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25 March 2015
In 2005 Newfield Peninsula Malaysia (the plaintiff) entered into a petroleum sharing contract with Petronas in order to carry out oil and gas exploration and production in a designated location known as PM323 for a 30-year term. The plaintiff also signed a joint operating agreement with Petronas's subsidiary Carigali Sdn Bhd in order to regulate and govern the relationship between the plaintiff and Carigali in all matters concerning the joint operation of the petroleum sharing contract. The plaintiff constructed and installed the East Belumut A Platform with a 10-inch underwater pipeline that was connected to the Tinggi-A Platform which fell within a different oilfield, PM9.
On June 27 2010 the anchor handling tug supply vessel Tanjung Puteri 1 ruptured the underwater pipeline. This rupture caused a major disruption to the plaintiff's exploration and production operations. The plaintiff claimed that it had suffered considerable loss and damages due to the incident and made a claim against the defendant by way of a tort-based action. This action was brought against the Tanjung Pinang 1 – a sister ship of the Tanjung Puteri 1.
The Admiralty Court had to determine whether:
The plaintiff's damages claim was assessed later.
Was the plaintiff the correct party to bring the action?
After examining the evidence (eg, the petroleum sharing contract, the joint operating agreement and the oral evidence given by plaintiff witness PW1), the court found that the plaintiff had a beneficial interest and clear right of possession to PM323 and the facilities developed by it, including the ruptured oil pipeline and the oil that was subsequently lost. The deferred production caused by the incident in and of itself accorded the plaintiff a right to bring the action without Petronas or Carigali. In its conclusion, the court referred to the English Court of Appeal decision in Shell UK v Total UK,(1) in which the court held that a beneficial interest is sufficient to sue for negligence and that a beneficiary need not establish a concurrent possessory right.
The court strengthened its position by holding that the plaintiff had invested in the design, construction and installation of the facilities, including the pipeline. The plaintiff bore the entire cost and it was the sole active operator of PM323. Hence, the plaintiff exclusively controlled and managed the operations at PM323. Pursuant to the principle enunciated in Winkfield(2) (ie, that a plaintiff with exclusive possession can sue as a bailee), the plaintiff had the right to sue as the bailee in respect of the damaged pipeline, ancillary structures and other consequential damage.
Was the damage to the pipeline caused by the defendant's negligence?
Based on the facts of the case and those set out in Sabah Shell Petroleum v Owners of the vessel Borcos Takdir(3) (which was similar insofar as an anchor had snagged and ruptured an oil pipeline in an oilfield), the court held that the principle of res ipsa loquitur (ie, the thing speaks for itself) applied. The court held that the incident would not have occurred in the ordinary course of good seamanship and that this amounted to prima facie evidence of negligence on the part of the master and thus the defendant. The court disagreed with the defendant's argument that the accident had occurred because of defence witness DW1's mistake in correcting the UK Admiralty Chart.
The court held that even if the doctrine of res ipsa loquitur did not apply, the defendant was liable for the following reasons:
Could the defendant rely on the statutory limitation under Section 360?
Defendants that wish to rely on Section 360 must establish that the incident occurred without the shipowner's actual fault or privity. As such, two questions must be considered:
In relation to the first question, although the facts spoke for themselves, the court required evidence regarding how or why the master chose to drop anchor at PM323 and the steps which he took before doing so. However, as this evidence was not provided, the court was unable to ascertain whether the master and his crew took proper steps or followed accepted protocol to plot their position and drop anchor.
With regard to the second question, the court found that there had been a clear failure to ensure the existence and implementation of safe navigational and operational practices, which could be attributed only to the will of the defendant – in particular, the owners. Based on the evidence, the court determined that the defendant had ignored the obvious risk of a casualty arising from the dropping of a defective anchor near an oil pipeline. Thus, the defendant could not deny its liability by placing blame solely on DW1.
In its final analysis, the court found that the defendant had failed to discharge its burden to establish that the damages were not caused by its actual fault or privity; thus, the court denied its defence of tonnage limitation.
The court concluded, on a balance of probability, that the defendant was liable to the plaintiff for negligence.
For further information on this topic please contact Rajasingam Gothandapani at Shearn Delamore & Co by telephone (+60 3 2070 0644) or email (firstname.lastname@example.org). The Shearn Delamore & Co website can be accessed at www.shearndelamore.com.
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