Newcastle Port Corporation v RN Dredging BV

Other evidence 5Upon the prosecutor tendering the above ASOF, counsel for the defendant (Mr G J Nell SC) tendered (as Exhibit D1) the defendant's solicitors' letter of 20 May 2011, which is referred to in ASOF 30 and 32 above. It need not be set out in any more detail. 6Mr Nell also read and relied on an affidavit affirmed by Bo Toft Franzen, Administrative Technical Manager of a 45 year-old Danish company (Rohde Nielsen A/S, known as "RN"). 7RN manages the Brage R on behalf of the defendant owner, which is itself also a subsidiary of an "RN" holding company. The "hopper" dredger Brage R was acquired in October 2004. 8Franzen says (par 2) that he is the company's "most senior employee ... on the 'technical side', which includes the safety management of all vessels managed by RN". 9Franzen deposes (pars 3 to 5) that the defendant owns five barges and dredgers, and RN manages 29 dredges and barges, seven supply vessels and five tug boats, a fleet of 41 vessels, and this is the first time the defendant has been prosecuted anywhere in the world for such an offence, and also the first time any vessel managed by RN has been the subject of such a prosecution (par 9). 10On behalf of the defendant, Franzen deposes that he truly regrets and apologises for the discharge, and any damage caused by the discharge (par 8). There have been no further discharges from the vessel since the subject incident (par 13). 11Frazen also describes the action, referred to in ASOF 29, taken by the defendant to ensure that any similar incident is prevented. The vessel at the time of the incident was not fitted with any automatic shutoff system in the fuel tank, nor was it standard for a vessel such as the Brage R to have such a system. The vessel has since been retrofitted with a transfer pump timer (par 12). A high-level alarm system has also been installed. 12Franzen was not required for cross-examination, and there was no other evidence, but both counsel made substantial written and oral submissions.

Sentencing Considerations 13Section 3A of the Crimes (Sentencing Procedure) Act 1997 ("CSP Act") provides that some basic purposes of sentencing are to denounce the conduct of, and ensure adequate punishment of, the offender; to recognise the harm done to the community; and to deter the offender and other persons from committing similar offences in the future. 14Such sentencing must reflect, and be proportionate to, the objective circumstances of the offence and the personal and subjective circumstances of the defendant. 15The applicable sentencing considerations for environmental offences generally were set out by the present Chief Judge in cases such as Plath v Rawson [2009] NSWLEC 178; (2009) 170 LGERA 253, which provides a detailed and useful checklist of the objective and subjective factors to be "instinctively synthesised" when sentencing: Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357. 16The principles, especially those relevant to marine pollution prosecutions in particular, were set out in detail, and thoroughly analysed, in my recent judgment in Newcastle Port Corporation v MS Magdalene Schiffahrtsgesellschaft MBH; Newcastle Port Corporation v Vazhnenko ("Magdalene") [2013] NSWLEC 210. 17The hearing of Magdalene was conducted by the same counsel as were engaged in this present matter, and immediately preceded the hearing of this matter. As a result, most of the competing submissions in the present matter were "taken as read" from Magdalene, and much hearing time was thereby saved. 18I will not repeat all that I said in Magdalene, but of particular relevance in the present matter are the statutory considerations (at [119]), the concept of harm (at [120]-[121]), the grading of objective seriousness (at [233]-[248]), the effect of a plea of guilty (at [122]), and the principles to apply when discounting for a guilty plea and other mitigating factors (at [124]-[129], and [256]-[278]). 19Since 1 November 2002 the maximum penalty for an offence against s 8(1) of the MP Act, by a corporation, has been $10,000,000, so the regime of which that maximum is a central component had been in place for many years prior to the events which led to the present charge.

The present case 20The offence in this case, on the evidence, was not intentional. 21The prosecutor submitted that it was not just one of "casual negligence", but a "significant failing to leave a vessel unattended" (Tp6 L9-10). Only a few subcontractors remained onboard (Tp9, L47-Tp10, L5). 22Because of its strict liability nature, the s 8 offence lies in the "results" of the proven failure of a defendant. 23The defendant noted that there was no prosecution of the Chief Engineer, whose "human error", it is agreed, actually caused the spill (Tp8, LL45-6), and that the personal culpability of the owner should be considered in relation to its vicarious responsibility for the Chief Engineer and other crewmembers. 24The defendant also highlighted the fact that the reason the Chief Engineer left the vessel was to obtain the evening meal, as the crew of the vessel at that time included no cook. 25It is common ground that no environmental harm occurred from the diesel oil spill, and that the fairly modest clean-up costs have been fully met. 26Talbot J noted in Filipowski v Fratelli D'Amato S.r.l and others ("D'Amato") [2000] NSWLEC 50; (2000) 108 LGERA 88 that oil spread across a large surface area of water is inherently offensive (at [87]). In that case, 294,000 litres of Murban crude oil had been spilt, and in Magdalene 72,000 litres of heavy fuel oil was spilt. 27Whilst any amount of oil spilt on water may be perceived as offensive, this case can be distinguished from D'Amato and Magdalene, as the discharge here was of 200 litres of far less harmful diesel oil, and much of it was swept out to sea, where it dissipated or evaporated (ASOF 25), leaving only some "diesel residue along the shoreline" (Tp2, L3), in the form of "patches ..., sparse light sheens" (Tp9, L34), the effect of which is "relatively minor and transitory" (Tp9, LL42-3). 28Whilst the offensive effects may have been minor, the spill is not insignificant. The defendant accepted the prosecutor's description of the spill as "moderate" (Tp9, L7). In Environment Protection Authority v Waste Recycling and Processing Corporation [2006] NSWLEC 419; (2006) 148 LGERA 299, Preston J noted (at [145]-[149] - see Magdalene at [121]) that culpability depends only in part on the seriousness of harm which actually results. "The potential or risk of harm should also be taken into account", and harm can be indirect. 29The prosecutor submitted that the ship's owners ought to have encompassed in their operations, practical measures to avoid such a spill. The prosecutor acknowledged that human error was a factor in the spill, but sought to demonstrate that better articulated systems and/or better written policies should have been in place to prevent the spill, such as a standing policy that a fuel transfer should not be undertaken unless a qualified member of the crew is present on board to supervise that transfer. 30There should also have been, the prosecutor submitted, written safety management plans to regulate fuel transfer operations and reduce the risk of an oil spill in the course of such a transfer. Ship management systems should have layers of control, so that, if human error occurs, there are mechanical processes in place that will still protect the environment, and vice versa. 31The Chief Engineer is in charge of everything to do with the engine room and the dredger (Tp12, LL17-18), and his action in leaving the ship was "inherently risky" (subs par 4b). The defendant conceded that the Chief Engineer leaving the vessel was a "serious occurrence"; the vessel should not have been left unattended; someone who knew the system should have been left on board (par 4b, and Tp11, LL17-23): "The Chief officer and the AB are not members of the engineering staff" (Tp11, LL31-2). 32At the time of the spill, some of the crew had returned to the ship, but they too were unaware of how to stop the transfer. The Chief Officer discovered the discharge, but was unaware of the emergency fuel stops, did not know how to turn off the transfer pump, and had to call the Chief Engineer for instructions. 33The defendant recognises that s 8(1) creates a strict liability offence, but, in relation to the culpability of the owner, the defendant argues "that an owner would have reasonably expected a competent Chief Engineer" to have realised that the vessel should not have been left unattended while transfer operations were in progress (Tp12, LL16-37). 34The defendant also noted that, even if alarm systems are installed on a vessel, they would be pointless if there was no one on the vessel to hear them, and any automatic shutoff system may, through mechanical failure, not always shut off (Tp12, L50- Tp13, L5). 35The defendant rejects the prosecution submission that this case involves also "owner failure" in that there were faults in the management of the vessel, or the operation of the vessel, in terms of procedures. The mere fact that the defendants have since taken steps to prevent a recurrence should not result in criticism of the owner for not taking such steps prior to the incident. However, the lack of a qualified officer on board at the time caused the delay in the turning off of the fuel pump. 36I accept the prosecutor's position that there should have been safety management procedures in place to regulate fuel transfer operations. The foreseeability of risk was clear; leaving a vessel unattended whilst oil transfer operations are in process involved great risk of harm, and it is not enough for the owner to expect that its Chief Engineer would not need to be told not to leave the ship during transfer operations. 37The spill was not insignificant, it was reasonably foreseeable, and it was readily preventable, e.g. by better crewing and management. However, the effects of diesel oil on water are minor and transitory, and the majority of the diesel oil from this spill was swept out to sea and evaporated or dissipated. 38The prosecutor would "grade" this spill as "smaller medium" (Magdalene at 162), and I agree. 39I am of the opinion that the offence, therefore, falls at the lower end of any scale of objective seriousness (see my discussion of "grading", in Magdalene at [233]-[248], especially [246]-[247]), rather than at "the lower end of medium" (Tp5, L18).

Aggravation, mitigation and proportionality 40None of the aggravating factors listed in s 21A(2) of the CSP Act would strictly apply to this case, but several of the mitigating factors in s 21A(3) do: lack of substantial environmental harm, good character, lack of prior record, prospects of rehabilitation and not re-offending, remorse, assistance to prosecutor, and an early plea of guilty. 41It is agreed between the parties that the defendant entered a plea of guilty at the earliest possible opportunity, cooperated with the investigation, paid clean-up costs, modified the vessel and introduced a new procedure to avoid a similar pollution incident (s 21A(3) (i), (k), (m)). 42The defendant has also accepted that the court will make a costs order against it. 43The defendant also submitted that this was the first offence of its kind, anywhere in the world, for both the defendant and managers, and that no further discharges have occurred since. In cooperating, the defendant sent a letter, via its solicitors, to the prosecutor three weeks after the discharge occurred, informing both of their ownership of the vessel, and that a plea of guilty would be entered (subs par 14). The modification of the vessel may be taken as an indication that the defendant is unlikely to re-offend, is corroborative of a statement of contrition, and that specific deterrence is not a significant factor to be considered (s 21A(3)(g) and (i)). 44In line with the authority in R v Thomson; R v Houlton ("Thomson/Houlton") [2000] NSWCCA 309; (2000) 49 NSWLR 383 at [152]-[160], the full 25% discount should be afforded to the defendant for the utilitarian value of its early guilty plea (Magdalene at [125]). 45The defendant submitted that it should be entitled to a global discount of between 35 and 40%, as a result of the mitigating factors, and relies on the cases of Filipowski v Schiffsbeteiligungsges m.b.H & Co KG; Kleemann ("Kleemann") [2004] NSWLEC 207; (2004) 134 LGERA 48, at [32]; Thomson/Houlton, at [162], Filipowski v Mediterranean Shipping Company SA ("Mediterranean Shipping") [2005] NSWLEC 159, at [90]; Filipowski v Vopak Terminals Sydney Pty Ltd ("Vopak") [2006] NSWLEC 104, at [122] (these cases were discussed in Magdalene, at [259]-[278]). 46In Kleemann, Lloyd J took account of the early guilty plea, prior good record of the defendant, and the payment of clean-up costs to arrive at an overall discount of 35%, which he rounded down to one-third. After surveying the authorities, I arrived, in Magdalene at a similar discount ([278]). 47The principle of proportionality or even-handedness involves the analysis of the general pattern of sentencing for the offences being considered, in order to achieve consistency in approach on penalty. 48The prosecutor identified three cases that should be of assistance to the court, the first of which was Filipowski v Hemina Holdings SA (No 2); Filipowski v Rajagopolan (No 2) ("Hemina") [2009] NSWLEC 104, which involved, he submitted, a spill of comparable volume, and was determined after the 2002 amendments to the Act, increasing the maximum penalty to $10M. Pain J found that the environmental harm was neither substantial nor significant (at [140]), but imposed a fine of $150,000 after a discount of 20% for the plea of guilty. Her Honour found that the owners should have taken more care in the maintenance of the ship, and that that failure contributed directly to the cause of the discharge, reflecting a need for specific deterrence, and not just general deterrence. 49The defendant distinguished Hemina from the present circumstances, as less oil (103-124 litres) was found to have been spilt in Hemina than in the present case (200). The need for specific deterrence and the culpability of the owners were "reflected in a higher penalty than would have been the case", and despite the difference in volume it is submitted that there should not be a significant difference in penalty. 50In Filipowski v Lyndon and ADI Ltd [2001] NSWLEC 139, which predated the increased penalty, a two-fold error, human and mechanical, caused the discharge of 200 litres of diesel fuel - a plug was removed from the underside of a floating dock, and the failure of the sump pump caused the diesel fuel to spill into the harbour. The spill was considered small, but not insignificant, no environmental harm was recorded, the owner notified and cooperated with authorities, paid the clean-up costs and entered an early plea of guilty. The owner had one prior conviction, but otherwise a good environmental record. McEwan AJ found the appropriate global discount to be between 30-35%, as the company had hazard systems in place, and had demonstrated to the court a desire to take steps to improve those systems. The owner was fined $100,000 out of the then maximum penalty of $1.1M. 51The prosecutor also drew the court's attention to Morrison v Ausmarine Fisheries Pty Ltd ("Ausmarine") (1995) 88 LGERA 442, where the owner and Chief Engineer were both charged, after oil discharged into Darling Harbour during bunkering operations, as a result of the failure to shut off a valve. A boom placed around the oil mostly contained the spill. Bignold J concluded from the evidence that somewhere over 200 litres of oil had been discharged, and that several claimed mitigating factors ought not apply, including alleged faults in the ship's design - His Honour found that the Act's rationale goes against "regarding shoddy equipment...as a mitigating factor". The owner was fined $80,000, out of the then maximum of $1M. 52Two years later, in Morrison v Che Mat (1997) 95 LGERA 212, I was satisfied beyond reasonable doubt that 150 litres of oil had been discharged, but only 6 litres was recovered. No evidence of environmental harm was before the court, the leak was not reasonably foreseeable, the Master reported oil on the water with urgency and canvassed the crew to satisfy himself that the oil had not come from the ship. The owner was fined $50,000, and the Master $10,000, the maximum penalties at that time being $1M and $200,000 respectively. 53The defendant referred also to other cases to show the variation in penalty, particularly where "high" fines were imposed on an owner. 54 In Mediterranean Shipping, Bignold J found that a minimum of 180 litres and a maximum of 237 litres had been discharged. The vessel had a poor record of inspections; the defendants should have taken greater vigilance and care, particularly by monitoring the fuel and ballast tanks. The defendants were found to have exemplary seafaring records, and they entered early pleas of guilty, and expressed contrition and remorse. The environmental harm was small and the clean-up appeared to have been entirely successful. The owner was fined $150,000 out of the then maximum penalty of $1.1M. The defendant submitted that, similarly to Ausmarine, the fine was "high", due to the significant adverse findings against the owners, which reflected appropriate 'personal' condemnation. 55Filipowski v Island Maritime Ltd [2005] NSWLEC 73 involved a spill of 140 litres of oil during cargo transfer operations. Insufficient steps were taken to monitor the amount of water and product loaded during the transfer operations, and it was not considered prudent to heat the oil to the extent that occurred in the circumstances (at [24]). There were practical steps the Master could have taken to prevent the spill (at [31]). Talbot J found the offence to be of "moderate seriousness", but the defendants were entitled to a full discount as a result of the early pleas of guilty, cooperation in the investigation of the cause of the offence, clean-up and preparation for hearing. His Honour described the circumstances leading to the offences as "unique" and found that they "demanded innovative remedial action without precedent". He imposed a penalty at the very low end of the scale - the Master was fined $8,000 and the owner was fined $25,000, out of the maximum penalties of $220,000 and $1.1M, respectively. 56The spill in Filipowski v Wallenius Lines Singapore Pty Ltd [2002] NSWLEC 148 occurred as a result of human error, when the capacity of a bilge tank was miscalculated and the bilge tank overflowed (at [6]). The Master had extensive experience as a seaman, and the owner had no previous convictions. Cowdroy J was satisfied that the company was environmentally responsible (at [14]-[15]). The court took into account the strong environmental record of the defendants, and the lack of environmental damage, despite the 500 litres spill, and fined the owner $40,000 out of a maximum of $1.1M. 57In Filipowski v Cadem Shipping Pty Ltd [2005] NSWLEC 552, approximately 500 litres of oil was spilt, when an ordinary inspection would not have uncovered the causatory leak. The environmental harm was assessed almost three years after the spill occurred, and found by the court to be minor. No adverse findings were made against the owner, but it was fined $50,000, the maximum penalty being $1.1M. 58Morrison v Defence Maritime Services Pty Ltd [2007] NSWLEC 421 involved 5-15 litres of oil discharged, with only minor environmental harm. Preventative steps could have been taken by both the Master and owner. The owner was fined $35,000 and the Master, $30,000, the maximum penalties being, by then, $10M and $500,000, respectively. 59In Vopak, 40 litres of oil was discharged during a transfer operation, and the mitigating factors considered were an early guilty plea, expression of contrition, cooperation with authorities, excellent environmental record, and the company's standing as a world leader in its introduction of operational and procedural changes to improve supervision, maintenance and integrity of the pipeline (at [120]). The penalty was discounted by 40%, and the defendant was fined $60,000, out of the maximum penalty of $10M. 60In Filipowski v Magnavia Schiffahrtsgesellschaft & Co Kommanditgesellschaft [2007] NSWLEC 404, Talbot J was satisfied that 30-40 litres of oil had been discharged as a result of a leak from the vessel's lubrication system. Evidence of environmental harm was based on a spill 100 litres greater than what was determined on the evidence. Talbot J took account of the contrition and remorse of each of the defendants, their co-operation in the clean-up and investigation, and the action taken to prevent another occurrence. The owner was fined $25,000 (after a discount of 37.5%), the maximum being $10M.

Penalty 61In fixing the appropriate penalty in this case, I am mindful that many of the cases summarised above dealt with offences committed when the maximum penalty was $1M or $1.1M. 62The increase of the maximum penalty on 1 November 2002 to $10M, was and remains a "public expression" by Parliament of the seriousness of the offence. 63Particular cases have to be assessed against the principle that the maximum penalty is reserved for the "worst case" (see discussion in Magdalene at [136]-[141], and, especially Cabonne Shire Council v Environment Protection Authority ('Cabonne') [2001] NSWCCA 280; (2001) 115 LGERA 304 at 312, per Giles JA, quoting Environmental Protection Authority v Timber Industries Ltd [2001] NSWLEC 25 at [33] per Pearlman J). 64Offences of low criminality remain offences of low criminality, despite an increase in maximum penalty. 65Whatever one thinks of the various "grading" systems, I am of the view that this is an offence of relatively low criminality, but relatively high culpability, against a regime prescribing a very high maximum penalty. 66It was, at worst, a "moderate" spill, but it resulted from a serious "breach" by the owner (in its system, as in Hemina), and by senior crew, for whom the owner is vicariously responsible. 67It demonstrated a massive lack of awareness and/or training among the crew, but, fortunately, little harm resulted (c.f. Magdalene [233]-[248]). 68In line with the cases dealt with under that regime, the appropriate level of fine is $250,000 (2.5% of the "worst case"), subject to discount. 69As noted above, specific deterrence is not a significant factor in this case, as the owner has taken steps to prevent the reoccurrence of the offence, and has demonstrated contrition and remorse. Adequate steps were not taken, or articulated, in Magdalene, so the defendant in the present matter will receive a higher discount than I granted in that matter, namely 40%, rather than one-third or 35% (see Magdalene [269]-[277]). 70That brings the court to a fine of $150,000, after discounts.

Orders 71The orders of the court will, therefore, be: (1)The Court finds the offence proved. (2)The defendant is convicted of the charge set out in the summons. (3)The defendant is fined the sum of $150,000. (4)The exhibits are retained. (5)The defendant is ordered to pay the prosecutor's costs, on a party-party basis, as agreed or assessed, and its reasonable investigation expenses. (6)Pursuant to s 8 of the Fines Act 1996 (NSW) the fine in Order (3) is ordered to be paid to the prosecutor.

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