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  4. Noosa Cruises Pty Ltd v Saltwater Noosa Pty Ltd - [2022] QDC 278

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Noosa Cruises Pty Ltd v Saltwater Noosa Pty Ltd[2022] QDC 278

Noosa Cruises Pty Ltd v Saltwater Noosa Pty Ltd[2022] QDC 278

DISTRICT COURT OF QUEENSLAND

CITATION:

Noosa Cruises Pty Ltd v Saltwater Noosa Pty Ltd & Ors [2022] QDC 278

PARTIES:

NOOSA CRUISES PTY LTD

ABN 64 064 084 886

(Plaintiff)

v

SALTWATER NOOSA PTY LTD AS TRUSTEE FOR THE SALTWATER UNIT TRUST

ACN 608 797 315

(First Defendant)

And

TD MARINE SURVEYORS AND NAVAL ARCHITECTS

ACN 107 755 144

(Second Defendant)

And

TERRY R DAVIS

(Third Defendant)

FILE NO:

926/20

DIVISION:

Civil

PROCEEDING:

Trial

ORIGINATING COURT:

District Court at Brisbane

DELIVERED ON:

9 December 2022

DELIVERED AT:

District Court at Brisbane

HEARING DATE:

26 - 29 September 2022, 28 October 2022

JUDGE:

Loury KC DCJ

ORDER:

  1. There be judgment for the plaintiff on its claim. 
  2. The first defendant’s counterclaim is dismissed. 
  3. The first defendant’s claim against the second and third defendants is dismissed. 
  4. The first defendant pay the plaintiff the sum of $543,616.17.
  5. I will hear further from the parties as to any consequential orders sought and to costs.
  6. If agreement cannot be reached each party has 21 days within which to file further submissions not exceeding four pages.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – BREACH – where the plaintiff sold a business including a boat to the first defendant – where vendor finance provided – where the first defendant stopped making payments – where the defendant had no contractual right or entitlement at law to delay the payment of monies it had expressly agreed to pay under the terms of the contract

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – where the first defendant counterclaims that the plaintiff promised to sell a vessel which was lawfully, properly and safely able to carry 160 passengers, and that there were no restrictions on passengers on the upper deck – where the first defendant argues the vessel was not registered to carry 160 passengers – where the first defendant contends the plaintiff represented that there were no restrictions on passenger numbers on the upper deck – whether the representations made regarding the carrying capacity of the vessel and upper deck restrictions amount to misleading or deceptive conduct

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – where the first defendant counterclaims on the basis that there was an implied term in the contract that the vessel was lawfully, properly and safely able to carry 160 passengers – where the first defendant argues the vessel was registered as a result of flawed technical advice by the second and third defendant – where the first defendant argues the vessel was not seaworthy, and that that was an implied term of the contract

DAMAGES – ASSESSMENT OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT – whether the plaintiff caused any loss – where the first defendant renovated the vessel significantly, such that the vessel’s value now is greater than at the time of the contract – where not all of the renovations undertaken were necessary to allow for the vessel to operate safely with 160 people onboard – where the costs incurred in rebuilding the vessel far exceed the costs which were reasonably incurred in addressing the vessel’s deficiencies

LEGISLATION:

Australian Consumer Law (Cth) s 18, s 236

Civil Liability Act 2003 (Qld) s 22

Marine Order 503 (Certificates of survey – national law) 2018 (Cth)

Marine Order 504 (Certificates of operation and operation requirements – national law) 2018 (Cth)

Navigation Act 2012 (Cth) s 23

CASES:

Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Gates v City Mutual Life Assurance Society Ltd (1987) 160 CLR 1

Jones v Dunkel (1959) 101 CLR 298

COUNSEL:

G Forde for the Plaintiff

A Marinac (solicitor) for the First Defendant

M de Waard for the Second and Third Defendants

SOLICITORS:

Holland & Holland Solicitors for the Plaintiff

Pacific Maritime Lawyers for the First Defendant

Mills Oakley for the Second and Third Defendants

Introduction

  1. [1]
    The plaintiff, Noosa Cruises Pty Ltd owned and operated a business, Catalina Cruises, from September 1994 until late 2015. The most significant asset of the business was the MV Catalina (“the Catalina”), a boat.  The business involved taking passengers onboard the Catalina for the purposes of cruising up and down the Noosa River.  The Director of the plaintiff, Mr Bevan Inwood was the master of the vessel, the Catalina.  The Catalina was built in 1989.  It is a twin hull vessel.  When the plaintiff purchased the business in 1994, the Catalina was a single deck vessel with superstructure made predominantly out of timber.  Mr Inwood made some modifications to the vessel in 2006 such that it was said to be capable of carrying 160 passengers.  As a consequence of those modifications, Mr Terry Davis, a marine surveyor and the third defendant, surveyed the Catalina in 2006 for the purposes of the granting of a Certificate of Operation by the State regulator, Maritime Safety Queensland (“MSQ”). 
  2. [2]
    On 30 October 2015 the plaintiff entered into a contract of sale for its business, including the Catalina, to the first defendant, Saltwater Noosa Pty Ltd.  The purchase price was $550,000.  The business was sold on a “walk-in, walk-out” basis.  The plaintiff agreed to provide tuition/assistance for a period of 30 days after completion of the contract.
  3. [3]
    The special conditions to the contract included the following relevant clauses:
  1. SUNSET DATE

2.1 For the purposes of these Special Conditions, Sunset Date means 31/01/16, or such other date as agreed in writing by the parties.  

  1. DUE DILIGENCE

3.1 This contract is subject to and conditional upon the Buyer carrying out, within 14 days of the date of this Contract, due diligence enquiries in relation to the Business, satisfactory in all respects to the Buyer. In the event such enquiries are not satisfactory then the Buyer may terminate this Contract by written notice to the Seller in which event all deposit monies shall be refunded to the Buyer in full.

3.2 The Seller shall allow the Buyer, and it’s consultants, reasonable access to the Business and the Business Premises, on reasonable notice, to carry out its due diligence enquiries.

3.3 The Buyer indemnifies the Seller from and against any loss or damage caused as a result of its due diligence enquiries.

  1. SLIPPING & SURVEY OF VESSEL

4.1 The Buyer shall be entitled, prior to the Sunset Date, to have the motor vessel M.V. Catalina slipped (at a place and by a method agreed to by the parties), for survey at its cost.

4.2 In the event the survey reveals a major structural defect to the hull which the Seller is not prepared to repair at the Seller’s cost then the Buyer may terminate this Contract by written notice to the Seller in which event all deposit monies shall be refunded to the Buyer in full.

  1. PAYMENT OF BALANCE PURCHASE PRICE/VENDOR FINANCE

8.2 The Buyer shall pay to the Seller the balance Purchase Price of $495,000.00 together with interest thereon…as follows:

  1. (a)
    by 48 monthly instalments of $4,000.00 in arrears, payable on or before the 7th day of each month…;
  2. (b)
    as to the balance then owing, on a date 49 months after the Date of Completion of this Contract. 
  1. [4]
    On or about 14 November 2015 the plaintiff and defendant agreed to vary the contract as follows:
    1. (a)
      the Plaintiff would grant the Defendant early possession of the Business, prior to satisfaction of the Conditions and completion of the Contract;
    2. (b)
      the terms for repayment of the Vendor Finance were varied as follows:
      1. by 48 monthly instalments of $4000.00 in arrears, payable on or before the 7th day of each month (commencing the month following the date the Defendant was given possession of the Business);
      2. as to the balance then owing, on a date 49 months after the date the defendant was given possession of the Business.
  2. [5]
    The first defendant granted the plaintiff a bill of sale over the business, as security for payment of the vendor finance.  The first defendant took possession of the business on or about 14 November 2015, although the contract was not completed until 5 October 2017 due to delays associated with the transfer of a liquor license. 
  3. [6]
    The first defendant retained the services of Mr Davis, the third defendant (and Director of the second defendant) to survey the vessel around 23 November 2015.   A Certificate of Operation was granted to the first defendant by MSQ and it operated the business as intended until October 2018 when problems were detected with the vessel and remediation works were undertaken. 
  4. [7]
    The first defendant made payments in accordance with the terms of the contract from 14 December 2015 until 14 December 2018 when it stopped making payments. 
  5. [8]
    The plaintiff claims $455,778.87 as a debt due and owing and/or as damages for breach of contract.
  6. [9]
    The first defendant denies that it is in breach of the contract and has pleaded that the undelivered payments which constitute the breach of contract were delayed in circumstances arising from the plaintiff’s own breach of the contract and were delayed in circumstances where the contract did not express the time of such payments to be of the essence.  
  7. [10]
    The first defendant pleads that the plaintiff promised to sell a vessel which was lawfully, properly and safely able to carry 160 passengers.  It further pleads that the contract implied a term that the vessel would be seaworthy, in order to give business efficacy to the contract. 
  8. [11]
    The first defendant counterclaims against the plaintiff on the basis that the vessel was never able to lawfully, properly and safely carry 160 passengers and was not seaworthy.  The first defendant further pleads that it incurred costs to repair and renovate the vessel to render it seaworthy and capable of carrying 160 passengers and lost profits during the period of its repair.  The first defendant seeks $757,453.68 in special damages for remediation costs; $167,544.37 in damages for loss of use; and $19,738.03 in interest.
  9. [12]
    The plaintiff disputes the counterclaim but states that it is entitled to an indemnity from the first third party or the second third party for the first defendant’s claims for damages insofar as they arise out of or are occasioned by the first third party or second third party’s breaches of their contract with the plaintiff or their breach of the Australian Consumer Law.
  10. [13]
    The first defendant also claims against the second and third defendants (the first third and second third party) damages for breach of duty in performing the surveys in 2006 and 2015. 

The plaintiff’s claim

  1. [14]
    The contract is a standard form REIQ Contract Business Sale. Clause 22 of the Standard Conditions of Sale states that time is of the essence. 
  2. [15]
    Clause 6 of the Bill of Sale provides as follows:
  1. GRANTEE’S POWERS ON DEFAULT

6.3 If the Grantor shall commit or suffer any default hereunder the whole of the monies secured hereby shall at the option of the Grantee and whether any power exercisable after default shall be invoked or not be and become immediately payable.

  1. [16]
    Mr Inwood was not challenged on his evidence that the first defendant failed to pay the amounts agreed to under the contract.  No submissions were directed towards the concept of delaying the payments or to the suggestion that time was not of the essence. 
  2. [17]
    The Bill of Sale contains an express provision:
  1. NO SET OFF

17.1 This security and the right to receive any monies payable hereunder shall be free from any equities, set off or cross claim which but for this provision the Grantor would be entitled to set up against the Grantee or any intermediate mortgagee or any assignee.

  1. [18]
    The first defendant had no contractual right or entitlement at law to delay the payment of monies it had expressly agreed to pay under the terms of the contract.  The Bill of Sale makes clear that the first defendant had no entitlement to delay or suspend payment due to any equity or set off or cross-claim that it might have. 
  2. [19]
    The plaintiff has made good its case and is entitled to judgment against the first defendant for damages for breach of contract in the amount of $534,882.90 plus interest from 14 September 2022.

Counterclaim – misrepresentation – passenger capacity

  1. [20]
    The first defendant pleads that the plaintiff made the following pre-contractual representations in a document styled “information memorandum”[1] – “that MV Catalina was ‘registered to carry 160 passengers’ and which indicated no restrictions on passenger numbers on the upper deck”.[2] 
  2. [21]
    It is argued that each of those representations, namely, that the vessel was registered to carry 160 passengers and that there were no restrictions on passenger numbers on the upper deck, were misleading and in breach of section 18 of the Australian Consumer Law.
  3. [22]
    Schedule A to the contract of sale (which sets out the plant and equipment included in the contract) refers to the Catalina as follows:

MV Catalina, a fully-surveyed (Cat 1E) 160 passenger vessel built in 1989 of solid GRP construction and completely refitted with aluminium superstructure and top deck in 2006.

  1. [23]
    By that express term in the contract the first defendant has pleaded that the plaintiff promised to sell to the first defendant a vessel which was “lawfully, properly and safely able to carry 160 passengers”.[3] 
  2. [24]
    The first defendant contends that there was a contractual obligation on the plaintiff, according to the terms of the contract, to supply a vessel with a survey certificate and that this obligation was not met. The difficulty with this submission is that it was never pleaded that the plaintiff promised to supply a vessel with a Certificate of Survey or that the vessel was “in-survey”.[4]  Rather, as indicated, the pleading states that the plaintiff promised to sell to the first defendant a vessel which was “lawfully, properly and safely able to carry 160 passengers”. The misrepresentation relied upon in the defence is that the Catalina was registered to carry 160 passengers. 
  3. [25]
    Mr Inwood swore in his affidavit[5] that in March 2015, in anticipation of selling his business he applied for a renewal of the Certificate of Operation for the Catalina.  On 9 March 2015 the Australian Maritime Safety Authority (“AMSA”) issued a Certificate of Operation.[6] The certificate relevantly provides that the vessel (the Catalina) is able to carry a maximum of 162 passengers; with 160 passengers unberthed and is able to carry a maximum of 65 persons on the aft deck.  The certificate was current for a period of 12 months and was contained within schedule B to the contract of sale.
  4. [26]
    The Certificate of Operation was issued under Marine Order 504.[7]  A certificate of survey is different and is issued under Marine Order 503.
  5. [27]
    The Certificate of Operation proves that on the date that the contract was entered into, the Catalina was registered to carry 160 passengers with a maximum of 65 passengers on the aft deck.  In my view, the pre-contractual representation relied upon by the first defendant, that the vessel was “registered to carry 160 passengers” was not a misrepresentation at all.  The Catalina was registered to carry 160 passengers. 
  6. [28]
    The first defendant also pleads that the document “information memorandum” indicated that there were no restrictions on passenger numbers on the upper deck and that this was a misrepresentation.  The information memorandum does not contain any express words limiting the restriction on passenger numbers on the upper deck.  No submissions were advanced by the first defendant in relation to this argument.  I accept as the plaintiff submits that an express representation that the vessel was registered to carry 160 passengers does not carry with it, as a consequence, an implied term as to where those passengers are able to move on board the vessel.  
  7. [29]
    The first defendant has not proved on balance that the plaintiff made any pre-contractual misrepresentations. 

Counterclaim – breach of contract – passenger capacity

  1. [30]
    The first defendant pleads that the plaintiff promised to sell a vessel which was lawfully, properly and safely able to carry 160 passengers.  This was not an express term of the contract but is argued to arise by virtue of the description of the Catalina as “a fully-surveyed (Cat 1E) 160 passenger vessel”. Whilst this limb of the first defendant’s counterclaim appears under a heading “Express term”, it seems to me that the argument that has been made is that this was an implied term of the contract.
  2. [31]
    The first defendant’s contentions are: (1) that the Catalina was not capable of carrying 160 passengers because its registration was based on flawed technical advice provided by the second and third defendants; (2) there was an incident which occurred soon after the first defendant took possession of the Catalina which demonstrates it was overloaded with 80-100 passengers; and, (3) the lightship weight of the Catalina in 2018 demonstrates that it could not have lawfully, properly and safely carried 160 passengers in 2015.

1.Passenger capacity

  1. [32]
    Mr Norris, the Director of the first defendant, said in evidence, that it became obvious to the first defendant that the Catalina was not able to carry 160 people.  It seems that concern arose in 2018. He said that when there were 75-80 people on board the vessel, the boat would sit extremely low in the water to the point where the tell-tales on the outboard motors were under water.[8]  As a consequence, he engaged Aurora Marine Design to provide some advice on the vessel.  He also commissioned a survey be done by Mr Michael Ebsworth, an accredited marine surveyor. 
  2. [33]
    On 21 August 2018, after Mr Ebsworth had completed his survey of the vessel, the first defendant received from MSQ a Direction Notice which required the Catalina to operate within limits outlined in the trim and stability statement dated 20 June 2018 provided by Aurora Marine Design and to operate only within the limits of the Noosa River, and to continue to document verification on the timber structures.[9]
  3. [34]
    Mr Norris said that as a consequence of the advice received, he commissioned new hulls be designed and attached to the Catalina. 
  4. [35]
    The Catalina was removed from the water in October 2018 and effectively rebuilt. The only portion of the original vessel retained was the aluminium superstructure.   Two new fibreglass hulls were manufactured to which the superstructure was attached.  The new hulls increased the size of the Catalina. Its footprint increased from 88 square metres to 139.68 square metres. There were other opportunistic upgrades which were undertaken at the time. Mr Norris said that the first defendant paid $765,008 for the works undertaken.  
  5. [36]
    The first defendant contends that the carrying capacity of the Catalina at the time of sale (as capable of carrying 160 persons) was based upon a survey that Mr Terry Davis, the third defendant, undertook on the Catalina in 2006. Mr Davis, it is contended, breached his duty as a professional marine surveyor when undertaking this 2006 survey.
  6. [37]
    Mr Davis is a marine surveyor.  He has been a marine surveyor for approximately 41 years and holds an accreditation with the national regulator, AMSA. Prior to becoming a marine surveyor, he worked as an apprentice shipwright (building ships) and trained as a naval architect and marine surveyor for over 17 years.  He is, in my view, very experienced in conducting marine surveys.
  7. [38]
    Mr Davis conducted an inclining experiment on the Catalina on 21 August 2006 at the request of Mr Inwood.  Prior to that inclining experiment, in 2006, Mr Inwood determined to modify the Catalina by adding an upper deck and replacing the timber and fibreglass superstructure with a lighter and stronger aluminium superstructure.  He also increased the length of the vessel. Those modifications required a check to be performed on the vessel’s stability data. The ability of a vessel to maintain its equilibrium or stability is one of the key principles when determining passenger capacity.     
  8. [39]
    A lightship survey is done to calculate the displacement or weight of the vessel.  The lightship is calculated by deducting items onboard the vessel that do not form part of the lightship such as fuel, fresh water, stores and persons onboard. An inclining experiment is done to calculate the vertical centre of gravity of the vessel. By moving weights across a vessel, the angles of heel can be measured.  Using the inclining experiment results and the lightship of the vessel, the vertical centre of gravity can be determined. 
  9. [40]
    Mr Davis said in evidence that the then-regulator MSQ requested a lightship assessment be done to establish whether the existing displacement had increased or decreased because of Mr Inwood’s modifications.  Mr Davis said that he was asked to check (assumedly by Mr Inwood) if the vessel was capable of carrying 160 passengers, which is generally two busloads of passengers.[10]
  10. [41]
    The first defendant argued that I would infer from the evidence of Mr Davis that rather than determining the number of passengers that the Catalina was capable of carrying, he had in mind 160 passengers and used calculations that would justify that figure.  It was argued that Mr Davis deliberately left onboard the vessel the liquid stores that he ought to have removed before conducting his experiment, so that the weights of those liquid stores could be deliberately adjusted in order to produce the outcome he was intent on obtaining, which was a carrying capacity of 160 passengers.   
  11. [42]
    This challenge to Mr Davis’ credibility was not put to him in cross-examination so he was not given an opportunity of responding to it. 
  12. [43]
    In Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation,[11] the rationale for the rule in Browne v Dunn was explained by Hunt J:

"There are many reasons why it should be made clear, prior to final addresses and by way of cross-examination or otherwise, not only that the evidence of the witness is to be challenged but also how it is to be challenged. Firstly, it gives the witness the opportunity to deny the challenge on oath, to show his mettle under attack (so to speak), although this may often be of little value. Secondly, and far more significantly, it gives the party calling the witness the opportunity to call corroborative evidence which in the absence of such a challenge is unlikely to have been called. Thirdly, it gives the witness the opportunity both to explain or to qualify his own evidence in the light of the contradiction of which warning has been given and also, if he can, to explain or to qualify the other evidence upon which the challenge is to be based."

  1. [44]
    I do not consider that Mr Davis was at all dishonest, nor did he misrepresent what had occurred.  His memory was naturally impacted by the passing of time. I did not consider that he was reconstructing what had occurred.  I did not gain any impression that he was a man so lacking in integrity that he would engage in such dishonest conduct.
  2. [45]
    Mr Davis’ evidence was that in determining a vessel’s lightship it is necessary to reduce the vessel to its lightship condition.  That means removing all movable stores.  He agreed that ideally tanks should be empty but realistically that is not always possible. For example, it is not practical to remove fuel from a vessel before determining the lightship weight.  When liquid stores are not able to be removed it is necessary to take account of the weight of the liquid stores.[12] 
  3. [46]
    Mr Davis said that in conducting an inclining experiment, fluids can be left onboard the vessel, so long as account is taken of the contents, which he did.  His report demonstrates that he did take account of the liquid stores left onboard the vessel.[13]  Mr Davis said that a dip test allowed for the level of fluid to be determined. That is then considered against a tank capacity table in order to determine the amount of the liquid present.  Mr Davis said that a dip test was probably accurate up to five litres, depending on how the dip stick is graded. In response to the suggestion that it was inherently implausible that all of the fluids would be exact multiples of 100 litres as his report indicated, Mr Davis said that it could be that the graduations on the dipstick were in 10 litre lots and that it was giving the capacity in round numbers.[14] 
  4. [47]
    Mr Davis accepted that his report indicated that there was sullage onboard the vessel which would ordinarily be removed. He provided a possible explanation for it not being removed being, that perhaps there was no way of removing the sullage because the vessel was not near a sullage dump point. (Sullage is sewage.) Of the fresh water that was left onboard the vessel when he conducted his experiment, Mr Davis said that he could not remember where the vessel was when he conducted his experiment and that perhaps there was no means of pumping the fresh water out.[15]
  5. [48]
    Mr Davis was having to remember in his evidence, an event that occurred some 16 years earlier. I am not willing to draw an inference that Mr Davis deliberately engaged in dishonest conduct when I have not had the benefit of hearing his denial to that suggestion in evidence. I considered his explanations for why the sullage and freshwater were not removed from the vessel to be reasonable ones.  I am further satisfied that Mr Davis’ report took into account the stores that were onboard the vessel at the time of his survey. 
  6. [49]
    Mr Davis’ report[16] following his inclining experiment stated that the existing stability data for the Catalina was still acceptable.  He provided a supplementary report which he calculated for passenger crowding on the upper deck with 160 passengers on the upper deck.[17] That report indicated that the stability was satisfactory for up to 160 persons on the upper deck. That stability was calculated on what Mr Davis considered to be the worst condition with all people on the upper deck with offshore criteria applying.[18]
  7. [50]
    Mr Davis completed a MSQ form titled “Commercial/Fishing Ship Certificate of Compliance for Stability”. The form indicates that he submitted the new inclining experiment and supplementary report for increased passenger numbers on the upper deck.  Mr Davis declared on 21 August 2006 that the ship was suitable to be operated as a class 1E ship and that it was seaworthy for stability for the purpose of charters in smooth waters only.  He declared that the number of persons that the ship could carry was 160 passengers and two crew.  He further declared that the only limitation on the distribution of the ships complement was a maximum of 160 persons on the upper deck.[19] 
  8. [51]
    Mr Davis (and the second defendant) called an expert witness, Mr Craig Boulton.[20]  He is a naval architect and accredited surveyor for domestic commercial vessels in Australia.  He holds a Bachelor of Engineering in Mechanical Engineering in Naval Architecture.  Mr Boulton reviewed the survey undertaken by Mr Davis in 2006.  He said that, generally the experiment followed the then-legislative requirements.  Mr Boulton did note some errors in the experiment and opined that it was not done with sufficient accuracy.  The experiment did not calculate the lightship and compare that to the original lightship. The calculation that Mr Davis used for checking if the stability was acceptable for 160 passengers used the incorrect criteria. The criteria used was for a category S vessel which is one that is less than 20 metres in length and carries less than 50 persons and is engaged in offshore operations.  The correct category that Mr Davis ought to have used was category R which is for a multi-deck vessel of any length carrying 50 or more persons operating in sheltered waters.
  9. [52]
    Despite the deficiencies with Mr Davis’ experiment in 2006, Mr Boulton, after conducting his own Full Load Stability Condition Calculation, opined that the vessel in 2006 passed all stability requirements to carry 160 passengers.[21]
  10. [53]
    The first defendant called Mr Peter Holmes, a qualified naval architect with a Bachelor of Engineering in Naval Architecture.  He too is an accredited ship surveyor.  He considered that the methodology used by Mr Davis in his 2006 inclining experiment was sound.[22]  He was not asked to perform his own calculations.
  11. [54]
    Whilst there were errors in the calculations that Mr Davis undertook in 2006, I accept that the methodology he used was sound.  I also accept Mr Boulton’s evidence that using the correct calculations, the vessel was still properly able to carry 160 passengers.  The first defendant argued that I ought not accept Mr Boulton’s evidence because the calculations were not in evidence.  I do not accept that it was necessary for Mr Davis to adduce the actual calculations to make good his argument that the calculations were correct, particularly when no challenge was made to Mr Boulton as to his calculations. 
  12. [55]
    The first defendant has not proved on the balance of probabilities that Mr Davis’ survey was inaccurate. Only if proven to be inaccurate could it be established that he breached any duty he owed.
  13. [56]
    The Catalina in my view was lawfully, properly and safely able to carry 160 passengers as at the time of entering into the contract.

2.Overloading incident

  1. [57]
    The first defendant argues that an incident onboard the Catalina shortly after it took possession of it on 14 November 2015 demonstrates that the vessel could not carry 160 persons.  There was an occasion when Mr Inwood was operating the vessel whilst providing tuition to the first defendant where he interrupted a photographer taking a photograph of wedding guests who had gathered on the upper deck of the Catalina.    Mr Inwood recalled the photographer asking the guests to move to the back of the boat which upset the trim of the vessel.  He acted to prevent any damage to the motors through water ingress by interrupting that process.[23]
  2. [58]
    Mr Scott Prince, who was at the time of entering into the contract of sale a Director of the first defendant, was present during this event.  His recollection was that the guests crowded to one side rail of the Catalina, that Mr Inwood became agitated, ran off the vessel and screamed at the guests to step away from the handrail.  He considered that there were between 80 and 100 guests onboard the vessel at the time (Mr Inwood gave a similar estimate of the number of guests on the upper deck).  The guests moved away from the side rail and distributed themselves evenly across the upper deck of the vessel. Mr Prince said that he didn’t speak to Mr Inwood about this incident at any time.[24] 
  3. [59]
    Mr Timothy Norris, the Director of the first defendant was present on the jetty when this event occurred.  The photographer asked the guests to move to the starboard side handrail.  Mr Inwood came rushing off the boat and yelled and waved his arms to tell the guests to step back from the handrail.  Mr Norris said that he did not notice any impact to the Catalina but he was more concerned about Mr Inwood’s behaviour rather than what the vessel was doing. He did not give any evidence as to any conversations he had with Mr Inwood about this incident.[25]
  4. [60]
    The first defendant argues that I should infer from Mr Inwood’s behaviour on this occasion, that he knew that the Catalina was overloaded and that the positioning of the passengers on the upper deck was placing the vessel at risk.
  5. [61]
    There was a variation in the evidence as to precisely where the passengers were standing.  Mr Inwood provided a credible explanation for his conduct which rested on his concerns for the Catalina.  I do not think it matters precisely where the wedding guests were positioned on the upper deck.  Mr Inwood was focused on the vessel and the immediate risks to it.  I do not consider that his conduct reveals a knowledge on his part that the Catalina was not capable of carrying 160 passengers.  That certainly was not the impression that Mr Inwood left with Mr Prince or Mr Norris, neither of whom spoke to him or questioned him about his concerns.  This event occurred prior to the sunset date in the contract and within the first four or so weeks of the first defendant taking possession of the Catalina, at a time when the first defendant could have terminated the contract if concerned about the passenger carrying capacity.
  6. [62]
    This event does not prove on balance that the Catalina was overloaded or not capable of carrying 160 passengers. 

3.Increase in lightship weight

  1. [63]
    It was pleaded by the first defendant that on or about 20 June 2018 Aurora Marine Design reported that the vessel’s lightship weight was in fact 15.58 tonnes and that the true carrying capacity of the vessel was five crew plus 100 passengers, with a maximum of 40 passengers on the upper deck. No evidence was led from any person from Aurora Marine Design of these material facts.
  2. [64]
    The lightship weight of the Catalina at the time it was built in 1989 was 11.5 tonnes. Under the Uniform Shipping Laws Code Section 8A,[26] at periodic intervals not exceeding five years, a lightweight survey was required to be carried out on all passenger ships to verify any changes in lightship displacement and longitudinal centre of gravity.  For vessels with a commercial Certificate of Registration under MSQ, this requirement was never mandated.  With respect to older vessels, MSQ relied upon an owner’s declaration at the time of renewal as to what changes to the lightship weight had occurred.[27]
  1. [65]
    Under the current regulations, the National Regulator AMSA requires lightship checks every five years and where the lightship displacement is found to exceed four percent of the original, a new stability assessment is required and the vessel needs to undergo transitional survey to obtain a new Certificate of Survey.  A change in the lightship weight greater than four percent triggers a change in the vessel’s status.  A change in a vessel’s status impacts on the passenger carrying capacity for reasons explained later.
  1. [66]
    The first defendant pleaded that shortly after purchasing the vessel, it determined to make some renovations to the vessel.  Those renovations are particularised in the first defendant’s defence as:

a installation of a new generator

b renovation of the top deck bar

c renovation of the main deck bar

d renovating wall cladding

e replacing a bar fridge; and

f installation of incidental items such as umbrellas and a sound system. 

  1. [67]
    The first defendant calculated that the renovations would add approximately 1.2 tonnes to the lightship weight of the vessel.[28]
  2. [68]
    There was a divergence in the evidence as to how much weight the first defendant added to the vessel in 2016.  What is apparent, is that no records were kept, it seems, keeping track of any additional weight added and any weight removed.  Much of the evidence given by each of Mr Prince and Mr Norris was in the way of estimates of the weights of items added and/or removed. 
  3. [69]
    Mr Prince accepted that he told Mr Davis in 2015, when conducting a survey of the Catalina pursuant to Special Condition 4 of the Contract, that he was going to make some changes to the vessel.  He also accepted that Mr Davis told him that the Catalina was grandfathered (a reference to it having existing vessel status) and that a change of four percent (to the vessel’s lightship weight) would mean that the vessel would not meet the new regulations.[29] Mr Prince did not recall Mr Davis mentioning 460 kilograms as the weight that they should not exceed.
  4. [70]
    Mr Prince’s estimate of the weight added in 2016 by virtue of the renovations (referred to at paragraph [66]) undertaken was 710 kilograms. This estimate relates only to the items that he could give first-hand knowledge about.  There were other items added of which no admissible evidence was given as to the weight.  On Mr Prince’s estimates alone, the lightship weight of the Catalina by virtue of the 2016 renovations, exceeded four percent.  That change meant that the Catalina then became a transitional vessel.  
  5. [71]
    Mr Norris gave evidence that on his calculations they added approximately 400 kilograms to the vessel.[30]  He could not explain why he had given instructions to his lawyers to plead 1.2 tonnes had been added to the lightship weight.  There was no documentation disclosed by the first defendant, despite request, that provided any assistance as to the weight of the items added and removed from the vessel.
  6. [72]
    The significance of the change from existing vessel status to transitional status is that in calculating passenger numbers the average weight attributed to a person is 80 kilograms rather than the 65 kilograms previously attributed.  That is why Mr Davis advised Mr Prince of the need to take care in making modifications to the vessel and adding to the lightship weight.  
  7. [73]
    Mr Prince gave evidence that the Catalina was increased in size in 2018 (from 88 square metres to 139.68 square metres) in order to accommodate 160 passengers on board.[31] However there is simply no evidence before me as to the lightship weight of the vessel after the 2018 remediation work. 
  8. [74]
    Mr Craig Boulton stated that it is common knowledge within the marine industry that a vessel’s weight “grows” over time which is why the regulatory authorities now insist on a lightship displacement check every five years.[32] 
  9. [75]
    The lightship displacement of the Catalina in 1989 was 11.5 tonnes.  There is insufficient evidence before me to properly determine how much the first defendant added to that lightship by virtue of the 2016 renovations.  There is no evidence of the lightship displacement as at 2018.  Given the evidence that the lightship of a vessel grows over time, there is simply insufficient evidence upon which any calculation can be made as to the lightship weight of the vessel at the time of the contract. I am satisfied however that the 2016 renovations to the Catalina triggered a change in vessel status.
  10. [76]
    The first defendant has not established by virtue of the lightship weight in 2018 that  the Catalina was not lawfully, properly and safely able to carry 160 passengers at the time the contract was entered into.

Counterclaim - Breach of contract - seaworthiness

  1. [77]
    The first defendant further pleads that it was an implied term of the contract that the Catalina would be seaworthy at the time it took possession of it.  The plaintiff argues that there was no representation made that the vessel would be seaworthy.  In particular the plaintiff points to the fact that the contract provided the first defendant with the opportunity to have the vessel slipped and surveyed and provided a 14 day due diligence period in which it could satisfy itself that the vessel was seaworthy.  The express terms of the contract provided for the first defendant to terminate the contract if it was not satisfied with its due diligence enquiries or if its survey revealed a major structural defect to the hull which the plaintiff was not prepared to repair.  Accordingly the plaintiff contends that such a term ought not be implied into the contract.
  2. [78]
    The first defendant has not pleaded what is meant by the term seaworthy. “Seaworthy” is defined in section 23 of the Navigation Act 2012 (Cth):

A vessel is seaworthy if, and only if:

  1. (a)
    it is in a fit state as to the condition of hull and equipment, boilers (if any) and machinery, the stowage of ballast or cargo, the number and qualifications of seafarers, and in every other respect, to:
    1. encounter the ordinary perils of the voyage undertaken; and
    2. not pose a threat to the environment; and
  2. (b)
    it is not overloaded; and
  3. (c)
    the living and working conditions on board the vessel do not pose a threat to the health, safety or welfare of the vessel’s seafarers.
  1. [79]
    The expert witnesses, Mr Inwood and Mr Davis all accepted that the definition of seaworthy was “a vessel’s ability to deal with the anticipated perils it may come across in the journey it intends to undertake”. 
  2. [80]
    It is pleaded by the first defendant that the Catalina was not seaworthy because of each of the following:

a the electrical system of the vessel was not in accordance with the required standards and presented an electrocution risk and fire risk; and

b the keelson of the vessel was substantially rotting; and

c deck timbers and deck support timbers were rotting; and

d the watertight bulkheads within the vessel were not watertight. 

The electrical system

  1. [81]
    Mr Inwood undertook considerable electrical work on the Catalina.  He held a trade electrical fitter/mechanics license which meant that he was qualified to do so.  He appreciated the need to wire the vessel in a safe manner given the close presence of water.[33] He said in his affidavit[34] that the electrical systems on the vessel were working properly prior to the sale of the business and that he was not aware of any issues relating to the electrical system that may have presented an electrocution risk or fire risk.
  2. [82]
    Mr Inwood also stated[35] that he had been onboard the Catalina sometime after handing over possession of it to the first defendant and observed that the first defendant had carried out various electrical works including adding power outlets to the top deck; adding power outlets in the main bar area; and, installing a new power supply to the electrical system from a new generator moved to the bow of the vessel.  Mr Inwood was not challenged about any of this evidence.  
  3. [83]
    The only other evidence called as to the state of the electrical system on the Catalina came from Mr Michael Ebsworth.  Mr Ebsworth is a marine surveyor.  He undertook a survey of the Catalina on 12 July 2018, more than two and one-half years after the first defendant took possession of it and after the first defendant had electrical work done to the vessel itself.  Mr Ebsworth’s report[36] of that survey was admitted in the trial on the basis that it was not being put forward as an expert opinion. Its admissibility was limited to what Mr Ebsworth saw during his survey.[37] 
  4. [84]
    Mr Ebsworth made clear in his evidence as he did in his report, that he is not a licensed electrician.   He could not comment on whether the electrical system on the Catalina complied with the Australian Standards.  He did however recommend an electrical surveyor be engaged to check and verify compliance with the Australian Standards.  There is no evidence before me as to the results of that electrical survey or even if one was undertaken.
  5. [85]
    There are otherwise photographs of the electrical system after a great deal of destructive work was carried out on the Catalina before the remediation works were undertaken in 2018.
  6. [86]
    There is no evidence in my view that would allow me to find that as at the time the contract was entered into, the electrical system was not in accordance with the required standards and presented an electrocution risk and fire risk.  Further, there is no evidence that the electrical system posed a threat to the health, safety or welfare of the vessel’s seafarers. 

The keelson

  1. [87]
    The keelson is an integral part of the hull’s structure and affects the longitudinal strength and integrity of the vessel and its seaworthiness.  The keelson on the Catalina is fully internal.  It was made of timber and fibreglass.  It was only visible via an internal inspection of the hull.
  2. [88]
    It is uncontroversial that in early 2016 the first defendant discovered that there was some rot in the keelson. Mr Prince spoke to Mr Inwood about the rot.  Mr Inwood agreed to pay for the costs of the materials necessary to repair the keelson and to assist in repairing it.  Mr Inwood said that he assisted the then skipper of the vessel to repair the keelson. Mr Inwood states in his affidavit that the rot that was cut out did not make the vessel unseaworthy.[38]
  3. [89]
    Mr Ebsworth reported in July 2018

“Through the hull interior there is a timber keelson, which has been laminated into the hull.  It is recommended that this timber is checked along its entire length need to be tested for In all compartments it was evident that timbers have been rotting for some time”.[39]  

  1. [90]
    In his evidence-in-chief, Mr Ebsworth said that he entered the compartments in the hull that were accessible and able to be entered freely.  His concerns were with respect to the hull structure and that there was quite extensive rot in the ends of the beams which join the two hulls together and support the deck, and in the shelves that support the beams.[40]  Mr Ebsworth confirmed that he saw rot in the keelson,[41] in one of the compartments that he was able to enter and inspect.  Later in evidence when Mr Ebsworth was asked if he saw rot in the timber keelson or whether because he saw rot elsewhere, he recommended a destructive test on the keelson he said

“There would’ve been something there that would’ve indicated for concern.  I wouldn’t have raised it without having seen a – a rot existing underneath the – it’s usually underneath the fibreglass ….there would’ve been black discolouration under the fibreglass.”[42]

  1. [91]
    Whilst Mr Ebsworth included some photographs in his report of the concerns he had with respect to the Catalina, there is no photograph which depicts the rot in the keelson. 
  2. [92]
    That is the extent of the evidence of any rot in the keelson.  What Mr Ebsworth saw was limited to one compartment in the hull and was not so significant that he incorporated a photograph of it into his report. 
  3. [93]
    Further, Mr Prince said in evidence that he got into the port hull to look at the condition of a water tank and found some rot in the keelson in 2016. He accepted that when he discovered the rot the first defendant was still in a position to terminate the contract.[43]  The discovery of the rot by Mr Prince therefore had to have occurred prior to 31 January 2016. Mr Inwood agreed to be involved in the remediation process and the rot was fixed. As far as Mr Prince was concerned the rot in the keelson was repaired in 2016. 
  4. [94]
    Mr Norris also said that he got into the hulls of the Catalina to have a look at the rot and took photographs of it.  He said that there was rot in the keelson.  He contacted Mr Davis asking for advice and obtained a quote to repair the rot.  The rot in the keelson was attended to by Mr Inwood and the then master of the vessel.[44]
  5. [95]
    If the keelson was substantially rotting as at the date of the entering into of the contract, I would have expected it to have been discovered in early 2016 when Mr Prince and Mr Norris did discover some rot in the keelson. Despite the discovery of that rot in the keelson the contract was not terminated by the first defendant. 
  6. [96]
    Rot is, by its very nature, progressive. That there was rot in the keelson in 2018 when Mr Ebsworth undertook a survey does not prove that there was substantial rot in the keelson as at the date of the entering into of the contract. 
  7. [97]
    I am not satisfied that it has been proven on the balance of probabilities that at the time the contract was entered into in October 2015, that the keelson was substantially rotting. 

Deck timbers and support beams

  1. [98]
    Mr Inwood said in his affidavit[45] that as at 30 October 2015 there was no wood rot in the deck timbers or the deck support timbers that affected the seaworthiness of the vessel.
  2. [99]
    Mr Inwood, in cross-examination said that he checked inside the compartments in the hull which he had access to, weekly.  Records were kept of those observations in the ship’s log.[46] He said that there was no specific way in which to check for rot.  However he regularly undid the spinouts (an access hole fitted to the top of each compartment in the hull) and looked through them into the compartments as, from time to time he experienced some water ingress into the hull compartment/s which he would need to siphon out.[47]  The beams between the hulls which supported the deck were not accessible and couldn’t be seen however if, when walking over the deck, he felt some spring in the boards he would investigate.[48] Mr Inwood also said that he inspected the deck beams from the hatches and if there was any rot identified, it was rectified.[49]  It is apparent from the photographs taken by Mr Norris when the Catalina was cut apart in 2018 that there had been repairs done to the deck beams from time to time by the attaching of new sister beams. 
  3. [100]
    Mr Davis also said that when he got onboard the Catalina in 2015 to undertake a survey, he noted that the hull and deck were in good condition.  He said that everywhere he went to on the deck was in good condition.[50] There is a dispute as to whether Mr Davis boarded the vessel in 2015. For reasons expressed later, I am satisfied that he did board the Catalina.
  4. [101]
    Mr Prince and Mr Norris both got inside the forward compartment of the Catalina in early 2016.  Mr Norris said in his evidence that he saw rot in the supporting members of the hulls where the timbers connected to the hulls and the keelson. He said that only the rot in the keelson was attended to by Mr Inwood and the then-master of the vessel.[51]  This event occurred prior to 31 January 2016 according to the evidence of Mr Prince. Whatever rot Mr Norris saw (other than in the keelson) was not of sufficient concern to him to consider terminating the contract. Further, neither Mr Prince nor Mr Norris indicated that at anytime in the two and one-half years that they operated the vessel before the problems with it were identified, were they concerned about any sponginess in the deck suggestive of rot. 
  5. [102]
    The first defendant did not call any of the masters of the Catalina that it engaged to operate it in the period up until the problems were identified in 2018.  It is submitted by the plaintiff that those witnesses are material and that I should draw an inference, given the failure to call them, that their evidence would not have advanced the first defendant’s case.[52] I agree with that submission. The masters of the vessel particularly in 2016 would have been in a position to comment on any problems that they noticed with respect to the deck.  I infer that their evidence would not have advanced the first defendant’s case.  
  6. [103]
    Rot is progressive.  No evidence has been adduced which establishes that even if there was some rot present at the time of the contract, the extent of that rot. That there was extensive rot found in 2018 does not prove on balance that there was substantial rot present in October 2015.
  7. [104]
    The first defendants have not proved on balance that the deck timbers and supporting beams were rotting at the time they entered into the contract to such an extent that it could be said that the vessel was not able to encounter the ordinary perils of the voyage undertaken. 

The bulkheads

  1. [105]
    The evidence established, and it is uncontroversial, that the watertight bulkheads inside the hulls were not in fact watertight.  Internal watertight bulkheads provide structural integrity to the intact hull and improve safety and seaworthiness by limiting flooding if water ingress into the hull occurs.[53]
  2. [106]
    The vessel’s stability book[54] prepared by JQ Stephen Naval Architect at the time it was built, indicates the presence of individual watertight compartments.
  3. [107]
    Mr Peter Holmes (the first defendant’s expert) was provided a series of photographs of some of the bulkheads which clearly show that they are not watertight.[55]  The bulkheads did not extend all the way up to the freeboard deck.  Mr Holmes, in evidence, said that they could be fixed by extending the bulkhead up to the freeboard deck provided it could maintain the watertight boundary all around the perimeter.[56]  The photographs also reveal the presence of holes which have been drilled into the bulkheads through which electrical cabling has been run.  Mr Holmes accepted that there are techniques which can be employed in order to drill a hole through the bulkhead and still maintain the watertight integrity including the use of silicone.[57] 
  4. [108]
    Mr Holmes maintained in his evidence that the absence of watertight bulkheads meant that the vessel was not seaworthy.  Whilst he accepted as a general proposition that the absence of watertight bulkheads do not necessarily make a vessel unseaworthy, it was the fact that the Catalina was capable of carrying a large number of passengers that meant that the absence of watertight bulkheads made the vessel unseaworthy.[58]  In his view the absence of watertight bulkheads meant that the vessel was not suitable for the purpose it was intending, being a commercial passenger vessel carrying 160 people.[59] 
  5. [109]
    Mr Holmes also said that if AMSA inspects a vessel and considers it unsafe they will order the vessel off the water.[60]
  6. [110]
    When Mr Ebsworth performed his survey on the Catalina in 2018, he had concerns as to the seaworthiness of the vessel which prompted him to notify the regulator, AMSA.  Mr Ebsworth’s evidence in that respect was not admitted as expert evidence as to the seaworthiness of the vessel.  As a consequence of his notifying the regulator of the results of his survey AMSA issued a Direction Notice pursuant to section 109 of the Marine Safety (Domestic Commercial Vessel) National Law Act 2012 (Cth) Schedule 1 on 21 August 2018.  That Direction Notice relevantly allowed the Catalina to operate within the limits of the Noosa River and within the limits outlined in the trim and stability statement dated 20 June 2018 authored by Aurora Marine Design (not in evidence).[61]  The notice was issued after an inspector from AMSA personally inspected the Catalina. 
  7. [111]
    That the national regulator allowed the vessel to continue operating on the Noosa River suggests that the regulator did not consider that the vessel was unsafe and therefore unseaworthy at the time that the defects, in particular, the absence of watertight bulkheads were found. 
  8. [112]
    As seaworthiness is determined by reference to the intended journey that the vessel will undertake, it is relevant that the Catalina travelled the sheltered waters of the Noosa River where it was within 100 metres of the banks of the river at all times and where the water is approximately three point five metres deep at its deepest point.  The Catalina, in 2018 prior to the remediation work being undertaken was 17.60 metres long and five metres wide.[62]  The floor of the upper deck was three point four metres above the keel meaning that in the unlikely event that the hull was breached and it sank the upper deck would be only 100 millimetres below the level of water.  Further Mr Inwood said that the Catalina was always within 100 metres or so of the shore.  If anything untoward were to happen (which it did not) it would have been an easy, quick and safe option to bring the vessel to shore and run it aground to ensure the safety of the passengers and the vessel itself.[63] 
  9. [113]
    On the evidence before me, whilst I am satisfied that the watertight bulkheads were not watertight, I am not satisfied, particularly given the actions of the regulatory authority, that the vessel was unseaworthy as defined in the Navigation Act 2012 (Cth). 
  10. [114]
    The Catalina operated from at least 2006 after Mr Inwood made some modifications through until 2018 without watertight bulkheads. In the period after the first defendant took possession of the vessel it undertook approximately three journeys per week carrying on average, 75 passengers per journey. Throughout this frequent period of use of the vessel there were no incidents.  I would infer that the masters of the Catalina were not concerned as to the absence of watertight bulkheads in terms of the seaworthiness of the vessel.
  11. [115]
    I am not satisfied that the Catalina was unseaworthy as a result of the bulkheads not being watertight. 
  12. [116]
    Even if the absence of watertight bulkheads made the vessel unseaworthy, I am not satisfied that I should imply such a term into the contract. 
  13. [117]
    A term implied into a contract, purports to give effect to the presumed intention of the parties in respect of a matter that they have not turned their minds to but which they would have agreed should be part of the contract had they turned their minds to it. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (“Codelfa”), Mason J said:[64]

“…with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it – it is not a term that they have actually agreed upon. Thus, in the case of the implied term the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it”. 

  1. [118]
    In Codelfa, Mason J adopted the five conditions stated by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings[65] as having to be satisfied before a term could be implied to give business efficacy to a contract.  The existence of those conditions must be assessed as from the time the contract was made.[66]  It is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract.[67]
  2. [119]
    The five conditions which must be satisfied are:
  1. the term must be reasonable and equitable;
  2. it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
  3. it must be so obvious that it goes without saying;
  4. it must be capable of clear expression; and
  5. it must not contract any express term of the contract.
  1. [120]
    In deciding whether to imply a term it is permissible to consider the terms of the contract and the relevant background circumstances in which it was made. Mason J in Codelfa[68] said that the Court can have regard to the factual background known to the parties at or before the date of the contract including the genesis of the transaction and the aim of the transaction.  Whilst I cannot have regard to the subjective intention of the parties to the contract, it is the presumed intention of the parties which I have to decide against that background.  Of prior negotiations, Mason J said:[69]

“Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract.  To the extent to which they have this tendency they are admissible.  But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable”.

  1. [121]
    Both the plaintiff and first defendant were represented by lawyers who engaged in negotiations over a period of two months prior to the signing of the contract on 30 October 2015. The contract agreed by the parties included a 14 day due diligence period and included provision for the slipping and survey of the vessel and the right to terminate the contract if a major structural defect was found.  The parties were aware that the Catalina was built in 1989. That background, demonstrates to me that the parties turned their mind to the seaworthiness of the vessel and provision was made for the first defendant to determine for itself whether there were structural defects which would make the vessel unseaworthy.  
  2. [122]
    Further, Clause 39 of the Standard Conditions of Sale of the Contract provided as follows:

39. ENTIRE AGREEMENT

39.1 This Contract contains the entire agreement between the parties with respect to its subject matter and supersedes all prior negotiations, understandings and agreements, whether oral or written.

39.2 This Contract shall not be modified, amended or supplemented except by an instrument in writing duly executed by the parties (any Guarantor excepted).

  1. [123]
    By this clause the parties expressly agreed that there are no further terms that were agreed between them. Whilst this does not mean that a term cannot be implied, in my view, the parties turned their mind to the seaworthiness of the Catalina and agreed to express conditions in the contract in that regard. 
  2. [124]
    I do not consider that it would be reasonable and equitable to imply a term into this contract which would require the plaintiff, who did not build the Catalina to ensure that it was seaworthy. That is because in order to ensure that the hulls were in a seaworthy condition, access to the hulls is necessary and there were restrictions to the access of the hulls in places, and difficulties with visibility.  Whilst there was some access to the hulls of the Catalina through hatches, in order to ascertain whether there was substantial rot present in either the beams or the keelson, destructive works would be necessary.  It is not reasonable to expect the plaintiff to have engaged in such destructive works.
  3. [125]
    Further, I do not consider that it is necessary to give business efficacy to the contract to imply such a term.  The first defendant was able to slip and survey the Catalina and conduct what other investigations they considered necessary in the 14 day due diligence period.  The contract provided a mechanism by which the first defendant could satisfy itself as to the seaworthiness of the Catalina and assess, if necessary, what needed to be done to make the vessel seaworthy.  The first defendant could then have elected to proceed with the contract or negotiated with the plaintiff to repair the defect/s and failing that, have terminated the contract. 
  4. [126]
    The contract contained conditions which allowed it to work as it was intended.  Additionally, the obvious was not overlooked by the parties.  Provision was made for ascertaining the seaworthiness of the vessel by the condition that allowed for slipping and survey and termination in the event of a major structural defect which the plaintiff was not prepared to repair.
  5. [127]
    To imply a term that the vessel was seaworthy does not, in my view, properly identify what it is that the parties intended to agree to.  There was a divergence of opinion as to whether the Catalina was seaworthy.  It seems from the evidence before me that insofar as the definition includes “encounter the ordinary perils of the voyage undertaken”, Mr Inwood and Mr Davis considered the Catalina seaworthy.  Mr Holmes considered that the absence of watertight bulkheads made the vessel unseaworthy.  I infer that the regulator did not consider the vessel unseaworthy at all, as they permitted it to continue operating despite the absence of watertight bulkheads, subject to conditions that would not have affected its operation as a commercial vessel operating on the Noosa River.  I am satisfied that seaworthiness is so obvious that it goes without saying or that it is capable of clear expression.
  6. [128]
    Even if the Catalina was unseaworthy by virtue of the absence of watertight bulkheads I would not imply such a term into the contract.  

First defendant’s claim against the second and third defendants

  1. [129]
    The first defendant engaged Mr Davis to carry out a survey of the vessel in accordance with special condition 4 of the contract of sale.  That survey was undertaken on 25 November 2015.  It is pleaded that Mr Davis did not perform that survey in a manner consistent with competent professional practice as he reported that the hull and deck were in good condition whereas they were substantially affected by rot.  Further, it is pleaded that the second defendant failed to identify rot in the keelson and failed to identify that the watertight bulkheads were not watertight. The first defendant contends that I would not be satisfied that Mr Davis even boarded the vessel in order to complete the survey. 
  2. [130]
    It is argued that had Mr Davis performed a pre-purchase survey, he would have identified that the vessel had rot in the keelson; the watertight bulkheads were not watertight and that the vessel was not safely able to carry 160 persons.  As Mr Prince was in the process of buying the vessel, Mr Davis, it is contended, had a duty to identify the correct survey which was required. Mr Davis therefore had a duty to undertake a pre-purchase survey which is much more comprehensive and would have involved a lightship displacement being calculated. 
  3. [131]
    At the time that the first defendant took possession of the business neither Mr Prince nor Mr Norris had any experience in commercial maritime activities.  Mr Prince indicated that he had no experience in anything seafaring.  Mr Norris owned a jet-ski at one time. 
  4. [132]
    Mr Prince engaged Mr Davis to undertake the survey.  Mr Inwood had suggested that Mr Davis would be a suitable person to survey the vessel as he was familiar with it. 
  5. [133]
    Mr Prince’s evidence was that he telephoned Mr Davis and told him that “they/we” were in the process of purchasing the vessel and that “they/we” needed an out-of-water inspection undertaken on it as they were wishing to proceed with the sale.  Mr Prince said his recollection was the words he used were “we were in the process of purchasing the vessel, Catalina and needed Mr Davis to assess the vessel to assist us in our decision-making”.  Mr Prince confirmed that there was no contract signed and no further communications between himself and Mr Davis until the survey was undertaken.  In cross-examination Mr Prince confirmed that he didn’t know what type of survey was necessary. He further confirmed that he himself used the expression “out-of-water survey”.  He said that he did not advise Mr Davis that Saltwater Pty Ltd was the owner of the business.[70] He did not give the contract of sale to Mr Davis or advise him as to the special conditions.[71]
  6. [134]
    Mr Davis’ evidence was that around 23 November 2015 Mr Prince contacted him by telephone to perform a survey on the Catalina.  Mr Davis’ memory of the conversation was that Mr Prince indicated that he’d bought the Catalina and wanted him to do an out-of-water survey because he didn’t know how long it had been since “it was out” and he wanted to make sure that the safety equipment was up to date so that he wouldn’t be breaching any laws.[72] Mr Davis confirmed that the words “pre-purchase inspection” were not used.[73]  He said that he did not undertake a pre-purchase survey of the Catalina. 
  7. [135]
    Mr Prince’s recollection of this survey was that the vessel had been removed from the water and was on the Noosa slipway so that the entire underside of the vessel was able to be viewed.  Mr Davis attended the slipway to survey the vessel.  He walked around the vessel and underneath it and asked Mr Prince to step onboard and view the “V-sheet” and the flares.  He said that Mr Davis did not step onboard the vessel himself.  Mr Davis indicated that he had worked on the vessel in 2006 but said nothing about that work. Mr Davis asked Mr Prince to purchase new flares and to send him a photo of the new flares with the expiry date, which he did. 
  8. [136]
    The first defendant’s case was that Mr Davis never stepped onboard the vessel in order to survey it.    In cross-examination however, Mr Prince accepted that Mr Davis may have boarded the vessel at an earlier time.[74]
  9. [137]
    Mr Prince received from Mr Davis via email within a few days or a week of the survey, a copy of an AMSA form titled Survey Report and Recommendation (Form 901).[75]  The form was filled in by Mr Davis and dated 25 November 2015.   The AMSA Form 901 clearly stated in the box provided for owner details that it was “Salwater Pty Ltd” [sic].  Mr Prince saw that entry and did not question Mr Davis about it or correct him.  The invoice that was issued was sent to Mr Prince and it was paid. 
  10. [138]
    Mr Davis’ evidence was that he attended upon the vessel when it was tied up at the wharf and conducted the safety survey.  He conducted the out-of-water survey in the presence of Mr Prince.  He thought that he might have conducted the safety survey after the vessel had come off the slip. [76]
  11. [139]
    Mr Davis filled in an AMSA Form 901, which is a form produced by AMSA to be used by accredited marine surveyors undertaking a survey of a vessel in accordance with the requirements of the National Standard for the Administration of Maritime Safety (“NSAMS”).  The form provides for a periodic survey, in-water survey, out-of-water survey and safety equipment survey.   
  12. [140]
    That form[77] completed by hand by Mr Davis relevantly includes the following details: 
  1. (a)
    The date of the survey at the Noosaville Slipway was 25 November 2015.
  2. (b)
    The owner’s details are recorded as “Salwater Noosa Pty Ltd” (misspelt).  Mr Davis had received an email from Mr Prince on 30 November 2015[78] which was said to include all the relevant details for the first defendant.  In the subject line of the email Saltwater is misspelt Salwater.   
  3. (c)
    Mr Davis has recorded the vessel as being a class IE vessel (a passenger vessel in smooth waters) with a crew of four and unberthed passenger numbers of 160. 
  4. (d)
    The form indicates that a periodic survey and out-of-water survey were conducted on 25 November 2015 and that the next survey due was 25 November 2017.  Mr Davis has marked with a cross the following surveys:  “periodic survey”; “out-of-water survey” and “safety equipment survey”. 
  1. [141]
    Mr Davis has also filled out sections of the document which record the following:

SMS (safety management plan) Doc on Board

Log book and manuals on board

Stability Doc on Board

  1. [142]
    Mr Davis said that he would have sighted these documents and had to board the vessel to do so.[79]   There are other portions of the form which tend to indicate that Mr Davis did board the vessel. He has recorded sighting the fire and safety plan, the anchor and other of the ship’s safety equipment.  Mr Davis said that when he boarded the vessel there was somebody onboard but he could not say who that was.  He confirmed that it was not Mr Prince or Mr Norris but might have been the skipper who was going to take over as master of the vessel. 
  2. [143]
    Other sections filled out suggest that Mr Davis checked the medical supplies and ascertained that there was a quantity of medical supplies meeting scale G; there was an electric horn; a clock and barometer; the depth sounder was electronic; the engine instruments were “full set to dash”; the anchor was a 20lb Danforth with 8 mm shortlink chain 10 metres long and with 90 metres of rope 14 millimetres in size. 
  3. [144]
    Mr Davis, in completing the form, checked a box on the form which indicated that no deficiencies were identified.
  4. [145]
    Mr Davis also wrote next to an item of ships equipment referred to as pyrotechnics and container (a reference to the flares) – “2 x red hand 11/18 and 2 x orange smoke 11/18”. He accepted that the flares he initially sighted were out of date and that he advised Mr Prince to replace them and send him a photograph of the new flares. Mr Davis and Mr Prince both indicated that he did so.  The notation in the form set out above is a reference to the new flares and their expiry date.  Mr Davis was criticised for not having ticked the box which indicated that “minor deficiencies were identified” when the location of out-of-date flares would amount to a minor deficiency.  Mr Davis provided an explanation that Mr Prince indicated that he would replace the flares immediately and did so.  Mr Davis indicated that if an owner is caught with out-of-date flares, the fine is $2500 per flare that is out-of-date and that he did not want to inflict such a fine on the owner of a boat. 
  5. [146]
    I do not consider that this criticism of Mr Davis leads to a conclusion that he was either dishonest or negligent in his survey.  The explanation he provided was a reasonable one.  The flares could readily be replaced and were replaced.  He was provided the evidence of the replacement of the flares by way of a photograph.  He included in the Form 901 the expiry date of the new flares, taken from that photograph.
  6. [147]
    Criticism was also directed at Mr Davis for not inspecting the life jackets.  On the form he indicated “N/A”.  He said in evidence that the life jackets were not on board the vessel or at least they weren’t stowed in a place which was obvious to him.[80]  He assumed that the vessel had lifejackets and so ticked the “no deficiencies identified box”.  If Mr Davis was acting dishonestly and had not in fact boarded the vessel, he could simply have written 160 lifejackets as being present. It was reasonable for him to assume that a commercial passenger vessel would have lifejackets. He did not seek to misinform the regulator about the lifejackets.  The regulator granted a Certificate of Operation despite there being no clear indication that there were lifejackets present. 
  7. [148]
    In considering the entirety of the form there are numerous entries that indicate to my mind that Mr Davis did board the vessel and conduct a safety survey as he indicated.  As earlier expressed, I do not consider that Mr Davis was a dishonest person who would have falsified this document.  The only feature of the form that Mr Davis completed which was clearly identified to be incorrect was the reference to the passenger carrying capacity being four crew and 160 unberthed passengers.  The vessel was only registered to carry two crew and 160 unberthed passengers.  Mr Davis said that he obtained that information from his previous knowledge of the vessel.[81]   A little later Mr Davis said that the crew numbers were open to adjustment and on the basis that drinks and food may be served on the Catalina he increased the crew numbers to four.  He said that there was a margin in the crew numbers so that they can be adjusted slightly up or slightly down.   He also said that when he was completing the form that he did not consult the compliance certificate.  He said that he had a professional idea that a crew of four would be acceptable in smooth waters.  He conceded he made no calculations in determining the number. 
  8. [149]
    I do not accept Mr Davis’ explanation for his having written four crew members rather than two.  As indicated, I do not consider that he is a dishonest person but rather I suspect he was trying to cover up a mistake he made in completing the Form 901.   Whilst I do not accept Mr Davis’ evidence on this point, I am not prepared to find that he did not board the Catalina at all when performing his survey.  As indicated, there is information contained on the form which indicates to me that he did board the Catalina.  The sections filled out headed “Deck Survey” and “Engineering”, which also evidence his having boarded the vessel. [82]
  9. [150]
    A section headed “Required during intermediate and renewal surveys only” is filled out.  It reveals the following:

Hull/deck external out of water – good condition

Hull/deck internally – good where can be seen

Tanks/voids internally – NA

Anchoring (out of vessel) – yes

Internal examination of chain locker – good order

  1. [151]
    Of this section of the form, Mr Davis said that he was not conducting an intermediate and renewal survey.  He was only conducting a survey of the underwater section of the boat and the safety equipment.  He used this section of the form headed “Required During Intermediate and Renewal Surveys Only” in order to reflect that he had checked the deck where he could see it and was satisfied that it was safe in terms of the Workplace Health and Safety Regulations.[83]
  2. [152]
    Mr Davis said that he did not look down the spin-outs into the hull as that wasn’t a requirement for the survey he was undertaking.  His reference to “hull/deck internally – good where could be seen” was not intended to show that he inspected the internal parts of the hull.[84]
  3. [153]
    Each of Mr Davis and Mr Prince were recalling a conversation about Mr Davis’ engagement to perform a survey at a time almost seven years after the event. There is some contemporaneous, documentary evidence available that tends to suggest to me that Mr Prince did not inform Mr Davis that he was in the process of purchasing the Catalina but rather that he had purchased the vessel, as Mr Davis testified. 
  4. [154]
    The invoice[85] issued by the second defendant clearly states that the services rendered for the vessel were to “attend at Noosaville slipway and carry out an Out of Water Survey, complete AMSA 901 form Submit to MSQ Mooloolaba”. The amount invoiced was $825.  A pre-purchase survey does not need to be submitted to any regulatory body; costs a great deal more than $825 and is accompanied by a full list of defects.
  5. [155]
    There is no dispute that Mr Davis was not specifically asked to undertake a pre-purchase survey. Mr Prince accepted that he asked Mr Davis to perform an “out-of-water” survey.  That is despite him saying in evidence that he did not actually know what type of survey was necessary.[86]  An in-water survey which would have required an examination of the internal hull/deck was not marked on the form as having been undertaken. Mr Davis was not provided a copy of the contract of sale so had no knowledge of the contract or its terms.   There is no evidence that Mr Davis was aware of Mr Prince’s lack of knowledge of anything maritime-related.  That Mr Prince specifically asked for an “out-of-water survey” does not give the impression that he was lacking in knowledge about such matters.  Further Mr Prince did not give any evidence that he was relying upon Mr Davis to advise him with respect to what sort of survey was appropriate in the circumstances.  
  6. [156]
    The documentary evidence provides support for Mr Davis’ evidence. The AMSA Form 901 clearly indicates that the surveys being performed were a periodic survey; an out-of-water survey; and safety equipment survey.[87] The form also makes clear that the owner of the vessel is the first defendant and not the plaintiff.  Mr Prince provided the first defendant’s details to Mr Davis in an email on 30 November 2015.   Mr Prince gave evidence himself that he reviewed the Form 901 very carefully once it was received.[88] He did not correct Mr Davis to indicate that Saltwater Pty Ltd was not the owner of the vessel and that the first defendant was merely in the process of deciding whether to buy the vessel. He did not question the invoice that indicated the services rendered.  
  7. [157]
    Mr Davis said that the regulator will usually require an out-of-water survey to be done before issuing a new Certificate of Operation. Certificates of Operation are not transferable.[89] He recalled Mr Prince saying that they wanted to start operating the vessel as soon as possible. The services set out in the invoice are consistent with Mr Prince wanting to operate the vessel as soon as possible. 
  8. [158]
    On balance, the probabilities favour that Mr Prince did not tell Mr Davis that he was in the process of purchasing the Catalina but rather that he told Mr Davis that they had purchased the Catalina and were wanting to operate it as soon as possible. I do not consider that Mr Davis had a duty to conduct a pre-purchase survey in those circumstances, nor do I consider that it was incumbent on Mr Davis to determine what sort of survey was necessary. Mr Prince asked for a specific type of survey. There is nothing in the conversation that occurred which would give rise to a suggestion that Mr Prince was not capable of looking after his own interests.
  9. [159]
    As indicated, the first defendant maintained in submissions that Mr Davis did not board the vessel to conduct his surveys.  If Mr Prince did not believe that Mr Davis boarded the vessel at all to perform the survey he cannot have had any belief that what he was being provided was a pre-purchase survey.  Mr Prince did not question Mr Davis about how he identified some of the information on the form if he believed that Mr Davis did not board the vessel.  I do not consider that Mr Prince was being dishonest in his evidence.  He made reasonable and fair concessions.  He was recalling a conversation that occurred many years previously.  He is, in my view mistaken. 
  10. [160]
    I accept that Mr Davis was engaged to perform an out-of-water periodic inspection and safety check. The second and third defendants accept that a duty of care was owed to the first defendant in conducting the 2015 survey. Section 22 of the Civil Liability Act 2003 (Qld) provides that a professional does not breach a duty arising from the provision of a professional service if it is established that the professional acted in a way that (at the time the service was provided) was widely accepted by peer professional opinion by a significant number of respected practitioners in the field as competent professional practice.  
  11. [161]
    Mr Davis called Mr Craig Boulton to establish that the out-of-water periodic inspection that he carried out was done in accordance with professional standards at that time.  In 2015 the general practice in the industry was that a periodic out-of-water survey consisted of checking the underwater hull for damage, checking the sea inlets and checking the shafting and underwater propulsion systems including rudders.  Checking of the hull structure was normally done by visual inspection only and the presence of rot, unless clearly visible, could be easily overlooked.[90]
  12. [162]
    Whilst the national regulator, AMSA, has standards for the scope of an out-of-water survey detailed in the National Standard for the Administration of Marine Safety (NSAMS) Chapter 4, in 2015 AMSA used MSQ to administer the surveys for domestic commercial vessels.  Since 1 July 2018 AMSA has taken over the management and administration of surveys and has increased the level of survey standards that are required. The general practice in the industry as at 2015 was as indicated by Mr Boulton.
  13. [163]
    Mr Holmes, the expert called by the first defendant also referred to the requirements for an out-of-water survey being external to the vessel.  They included looking at components such as rudders, propeller, shafts and hull condition.[91]  Mr Davis’ evidence, which I accept, proves that he conducted an out-of-water survey in accordance with what was widely accepted by other professionals at the time.[92]  He further conducted a safety inspection onboard the vessel.  The form he completed clearly indicates that he was not completing an in-water survey.  There was therefore no requirement for him to get inside the hulls and inspect them internally. 
  14. [164]
    Mr Davis acted in a professional way in accordance with his retainer.  The first defendant has not proved that Mr Davis had a duty to advise what survey was required or that he breached the duty he owed in conducting the survey that he did.  He was not retained to perform a pre-purchase survey. The performance of an out-of-water survey and a safety inspection survey in 2015 did not require him to discover any defect in the keelson, or the bulkheads.  

Damages

  1. [165]
    Whilst I have found against the first defendant in respect of each of its claims, even if that were not the case, I am not persuaded that it proved its damages.
  2. [166]
    Damages under section 236 of the Australian Consumer Law are assessed so as to put the first defendant in the position that they would have been but for the contravening conduct.[93]  Whilst the first defendant pleaded that it would not have purchased the business had it known about the misrepresentations, no evidence was led at trial of that fact.  Even accepting that to be so, in my view the first defendant has suffered no loss. It purchased a business for $550,000.  The Catalina that was included in the sale of the business was assessed to have a market value of $220,000 for existing use or $150,000 as estimated realisable value at auction.[94]  The first defendant spent over $757,000 renovating the Catalina in 2018.  The Catalina was valued at $1,020,000 in 2018.[95]  Adding the costs of the remediation work to the value of the Catalina at the time of the contract in 2015 at its highest amounts to $977,000.  The first defendant therefore has an asset worth at least $43,000 more than what it has spent on it.  At the lower realisable value at the time of entering into the contract, the first defendant has an asset worth $103 000 more than what it spent on it. 
  3. [167]
    The first defendant did not lead any evidence that the business it purchased in October 2015 was not worth $550,000.  The Catalina was only a portion of the worth of the business.
  4. [168]
    The money spent by the first defendant renovating the Catalina in 2018 was done in order to create a larger vessel which was capable of carrying 160 passengers.  The first defendant was intent from the time of taking possession of the vessel on doing renovations to the vessel to make it more appealing.  On Mr Prince’s evidence the renovations made in 2016 altered the status of the Catalina from existing status to transitional status. That in itself necessitated the vessel requiring a new trim and stability report to ascertain passenger numbers.  Given the change in legislation and the change in the weight attributed to a passenger, it would have been necessary to increase the size of the Catalina in order to carry 160 passengers because of those modifications.  The plaintiff therefore did not cause the harm that the first defendant attributes to it. 
  5. [169]
    In any event, I do not consider that the evidence establishes that the first defendant would have done anything different but for the representations.  Neither Mr Prince nor Mr Norris gave any evidence that had they been aware of what the first defendant allege were the misrepresentation/s that they would not have purchased the business.  Despite knowing of the significance of a change in the lightship weight of the vessel of more than four percent and the impact that would have on the existing status of the vessel, the first defendant added more than four percent of the lightship weight to the vessel in 2016.  No records of the weight added to the Catalina were adduced in evidence.  Notwithstanding the warning that Mr Davis provided as to the loss of existing vessel status by adding more than four percent of the lightship weight to the Catalina, additional weight exceeding that limit was added and the vessel lost its existing vessel status.  From that evidence, I infer that the loss of existing vessel status was not something so significant to the first defendant that it would have stopped it from purchasing the business in 2015. 
  6. [170]
    Further, the contract did not settle until 2017 due to delays experienced with respect to the transfer of a liquor license and Ministerial consent.  The first defendant discovered rot in the keelson in January 2016 before the sunset date had expired, yet did not look to terminate the contract.  Additionally, despite the first defendant’s contention that Mr Davis did not board the vessel to perform his survey, Mr Prince did not query the reliability of the survey undertaken in accordance with the special condition of the contract, as set out in the Form 901 that Mr Prince received and carefully reviewed.   On the first defendant’s case, that form had to be unreliable and known to be so by Mr Prince.  When the overcrowding incident occurred in late 2015 (referred to at paragraphs [57]-[62]) neither Mr Prince nor Mr Norris queried Mr Inwood at all about what they each considered to be an overcrowding problem.
  7. [171]
    I am not satisfied that even if the plaintiff did misrepresent the carrying capacity of the Catalina that the first defendant would have done anything differently.  They cannot therefore have suffered a loss as a result of any contravention of section 18 of the Australian Consumer Law. 
  8. [172]
    With respect to the claim for breach of contract, the first defendant did not adduce any evidence to identify what was needed to be done to rectify any of the four defects referred to in the pleadings, or what costs might reasonably have been incurred in rectifying those defects. 
  9. [173]
    The second and third defendants called Mr Craig Harrison in their case.  He is a qualified marine engineer whose expertise is in the area of project management.  He was asked to review before and after photographs of the Catalina and the invoices disclosed by the first defendant as to the work undertaken and consider whether it was necessary for the first defendant to carry out all of the remediation works that it did, in order to allow the vessel to operate safely with 160 people onboard.  He also provided an opinion on what would have been the reasonable costs for undertaking remediation works for the purpose of allowing the vessel to operate safely with 160 people aboard. 
  10. [174]
    Mr Harrison opined that not all of the work undertaken was necessary to allow for the vessel to operate safely with 160 people on board.  The remediation works undertaken were effectively the construction of a new vessel, plus the inclusion of opportunistic and improvement scopes.  As much is apparent from the photographs of the vessel now as to how it appeared as at the date of sale.[96]
  11. [175]
    There was no documentation disclosed by the first defendant which outlined how the scope of works was developed by the first defendant as a solution to the safety issues that needed to be resolved in order to allow the vessel to operate with 160 people onboard. The remediation work undertaken was essentially a new build incorporating a small percentage of the original vessel into the design.  As there was no scope of works it is impossible, he said, to demonstrate the minimum necessary remediation steps required for the purpose of allowing the vessel to operate safely with 160 people on board. 
  12. [176]
    From the documentation available Mr Harrison stated that the work consisted of:

Building an extended hull and including an extension of the existing wheelhouse

Building a new upper deck structure including covers, partially retractable

Fitting of new toilet facilities and holding tank systems

Fitting of fixed diesel generator including new electrical wiring and systems

Fitting of 2 x new Suzuki 4-stroke outboard motors

Fitting of a new sound system

Some new electronics fitted

Review of mandatory safety equipment

Review of the safety management system

Fitting of new bar equipment and refrigeration. 

  1. [177]
    That information came from a post-works survey report prepared by Mr Stephen Earp which indicated that 85 percent of the vessel was considered new work. 
  2. [178]
    Mr Harrison states that there is little evidence of meaningful remediation work of the existing structures and equipment being undertaken but rather the project was effectively a new build.  He also states that for some of the works they appear to be an improvement and of an opportunistic nature rather than the minimum upgrade needed for the purposes of achieving a carrying capacity of 160 passengers.  For that reason, he stated that all of the work undertaken was not necessary for the purpose of allowing the vessel to operate safely with 160 passengers on board. 
  3. [179]
    Mr Harrison also undertook a process of estimating the cost required for undertaking remediation works to safely operate with 160 people onboard.  He used the Advancement of Cost Engineering recommended practices to prepare a cost estimate.  Mr Harrison was provided with the invoices/receipts for the work undertaken.  He said that those documents were hard to interpret because of an absence of detail as to the precise works undertaken.  No quotations were disclosed by the first defendant, despite request, which might have provided some indication as to the precise nature of the work that was undertaken by any particular contractor.  Doing the best he could, he estimated that the cost would fall between $98,315 and $210,675. 
  4. [180]
    Mr Harrison’s instructions were that the four defects set out in the pleadings required remediation, namely:

a fault in the electrical system;

that the keelson was substantially rotting;

that the deck timbers and deck support timbers were rotting; and,

the watertight bulkheads were not watertight

  1. [181]
    In cross-examination he said that these items were not scopes of work but rather defects and whilst he had regard to them, he did not use a method whereby he determined the cost of repairing a particular defect. He did concede however that if there wasn’t a fault in the electrical system for instance, then the costs could be less.[97]
  2. [182]
    Mr Mark Hughes[98] (with Mr Joe Akacich) provided a report reviewing the opinions of Mr Craig Harrison.  Mr Hughes was called by the first defendant.  He is a qualified naval architect and accredited marine surveyor.  He criticised Mr Harrison’s expertise principally on the basis that he is not an AMSA-certified surveyor. I do not consider that anything turns on this criticism.  
  3. [183]
    Mr Hughes’ other criticism of Mr Harrison was of his opinion that not all the work undertaken was necessary.  That criticism however was based on a misunderstanding of Mr Harrison’s opinion.  Mr Hughes understood his opinion to be that no work was necessary which is not what Mr Harrison intended to convey.   Whilst he criticises Mr Harrison for not identifying what he considered to be improvement works as opposed to opportunistic works, he accepted in evidence that he would need a scope of works or a defect list in order to identify the differences.   Mr Hughes accepted however, that Mr Harrison had identified the degraded structure, the lack of watertight subdivision and the dangerous electrical system as matters that would fall within defects which would require maintenance. 
  4. [184]
    Mr Hughes otherwise criticised Mr Harrison for using the term “grandfathering” which is a term no longer in use by AMSA.   Because that is the term used in the pleadings, I do not consider anything turns on that criticism. 
  5. [185]
    Mr Hughes accepted that in a situation such as that which arose for the Catalina, a prudent owner wouldn’t just rebuild the majority of the vessel without exploring whether things could be replaced at a cheaper cost.  He further accepted that in order to determine what were defects that required repair and what were opportunistic works undertaken that you would need a scope of works or a defect list indicating on what grounds the vessel had become transitional and what would be required to get it operating commercially again. 
  6. [186]
    The only evidence establishing a defect that might have made the Catalina unseaworthy was the lack of watertight bulkheads.  Mr Holmes, called by the first defendant, in his evidence said that it would be possible to repair any holes in the bulkheads by the use of silicone and that the bulkheads could have been extended up to the freeboard deck in order to make them watertight.  There is no evidence that has been adduced that would allow me to determine what the reasonable costs of such works would be.
  7. [187]
    Further, as indicated, the first defendant now has a vessel worth $1 020 000 which is greater than the value of the vessel at the time of contract together with outlays.  The first defendant has suffered no loss.
  8. [188]
    In rebuilding the Catalina, a great deal of opportunistic improvements were undertaken which would, by their very nature, have added to the lightship weight of the Catalina.  Such items include a bar with what appears to be a stainless steel sink; a disc jockey booth; a bimini with retractable panels; seating; a new set of stairs, and a new toilet.   Those improvements would have added, considerably to the lightship weight of the vessel and so would have contributed to the need to increase the size of the vessel. 
  9. [189]
    To prove its damages the first defendant simply tendered all the invoices that it paid for rebuilding the Catalina.  Mr Norris gave evidence that all of the invoices related to the work undertaken for the hull and the connection of the hull to the superstructure.[99]  Some of those invoices clearly did not relate to work undertaken in the building of the hulls and attaching them to the original superstructure.  Invoices relating to the installation of wifi; the replacement of life jackets; and the costs associated with the bimini had nothing to do with the carrying capacity of the Catalina or the rectification of any defects. Whilst I did not consider that Mr Norris was a dishonest witness, the reliability of the evidence adduced as to the costs of the remediation works is questionable.
  10. [190]
    Further, the first defendant did not disclose, despite request, the quote associated particularly with the invoice from Moreton Bay Boat Works. That invoice totals $335,588.40 and was provided pursuant to a quote dated 27 August 2018.  By failing to disclose that quote I am left in a position where I cannot make any assessment as to what part or parts of that amount might be associated with rectifying the defects or making the Catalina capable of carrying 160 passengers. 
  11. [191]
    On the evidence before me, the costs incurred in rebuilding the Catalina far exceed the costs that might have been reasonably incurred in addressing any and all of the deficiencies in the vessel, as set out in the pleadings.
  12. [192]
    The first defendant also claims that the remediation works caused the first defendant to sustain a loss of profit in the amount of $167,544.37. No evidence was called regarding any loss of profit. 
  13. [193]
    The first defendant has failed to prove their loss. 
  14. [194]
    I order:
  1. There be judgment for the plaintiff on its claim. 
  2. The first defendant’s counterclaim is dismissed. 
  3. The first defendant’s claim against the second and third defendants is dismissed. 
  4. The first defendant pay the plaintiff the sum of $543,616.17.
  5. I will hear further from the parties as to any consequential orders sought and to costs.
  6. If agreement cannot be reached each party has 21 days within which to file further submissions not exceeding four pages.

Footnotes

[1] Exhibit 9, p. 710 trial book.

[2] Defence of the First Defendant, Court Document 2, para [7].

[3] Defence of the First Defendant, Court Document 2, para [9].

[4] A vessel is in-survey if it has passed an initial survey and is operational. It is then required to have periodic surveys carried out by an accredited surveyor each year. 

[5] Exhibit 23, sworn 23 September 2022.

[6] Ibid, exhibit BI-7, p. 353 trial book.

[7] Regulations made under the Maritime Safety (Domestic Commercial Vessel) National Law Act 2012 (Cth).

[8] T2-8 line 30.

[9] Exhibit 11, trial book p. 725.

[10] T4-41, line 11.

[11] [1983] 1 NSWLR 1 at 22-23.

[12] T4-33.

[13] Exhibit 6, trial book p. 648.

[14] T4-37, line 9.

[15] T4-36, lines 6-7.

[16] Exhibit 6.

[17] Exhibit 23, exhibit BI-4, p. 651 trial book.

[18] Ibid.

[19] Exhibit 19, p. 782 trial book. 

[20] Exhibit 39, p. 105 trial book.

[21] Ibid, para [7.30], p. 116 trial book.

[22] T3-34.

[23] T1-20, line 6.

[24] T1-56, lines 39-43.

[25] T2-5-6.

[26] Which was the relevant legislation at the time of the contract of sale.

[27] Exhibit 32, para [5.13.1], trial book p. 152.

[28] Defence of the First Defendant, Court Document 2, para [15].

[29] T1-102, lines 44-45.

[30] T2-43, line 29.

[31] T1-104, line 34.

[32] Exhibit 39, para [7.27], p. 115 trial book.

[33] T1-39-40.

[34] Exhibit 23, para [24], p. 303 trial book.

[35] Ibid, para [36]-[37], p. 309 trial book.

[36] Exhibit 25.

[37] T1-70-71.

[38] Exhibit 23, para [35(e),(g)], p. 307-8 trial book.

[39] Exhibit 25 (Rev A) p. 8.

[40] T2-62.

[41] T2-64; T2-73.

[42] T2-86, lines 3-5.

[43] T1-75, lines 8-9.

[44] T2-7, lines 39-40.

[45] Exhibit 23, para [35(k)], p. 308 trial book.

[46] T1-17, line 7.

[47] T1-27, lines 43-46.

[48] T1-28, lines 39-40.

[49] T1-30, lines 15-16.

[50] T3-74, lines 16-17

[51] T2-7, lines 39-40.

[52] Jones v Dunkel (1959) 101 CLR 298.

[53] Exhibit 32, para [5.5.2], p. 149 trial book.

[54] Exhibit 23, exhibit BI-1, p. 335 trial book.

[55] Exhibit 34.

[56] T3-20, lines 21-23.

[57] Ibid, lines 5-13.

[58] T3-24, lines 8-12.

[59] T3-23, lines 40-41.

[60] T3-24, lines 24-25.

[61] Exhibit 11, p. 727 trial book.

[62] Exhibit 5, p. 622 trial book.

[63] Exhibit 23, para [16], p. 300 trial book.

[64] (1982) 149 CLR 337, 346.

[65] (1977) 180 CLR 266.

[66] Bou-Simon v BGC Brokers LP [2018] EWCA Civ 1525 at [12].

[67] Codelfa (supra) at 346.

[68] Ibid, 348.

[69] Ibid, 352.

[70] T1-95, lines 25-26.

[71] T1-97, lines 1-5.

[72] T3-67, lines 28-30.

[73] T3-68, lines 16-17.

[74] T1-100, lines 19-21.

[75] Exhibit 10, p. 720 trial book.

[76] T3-79, line 44.

[77] Exhibit 10, p. 720 trial book.

[78] Exhibit 28.

[79] T3-72, line 15.

[80] T4-10, lines 37-39.

[81] T4-3, lines 8-9.

[82] Exhibit 10, p. 722 trial book.

[83] T3-74, lines 15-21.

[84] T3-74.

[85] Exhibit 16, p. 776 trial book.

[86] T1-95, line 22.

[87] Exhibit 10, p. 720 trial book.

[88] T1-96, lines 11-12.

[89] T3-72, line 46.

[90] Exhibit 39, para [7.2], p. 110 trial book.

[91] Exhibit 32, para [5.2.1], p. 148 trial book.

[92] Exhibit 39, para [7.2], p. 110 trial book; T3-69, line 46.

[93] Gates v City Mutual Life Assurance Society Ltd (1987) 160 CLR 1 at 11-12.

[94] Exhibit 20, p. 784 trial book.

[95] Exhibit 13, p. 769 trial book.

[96] See p. 452-459 trial book. Cf p. 596-617 trial book.

[97] T4-63-64, lines 46-2.

[98] Review of Expert Report of Craig Harrison for Saltwater Noosa Pty Ltd, Prince and Norris MV Catalina Noosa Cruises Pty Ltd, p. 209 trial book.

[99] T2-39, lines 20-22.

Close

Editorial Notes

  • Published Case Name:

    Noosa Cruises Pty Ltd v Saltwater Noosa Pty Ltd & Ors

  • Shortened Case Name:

    Noosa Cruises Pty Ltd v Saltwater Noosa Pty Ltd

  • MNC:

    [2022] QDC 278

  • Court:

    QDC

  • Judge(s):

    Loury KC DCJ

  • Date:

    09 Dec 2022

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2022] QDC 27809 Dec 2022-
Primary Judgment[2023] QDC 1917 Feb 2023-

Appeal Status

No Status

Cases Cited

Case NameFull CitationFrequency
Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1
2 citations
Jump To
Cite 1 - [1983] 1 NSWLR 1
Cite 2 - [1983] 1 NSWLR 1
Bou-Simon v BGC Brokers LP [2018] EWCA Civ 1525
1 citation
Jump To
Cite 1 - [2018] EWCA Civ 1525
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
2 citations
Jump To
Cite 1 - (1977) 180 CLR 266
Cite 2 - (1977) 180 CLR 266
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 C.L R. 337
5 citations
Jump To
Cite 1 - (1982) 149 C.L R. 337
Cite 2 - (1982) 149 C.L R. 337
Cite 3 - (1982) 149 C.L R. 337
Cite 4 - (1982) 149 C.L R. 337
Cite 5 - (1982) 149 C.L R. 337
Gates v City Mutual Life Assurance Society Ltd (1987) 160 CLR 1
2 citations
Jump To
Cite 1 - (1987) 160 CLR 1
Cite 2 - (1987) 160 CLR 1
Jones v Dunkel (1959) 101 CLR 298
2 citations
Jump To
Cite 1 - (1959) 101 CLR 298
Cite 2 - (1959) 101 CLR 298

Cases Citing

Case NameFull CitationFrequency
Noosa Cruises Pty Ltd v Saltwater Noosa Pty Ltd [2023] QDC 192 citations
1

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