Filipowski v Island Maritime Limited; Majgaonkar

KEY ISSUES: Prosecution :- plea of guilty - application of s 10 of Crimes (Sentencing Procedure) Act 1999 for strict liability offence - vicarious liability of owner of ship for acts of Master.

Crimes (Sentencing Procedure) Act 1999 s 10 LEGISLATION CITED: Marine Pollution Act 1987 s 8, s 8(1)

Morrison v Peacock and Roslyndale Shipping Company Pty Ltd [2003] NSWLEC 68, unreported ; CASES CITED: Thorneloe v Filipowski (2001) 52 NSWLR 60 ; Tiger Nominees Pty Ltd v State Pollution Control Commission (1991) 25 NSWLR 715

DATES OF HEARING: 16/02/2005, 17/02/2005, 18/02/2005 EX TEMPORE JUDGMENT DATE : 02/21/2005

PROSECUTOR Mr A L Hill (Barrister) SOLICITORS Dibbs Barker Gosling LEGAL REPRESENTATIVES:

DEFENDANTS Mr P Byrne SC SOLICITORS Ebsworth and Ebsworth

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

50042 of 2004 Barbara Filipowski v Island Maritime Limited

50043 of 2004 Barbara Filipowski v Salilkumar Majgaonkar

JUDGMENT 1 Both defendants in these matters are charged that, on 6 September 2002 respectively as the owner and the master of the ship Pacific Onyx from which a discharge of oil occurred into New South Wales waters namely Gore Bay, Port Jackson, they contravened s 8 of the Marine Pollution Act 1987. Both defendants have entered a plea of guilty. 2 Section 8(1) of the Marine Pollution Act provides:- Subject to subsections (2) and (4), if any discharge of oil or of an oily mixture occurs from a ship into State waters, the master and the owner of the ship, and any other person whose act caused the discharge, are each guilty of an offence punishable, upon conviction, by a fine not exceeding: (a) If the offender is a natural person - 2 000 penalty units, or (b) If the offender is a body corporate - 10 000 penalty units. 3 Each penalty unit at the relevant date was $110. 4 The following evidence is established by an agreed statement of facts:- On 31 August 2002 the ship "Pacific Onyx", after loading McKee Crude and Maui Condensate Crude as cargo at the port of New Plymouth, New Zealand, berthed at the Floating Production Storage and Offloading ("FPSO") Vessel "Whakaaropai" off New Plymouth, New Zealand. Whilst at the FPSO the "Pacific Onyx" loaded a quantity of Maui Crude as cargo. The Maui Crude was loaded from the FPSO into 10 tanks on board the "Pacific Onyx", including No 5 Centre Cargo Tank. At the conclusion of the receipt of the cargo of Maui Crude at the FPSO, the hose through which the cargo is transferred, from the FPSO to the receiving ship, was back flushed with water. This process is known as a "water stop". The ship "Pacific Onyx" left the FPSO at approximately 0236 hours on 31 August 2002 and set course for Gore Bay No 1 Berth. The ship arrived off Port limits at 0634 hours on 6 September 2002 and transited the Heads of Port Jackson at 0656 hours. It was all secure at the Gore Bay No 1 Berth by 0833 hours. At approximately 1150 hours on 6 September 2002 SPC Port Officer F Nascimento and SPC Shift Master W West, went on board the SPC vessel "Investigator" to Gore Cove as the SPC representatives for the ship-to-shore transfer cargo from the ship "Pacific Onyx". Messrs Nascimento and West arrived at approximately 1205 hours at the Shell Terminal at Gore Cove at the Southern Dolphin. On arrival, Mr Nascimento saw that the stern lines from the ship "Pacific Onyx" were secured to a bollard on the southern dolphin, that the "Pacific Onyx" was port side to the No 1 Berth and that there was an oil sheen and oil blobs on the water surface with the oil sheen and blobs being located near the southern dolphin.

At approximately 1225 hours more blobs of oil were observed scattered on the water surface in an area of a loading arm, the shore and the aft of the "Pacific Onyx" on the port side.

Oil containment booms were deployed around the "Pacific Onyx" to contain and absorb the oil.

Divers entered the water to investigate the cause of the oil discharge and observed traces of oil on the flat bottom of the hull and under the bilge of the "Pacific Onyx".

When the ship's Inert Gas system was dismantled an oil coating was observed in parts of the pipe work and oil was found in the pipe at the last valve before the overboard discharge outlet.

After cargo transfer recommenced on 7 September 2002 oil was seen again to be coming to the surface of the water around the port quarter of the "Pacific Onyx". The transfer operation was stopped.

Shell personnel used scoops to remove oil blobs from the water surface along the foreshore near the rocks. They also deployed lengths of 3M oil absorbent boom and utilised 3M oil absorbent pads.

Using the OILMAP model to predict the spreading and thickness of the oil spill Dr Brian King has assessed the coverage of the oil slick on the water surface on 6 September 2002 to be 3,500m2. Furthermore based on the absorbent capacity of the oil absorbent pads used in the cleanup operations Dr King assessed that potentially up to 200 litres of oil was spilt.

It is accepted that the impact of the spill itself is likely to have been small. 5 The defendants have made the following formal admissions:-

1. On 6 September 2002 Island Maritime Limited (Island Maritime) was the registered owner of the vessel "Pacific Onyx".
2. On 6 September 2002 Salilkumar Majgaonkar was the master of the Pacific Onyx.
3. On 31 August the Pacific Onyx loaded a cargo of crude oil at the port of New Plymouth and at a floating production storage and offloading vessel ("FPSO") off New Plymouth, New Zealand.
4. At the completion of loading at the FPSO an amount of water agreed between the FPSO and the Pacific Onyx (the water plug) was to be pumped through the cargo line by the FPSO, to the Pacific Onyx in order to clean the cargo line prior to its disconnection form the Pacific Onyx.
5. An amount of water in excess of the agreed amount was sent through the cargo line by the FPSO and received by the vessel into its No. 5 centre tank.
6. Following disconnection from the FPSO the Pacific Onyx sailed from New Zealand to Sydney. During the voyage the Pacific Onyx encountered heavy weather.
7. As a result of the additional water received onto the Pacific Onyx in excess of the agreed amount as well as the heavy weather, a quantity of oil and/or oily water entered the vessel's inert gas system.
8. The vessel arrived at the Shell Terminal in Gore Bay Sydney Harbour on 6 September 2002 at 0833.
9. Following its arrival at the Shell Terminal the vessel commenced discharge operations. Discharge operations required the use of the inert gas system. The inert gas system has an outboard valve allowing water circulating in the system to be pumped overboard.
10. Shortly after the commencement of cargo operations oil and/or oily sheen was observed in the waters of Gore Bay near the Pacific Onyx. Cargo operations were stopped immediately.
11. Investigations were carried out by the Sydney Ports Corporation (SPC) and the vessel's crew into the source of the oil spill.
12. The source of the spill was from an outboard water pipe that formed part of the inert gas system of the Pacific Onyx.
13. A clean up of oil in Gore Bay was undertaken by Shell whose clean up costs amounted to $8,386.78 (ex GST).
14. There was no identifiable damage to the environment as a result of the spill.
15. Proceedings were commenced pursuant to Section 8 of the Marine Pollution Act on 10 May 2004. The defendants each entered pleas of guilty at the first available opportunity. 6 At the conclusion of the transfer of cargo from a Floating Production Storage and Offloading vessel ("FPSO") the hose through which the oil is transferred to the receiving ship is back flushed with water. Water is pumped into the oil filled pipeline to displace the oil from the pipeline and to replace it with water. This process is known as a "water stop" or "water plug". At the commencement of the loading the Pacific Onyx received the loading hose water plug content of 51m3 together with 189.1m3 suspended free water in the FPSO tank. The loading hose was flushed with water at the completion of the loading operation to form a new water plug. This included an overrun.

7 The master of the Pacific Onyx, Captain Majgaonkar, has given evidence that as a consequence of the delivery of 149.8m3 of excess water, Centre Tank No. 5 on the Pacific Onyx was overfilled to 99% capacity in lieu of 97% as intended. On the other hand, the Cargo Operator responsible for the loading of oil onto the Pacific Onyx from the FPSO says that only 9m3 of excess water was delivered.

8 The evidence from shift logs shows that pumping commenced in Sydney at 1020 on 6 September and ceased at 1136 when oil was observed at the rear of the ship. Discharge recommenced on 7 September and was discontinued after 13 minutes when oil was seen coming to the surface. 9 There are a number of contested matters that need to be resolved in order to establish the extent of culpability of the two defendants. The controversy centres mainly on the events that occurred during the loading operation from FPSO Whakaaropai to the Pacific Onyx. The transfer at sea and journey to Sydney 10 The prosecutor initially appeared to base her case on the failure by the responsible persons on the Pacific Onyx to call for pumping to cease as soon as a potential for the overfill of the No.5 Centre Tank became apparent. However, as the evidence evolved, the case also concentrated on what the Master of the Pacific Onyx should have done once he knew at the time of completion of loading from the FPSO that the No.5 Centre Tank was 99% full. The final submission by Mr Hill, on behalf of the prosecutor, was that whether or not the Pacific Onyx was overloaded by the FPSO is not to the point. 11 A critical factor in the transportation of the Maui Crude product is that standing orders requires it to be heated to 35oC during the journey and prior to discharge in order to keep it above its pour point of 18oC. 12 According to Captain Majgaonkar the Maui Crude was loaded at a temperature of 20.5oC and that the vessel was required to heat it to a temperature of 32oC so that it could be pumped in liquid form. 13 He says that as the No.5 Centre Tank was the final tank to be topped off it was necessary for the vessel's loading calculations to take into account the water plug to ensure that the tank would be loaded to 97% capacity, with 1% being allowed for expansion as the cargo was heated. The Pacific Onyx actually took on extra water in the No.5 Centre Tank so that it was filled to 99% of total capacity. 14 Captain Majgaonkar states that the only ship's tank with spare capacity into which any part of the contents of the No.5 Centre Tank could be transferred was the port slop tank but at the time he felt it preferable to contain the oil water interface within one tank. Moreover, during the course of the journey from New Zealand to Sydney he claims the vessel experienced very heavy weather with winds up to Beaufort Scale Force 10 and high seas so that the pitching and rolling of the vessel through a total arc of 30o prevented any transfer taking place. 15 The prosecutor alleges that a number of other options to reduce the holding in the No. 5 Centre Tank were open to the Master. Each of these are rejected by the defendants as either obviously impractical or without precedent, so that in the circumstances once the overfill occurred in the No. 5 Centre Tank there was no choice but to proceed. Master Majgaonkar says he made a calculation and formed the opinion that there was sufficient space at the top of the tank, including the dome over it, to accommodate the expansion of the Maui Crude oil during heating. Inert gas is pumped into the cargo tanks to form a blanket over the cargo to contain dangerous vapours. It is common ground that the spill occurred as a consequence of oil entering the inert gas system during the journey from New Zealand. 16 The prosecutor relies on the evidence of a consultant marine engineer Dennis Robert Petersen to demonstrate, obviously with the benefit of hindsight, what options could have been available to Captain Majgaonkar in the whole of the circumstances as follows:

1. He should not have agreed to FPSO control of the stop order.
2. He should have insisted that the excess water be taken back by the FPSO.
3. If not then a ship to ship or ship to barge transfer should have been arranged.
4. To transfer some of the excess to the port slop tank that already had oil water interfaces.
5. Not apply the heating. 17 Although it may be normal practice for an FPSO to be in control of the water plug, the Court has been told by the defendant's witness Keiku Faredoon Bhabha (who has experience as a Mooring Master at the FPSO on board offtake vessels during loading) that the offtake vessel, would as a practice, also monitor the water plug and inform the FPSO to stop in case the stated amount is exceeded. He described the expected response time by the FPSO as "almost immediately." 18 Atul Chemburker, the Cargo Operator for the FPSO facility, gave evidence that the FPSO has the capacity to deliver cargo to a ship and to receive product from a ship. He says that if the Pacific Onyx had received more water than it could accommodate, arrangements could have been made for the excess water to be pumped back from the ship in what he described as a relatively simple process. I therefore regard the prospect of pumping back to the FPSO as a realistic one although no witness could attest to the occurrence of such an event, before anywhere else. The Master says he protested about receiving too much water but not specifically about overfilling. No formal letter of protest has been produced. 19 After hearing the evidence and the location of the ship I discount the suggestion of a ship to ship or ship to barge transfer. 20 Master Majgaonkar says he planned an internal transfer but the weather would not permit it. The prosecutor has attempted, by evidence from a consultant meteorologist, to reconstruct the weather conditions throughout the relevant twelve hour periods of the journey of the Pacific Onyx from New Zealand to Sydney. This evidence does not necessarily confirm the actual state of the sea and importantly the swell. The only direct evidence of the sea conditions and their impact on the capacity to make an internal transfer is from the defendant Master Majgaonkar. Although the ship stood off Sydney for 24 hours before berthing he says it was beam to and it was not possible to anchor and to perform an internal transfer. 21 The evidence of the defendant Master is accepted in this respect. The prosecutor has not proved beyond reasonable doubt that there was an opportunity to make an internal transfer before entering Sydney Harbour. 22 On balance, I accept that the opportunity to make an internal transfer at sea did not present itself. 23 Heat was applied to the product to raise the temperature to 31oC. It is doubtful that it was necessary to do this, despite standing orders. No real attempt has been made to explain why there was no consideration to maintaining temperature sufficiently above the pour point to maintain the capacity to pump, but less than instructed in the interest of limiting the extent of expansion for safety reasons. 24 In summary, in my view, insufficient steps were taken to monitor the amount of water and product loaded during the transfer from the FPSO and the Pacific Onyx. The Master should have retained a capacity to order a stop in the event of excess delivery. Moreover I am not convinced that it was prudent to heat the oil to the extent that occurred in circumstances where the level of expansion could be critical, as indeed it proved to be. 25 The Cargo Operator of the FPSO, Mr Chemburker, confirmed that arrangements could have been made if required. No request was made. 26 For the reasons I cannot find that the Master, who was on duty and responsible for the ship at the time, could not have done anything to ensure as a matter of practical reality that the adverse consequences of overfilling No. 5 Centre Tank did not occur. Furthermore, I cannot find that no remedial action was reasonably open in order to prevent or at least limit the ultimate consequence of a spill during off loading. The Master must accept responsibility for the abovementioned lapses. 27 However as a matter of weight I take into account the overwhelming evidence of all the witnesses that to their knowledge, particularly in relation to cargo loading at sea, there is no occasion when there has been a return of product or water to an off loading vessel. Balanced against this evidence is the known prospect of product entering the inert gas system during rough seas and the decision to nevertheless heat the Maui Crude significantly above its pour point. I accept that the Master did consider the problems that could arise but then made a judgement about the capacity for expansion that proved to be wrong. It was not however in the circumstances a judgement that displayed recklessness or a lack of regard for the seriousness of the situation. I have already found that the opportunity to alleviate the difficulty by means of an internal transfer did not arise in a practical way. 28 The defendants are entitled to have the extent of the spill assessed on the basis of the lower range of estimation by Dr King at 140 litres where, as in this case, there is no concrete measurement of the amount involved. Apart from the obvious visual impact of the oil on the water there is no evidence that there was any loss of any living organism. I am satisfied that the volume of oil that entered or that could have entered into the inert gas system did not present as a potential risk for a major discharge into the waters of Sydney Harbour. The cost of clean up at $8,386.78 is also indicative of the degree of seriousness of the result from the event. Although not minimal, the seriousness of the consequence is moderate. The application of s 10 of the Crimes (Sentencing Procedure) Act 1999 29 A great deal of instruction can be taken from the decision of Court of Appeal in Thorneloe v Filipowski (2001) 52 NSWLR 60 and in particular the judgment of the Chief Justice for the purpose of understanding principles to be applied when an application is made pursuant to s 10 in the case of a strict liability offence. 30 In the case of the defendant Master the following matters arising out of my findings relevant to this issue are as follows:-

32 The offence is regarded as a serious one and the Marine Pollution Act provides significant penalties. Having regard to the amount of oil spilt and the lack of environmental harm, I do not regard the nature of the offence in this case as serious, but I cannot find that it is trivial for the purposes of s 10. The failure to operate the ship in a safe manner precludes such a finding. 33 The owner is in a slightly different position to the Master. There is no evidence that attributed the knowledge of the particular circumstances to the owner or that it could have intervened. As Spigelman CJ said in Thorneloe at [177] the responsibility of the owner extends to establishing systems, guidelines and practices. 34 The Court has heard nothing about any change in procedures or practice subsequent to the events of 6 September 2002. 35 A message sent to the Master by the charterers in the course of the subject voyage raises the specific issue about the necessity to raise the temperature of Maui Crude to 35oC and canvasses the possibility of maintaining "10 deg over pour point (as per Owners Carriage instructions) and then heat to 35 deg C prior discharge." The involvement of the owners in this context has not been made clear. 36 In Morrison v Peacock and Roslyndale Shipping Company Pty Ltd [2003] NSWLEC 68, unreported, the Court considered the application of s 10 in favour of an owner where the resultant spill was "by any standard small" and that neither defendant could have done anything to avert the event that occurred. Section 10 was applied in relation to both defendants. The facts and circumstances were different in Peacock where the spill was minimal and beyond the control of the defendants. In this case the Master was the owner's representative on board and the person responsible for the practice of professional seamanship.

37 A person can be found vicariously liable for the acts of its servants even where the offence is one of strict liability (Tiger Nominees Pty Ltd v State Pollution Control Commission (1991) 25 NSWLR 715). Accordingly the acts of the Master can be regarded as the acts of the owner as there is no suggestion the Master embarked upon an unauthorised frolic of his own. 38 Like the Master, the owner has no prior conviction. No extenuating circumstances have been shown. 39 This is not an appropriate case to exercise the Court's discretion to apply the provisions of s 10 for the benefit of either defendant. 40 One of the reasons for proceeding to convictions is to inform others that the responsibility to prevent pollution is to be taken seriously. Penalty 41 The maximum penalty for the Master as a natural person is $220,000 and for the owner as a body corporate is $1,100,000. 42 Both defendants pleaded guilty at a relevantly early time. That in itself is a demonstration of contrition. The Master has expressed his regret and apologised for the events that happened both in writing and orally from the witness box. A representative of the owner has been in Court throughout the three day hearing and Mr Byrne Senior Counsel appearing for the company as well as the Master has expressed the company's contrition. 43 The defendants are entitled to the full discount for an early plea of guilty, co-operation in the investigation of the cause of the offence, the clean up operation and preparation for the hearing.

44 Both have no previous record and no submission has been put against their good character.

45 The nature of the offence although avoidable was moderate and the consequences minor. The potential for a more serious outcome was not significant. 46 The circumstances that led to the offence of discharging oil into Sydney Harbour were to a major extent unique and demanded innovative remedial action without precedent. The Master was faced with operational decisions which have since been shown to be deficient with the benefit of hindsight and intense investigation by experts who were not present at the time and not pressed with the exigencies that existed at sea for the Master. 47 The owner is technically liable for the actions of the Master. 48 Although I have not been persuaded to apply the provisions of s 10 of the Crimes (Sentencing Procedure) Act 1999 I nevertheless regard the nature of the offence and the circumstances leading up to its commission as demanding a penalty at the very lowest end of the scale. Considerable costs have been incurred by both defendants in the conduct of these procedures and the investigation that followed the discharge. These costs are self-evidently not inconsiderable. 49 I determine that the penalty applicable to the offence committed by the Master before the application of any discount for the utilitarian value of the plea of guilty, co operation and contrition is $12,000. I propose to impose a fine in the sum of $8,000. 50 The commensurate fine for the owner having regard to the respective maximum would be $40,000. Taking into the account the minimal direct personal involvement of the owner in the actual events that occurred, but noting the lack of evidence of any direct action taken to prevent recurrence, I determine that the penalty for that defendant, namely the owner, is $25,000. 51 Mr Byrne made a submission about costs, as I understood it on the basis that the provisions of s 10 were applied. As the defendants have been found guilty I propose to exercise the Court's discretion and order that they compensate the prosecutor for her costs. Orders

1. In matter No. 50043 of 2004 I find the defendant, Salilkumar Majgaonkar, guilty of the offence of contravening s 8 of the Marine Pollution Act 1987 as Master of the Pacific Onyx.
2. In matter No. 50043 of 2004 the defendant is convicted and fined the sum of $8,000.
3. In matter No. 50042 of 2004 I find the defendant Island Maritime Limited guilty of the offence of contravening s 8 of the Marine Pollution Act 1987 as owner of the Pacific Onyx.
4. In matter No. 50042 of 2004 the defendant is convicted and fined the sum of $25,000.
5. I order that the defendants pay the costs of the prosecutor as agreed or assessed.
6. The exhibits may be returned.

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