said the Court of Appeal.

PNSL Berhad v Dalrymple Marine Services P/L; PNSL Berhad v the Owners of the Ship ‘Koumala’ (2007) QCA 429, Nov 30, 2007 (www.austlii.edu.au)

The writer, a law graduate, contributes law reports to the media

Author: Selva Kumar
Source: LawNet