Marine & Civil v SGS
A recent case in the Australian Federal Court (Marine & Civil Construction Company Pty Ltd v SGS Australia Pty Ltd) serves as a reminder of the importance in ensuring that surveyors and consultants clearly and promptly notify the party instructing them of any limitations as to the services that the surveyor or consultant is to provide, before the contract for the provision of services is concluded.
In early 2006, Marine & Civil Construction Company Pty Ltd (M&C) were engaged to arrange the transportation of a crane loaded on a barge from Dampier, Western Australia, to Koolan Island, where the crane was required for the construction of an iron ore offloading wharf. The crane weighed 250 tonnes and its boom measured 67m (the crane could not be constructed on the island so had to be transported with the boom assembled).
M&C engaged a third party to design the sea fastenings of the onboard equipment and crane, prepare a towing plan and undertake a barge stability analysis. M&C were advised by their insurers that a warranty survey report would be required as condition of insurance for the voyage. M&C were put in contact with SGS Australia Pty Ltd (SGS), and sent to SGS the following instruction:
“We require maritime survey to be completed for onhire/offhire reports and warranty survey for towing purposes for tugs and crane barges…”
SGS responded to this request with the following email:
“Warranty surveys are only conducted by the Classification Society however we are able to provide you with a survey report. This is a report of our findings at time and place of intervention but I must stipulate is not a Certificate of Seaworthiness for towing…”
M&C proceeded on this basis and SGS produced their report. That report contained the following qualification:
“Sea fastening were checked by us, with barge in static condition. In that condition they appeared to be satisfactory (Please note that we were not provided with test certificates of the lashing material)…”
The day after the survey report was provided, the tow commenced. Later that evening, the wind strengthened and sea conditions became rough. Early in the morning of the next day, the tug’s crew noticed that the sea fastenings securing the boom of the crane to the barge had failed and that parts of the crane were being dragged behind the barge. Severe damage had been caused both to the crane and to other items on the barge. That same day, the tug and the barge returned to Dampier.
M&C subsequently commenced proceedings against SGS, the party who had designed the fastenings, and the tug operators, seeking to recover approximately AUD 600,000 being the cost of repairs to the crane and boom. M&C settled the dispute with the designer and the tug operators, leaving SGS as the only defendant. M&C’s claim was essentially that SGS had impliedly or expressly warranted that the securing arrangements were suitable and seaworthy (a warranty that M&C said was false) and that M&C had suffered a loss as a result of this alleged misleading and deceptive conduct in contravention of Section 52 of the Trade Practices Act 1974.
The Judge found that while M&C had requested a “warranty survey”, both in the acceptance of their instructions and again in the survey report itself, SGS had made it quite clear that they were not providing a “warranty survey” and that M&C (who, despite their assertions to the contrary, the Judge deemed could not be said to be inexperienced in the maritime industry) cannot have relied on the report provided by SGS as a “warranty survey”. It therefore followed that SGS were not found to have been in breach of the relevant provisions of the Trade Practices Act. M&C’s claim was dismissed, and they were ordered to pay SGS’ costs.
As well as providing a timely reminder of the importance of understanding the instructions being given to surveyors/consultants, and notifying the instructing party of any limitations, qualifications or additional information required, this case also highlights that these exchanges should be put in writing. This case was heard over 6 years after the original discussions took place, and various witnesses from both parties were called to give evidence. Had SGS not stated quite clearly in writing the parameters of their report, and had instead to rely on the recollections of their staff, the result could have been quite different due to memories having faded over time.
The case also contained discussion as to whether M&C were “experienced in the industry”, and it is clear that when dealing with less experienced clients, courts will likely impose a higher onus on surveyors to make it clear what they can and cannot be expected to include within their report.