On 14 February 1991, the Sanko Harvest ran aground and sank with a total loss of cargo. Its time charterer, Sanko Steamship Co Ltd (Sanko), and demise charterer, Grandslam Enterprise Corp (Grandslam), were liable to the voyage charterer and owner of the lost cargo, Sumitomo Australia Ltd (Sumitomo).

On 4 March 1991, Sanko and Grandslam instituted proceedings under s 25 of the Admiralty Act 1988 (Cth), seeking a declaration limiting their liability under the LLMC 1957.

The LLMC 1957 had the force of domestic law in Australia until the repeal of s 333 of the Navigation Act 1912 (Cth) (the Navigation Act) and the commencement of the Limitation of Liability for Maritime Claims Act 1989 (Cth) on 1 June 1991, which instead gave the LLMC 1976 the force of domestic law.

Sumitomo filed a defence and cross-claim seeking damages from Sanko and Grandslam for breach of contract, breach of bailment, and negligence. Initially, Sanko and Grandslam pleaded limitation under the LLMC 1957 as a defence to the cross-claim, but later amended their defence to limitation under the LLMC 1976.

The Federal Court did not make an order but reserved the following question for the Full Court of the Federal Court.

Does the LLMC 1976 set forth in the first schedule to the Limitation of Liability for Maritime Claims Act 1989 (Cth) apply in respect of the grounding and sinking of the Sanko Harvest?

The Full Court answered the reserved question with 'No'. Sanko and Grandslam appealed to the High Court.

Held: Appeal dismissed.

Deane, Dawson, Toohey, Gaudron JJ: The LLMC 1976 is, under Australian law, inapplicable to occurrences taking place before 1 June 1991. The Full Court was therefore correct in its answer to the question reserved in the stated case. For the reasons given in Victrawl Pty Ltd v Telstra Corp Ltd [1995] HCA 51 (CMI667), the appeal must be resolved adversely to Sanko and Grandslam. Nothing turns upon the fact that, in this case but not in Victrawl, proceedings claiming limitation of liability under the Convention had been instituted prior to 1 June 1991.

Brennan J (dissenting): The question reserved by the special case should be answered as 'Yes'.

This appeal was heard around the same time as the appeal in Victrawl. Both appeals turned on the construction and operation of the same Acts and Conventions. However, this case differs from Victrawl in two respects. First, limitation proceedings were commenced on 4 March 1991 under s 333 of the Navigation Act and the LLMC 1957. Secondly, all parties agreed that the LLMC 1957 applied in respect of the incident, and that the appellants' application for limitation under that Convention might be pursued notwithstanding the repeal of Sch 6 to the Navigation Act which set out that Convention.

However, the appellants' entitlement to a limitation decree now depends solely on the LLMC 1976. The LLMC 1957 has had no application in Australian municipal law since the repeal of s 333 of the Navigation Act on 1 June 1991 and, having been denounced by Australia and the denunciation having taken effect, that Convention no longer regulates Australia's relations with any other State Party. The agreement of the parties to the contrary effect has not been acted on by the Federal Court by the making of a limitation decree and, being erroneous in law, should not be acted on once the appellants contend that the LLMC 1976 applies.

[For subsequent proceedings see The Sanko Steamship Co Ltd v Sumitomo Australia Ltd (CMI2093).]