Federal Court confirms shipowners cannot limit liability for wreck removal

8 minute read 07.05.2025 Chris Keane and Joshua McKersey

In a welcome development for ports and terminals, the Federal Court has confirmed that shipowners are unable to limit liability for wreck removal expenses. However, shipowners are still able to limit liability in relation to various other claims (even when entirely at fault). It is therefore appropriate to consider what can and might be done to modify the allocation of risk between careless shipowners and innocent claimants.

It is an established feature of international maritime law that shipowners are entitled to limit their liability for claims arising out of a maritime casualty or incident. However, not all claims are limitable. On 29 April 2025, in Tasmanian Ports Corporation Pty Ltd v CSL Australia Pty Ltd (The Goliath) [2025] FCAFC 53, the Full Court of the Federal Court of Australia confirmed that a shipowner cannot limit its liability for wreck removal expenses.

The judgment is a welcome development for the operators of Australian ports and terminals, albeit one that only partially shields ports and terminals from being significantly ‘short changed’ in instances where substantial loss and damage has been incurred as a result of a negligent act or omission involving a ship. From a risk management perspective, operators might therefore consider supplementing the decision of the Full Court with amendments to their terms and conditions governing the access and use of ports and terminals.

The rights of shipowners to limit liability in relation to claims involving ships

For centuries, a distinguishing feature of maritime law has been the capacity for shipowners to limit the quantum of their liability in relation to claims involving ships. This was historically justified on public policy grounds, in particular to protect shipowners engaged in the carriage of goods by sea from financial ruin as a result of the ship causing loss and damage many times greater than the value of the ship. Limitation of this kind is virtually unique to shipping law; few other wrongdoers are freed from the obligation to compensate in full those to whom they have occasioned injury or loss.

The Limitation Convention

Efforts to harmonise the law of maritime limitation culminated in the Convention on Limitation of Liability for Maritime Claims 1976, commonly referred to as the ‘1976 Convention’ (Limitation Convention). The Convention amounted to a profound change in the law of maritime limitation in that it set the limit on the quantum of maritime claims at a much higher level in return for a virtually unbreakable right to limit.

Article 2 of the Limitation Convention identifies the claims against shipowners that are subject to limitation:

claims for loss of life or personal injury;
claims for loss of or damage to property;
claims for pure economic loss; and
claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including the cargo of the ship and anything else that is or has been on board such a ship (wreck removal claims).

Article 2(1) provides that an applicant shipowner may limit its liability for such claims, whatever the basis of liability may be, provided that the claim is not excepted from limitation by the provisions of Article 3 and further provided that the applicant is not guilty of the conduct specified in Article 4.

Article 3 of the Limitation Convention excludes five types of claim from limitation:

claims for salvage;
claims for general average contribution;
claims for oil pollution;
claims subject to a law prohibiting limitation of liability for nuclear damage; and
claims by employees of the shipowner, if the proper law of the employment contract precludes the shipowner from limiting its liability for such claims.

Article 4 of the Limitation Convention provides: A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with such knowledge that such loss would probably result.

Limitation of liability for maritime claims in Australia

The Limitation Convention was given the force of law in Australia by the Limitation of Liability for Maritime Claims Act 1989 (Cth) (LLMC Act). However, Australia exercised its right of reservation under Article 18(1) of the Convention to exclude wreck removal claims from limitation. As a consequence, it was widely assumed that all wreck removal claims were intended to be unlimitable under Australian law. This assumption was challenged by CSL in the ‘Goliath’ proceedings.

The ‘Goliath’ proceedings

On 28 January 2022, the MV Goliath, a 11,754 GRT bulk cement carrier owned and operated by CSL, collided with two TasPorts tugs, the ‘York Cove’ and the ‘Campbell Cove’, and an adjacent wharf at the Port of Devonport. The two tugs sank, emitting diesel fuel and other hydrocarbons into the Mersey River. TasPorts commenced proceedings in the Federal Court against CSL for breach of contract and negligence, claiming damages totalling AU$22,606,359 for:

loss of the tugs;
damage to the wharf;
loss of hydrocarbons;
the cost of chartering replacement tugs; and
the cost of containing, removing and disposing of hydrocarbons, and removing and disposing of the tugs (wreck removal).

The wreck removal claim is by far the largest of the claims, totalling approximately AU$17.245 million.

In accordance with Article 11 of the Limitation Convention, CSL established a limitation fund in the amount of SDR7,401,416 (approximately AU$15.66 million and therefore $6 million below the damages TasPorts is claiming) (limitation fund).

It was common ground that the first four claims were limitable, in accordance with Article 2 of the Limitation Convention and thus claimable only against the limitation fund. However, it was TasPorts’ position that the wreck removal claim was unlimitable and thus claimable independently of the limitation fund. This was disputed by CSL.

Judgment of the primary judge

As a result of the dispute between CSL and TasPorts as to whether the claim for wreck removal was limitable, the Federal Court agreed to consider this issue as a preliminary question. On 26 July 2024, Stewart J delivered judgment. His Honour found that the claim for wreck removal was limitable, on the basis that it could also be characterised as a claim for consequential loss resulting from damage to property within the meaning of Article 2(1)(a) of the Limitation Convention. Stewart J held that the purpose of the right of reservation in Article 18(1) was only to exclude claims by harbour authorities in respect of wreck removal from limitation. Accordingly, his Honour held that the fact that Australia had exercised its right to exclude wreck removal claims from limitation did not preclude such claims from being limitable where they were otherwise captured by Article 2(1)(a).

The judgment was inconsistent with a recent judgment of the Hong Kong Court of Final Appeal (which concerned Hong Kong legislation that does not materially differ from the LLMC Act) and previous obiter of the Queensland Court of Appeal and the Federal Court.

TasPorts appealed the decision of Stewart J.

Judgment of the Full Court

On 29 April 2025, the Full Court (Burley, S Derrington and O’Sullivan JJ) allowed TasPorts’ appeal.

The Full Court declared that CSL is not entitled to limit its liability for the wreck removal claim, having reasoned as follows:

as noted in The MSC Flaminia (a judgment of the UK Supreme Court handed down on 9 April), there is no reason why the Limitation Convention should be construed either narrowly or widely - the Convention should be applied according to the ordinary meaning of its terms;
to determine whether a claim is limitable under Article 2(1), the Court must look to the factual question which has given rise to the claim, and not the way any particular domestic legal system might characterise the claim;
in circumstances where:

the wreck removal claim falls within Article 2(1)(d); and
Australia has exercised its right to exclude the application of Article 2(1)(d) in accordance with Article 18(1),

such claim cannot be limitable regardless of whether it falls within another limb of Article 2(1);

Stewart J was wrong to depart from the persuasive judgments of the superior courts of other nations enacting the Limitation Convention into their domestic law (being The Star Centurion in Hong Kong and two judgments of the Supreme Court of the Netherlands) that had considered this issue in their own jurisdictions.

Consequences of the Full Court’s judgment

The limitation fund remains in place (this was not the subject of the appeal). However, as a consequence of the Full Court’s judgment:

the wreck removal claim (which exceeds the amount of the limitation fund by approximately AU$1.6 million) is not limitable;
it is highly unlikely that the limitation fund will be exhausted by reason of TasPorts’ other claims (as identified above);
TasPorts will therefore be able to recover all of its losses, subject to proving that:

CSL breached its duty of care to TasPorts (if this is not admitted by CSL);
TasPorts’ claims reflect the loss naturally arising from CSL’s breach; and
the quantification of the claims is reasonable;

(most importantly) it now appears to be settled that in Australia, shipowners will not be able to limit their liability for wreck removal claims.

A welcome development for ports and terminals, but with limited application

Although a most welcome development for operators of Australian ports and terminals, it is important to emphasise that the judgment of the Full Court does not prevent ports and terminals from being significantly ‘short changed’ in a number of instances where substantial loss and damage has been incurred as a result of a negligent act or omission involving a ship. In particular, shipowners will still be able to limit their liability for claims for:

loss of life or personal injury;
loss of or damage to property; or
pure economic loss,

as a result of a negligent act or omission or breach of contract in Australia (subject to Articles 3 and 4 of the Limitation Convention). In that regard, it is noteworthy that:

despite the best efforts of AMSA, unseaworthy or problematic vessels continue to enter Australian ports and, over the past 18 months, at least several have been involved in ‘near misses’ where it was only good fortune that prevented a major incident;
port congestion and heavy demand on port infrastructure is now a reality in many Australian ports and terminals and this is unlikely to change for the foreseeable future, thereby increasing the potential for further incidents involving damage and loss caused by vessels;
other than pleasurecraft, almost all of the tonnage entering and using major Australian ports and terminals will hold P&I insurance (and should not otherwise be permitted to access a terminal or port).

Can you contract out of the Limitation Convention?

Recent judgments in Australia and the UK have confirmed that it is possible for ports and terminals to contractually exclude the application of the Limitation Convention (in whole or in part). However, this is on the proviso that the contractual exclusion is articulated in the clearest terms. Accordingly, any contractual exclusion should at least include an express reference to the Limitation Convention and the LLMC Act.

Limiting the right to limit

Although it undeniably has the potential to generate some controversy, port and terminal operators might consider supplementing the decision of the Full Court with amendments to their terms and conditions governing the access and use of ports and terminals. Possible options include:

complete exclusion of the application of the Limitation Convention;
partial exclusion, by reference to type of ship and/or a ship's tonnage;
partial exclusion, by reference to type of limitable claim (e.g. claims for loss of, or damage to, port infrastructure); and
refining the manner in which the applicable limit is calculated.

MinterEllison has extensive experience drafting, reviewing and negotiating agreements and terms and conditions, regarding access to, and use of, ports and terminals by shipowners and charterers. This experience includes bespoke arrangements in relation to:

bulk commodities;
project cargo;
renewables projects;
cruise ships; and
offshore support vessels.

*The authors represented TasPorts in the proceedings before the Full Court, ably assisted by a strong counsel team comprising Shane Doyle KC, Matthew Harvey KC and Charles Street.