Australia: Ship owner fined A$1.2 million for 72,000 litres heavy fuel oil spill


Published: 3 February 2014

This advisory to members highlights an example of a case where the ship owner did everything right but still got fined.

In a decision handed down on 11 December 2013, the Owners  were fined A$1.2 million in respect of the unintentional discharge of 72,000 litres of heavy fuel oil ("HFO") into the port of Newcastle, Australia. In addition, the Owners had already paid A$1.7 million dollars in clean up costs and were ordered to pay the prosecution's costs of the investigation and court proceedings.

The  coal carrier that was purchased by the defendants in December 2006. Despite her age, the vessel was well maintained and had no record of detentions.

Prior to the spill, on 23 August 2010 the vessel had ballasted and taken up 376 cubic metres of ballast water into the No. 6 starboard double bottom ballast tank, in accordance with her usual ballasting procedures.

The spill occurred during deballasting of the No. 6 starboard double bottom ballast tank during loading operations at Kooragang Berth No. 4 on 25 August 2010. Oil was observed on the surface of the water in the vicinity of the vessel and all operations were ordered to be immediately ceased. Containment and clean-up operations took until 8 October 2010, involving substantial manual clean-up of the shoreline and tidal areas. Total clean-up costs were A$1.9 million, of which Owners agreed to pay A$1.7 million.

Subsequent investigations determined that fuel oil had leaked into the ballast tank through a 15mm hole in the internal transverse bulkhead between the ballast and HFO tanks. It was accepted that oil would have leaked into the ballast tank over an extended period of time between the last scheduled inspection on 27 February 2010 and the ballasting and deballasting on 23-25 August 2010. Prior to the ballasting and deballasting, the No. 6 starboard double bottom ballast tank had not been used for at least two months.

The prosecutor alleged that the Owners were negligent in not properly sounding and/or inspecting the ballast tank prior to deballasting (having thought it to be empty prior to taking on and then discharging ballast). The prosecutor also alleged that because the sounding pipes on the vessel did not have perforations, manual sounding would not have detected the presence of oil floating on top of the ballast water and additional vigilance was therefore required on the part of the Master and crew. The prosecutor further alleged that, as the ballast tank had not been used for some time, a thorough visual inspection was prudent before it was used, which was not done.

However, the judge accepted Owners' arguments that Owners conducted ordinary and reasonable yearly inspection of the ballast tanks and no inspection had found any evidence of substantial unremedied bulkhead deterioration or any other potential cause of contamination of the ballast tanks. Accordingly the judge accepted that Owners had no reason to suspect the contamination of the ballast tank and had conducted the ballasting and deballasting operations in accordance with proper practice.

The maximum possible fine for Owners was A$10 million. The court held that, primarily having regard to the size of the spill, an appropriate fine would have been A$1.8 million, but discounted it in light of various mitigating factors, such as an early plea of guilty and Owners' cooperation in the containment, clean-up and investigation.

The Master was also charged and found guilty. However, in light of the relatively low level of his personal culpability, the court chose not to record a conviction against him.

In this case, the court effectively accepted that the Owners conducted themselves at all times in accordance with good and proper practice and could not be blamed for the spill. However, owing to the sheer size of the spill and the substantial damage that was caused to the surrounding environment, the court still felt compelled to impose quite a substantial fine on Owners, although this was discounted by A$600,000.00 in light of the various arguments in mitigation made by Owners during the hearing. The latter point in particular proves the utility in Owners conducting themselves responsibly and transparently in response to any spill, no matter how large or small, and making the effort to present the court with all available arguments in mitigation of the fine.

Nathan Cecil
Norton White lawyers 

The Association is grateful to Nathan Cecil, Partner, Norton White lawyers for contributing this update for Members' benefit.