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Ocean Harvester Holdings Pty Ltd v MMI General Insurance Ltd

 

[2003] QSC 262

 

SUPREME COURT OF QUEENSLAND

 

PARTIES:

FILE NO/S:

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court

DELIVERED ON:

15 August 2003

DELIVERED AT:

Townsville

HEARING DATE:

21, 22, 23, 24 July 2003

JUDGES:

Cullinane  J.

ORDER:

Action is dismissed with costs to be assessed.

CATCHWORDS:

INSURANCE – MARINE INSURANCE – where the plaintiff’s vessel sank – plaintiff alleges that this was due to an ‘accident’ within the terms of its policy – whether definition of ‘accident’ accords with that of ‘perils of the sea’ in Marine Insurance Act (Cth) 1909

EVIDENCE – BURDEN OF PROOF, PRESUMPTIONS, AND WEIGHT AND SUFFICIENCY OF EVIDENCE – where the defendant alleges scuttling – where the burden of proof lies – whether the defendant if unable to positively prove scuttling, may still succeed if plaintiff is unable to demonstrate that the loss was occasioned by accident.

Marine Insurance Act (Cth) 1909

Uniform Civil Procedure Rules, rule 189

Rejfek & Anor v McElroy & Anor (1965-66) 39 ALJR 177, applied

Craig v Associate National Insurance Co Ltd (1984) 1 Qd R 209, followed

Skandia Insurance Company Limited v Skoljarev & Anor 142 CLR 375, applied

Itobar Pty Ltd v Mackinnon & Commercial Union Assurance Co PLC (1985) 3 ANZ Insurance Cases 60-610, applied

Doak v Weekes (1986) 82 FLR 334, applied

Rhesa Shipping Co SA v Edmunds & Anor (1985) 2 All ER 712, applied

COUNSEL:

AJ Moon for the plaintiff

SW Couper for the defendant

SOLICITORS:

Roberts Nehmer McKee for the plaintiff

McCullough Robertson for the defendant

[1] The plaintiff brings this action on a valued policy held with the defendant in respect of a trawling vessel (Ocean Harvester) and including fittings, machinery, special equipment and other items.  The agreed value is some $282,250.

[2] After making allowance for the excess for which the policy provided and the value of certain items which were salvaged, the claim is one of $276,550.

[3] The vessel was a 1974 15.64 metre wooden hull prawn trawler, bearing registered number FVYD.

[4] It was lost when it took on water on the early morning of 3 September 2000 in waters in the general vicinity of Keeper Reef and sank.

[5] The event in the policy which the plaintiff relies upon is loss by accident.  See clause 9.2(a).

[6] “Accident” is defined in the policy in the following terms:  “an unforeseen and unintended happening which caused loss or damage”.

[7] The defendant by its defence alleges that the vessel was scuttled by one Wade Kerr (the sole director of the plaintiff) with the assistance of one Craig Thompson, the owner of another vessel, the Shackrali.

[8] There was some argument as to the principles which are applicable.

[9] The plaintiff, it is clear, carries the onus of proving that the loss of the vessel came within an event in the policy relied upon.

[10] It is also clear that the defendant, insofar as it seeks a positive finding that the vessel was scuttled, carries the onus of proof in this regard.  The standard is the civil standard.  I take the relevant principles in this regard to be those found in the judgment of the High Court in Rejfek & Anor v McElroy & Anor (1965-66) 39 ALJR 177.  The allegation in this case involves serious misconduct of a criminal nature.  The court, in that judgment, after holding that the civil standard of proof applied went on to say:

the ‘clarity’ of the proof required, where so serious a matter as fraud is to be found, is an acknowledgement that the degree of satisfaction for which the civil standard of proof calls may vary according to the gravity of the fact to be proved”.

[11] In Craig v Associate National Insurance Co Ltd (1984) 1 Qd R 209, Carter J, in a case involving somewhat similar issues to those which arise here, after referring to the judgment in Rejfek v McElroy (supra) said at page 211: 

“I perceive the law to be that the defendant must prove to my satisfaction on the balance of probabilities that the plaintiff fraudulently set fire to the vessel and in determining whether the defendant has induced in my mind that degree of persuasion, I must examine closely the clarity and cogency of the proof offered by the defendant in the knowledge that an allegation of  fraudulently setting fire to the vessel is one which is serious and grave.”

[12] The defendant in making the allegation of scuttling relies, to avoid liability in such a case, upon the terms of clause 8.3(d) which provides that the policy does not apply to “any loss, damage or expense caused intentionally by you or by any other person with your knowledge”, and also clause 13.1 which is the general exclusions clause.  This provides so far as is relevant [13.1(g)] under the heading fraud, “any claim, liability, loss or damage in relation to which there is any form of a false or fraudulent misrepresentation or any fraudulent or criminal act or mission (sic)”.

[13] Counsel for the defendant submitted that the effect of the authorities was that even if the defendant failed to affirmatively satisfy the court on the issue of scuttling, the court could have regard to the evidence on that subject in order to consider whether the plaintiff had discharged the onus resting upon it to demonstrate that the loss was occasioned by accident.  Counsel for the plaintiff submitted that, whilst there was a body of authority to that effect, none of the cases were binding upon this court and all of the cases concerned policies in the traditional language of marine insurance policies covering “perils of the sea”, something which, he argued, distinguished those cases from this.

[14] Before turning to a consideration of this issue, it is desirable if I make reference to some of the cases in which this issue has been considered.  It is to be noted that Mr Justice Mason, as he then was, in Skandia Insurance Company Limited v Skoljarev & Anor 142 CLR 375 (with whom the other members of the court agreed) said in relation to this issue at page 382:

The onus of proof in such a case has its own difficulties and they have not yet been completely resolved”.

      His Honour went on to refer to a number of on the subject.

[15] As will be seen from the definition of accident in the policy it is only unforeseen and unintended happenings which cause loss or damage which are within the cover of the policy.

[16] The cases to which I was referred dealing specifically with the onus of proof issue include judgments of this court.  In Itobar Pty Ltd v Mackinnon & Commercial Union Assurance Co PLC (1985) 3 ANZ Insurance Cases 60-610,  Macrossan J in the course of his judgment said at pages 78,719 and 78,720:

“But the burden of showing that the loss was due to a cause such as this (the peril of the sea) which must thus be regarded as falling within the policy, remains on the insured and if in response to an evidentiary onus arising in the circumstances, the insurers adduce some evidence of scuttling then, even if it is insufficient to sustain a finding of scuttling it may still be sufficient to prevent a finding on the balance of probabilities of loss due to a peril of the seas.  The ‘Vainqueur’ (1974) 2 Lloyd’s Rep 398 and Palamisto SA v Ocean Insurance Ltd (1972) 2 QB 625 per Cairns LJ  at page 647.  In the present case the defendants accept the onus of proof upon their positively pleaded issue of scuttling.”

[17] In Doak v Weekes (1986) 82 FLR 334, Ryan J addressing the same question said at page 346:

“In the pleadings the defendants have alleged loss by scuttling.  They have also traversed the plaintiff’s claim that the loss was occasioned by a peril of the sea.  An allegation of loss by scuttling will not be sustained unless it is proved by the defendants.  But the onus is on the plaintiffs to prove that the loss was due to perils of the sea.  A rebuttable presumption arising from the loss of a seaworthy vessel in calm waters is nothing more than that and if evidence is adduced which puts forward as an alternative cause of the ship’s loss, the scuttling of the ship by the owner, the insured will fail unless he establishes affirmatively that the loss was due to a peril of the sea.”

[18] See also the judgment of Thomas J in Jeffrey v Associated National Insurance Co Ltd (1984) 1 Qd R 238 at page 246.

[19] There is also a judgment of the House of Lords which would seem to support this proposition generally.  Lord Brandon of Oakbrook (with whom the other members of the House of Lords agreed) said in Rhesa Shipping Co SA v Edmunds & Anor (1985) 2 All ER 712 at page 714:

“In approaching this question it is important that two matters should be borne constantly in mind.  The first matter is that the burden of proving, on a balance of probabilities, that the ship was lost by perils of the sea is and remains throughout on the ship-owners.  Although it is open to the underwriters to suggest and seek to prove some other cause of loss, against which the ship was not insured, there is no obligation on them to do so.  Moreover if they choose to do so, there is no obligation on them to prove, even on the balance of probabilities, the truth of their alternate case.”

[20] In addition to the various judgements referred to in those cases see also La Compania Martiartu v The Corporation of the Royal Exchange Assurance [1923] 1 KB 650.

[21] It is true, as counsel for the plaintiff submitted, that there is no authority on the subject which binds me.  It is submitted that since each of those judgements was concerned with a policy covering perils of the sea, they should not be applied in the case of this policy.  I was also referred to the South Australian judgment of Winter and Anor v Weekes (1989) 5 ANZ Insurance Cases 60-896 where Perry J expressed some dissent from the above propositions.

[22] Whilst it is true that the policy in this case is not expressed in the traditional language of marine insurance policies covering “Perils of the Sea”, it must be regarded as having a similar, if not identical, import and area of operation.

[23] As I have pointed out, what is relied upon here is the provision of the policy providing cover for loss occasioned by accident.  The definition of accident has already been set out.

[24] It is noteworthy that in the Marine Insurance Act of 1909, the schedule containing rules for the construction of a policy contains the following provision in relation to the term “perils of the sea”:

“‘Perils of the seas’ refers only to fortuitous accidents or casualties of the seas.  It does not include the ordinary action of the winds or waves.”

[25] In Skandia Insurance Company Limited v Skoljarev & Anor (supra) Mason J said when speaking of this rule:

“The rule draws a distinction between fortuitous accidents or casualties of the sea and the ordinary action of the wind and waves. Consequently, not every loss caused by the entry of sea water into a vessel is a loss due to a peril of the sea.  Loss caused by the natural and inevitable action of the wind and waves are not due to perils of the sea, because they are foreseen and expected.”

[26] The language of Mason J bears a notable similarity to that of the policy. 

[27] There is thus a very close correlation between the cover provided for in the policy, given the definition of accident, and the cover provided for in the traditional ‘perils of the sea’ policy taken with the definition in rule 7.

[28] The present policy might be said to express in a more common parlance what is covered by a ‘perils of the sea’ policy.

[29] Whether this is the case or not, it seems to me that there is at least a sufficient degree of similarity between the two policies to require the application of the principles to which I have referred.

[30] The remaining legal issue relates to whether the plaintiff can rely upon what was referred to by Ryan J in the passage in Doak v Weekes (supra) set out above as “a rebuttable presumption arising from the loss of a seaworthy vessel in calm waters”.

[31] In this case, it was submitted on behalf of the defendant that, quite apart from any consideration of the issue of scuttling, the plaintiff is not entitled to rely upon the presumption to which Mr Justice Ryan referred in Doak v Weekes (supra).

[32] This presumption is that if a ship which is seaworthy sinks in smooth water and there is no other evidence as to the cause of loss, then the cause is attributable to a peril of the sea.  In Skandia Insurance Company Limited v Skoljarev (supra) Mason J, after a review of the authorities on this subject said at pages 390-391:

“Although there is nothing in all this to throw the burden of seaworthiness onto the insured, there is one class of case in which the insured will find it necessary to establish seaworthiness in order to prove his case.  This is where the insured, having no direct evidence of loss due to a fortuitous event, seeks to establish by inference a case of loss due to an unascertained peril of the sea.  To justify this inference he will seek to exclude the possibility of loss caused by unseaworthiness by calling evidence as to the condition of the ship.  In such a case, once evidence is given of seaworthiness, the issue of causation must be decided as a question of fact.  Then the tribunal of fact, unless it is satisfied that the ship was seaworthy, cannot draw the inference upon which the insured depends in order to make out his case.”

[33] In the present case, it was common ground that a notice to admit the seaworthiness of the vessel at the relevant time was served on the defendant.  The defendant did not respond to this.  The effect of the rules is that in those circumstances the facts are taken to be admitted. See Rule 189 of the Uniform Civil Procedure Rules.

[34] Mr Ballantyne, a marine consultant, was called by the plaintiff and it was contended on behalf of the defendant that, as his evidence was intended to ascribe the loss of the vessel to one or other of a number of possible causes, the plaintiff was no longer permitted to rely upon the presumption.

[35] Mr Ballantyne’s evidence canvassed hypothetically a number of possible ways in which water might enter a vessel, some of which would be within the ambit of the policy and some of which would not.  The plaintiff says that such evidence was led in order to demonstrate that a vessel might take on water even in good conditions and that the fact of sinking does not give rise to any inference of scuttling.

[36] I do not think in this case that the effect of the evidence placed before the court by the plaintiff was to identify a cause or possible cause of the loss of the vessel in this case.  Rather the effect of the evidence was to show possible explanations for the sinking of a vessel without advancing a cause of the sinking.  This is similar to the evidence given Anderson v Morice (1875) L R 10 CP 58.

[37] This being so, it seems to me that the circumstances distinguish this case from  Rhesa Shipping Co SA v Edmunds & Anor (supra) where the ship owners were not able to rely upon the presumption for this and other reasons.  Thus if the plaintiff positively satisfies the court that its claim is not excluded because of scuttling, it is entitled to rely upon the presumption or inference in order to bring itself within the policy and succeed in the action. I acknowledge that this would seem to be an approach more favourable to the plaintiff than that reflected in the judgment of Ryan J in the passage set out above in Doak v Weekes (supra).

[38] The plaintiff had acquired an interest in the vessel in 1996. 

[39] The vessel had something of a troubled history after this.   In 1997 it was damaged by fire and later in 1997 it sunk at its mooring at a wharf.  It was following this that the plaintiff acquired the co-owner’s interest, borrowing $75,000 to do so.  Wayne Kerr was at all material times the sole director of the plaintiff and the skipper of the vessel.

[40] The plaintiff by its counsel made it clear in his opening that the plaintiff did not know what caused the vessel to sink, and, as I have said, did not advance any such cause in evidence.

[41] The defendant advanced a positive case of scuttling and led direct evidence of this.  In addition it relied upon evidence of motive arising from what it claimed was the plaintiff’s financial difficulties.

[42] There were four persons present when the vessel sank.  These were Wade Kerr (“Kerr”), Craig Thompson (“Thompson”), the skipper of the vessel, “Shackrali”, Michael James Dobbins (“Dobbins”), deckhand on the Shackrali and Leonard Morgan (“Morgan”) deckhand on the Ocean Harvester.

[43] I heard from three of these.  Kerr and Thompson were called for the plaintiff and Dobbins for the defendant.

[44] It is convenient if I turn first to the evidence of the plaintiff’s financial circumstances at the time of the sinking of the vessel.

[45] The plaintiff had engaged in night trawling for prawns and bugs for some years.  This plainly was the most lucrative use to which the vessel was, during that time, able to be put.  However, the plaintiff held a number of other licences such as a reef fishing licence, a crab endorsement and netting licences. 

[46] The defendant contended that, because of changes which the authorities were contemplating as part of a process to rationalise the number of nights licensees could fish as a means of preserving the fishery, the plaintiff faced serious financial difficulties in the near future.

[47] It appears that the process involved taking the average of the highest four years for the period from 1988 to 1998 and applying a reduction to that to fix the number of nights fishing was permitted.

[48] It was put to Kerr that this would result in his fishing nights being reduced from 234 in 1999 to something like 120-150.

[49] Kerr said that the proposal had been around for some time and it was by no means clear when it might come into effect. 

[50] A tribunal of some kind had been established to enable fishermen potentially affected by a proposal to seek a review.

[51] Exhibit 7 is a letter written under the hand of Kerr but was in fact written by his wife, Mrs Kerr, to The Queensland Fishing Management Authority (QFMA).  Particular reliance was placed upon the following passage:

“Due to my financial obligation with Westpac Bank the ‘Ocean Harvester’ would need to be allocated more nights to meet my payments and living expenses.”

[52] The letter had earlier outlined the difficulties associated with the vessel since its acquisition and in particular the time that it was out of action because of the fire and the subsequent sinking.

[53] Mrs Kerr, in her evidence, spoke of the contact which she had had with people at QFMA.  She expressed the view that the purpose of the letter was to set out the history of the vessel in order to show that the number of nights worked would have been totally different but for the difficulties that had been encountered.

[54] It would seem that the advice that had been given to the Kerrs from people within the industry had encouraged them to write Exhibit 7 in the hope of obtaining a greater allocation of fishing nights than the application of the formula to be used might otherwise have produced.  It would also seem that some time was still to pass before there would have been any resolution of this issue.  Given the context of Exhibit 12, I do not think that it could be certain that the authorities had even determined to proceed with the proposal.

[55] Another means by which the authorities were attempting to rationalise the number of vessels engaged in fishing was to double the hull units attached to a vessel.  This meant that if a vessel was sold after a particular date, only one half of the hull units necessary to obtain a licence would attach to that vessel than had been the case prior to that.

[56] The plaintiff had preserved its situation so far as hull units was concerned at the time the vessel sank at the wharf by successfully applying for an exemption from the “two for one” rule.  Following the sinking of the vessel in August 2000 the plaintiff was successful in preserving the units (by now called effort units) and subsequently was able to sell those.

[57] Mrs Kerr’s evidence was that if in fact the plaintiff had been faced with a reduction in the number of nights the vessel could fish, then the disadvantage of this could be offset by fishing more selectively and efficiently.  Instead of fishing every night as was the case with such vessels, economies with the use of fuel and a more efficient selection of appropriate nights to fish and places at which to fish would offset any losses arising from the reduced number of nights.

[58] It was Kerr’s evidence that he was not using any of the other licences which he had and that it would have been possible for him to earn an income by using those licences.  There were, he said, a number of fishermen who fished only in those areas and did so profitably.

[59] Tax returns in the year ended 30 June 1999 show that  the plaintiff generated gross earnings of about $349,000 and made an operating profit of about $53,000.

[60] A wage of $5,000 was paid that year to Mrs Kerr and Kerr received $40,000 as part of the crew’s receipts.

[61] In 2000 Mrs Kerr received $5,000 by way of wages and Kerr received a wage of $34,000.  Gross earnings were $323,000

[62] Interest payments of $15,831 on monies borrowed were made out of the plaintiff’s earnings in 2000.  It appears that the plaintiff was able to meet its obligations to creditors.  There is nothing to suggest that it or the Kerrs were under pressure from creditors.

[63] My assessment of the evidence on this subject overall is that whilst, if the scheme to reduce the number of nights had been introduced so as to reduce the plaintiff’s entitlements to the extent suggested, the plaintiff may have been seriously affected, the introduction of this scheme did not appear to be imminent and according to Kerr had been mooted for some time.  The plaintiff was taking steps to challenge the reduction and to seek a greater number of nights and believed that it had good grounds to argue for such an increase. It would seem that the plaintiff’s letter of 3 August 2000 (Exhibit 7) was somewhat premature. In addition, even given a reduction of fishing nights, the plaintiff could offset such losses to some extent by more efficient use of the reduced number of nights.  If necessary, other licences could be used to obtain income from fishing in other areas.

[64] In the meantime the plaintiff was fishing profitably, paying a wage to Kerr and a small wage to Mrs Kerr and was meeting its obligations.

[65] I do not regard the evidence of motive arising from adverse financial circumstances as being strong in the present case.  It is, in my view, far from compelling the conclusion that the plaintiff had a motive to scuttle the vessel. 

[66] There was some debate about the number of pumps on the vessel. According to Kerr, as is shown in Exhibit 5(a), there were three 240V pumps and two 24V pumps as well as a manually operated whale gusher.  The defendant contended that there was, in addition, a pump attached to the main engine which was required for safety purposes.  Kerr denied this and it is not mentioned in a survey report prepared by one Bartlett, a surveyor, following an inspection in March 2000.  I am satisfied there was no such pump on the vessel at the relevant time.

[67] On the other hand, Bartlett’s report notes four 240V pumps and only one 24V pump.  I am inclined to think that he may have erroneously recorded one of the 24V pumps as a 240V pump.

[68] The 240V pumps were on a circuit which drew its power from a generator set at the auxiliary motor towards the stern of the vessel.  Some of the lights also ran from this circuit.

[69] The 24V pumps were powered from batteries which received charge from the main engine.

[70] At about mid afternoon on 2 September, Kerr (with Morgan as his crew) had been fishing inside grounds near Magnetic Island and decided to go to Keeper Reef which was the closest reef.  Morgan was an inexperienced deck-hand

[71] Thompson’s vessel, the Shackrali, came to Keeper Reef sometime after the Ocean Harvester had arrived.

[72] Kerr and Thompson had known each other for many years.  Dobbins was the deckhand on the Shackrali.

[73] According to Kerr, Thompson threw a rope onto the back of the Ocean Harvester which was at anchor. They had a general discussion about matters and Kerr took some oil and cleaning agent from the Ocean Harvester to the Shackrali to repay Thompson for some similar items he had earlier borrowed from him.

[74] As dark approached, each vessel left the reef and commenced trawling operations.  The Ocean Harvester started trawling about eight or nine miles from the reef.  The Shackrali went in a different direction but the lights of each vessel would have been visible to the other.  Kerr carried out two “shots”, each lasting about two and a half hours. 

[75] When trawling, the vessel has arms and booms fully extended from its side.  Fishing gear is attached to these and rests on the bottom as the vessel traverses the area trawled.  There are also stabilisers on each side of the vessel.

[76] According to Kerr, there was a wind of about 15 knots and the tide was running at about two to two and a half knots.  He was trawling side beam onto the tide, which was running from port to starboard.

[77] Kerr’s account of what happened was that as he was checking the try gear at the stern of the vessel, he heard “water slapping”.  He had not heard any bang or any unusual sound which might have indicated the vessel had come into collision with anything. 

[78] He checked the hatch of the auxiliary engine at the rear.  He saw water “flapping everywhere” and could see water splashing off the main drive shaft.  The lights in this area were not working and he was using a torch.  As I have said, these lights were powered on the same circuit as the 240V pumps and the submersible pump at the rear of the vessel was not going.  Water had caused this system to short and when Kerr flicked the switch on at the circuit board in the wheelhouse it flicked back on, at least momentarily.

[79] Some time shortly after he heard the sound of the water, he called Thompson and told him of his problems and asked him if he could stand by in case it was necessary.  Thompson agreed and pulled his gear up and commenced to travel to the Ocean Harvester, which was approximately 45 minutes away.

[80] When Kerr saw that he had a problem, he shut the main engine down.  He could not see the cause of the water and says that it is not easy to see in the main engine area. He thought that the best course to take was to close the engine down and try to hear where the water was coming from.  The auxiliary motor was still going at this time.  He obtained a lead from the wheelhouse which he tried to use on the 240V pump at the rear but it kept shorting out.

[81] During this period he woke Morgan up.  Morgan, according to Kerr, panicked when he realised what was going on.  Morgan was asked to attend to the dinghy and he placed it in the water.  There were sharks in the water at this time.

[82] Because he had to go down into the area of the auxiliary motor looking for the source of the problem and because he could see water spraying off the coupling making the whole area generally wet, Kerr says that he was fearful of being electrocuted and turned off the auxiliary motor.

[83] As he inspected it with a torch, he noticed water “seemed to be bubbling” in the shaft area which is a very restricted area.  He took a doona and forced it with a screw driver into an area in the vicinity of the stern gland in the hope that that was where the water was entering from and that it would stem the flow.

[84] At this time there were few lights on the vessel.  The dinghy had been thrown into the water and Morgan got into it.

[85] Kerr said that he did not try the forward 240V pump because, from what he could see, there was already water “slapping against it so it was a – well, electricity and water just don’t mix”.  The defendant placed some significance on this and some subsequent evidence on this subject and I will return to it.

[86] The 24V pumps were operating and had been activated when Kerr first went to the main engine room after he had heard the sound of the water.  No attempt was made to use the whale gusher.

[87] The vessel had commenced to list to port.  It was now lower in the water at the stern and water commenced to enter through the scuppers.

[88] When Thompson arrived on the Shackrali, Kerr and Thompson spoke and Thompson asked if he could help with pumping.  A 240V pump was handed over in a bucket by Dobbins.

[89] This pump was powered by a lead attached to a power point on the Shackrali.  According to Kerr he tried to use the pump in different areas on the Ocean Harvester but was not successful because the boats were swinging around, pulling the lead. 

[90] It was decided to tie a line from the Shackrali to the starboard boom on the Ocean Harvester to steady it because of its listing to port. Because the front of the Shackrali was caught up in the wires and gear and the stabiliser on the Ocean Harvester, a set of bolt cutters was used to cut away the main trawl wire on the starboard side and the stabiliser was removed.

[91] This allowed access to the Shackrali and enabled a line to be attached to the starboard boom.  The Shackrali was hanging on the end of the boom and the Ocean Harvester “started levelling up” according to Kerr.

[92] However the vessel continued to take water and the 24V pumps were not, according to Kerr, “roaming” as well as when first activated.  Kerr says that for a while the pumps appeared to be keeping up with the water but the point was reached where this was not occurring and water started to enter the freezers.  Whilst these had hatches they were not watertight and Kerr says that once water had reached the level where it could enter the freezers, he realised that there was nothing more that could be done to save the vessel. 

[93] Some personal items and the catch from that night from the Ocean Harvester were transferred to the Shackrali.  Kerr left the Ocean Harvester and, after going onto the Shackrali, removed the rope from it and shortly after, the vessel sank.

[94] Kerr had not attempted to call Townsville Radio but Thompson did and Kerr was aware of this.  In fact, Thompson called on a number of occasions and when the vessel sank, he called the police.

[95] It would seem from Kerr’s evidence that he first noticed the water at about 2.30 a.m. and that the boat sunk somewhere around 5.00 a.m.

[96] Thompson gave evidence that generally supported the account given by Kerr.

[97] He said that after the Shackrali arrived there was a rope tied to the bow rails of the Ocean Harvester for a period.  Thompson says that he could see after he went on board the Ocean Harvester and as he looked down through the focsle where the engine room hatch was open, that the engine room was half full of water.  He said it “would have been half way up or close to the top of the motor”.

[98] Thompson confirmed that the 240V pump was handed over to the Ocean Harvester but that it was not able to be used successfully because the booms of the vessels started to clash. He (Thompson) had to hold the boat straight and reverse and go forward with a view to moving the boom on the Shackrali around and out of the way, so that its gear did not tangle with that on the other vessel.  The result was that the lead was getting tight and pulling out of the power point.

[99] He confirmed that following a discussion with Kerr it was agreed that a rope should be tied to the starboard boom of the Ocean Harvester, which was some feet above the bow rail of the Shackrali.  Because the Ocean Harvester’s gear and stabilisers were getting in the way of the Shackrali, Kerr removed the stabilisers.  The wires were cut off the starboard side.

[100] Thompson said, when asked what would have happened if the port gear had been removed as well, that it would not have been possible for the vessels to remain where they were for any length of time.  Kerr had been cross-examined on this subject.

[101] Both Kerr and Thompson gave evidence that no consideration had been given to towing the vessel to Keeper Reef and running it onto the reef or allowing it to sink in shallow waters nearby.

[102] Both denied the suggestion that the vessel had been scuttled by the two of them acting in concert.  In particular they rejected the claim that was to be made later in evidence by Dobbins that a line had been passed from the Shackrali under the Ocean Harvester and attached to its portside, and that Thompson had then reversed the Shackrali so as to pull the portside of the vessel down into the water and cause it to sink.  He thought it would be very difficult to pass a rope under the vessel in the way suggested and that it would probably be necessary for somebody to get into the water, something which, given the sharks in the vicinity, would have been highly   improbable.

[103] Dobbins was called for the defendant and he gave a more sinister account of the sinking of the Ocean Harvester.

[104] He had been engaged by Thompson for a 10 day period.  They had had to return to Townsville early on 31 August to have a compressor fixed and remained there until 2 September.  At some time whilst in Townsville, the Shackrali was moored beside the Ocean Harvester

[105] When the vessel reached Keeper Reef on the afternoon of 2 September, the Ocean Harvester was already there and the bow of the Shackrali was tied to the stern of the Ocean Harvester.

[106] About an hour after the Shackrali arrived, Thompson called Dobbins to the bow of the Shackrali.  Kerr was on the Shackrali at the time.  According to Dobbins,   Thompson and Kerr went onto the deck of the Ocean Harvester and some 14 cartons of frozen catch (some of the cartons were not full) were passed between the three men from the Ocean Harvester to the Shackrali, where Dobbins placed them into the snap freezer (except in the case of the half cartons which were stacked above deck in the freezer).  Both Kerr and Thompson had denied this when it was put to them.

[107] He says that in the early hours of the following morning, when the Shackrali had been trawling for some time, Thompson told Dobbins they would be going to the Ocean Harvester and that the gear should be wound up so that they could do so.  Dobbins says that when they arrived, the Ocean Harvester was “pretty dark” with only navigation lights on. 

[108] The tide was pushing against the boat so that the trawling gear was at something of an angle across it.  When they got close to the Ocean Harvester, Dobbins saw Kerr putting the dinghy in the water and then saw Morgan, the deckhand, get into the dinghy with his gear and both came across to the Shackrali.

[109] At this time and for a good deal of the time that the two vessels were together,  Dobbins was sorting the catch at the back of the Shackrali.

[110] According to Dobbins (who was with Morgan for much of this time), Thompson appeared to be moving the Shackrali backwards and forwards through the gears towards and away from the Ocean Harvester.  As the bow of the Shackrali got close to the bow of the Ocean Harvester, some items of property including, according to Dobbins, a computer, were handed over.

[111] He says that later in the night he was told by Thompson to stay in the cabin of the Shackrali with Morgan.  He was there for about 20 minutes and, when he came out, saw a rope leading from the bow of the Shackrali at an angle of 45 degrees under the keel of the Ocean Harvester which seemed to be attached to the portside of that vessel.  Thompson put the trawler into reverse a couple of times to try and pull the boat back and on the final occasion “he really gave it to it” and the portside stern of the Ocean Harvester went down and took on water.  At this time the rope was still attached to the Shackrali and Kerr came running out from the wheelhouse where he and Thompson had been, and took the rope off the bow stump of the Shackrali.  This occurred as the vessel was sinking.

[112] Dobbins said that the vessel sank just before dawn.

[113] They returned to Townsville with Kerr and Morgan.  Some days later Dobbins was on the Shackrali when it stopped off Orpheus Reef and the contents of the boxes of product which had been removed from the Ocean Harvester were cooked.  The prawns were emptied out of the boxes and he does not know what happened to the boxes.

[114] He says that at no time did he pass a pump from the Shackrali to the Ocean Harvester nor did he see this happen. 

[115] He says that when they arrived at the position where the Ocean Harvester was, the vessel was listing somewhat to port because of the way in which it was facing in relation to the tide but it was not low in the water.  At no time was a line attached to the starboard boom of the Ocean Harvester.

[116] In cross-examination it emerged that there was some bad blood between Dobbins and Thompson and that they had parted company on bad terms.  However Dobbins did not know Kerr prior to this. 

[117] There is thus in this case a direct conflict of evidence as to the circumstances in which the vessel sank. 

[118] The resolution of these issues is not without considerable difficulty.

[119] So far as my impression of the witnesses are concerned, I thought that Kerr, who is a man of relatively limited education, tended to answer questions without thinking first and to give long and somewhat rambling accounts in his answers.  The result has been significant confusion in some of his answers. He was interviewed some time after making a claim against the defendant. The interview was tape recorded. A transcript of that interview is before the court and some reliance is placed upon it by the defendant.  There are some apparent conflicts between what he said in evidence and what he said in the interview.  I will return to this shortly.

[120] He appeared to be particularly agitated on the third day of the trial and it appears that he was concerned about whether he had done justice to some of the answers that he had previously given.  The answers that he gave in evidence at that time tended to be longer and less responsive than had been the case earlier in his cross-examination.

[121] The defendant contended that the account given by Kerr and, necessarily, that given by Thompson (who it is alleged was a party to the scuttling of the vessel) was so inherently implausible or illogical that it required rejection and that it could not be accepted as a genuine account to save the vessel.

[122] Particular reliance was placed upon a number of matters. 

[123] It was put to Kerr that the effect of continuing to use the two pumps when they were not effectively pumping water would have been to run down the batteries.  There were however many hours of charge left and Kerr said that he was continuing to look for the source of the water.

[124] It was said that it must have been clear that the pumps which were operating were not able to keep up and that unless something was done the vessel would sink.   What should have been done, it was suggested, was to attempt to run the vessel onto Keeper Reef.  Both Kerr and Thompson rejected the suggestion that the vessel might have been run onto the reef or allowed to settle in shallow water nearby.  The proposition was that the Shackrali could have towed the Ocean Harvester to Keeper Reef and that, as they approached the reef, the Shackrali, after removing the rope, could have turned away before the reef, allowing the momentum of the towed vessel to move it forward onto or near the reef.  Both of them said that this had not been considered.  Kerr said that he would not have asked Thompson to attempt such an undertaking with his vessel, and Thompson said that he would have been concerned about the insurance cover on his vessel if he attempted to do this.  Kerr spoke of the possibility that action would be taken by the relevant authority if damage was done to the reef.

[125] Such a course of action would, in my view, have been quite hazardous.  There would plainly be risks of striking coral outcrops, or bommies, as they were referred to.  I reject the suggestion that the failure to attempt to do this itself calls into question the account given by Kerr. 

[126] The defendant relied upon some references in the transcript (to which I have referred) to a line being tied to the portside of the Ocean Harvester.  This is of course what Dobbins alleges occurred, although it is conceded by the defendant that the account in the transcript does not purport to implicate Kerr in the use of such a line to sink the vessel.  This passage appears at pages 46 and 47. There is an earlier reference at page 21 in which Kerr appears to have agreed to a suggestion that there was a line attached to the portside of the vessel.  However shortly after at page 22, he corrects this and says it was the starboard side of the vessel. 

[127] Having regard to my assessment of Kerr’s evidence, I am not convinced that what appears in the transcript at either pages 46 and 47 or page 21 should be regarded as reliable evidence that Kerr was stating that there was a line which was attached to the portside and which had in some way or other got under the vessel.  It is at least consistent with an erroneous reference to the line attached to the starboard side of the Ocean Harvester of which Thompson gave evidence.

[128] It was said that a particularly significant part of the evidence and which would lead to a rejection of the account was the explanation which Kerr gave for not trying to use the 240V pump in forward section of the vessel.

[129] I have already referred to his evidence-in-chief.  When he was asked about this in cross-examination at pages 118 – 120 he said:

“MR COUPER:  Right.  Do you recall giving evidence yesterday about – you were asked why you didn’t try to turn the 240 volt pump in the for’ward section of the – of the vessel on?—Yep.

All right. And as I understand you, you say – well, firstly, you – you never tried to turn that pump on. Is that correct?— No.

All right.  Now, just tell me again why that was, why you never made the attempt to turn that pump on?— It has to be switched over. It’s got to be switched over to enable it to do bilge pumping anyway.

HIS HONOUR: The 240 volt bilge.  And – and what would have to be done, it would have to be changed over to a -----?— There’s a – it’s a seacock set up in it. It’s got to be – actually, you’ve got to shut all the seacock off to bring – like to stop salt water coming in and change it over to bilge – bilge pumping. The pump all has to be primed up.

MR COUPER:  If we can take this in stages, Mr Kerr, the bilge alarm – the high level bilge alarm is designed to tell you that there is water in the bilges.  Correct?— High level bilge alarm, yes.

Yes.  And its purpose is so that you know to turn on the manual bilge pump?—That – that is correct, yes.

All right.  And it’s the case, isn’t it, that what you were suggesting yesterday was, by the time the water got to the level of the high level bilge alarm there was no point trying to turn on the high level bilge pump because it wouldn’t work, because it was covered in water?— The bilge pump still has to be changed. You’ve – it’s a deck hose at that time.  I can’t just switch a deck hose on. It’s – it’s still a deck hose. It has to be – you’ve got to do a lot of alterations to it to turn it into a bilge pump. It still is only a deck pump. It’s a – it’s a deck wash pump, not a – not a bilge pump.  It can be adapted to a bilge pump.

Well, if we can take it a step further.  Page 47, you were asked this question immediately after giving that explanation.  ‘Well, did you have any concern about the possibility of electric shock?’ And you said, ‘Oh, yes, for sure.’  There was no prospect of electric shock when you were trying to turn on the for’ward bilge pump, was there?—I don’t know that.  I’m not going to go switching a pump on that’s got water slapping up against it to be honest.”

[130] When asked again at page 202 he said:

“MR COUPER:  All right.  Mr Kerr, you gave some evidence yesterday about the for’ward deck bilge pump, amongst other things, that you would have had to prime that pump before it could work.  Do you recall that?—Yes.

MR COUPER:  It was a self-priming pump, wasn’t it, Mr Kerr?— Course the – the – the pump is a self-priming pump, if that’s – this – like in the scenario report which I’m not sure who wrote it out to pass it on, which these documents have been taken off.  The – I’ve already stated it is a – like they a self-priming pump, if – if they are level, by all means.  The way my setup was, if – if I could explain-----

You’ve answered my question, thank you?--  But what – the – the question you’re answering me – you’re asking me on a – on a totally – you’re telling me what my pump is, but you – you don’t know what – what my pump is.  I’m telling you what my pump is so you can ask me on my pump. I don’t know what to answer about your pump because I – your pumps are different. 

HIS HONOUR:  All right.  Well, what do you want to say about your pump?--  My – my pump which by survey is the deck wash pump which comes out of the seacock which goes to a three-way valve which has a pipe into the bilge which you have to hop into the – if – if I may – if – to engage it.  To pump bilge you’ve got to hop down into the bilge. You’ve got to select from the three-way seacock.  You’ve got to shut off the seacock that you’ve been asking me about.”

[131] It may be that this is an area in which Kerr failed to do justice to his position because of his readiness to answer without thinking first.  However it seems to me that there is a significant shifting of ground in relation to the explanations that he gave on the three occasions that he was asked about why he failed to attempt to use the forward 240V pump, although at all times he emphasised his safety concerns.

[132] Apart from this area of Kerr’s evidence about which I have reservations, I am not convinced that there was anything inherently implausible or illogical in the account generally which he gave.  He says that he was faced with an emergency and that his primary focus was upon finding the source of the entry of the water and his actions fall to be judged in the light of that.  I have rejected the suggestion that on his account there were steps open which could have been taken and which were not taken, to avoid the vessel sinking.  Of course, ultimately the issue is not whether the account is a plausible or logical one but whether it is a credible one.

[133] The area of the evidence to which I have referred does give me some cause for concern, although as I have said, it may simply be a particularly notable example of Kerr’s readiness to answer without thinking.  Of the three witnesses, I thought that he was the least impressive.  He has an obvious interest in the matter and given my reservations about this important aspect of his evidence, I would not be prepared to accept his evidence in preference to that of Dobbins.

[134] I thought that Thompson was a good witness and I did not think his account was breached in cross-examination.  The defendant placed reliance upon some differences between his account and that of Kerr, such as where the pump which was said to have been passed over was used on the Ocean Harvester. I thought that this and the other areas relied upon were matters of detail which did not significantly impact upon the credibility of either witness.  It must be remembered that Thompson was, except for a short period, at all times on the Shackrali.  His demeanour was quiet and he gave his evidence in a matter-of-fact way.  Overall I did not think his evidence lacked credit-worthiness.

[135] However I think the same can be said of the evidence of Dobbins.  His account was also not breached.  His evidence was impressive in its detail and there was a cogency and credibility about it.  The transfer of the Ocean Harvester’s catch on the day before the sinking was an important piece of evidence which suggests some degree of pre-meditation.  His account of being asked by Thompson to stay in the wheelhouse immediately prior to the sinking of the vessel following which he saw the line which appeared to go under the Ocean Harvester also was, I thought, something which it would be difficult to reject as an invention or based on a mistaken apprehension of what he was observing, given what he says immediately followed.

[136] The evidence as to just how a line could be attached in these circumstances is a little unclear.  There is evidence from Behan, a marine consultant who was called by the defendant, that this could be done and in his experience had been done.  It is obvious from his description, however, that it is not without difficulty. 

[137] Whilst there is some evidence of bad blood between Thompson and Dobbins, he did not know Kerr and it is difficult to accept that his argument with Thompson would motivate him to give a false account involving such serious misconduct and with such serious consequences to Kerr. 

[138] Many of the authorities emphasise the difficulties which are usually attendant upon proof of scuttling.  See “The Olympian” (1924) 19 LIL Rep at 275 per Lord Birkenhead.  See also Thomas J. in Jeffrey v Associated National Insurance Co Ltd (supra) at pages 24 and 25.

[139] The present case involves circumstances very different to those referred to in the cases just cited.  Here, unusually, at least by reference to the reported cases, there is direct evidence of scuttling.  Nonetheless the case presents difficulties.

[140] The issue is one of credence.  There is nothing external to the accounts of the witnesses which can be regarded as either supporting or weakening the different accounts given.  I have already said that I do not regard the evidence of financial stress as being particularly convincing.

[141] Attention necessarily must focus on whether there are internal inconsistencies or inherent improbabilities in the accounts given.  I have already referred to the difficulties I have had with one aspect of Kerr’s evidence.

[142] I would not be prepared to accept his evidence in preference to that of Dobbins, and would, if the issue remained between them, accept Dobbins’s account in preference.

[143] However, putting Kerr’s evidence to one side, I am left with the evidence of Thompson on the one hand and Dobbins on the other.  Thompson was, on the defendant’s case, a party to the scuttling of the Ocean Harvester.  His evidence however, in my view, was not in any way damaged in cross-examination.  I did not think that his evidence lacked creditworthiness.

[144] On the other hand I thought that Dobbins’s evidence  had an undeniable cogency and credibility.

[145]  In Rhesa Shipping (supra) at 718 Lord Brandon (speaking in a somewhat different context) observed:

“…the judge is not bound always to make a finding one way or the other with regard to the facts averred by the parties. He has open to him the third alternative of saying that the party on whom the burden of proof lies in relation to any averment made by him has failed to discharge that burden. No judge likes to decide cases on burden of proof if he can legitimately avoid having to do so. There are cases, however, in which, owing to the unsatisfactory state of the evidence or otherwise, deciding on the burden of proof is the only just course for him to take.”

[146] This is, after consideration of the evidence in this matter, the position I find myself in.

[147] Given my assessment of Thompson as a witness and given the very serious nature of what is alleged against the plaintiff (with Thompson as a party), I would be reluctant to reach a positive conclusion that the vessel had been deliberately scuttled and I decline to do so.

[148] However, the credibility and cogency of Dobbins’s evidence when considering whether the plaintiff has established that it does not fall outside of the policy, having regard to the evidence of scuttling, it seems to me must stand as a bar to the plaintiff succeeding in its action.  Having regard to Dobbins’s evidence and my evaluation of it, I am unable to be satisfied that it is more probable than not that the vessel was not scuttled. 

[149] The action is dismissed with costs to be assessed.

Close

Editorial Notes

  • Published Case Name:

    Ocean Harvester Holdings Pty Ltd v MMI General Insurance Limited

  • Shortened Case Name:

    Ocean Harvester Holdings Pty Ltd v MMI General Insurance Ltd

  • MNC:

    [2003] QSC 262

  • Court:

    QSC

  • Judge(s):

    Cullinane J

  • Date:

    15 Aug 2003

  • White Star Case:

    Yes

Litigation History

No Litigation History

Appeal Status

No Status