Consideration - specific and general deterrence
84 I reject the Ombudsman's argument that Transpetrol was culpable because it failed (so she alleged) to exercise due diligence or reasonable care in relation to the use of Turmoil on the ten voyages. Her argument failed to take account of Transpetrol's position as agent of the demise charterer (which I accept was responsible, under the Shipman agreement, for the demise charterer's obligations to pay the crew) in circumstances where, first, Turmoil was subject to, respectively, time charters of three years (by Transpetrol Maritime to Chevron) and one year (by Transpetrol Maritime to BP) and under sub-charters (by Chevron to Caltex and by BP to BP Australia respectively) and, secondly, she was sailing voyages under the Caltex and BP Australia temporary licences.
85 It is important to appreciate that, by force of reg 1.15B of the Fair Work Regulations, the definition of a "temporary licensed ship" meant a ship that was used to undertake a voyage authorised by a temporary licence in circumstances, relevantly, in which within the preceding 12 month period before the particular voyage commenced, she commenced at least two other voyages authorised by a (not necessarily the same) temporary licence. Regulation 1.15E(1)(c) extended the operation of the Fair Work Act to a temporary licensed ship, as defined in reg 1.15B.
86 I reject the Ombudsman's argument that, in addition, reg 53(1) of the 2013 Marine Order applied the provisions of the Fair Work Act to Turmoil during the 2014/15 voyages so as to require Transpetrol to comply with the Seagoing Industry Award and the NMWO. I am of opinion that reg 53(1) could not have been intended to do other than enforce the provisions of the Fair Work Act and any instrument made under it "if applicable" to a vessel. Neither reg 53(1) nor the 2013 Marine Order as a whole was intended or worded to impose, independently, obligations on foreign flagged ships to comply with Australian domestic employment laws, other than by enforcing the provisions of the Maritime Labour Convention that a vessel's flag State had imposed in respect of her owner's existing employment agreements with her crew. Accordingly, nothing in the 2013 Marine Order operated to create any wider or different obligations on Transpetrol, as the employer of a ship's crew, than already existed (whether under the laws of the ship's flag State or by the operation of s 33(3) of the Fair Work Act and reg 1.15E of the Fair Work Regulations in respect of Turmoil).
87 Thus, I find that, in the circumstances here, when Turmoil sailed on each of the 2013 and 2014/15 voyages under the Chevron or BP licences in Australian regulated waters, Transpetrol, as employer of her crew, became liable to pay them wages in accordance with the Fair Work Act because reg 1.15E of the Fair Work Regulations applied to those ten voyages. However, this legal consequence occurred without Transpetrol having any knowledge of the existence of either the Chevron or BP licences or of the number of voyages authorised by either licence that Turmoil had undertaken previously, let alone that it would become liable to pay the higher wages for any of the ten voyages.
88 The different natures and incidents of each of a demise, or bareboat, charter and a time charter are well understand in maritime law. The Full Court explained the nature of a demise charter in Ship "Hako Endeavour" v Programmed Total Marine Services Pty Ltd (2013) 211 FCR 369 at 386-387 [53]-[57] per Rares J, 404-405 [138]-[142] per Buchanan J. Siopis J agreed with both judgments on this issue at 372 [1]. In essence, a demise charterer is aptly described as a temporary owner because of the extent of his possession and control of the chartered ship allowing him, effectively, to do as he pleases with her (see Hako Endeavour 211 FCR at 386 [55], 405 [140]).
89 In contrast, under a time charter (such as in the SHELLTIME 4 and BPTIME 3 forms), the owner (or demise charterer) retains possession of the ship and employs her crew, but gives the charterer the rights to give sailing orders to the master and to use the ship to carry cargoes and undertake voyages at the charterer's direction, subject to any limitation to that authority in the charterparty. In Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana (The Scaptrade) [1983] 2 AC 694 at 700G-H, Lord Diplock, with whom Lords Keith of Kinkel, Scarman, Roskill and Bridge of Harwich agreed, said:
A time charter, unless it is a charter by demise, with which your Lordships are not here concerned, transfers to the charterer no interest in or right to possession of the vessel; it is a contract for services to be rendered to the charterer by the shipowner through the use of the vessel by the shipowner's own servants, the master and the crew, acting in accordance with such directions as to the cargoes to be loaded and the voyages to be undertaken as by the terms of the charterparty the charterer is entitled to give to them. (emphasis added)
90 And, because of a time charter's character as a contract for services, the charterer is responsible for where the ship sails, the ports into which she calls, and the cargoes that she loads and discharges at those ports. Ordinarily, the time charterer arranges and pays (or is responsible for payment to the ship owner or demise charterer) for the costs of the bunkers, port fees and stevedoring. That is because these costs are incurred in order to perform the services that the charterer wants when employing the ship to achieve its commercial objectives.
91 In addition, Mr Hansen confirmed that, in his experience in the shipping industry, there is no general expectation that a shipowner would be informed of a charterer's trading intentions or be given advance knowledge of any intended trading patterns. That is because a charterer's intentions concerning the ports at which it wishes the ship to load or discharge can be commercially sensitive. Mr Hansen also said that in his experience, charterers give voyage orders directly to the master shortly before the vessel is about to leave the last port on her previous voyage so that the master can then calculate the route, cargo intake and bunkering requirements.
92 Each of Chevron and BP, as a charterer, had the right to apply for a temporary licence under s 28(1)(a) of the Coastal Trading Act, and could nominate, under s 28(2)(ea), in that application the name of the vessel if known. When the Minister granted a temporary licence, s 35 required him or her to publicise, among other matters, the number of voyages that it authorised. But, critically, that Act did not require the Minister to publicise the name of the vessel or vessels, even if known, that would undertake any of the voyages. Nor did s 37 require the name of a vessel to be specified in a temporary licence when issued.
93 In contrast, s 30(b)(ii) required the Minister to notify a body or organisation that he or she considered would be directly affected if the licence were granted. It is possible that the Minister could have given such a notification to a shipowner and any charterers (other than the applicant for the temporary licence), although it is notoriously difficult to identify correctly the name of the owner or a demise charterer or the interest, if any, of a disponent owner of any particular ship, especially in a limited time frame, such as the two business days that s 30 stipulated as the period within which the Minister had to give notice of an application for a temporary licence. It is unnecessary to decide whether the words "body or organisation" in s 30(b)(ii) included "person", but on their face, those words are apt to refer to industry and industrial organisations, such as employer or trade bodies and unions, rather than to companies or individuals.
94 Moreover, a sub-charterer of a ship most often has no contractual relationship with the ship owner or demise charterer, although, here, the Chevon and BP charterparties were made directly with the demise charterer, Transpetrol Maritime. But, the sub-charters, by Chevron to Caltex and by BP to BP Australia, did not involve Transpetrol Maritime in a contractual relationship with either sub-charterer.
95 Importantly, the Coastal Trading Act was not enacted in 2008, when Transpetrol Maritime entered into the Chevron charterparty. Therefore, Transpetrol Maritime could not have been expected to include any provision in the additional clauses of that charterparty to address the potential (that eventuated in the case of the 2013 voyages) that the crew of Turmoil might become entitled to additional wages under the Fair Work Act if she sailed in Australian regulated waters under a temporary licence. Similarly, although the BP charterparty was made in 2014, Transpetrol Maritime was not then aware of the application and operation of the Fair Work Act or of the existence of any temporary licence or licences so as to put it on notice to make some provision in that charterparty in respect of those matters (to cover its position in respect of the 2014/15 voyages).
96 Moreover, both the Chevron and BP charterparties provided for Turmoil to trade worldwide. Thus, while it was possible that she may have undertaken one or more voyages in Australian (regulated) waters under either of the Chevron or BP charterparties, there was no particular reason why Transpetrol Maritime (as the disponent owner) or Transpetrol (as the employer of her crew) could, or would, have contemplated that, when the Coastal Trading Act applied pursuant to reg 1.15E of the Fair Work Regulations coming into force on 21 August 2012, one or more voyages could occur that would have exposed Transpetrol to liability under the internationally exceptional and unusual provisions of the Fair Work Act.
97 The Ombudsman did not articulate any plausible argument, beyond mere assertion, as to how Transpetrol or Transpetrol Maritime should have become aware that, first, Turmoil would sail under a temporary licence at all, secondly, any particular voyage was the third or later under a temporary licence within the preceding 12 months (see reg 1.15B(b)(i)) and, thirdly, the Fair Work Act applied to such a voyage and imposed liabilities on Transpetrol in addition to those under the Maritime Labour Convention, the relevant national laws of the crew members, and their employment and collective bargaining agreements. Whilst Turmoil's master was Transpetrol's employee, the terms of both time charters by Transpetrol Maritime placed him under the orders and directions of the time charterer or, when the Caltex and BP sub-charters respectively came to operation, the sub-charterers, as to the employment of the ship (see [88]-[91] above). There was no evidence as to how Transpetrol (or Transpetrol Maritime) or a reasonable foreign shipowner or employer in its position could, or should, have become aware, in the period between 2013 and its first contact with the Ombudsman, that Turmoil was undertaking any or all of the ten voyages as a voyage or voyages under a temporary licence or that in those circumstances, the crews had to be paid more money than they were in accordance with the Fair Work Act.
98 The principal purpose of civil pecuniary penalties is to promote the public interest in compliance with the provisions in the enactment that the contravenor has infringed by putting a sufficiently high price on contravention "to deter repetition by the contravenor and by others who might be tempted to contravene the Act": Director 258 CLR at 506 [55], per French CJ, Kiefel, Bell, Nettle and Gordon JJ, adopting what French J had said in Trade Practices Commission v CSR Ltd [1991] ATPR ¶41-076 at 52,152 (emphasis added). When fixing a civil pecuniary penalty, the Court must make clear to both the contravenor and the market that "the cost of courting a risk of contravention…cannot be regarded as [an] acceptable cost of doing business": Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 659 [64] per French CJ, Crennan, Bell and Keane JJ (adopting what the Full Court of this Court said in Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at 266 [68]). Their Honours (250 CLR at 659 [65]) said that general and specific deterrence had to "play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct" (emphasis added).
99 The reasonableness of a contravenor's conduct constituting a contravention, including a genuine and reasonable misunderstanding of one's legal position in the circumstances, is relevant to the question of whether any civil pecuniary penalty should be imposed and, if so, its amount: cf. Flight Centre Ltd v Australian Competition and Consumer Commission (2018) 356 ALR 389 at 405 [63]-[64] per Allsop CJ, Davies and Wigney JJ.
100 Of course, ignorance of the law is no excuse. The Fair Work Act, as extended by reg 1.15E made under s 33(3), applied to the ten voyages. Once it became aware of this legal rseult, Transpetrol promptly accepted its liability and paid each of its crew the full sum that the Ombudsman had calculated was due, totalling $255,042.94. Nonetheless, the contraventions occurred in circumstances where no legislation, including the Coastal Trading Act and the Fair Work Act, required the person who applied for a temporary licence to obtain the consent of, or inform, the owner, demise charterer or master of a ship about the application of the Fair Work Act to her on any voyage covered by a temporary licence or even to inform the owner, demise charterer or master that the voyage was occurring under a temporary licence.
101 I reject the Ombudsman's argument that there is any need for specific deterrence of Transpetrol. There is no doubt that Transpetrol contravened the Fair Work Act without fault on its part or awareness of its application. And, as Mr Hansen deposed, in the future, it has every intention of complying with the somewhat singular (in international maritime trade) requirements of that Act, that apply even though a shipowner has a current valid maritime labour certificate for his ship that the Maritime Labour Convention required. There is nothing in the facts here to suggest that Transpetrol acted deliberately or to make profits from a "calculated contravention of legislation": cf. TPG 250 CLR at 659 [65]. Quite the opposite is true. Transpetrol sought carefully to meet, and not only met but set out to exceed, its obligations to provide "decent employment" and reasonable wage and payment terms for its crew members under the law of Turmoil's flag State, Panama, namely the Maritime Labour Convention, and the relevant national laws, India and the Philippines (see Art 1(1) of the Maritime Labour Convention and regs 2.1, 2.2, 2.3 and 5.1.1). It paid additional sums to its employees so as to achieve parity of remuneration for crew of the same rank and seniority who performed the same work on all ships in the Transpetrol group fleet over and above those negotiated by the ITF and the local trade unions, regardless of the different wage scales in their different home States.
102 Moreover, Transpetrol had no contractual entitlement to recoup from any sub-charterer (or, in particular, the holder of the relevant temporary licence) the liability to make payments to its employees under the Fair Work Act. Transpetrol had not agreed to a provision in either the Chevron or BP charterparties for recoupment of any liability to make the payments such as those that the Fair Work Act imposed on it as employer of the crews.
103 It follows that Transpetrol and Transpetrol Maritime got no benefit at all from any contravention. The contractual rate of hire remained constant, whereas the sub-charterers, Caltex and BP Australia, did receive the benefit of their sub-charters in circumstances where neither Transpetrol nor Transpetrol Maritime knew of, let alone, could recoup from the holders of the temporary licences, the liabilities imposed on Transpetrol by reg 1.15E of the Fair Work Regulations.
104 Nor, in my opinion, would it be just or fair in all the circumstances to impose a penalty on Transpetrol in order to deter others from similar, unintentional contraventions. The Ombudsman's argument on general deterrence was, in effect, a reflection of the Admiral Byng principle, encapsulated by Voltaire, namely "pour encourager les autres": cf. Attorney-General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 75 ALR 461 at 466 per Deane J, adopting Lord Oliver of Aylmerton's colourful description in Attorney-General v Guardian Newspapers Ltd [1987] 1 WLR 1248 at 1317E-F. Moreover, there is no realistic prospect that Transpetrol will contravene again. It acted promptly to pay the full amounts that the Ombudsman ultimately asserted were underpayments (even though it believed that it was entitled to the benefit of the set off to reduce that sum) and cooperated fully in the conduct of the investigation.
105 Ordinarily, the public denunciation by a court of a wrongdoer's conduct that contravened the law by imposing a civil pecuniary penalty and or making declarations, has the salutary effect of bringing to the market's and community's attention the need to comply with the law and to warn of the severity and likelihood of punishment for later infractions. However, on the basis of the present facts, that purpose is not likely to be achieved by punishing Transpetrol in the context of seeking to secure compliance with the Fair Work Act by foreign shipowners (including demise charterers). First, if a shipowner (or his master or another agent, such as Transpetrol) applies for a temporary licence, that person is likely to be, or to become (from communications with the master or other agent), personally aware of the requirement to comply with the Fair Work Act while the ship is regulated under reg 1.15E. But, secondly, if, as occurred with Transpetrol, a third party, such as a time or sub-charterer or shipper, obtains a temporary licence under the Coastal Trading Act without informing the shipowner or even the master, there is nothing in Australian law to require that person (or anyone else, including the Minister) to inform the shipowner, demise charterer or other employer of the ship's crew of the existence of the temporary licence, let alone the obligations under the Fair Work Act that it imposes on the shipowner, demise charterer or employer.
106 In addition, as I have noted, a ship could sail in Australian regulated waters on voyages under a series of temporary licences that third parties (such as charterers, other agents, or shippers) could have obtained by applications under s 28(1) of the Coastal Trading Act without any knowledge or involvement of the shipowner. In that situation, when the ship sailed on a third or subsequent voyage within the 12 month period prescribed in reg 1.15B(b)(i) of the Fair Work Regulations, reg 1.15E(1)(c) imposed a liability on the unknowing shipowner to comply with the Fair Work Act.
107 Imposing a penalty on Transpetrol is unlikely to deter unintentional contravening conduct by another shipowner who had a current, valid maritime labour certificate under the Maritime Labour Convention in force for the crew of his ship and who is unaware, and could not reasonably be expected to be aware, that his ship is on a third or later voyage the subject of any temporary licence that a third party has obtained and used without notice to him.