In Port Phillip Bay on 13 December 2008, the APL Sydney dragged at anchor in a gale, and its anchor struck a nearby submarine ethane gas pipeline. Strong Wise Ltd (SWL) owned the vessel. The pipeline, which was jointly owned by Esso Australia Resources Pty Ltd and BHP Billiton Petroleum (Bass Strait) Pty Ltd, was badly damaged, putting it out of order. This caused the plaintiff to suffer economic loss.

This case dealt with claims brought by both Qenos Pty Ltd (Qenos) and Huntsman Chemical Co Australia Pty Ltd (Huntsman) against the APL Sydney, as distinct from the separate claims brought by the joint owners of the pipeline for their own losses. Both Qenos and Huntsman alleged that their claims against SWL could not be limited under the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 1976).

Qenos utilised the ethane it received to produce polyethylene; when its supply was disrupted, this impacted on its production output and therefore its income. It also meant that, for example, Qenos was required to use liquefied petroleum gas (LPG) instead of ethane gas, which was more expensive and created waste products that had to be disposed of at Qenos' cost. Qenos' case against SWL was that it had, by its servants or agents (the ship was under a time charter at the time), negligently caused the ethane gas pipeline to rupture and that this had caused Qenos economic loss. Qenos claimed AUD 30 million in damages.

Huntsman utilised the ethane that it received from the pipeline to make styrene monomer, polystyrene, and expendable polystyrene. Like Qenos, Huntsman contended it had suffered economic loss from various causes when the supply of ethane was disrupted. Huntsman claimed AUD 7 million in damages.

The key question was whether the economic loss claims of Qenos and Huntsman could be limited under the LLMC 1976.

Held: The claims by Qenos and Huntsman for economic loss fell under art 2.1.a of the LLMC 1976. The plaintiffs would thus have to claim against the limitation fund already constituted by SWL. Claims in tort for pure economic loss also fell within the scope of art 2.1.c of the Convention.

Section 6 of the Limitation of Liability for Maritime Claims Act 1989 (Cth) gives the LLMC 1976 the force of law in Australia. The LLMC 1976's purpose is to protect shipowners and their servants, and to allow for the creation of limitation funds that can be equitably distributed amongst those claiming against the shipowner. Finkelstein J identified arts 1, 2, 11, and 13 as relevant to this case. Article 1 identifies which persons can limit their liability, and defines the 'shipowner'. Article 2 identifies what manner of claims are subject to limitation, which encompasses a broad range. Article 11 allows for the constitution of a limitation fund (just as art 10 confers the right to limit). Art 13 prevents persons who have claimed against a limitation fund from making additional claims against the shipowner's assets, and provides for the release of vessels that have been arrested in lieu of a limitation fund.

SWL argued that Qenos and Huntsman's claims fell under arts 2.1.a or 2.1.c, and therefore were subject to limitation, and that both parties should claim against the limitation fund it had already constituted as of 23 January 2009. This fund was in the sum of AUD 32,112,540. Clearly this fund alone would be insufficient to meet the amounts claimed by both plaintiffs.

To discern whether both plaintiffs' economic loss claims could be limited under the LLMC 1976, it was necessary to look at the meaning of both arts 2.1.a and 2.1.c. Finkelstein J relied on the Vienna Convention on the Law of Treaties 1969 (VCLT), which although coming into force later than the LLMC 1976, formed part of customary international law and included customary rules of treaty interpretation within arts 31 and 32. There was already an established practice of applying these articles to treaties retroactively.

Article 31.1 of the VCLT requires treaties to be interpreted in good faith, in accordance with the ordinary meaning given to the terms of that treaty in their context, and in light of their object and purpose. When relying on art 31 to interpret a treaty, it is necessary to: a) determine the ordinary meaning of a term; b) question whether that meaning (or meanings) should be adopted considering the wider context (context including the article being interpreted as well as the entire treaty); and c) consider the purpose and object of the treaty, in conjunction with the terms of the treaty. Domestic law should be set aside when undertaking this process.

Article 32 provides that courts may also have regard to supplementary means of interpretation when construing a treaty, including the preparatory work behind the treaty, which incorporates the negotiating history of the treaty. This is done in order to confirm what has been discerned using art 31, and when an interpretation under art 31 has failed to entirely clarify a treaty's meaning or has created an unreasonable result.

Turning to arts 2.1.a and 2.1.c of the LLMC 1976, Finkelstein J noted that art 2.1.a was concerned with three kinds of claims: loss of life or personal injury, loss of or damage to property, and finally, consequential loss resulting from these. To fall into the third category, a plaintiff's loss must result from or be caused by either loss of life or personal injury, or loss of or damage to property.

This consequential loss can take the form of further loss of life or personal injury, further loss of or damage to property (these forming the two kinds of 'concrete' loss), financial loss proceeding from that loss or life or personal injury, or finally, financial loss resulting from loss of or damage to property (these forming the two kinds of 'abstract' loss).

Article 2.1.b is in regard to claims for loss resulting from the delay of passengers, cargo, or passenger luggage, while art 2.1.c is about claims in respect of other losses resulting from the infringement of rights other than contractual rights, resulting from the ship's operation or a salvage operation. Both of these are abstract types of loss. Article 2.1.c appears to address all forms of loss not already covered by arts 2.1.a and 2.1.b, in the use of the phrase 'other losses'.

Finkelstein J referred to the travaux préparatoires of the LLMC 1976, in particular the Hamburg Draft Convention, which states that art 2.1.a was intended to form the 'hard core' of limitable claims, these being physical forms of damage, but that consequential damage arising from loss or damage in the 'concrete' sense would also be capable of limitation, and could justify the imposition of a maritime lien.

The plaintiffs Qenos and Huntsman argued that they were claiming for consequential loss in the abstract sense, resulting from the damage to the pipeline. They also argued, however, that art 2.1.a could not apply to them because art 2.1.a was intended only to apply to persons whose consequential loss was a result from a concrete loss they had also suffered - that is, some form of concrete loss was necessary before a plaintiff could be said to have suffered any abstract consequential loss. This is the same differentiation made between economic and pure economic loss in tort.

Finkelstein J concluded that the plaintiffs' consequential economic loss claims fell under art 2.1.a. In reaching this conclusion, His Honour considered arts 31 and 32 of the VCLT, finding that this conclusion was in accordance with a common sense reading of art 2.1.a, with the purpose of the LLMC to limit shipowner liability, and with previous cases.

In addition, Finkelstein J considered whether art 2.1.c could also encompass the claims made by the plaintiffs. Article 2.1.c, again, is in regard to claims in respect of other losses resulting from the infringement of rights other than contractual rights, resulting from the ship's operation or a salvage operation. It was necessary to discern whether 'rights other than contractual rights' referred to or was limited to either statutory or proprietary rights.

The LLMC 1957, as distinguished from the LLMC 1976, gives context to the latter. Article 1.1 of the LLMC 1957 refers to the 'infringement of any rights' caused through an act, neglect, or default of the shipowner or someone for whom they are responsible, as opposed to the phrase 'other losses resulting from the infringement of rights other than contractual rights' used in the LLMC 1976. At the Hamburg Draft Convention for the LLMC 1976, the usage of 'infringement of any rights' in the LLMC 1957 came up for discussion, and it was noted that the International Sub-Committee had suggested defining 'infringement of any rights' to mean "claims in respect of other loss in direct connection with the operation of the ship or salvage operations, not capable of being based on contract". This is a relatively broad definition.

At the fifth meeting of the negotiating parties for the LLMC 1976, the French representative's draft seemed to suggest that 'rights' should not be limited to proprietary rights, and suggested that under art 2, persons specified in art 1 should be able to limit their liability if the damage from which claims had arisen happened aboard the ship, or in connection with the navigation or operation of the ship.

In Finkelstein J's opinion, the word 'rights' as part of the phrase 'infringement of rights' included a legally enforceable claim, proceeding from the act or omission of another person. A person who suffers some kind of loss can bring a claim against the perpetrator of that loss, as the former possesses a protected interest (a right), the violation of which is a wrong. It also did not make sense to narrowly construe art 2.1.c of the LLMC 1976 to exclude claims for pure economic loss, because art 2.1.a already encompassed 'abstract' claims resulting from damaged property. Claims in tort for pure economic loss would come under art 2.1.c.