CFGC Forest Managers (NZ) Limited v The Ship "Achilles Bulker"
[2023] NZHC 3130
•7 November 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2223
[2023] NZHC 3130
ADMIRALTY ACTION IN REM AND IN PERSONAM BETWEEN
CFGC FOREST MANAGERS (NZ) LIMITED
Plaintiff
AND
THE SHIP “ACHILLES BULKER”
First Defendant
SE APEX CORPORATION
Second DefendantDAMPSKIBSSELSKABET NORDEN A/S
Intervenor
Hearing: On the papers Counsel:
C Hunter for Plaintiff
P Davies for Defendants E C Gellert for Intervenor
Judgment:
7 November 2023
JUDGMENT OF LANG J
[on application for inspection]
This judgment was delivered by Justice Lang
On 7 November 2023 at 11.00 am Pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:…………………………
Solicitors/counsel:
Hesketh Henry, Auckland Fee Langstone, Auckland Lowndes Jordan, Auckland
CFGC FOREST MANAGERS (NZ) v THE SHIP “ACHILLES BULKER” [2023] NZHC 3130 [7 November 2023]
[1] This proceeding arises out of a mechanical mishap suffered by the vessel MV Achilles Bulker as it left Tauranga Harbour bound for Putian in China on 24 July 2023. The mishap occurred when the rudder detached from the vessel shortly after it departed from the Port of Tauranga laden with logs. After losing its rudder the vessel was towed to anchorage offshore before being berthed again at the Port of Tauranga on 8 August 2023. It has remained at the Port of Tauranga since that date.
[2] The plaintiff, CFGC Forest Managers (NZ) Ltd (CFGC), was the owner of the logs that had been loaded onto the vessel. It had sold the logs to a third party but the purchaser subsequently terminated the contract because CFGC was unable to deliver the logs as the contract required.
[3] CFGC has given notice that it is making a claim against SE Apex Corporation (SEA) for losses CFGC has suffered by virtue of the contract for the sale of the logs being terminated. The claim will be determined by means of an arbitration to be held in London. CFGC issued this proceeding on 2 October 2023 seeking interim measures designed to preserve items that may explain or be relevant to the cause or causes of the vessel losing its rudder. This Court placed the vessel under arrest on the same date and it has remained under arrest since then.
Procedural background
[4] CDGC has named the vessel as first defendant and SEA as second defendant. SEA is the owner of the vessel. A company called Dampskibsselskabet Norden A/S (Norden) has entered an appearance in the proceeding as an intervenor. It is the disponent owner of the vessel, having taken it on time charter from SEA. Norden then sub-chartered the vessel to CFGC on voyage charter terms.
[5] On 19 October 2023, Muir J issued a minute in which he recorded a procedure agreed by the parties to enable the logs to be discharged from the vessel to prevent them from deteriorating in value. The procedure required CFGC to pay sums of money to the Registrar and into an escrow account for specified purposes before discharge of the logs could commence. Those funds have not yet been paid and the logs remain on the vessel.
[6] In the application that was before the Court on 19 October 2023 CFGC sought orders for the preservation and inspection of specified items relating to the vessel and the loss of the rudder. In the minute issued on 19 October 2023 Muir J made preservation orders in relation to these items. He also made an order permitting representatives of CFGC and Norden to inspect the steering room of the vessel and the compartment located directly beneath it. The orders also permitted inspection of the rudder and any other componentry that might be agreed between the representatives of the parties.
[7] SEA entered an appearance under protest to jurisdiction. It contended that the contractual arrangement between CFGC and SEA required any dispute between them to be determined by arbitration in London. It therefore applied for orders setting aside the notice of proceeding and staying the proceeding so the parties could arbitrate any claim that CFGC may bring.
[8] The parties have now agreed that the present proceeding must be stayed so that the dispute can be determined by way of arbitration. I therefore made an order staying the proceeding when SEA’s application was first called on 1 November 2023.
[9] An arbitrator has not yet been appointed. However, CFGC says it will advance claims against SEA based on breach of contract and bailment, as well as failing to take reasonable care of the cargo. CFGC anticipates that it will be some months before an arbitrator will be able to make procedural directions. It is aware that the vessel is likely to leave Tauranga shortly because it needs to be towed to China for repairs to be undertaken. This will occur once the vessel has been released from arrest and the logs have been unloaded. Investigations currently being undertaken by Maritime New Zealand and the Transport Accident Investigation Commission will also need to be completed. A towage plan Mr Williams also need to be approved by a relevant class surveyor. CFGC is concerned that crucial evidence relating to the incident on 24 July 2023 may be lost once the vessel leaves New Zealand waters.
[10] Norden supports CFGC’s application on the basis that it may also be the subject of claims by SEA and/or CFGC arising out of the loss of the rudder. These will also need to be determined by arbitration in London.
[11] The issue I am now required to determine is whether it is appropriate to make orders permitting CFGC and Norden to inspect the items that are currently the subject of the preservation orders. SEA contends that such orders should be left to the arbitral tribunal appointed to determine any claim that CFGC may bring.
The application
[12]The application is cast in the following terms:
1The applicant, CFGC Forest Managers (NZ) Limited (CFGC), will on apply to the court for the following orders:
(a)For the inspection and preservation of property in relation to the first respondent (Vessel), any documents and/or evidence associated with the loss of rudder that occurred on or about 24 July 2023 (Incident), specifically including, but in no way limited to preservation and inspection of the following documents:
(i)general arrangement plan for the ship;
(ii)steering gear general arrangement plan;
(iii)drawings for the rudder and rudder stock, including details of attachment and support;
(iv)Classification report on the rudder failure;
(v)Classification records for the Vessel since the last drydock, including any conditions of Class during that period;
(vi)maintenance records for all components of the steering gear system and rudder since the last drydock;
(vii)drydock report for any work/inspections conducted on the rudder and steering arrangement;
(viii)incident/accident reports recorded by the ship and ship operator since the last drydock;
(ix)underwater video and still imagery of the hull and rudder made following the loss of rudder;
(x)ship's particulars;
(xi)crew list;
(xii)copy of the official log book since the last drydock;
(xiii)Master's statement of facts;
(xiv)underwater video and still imagery of the hull and rudder made following the Incident;
(xv)list of ports visited for the last 12 months;
(xvi)the Class report for the drydock previous to the last drydock (circa 2018), including all work done and inspections on the rudder and steering arrangement;
(xvii)the drydock specification for the same drydock (circa 2018) regarding any work done on the rudder and steering arrangement; and
(xviii)the results of any measurement of tolerances withing the rudder and steering arrangement for the last 6 years.
(b)All physical evidence relating to the incident, whether now or in the future, be preserved and presented for inspection in New Zealand when available, including the rudder, parts held by Transport Accident Investigation Commission (TAIC) and any other relevant evidence.
(c)That the plaintiff's and any other interested party's representatives be given access to the Vessel to conduct a survey of the Vessel and cargo.
Approach
[13] The Court ordinarily makes interlocutory or procedural orders in accordance with the High Court Rules 2016 (HCR). However, where a dispute is referred to arbitration the HCR are displaced by the limited jurisdiction conferred by arts 9(1) and 17 of sch 1 to the Arbitration Act 1996 (the Act).
[14]Article 5 of sch 1 to the Act provides as follows:
In matters governed by this schedule, no court shall intervene except where so provided in this schedule.
[15]Article 9(1) and (2) of sch 1 then provides:
(a)It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure and for a court to grant such measure.
(b)For the purposes of paragraph (1), the High Court or the District Court has the same powers as an arbitral tribunal to grant an interim measure under article 17A for the purposes of proceedings before that court,
and that article and article 17B apply accordingly subject to all necessary modifications.
[16]Article 17 defines “interim measure” as follows:
Interim measure means a temporary measure (whether or not in the form of an award) by which a party is required, at any time before an award is made in relation to a dispute, to do all or any of the following:
(a)maintain or restore the status quo pending the determination of the dispute:
(b)take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral proceedings:
(c)provide a means of preserving assets out of which a subsequent award may be satisfied:
(d)preserve evidence that may be relevant and material to the resolution of the dispute:
(e)give security for costs
[17] As counsel for CFGC points out in his reply submissions, r 25.53 of the High Court Rules 2016 provides the Court with the power to make an order for inspection of any ship or other property where that is necessary or desirable for the purpose of obtaining full information or evidence in connection with any issue in a proceeding. As I have already noted, the orders made by Muir J on 19 October 2023 permitted CFGC’s representatives to inspect specified areas of the vessel as well as the vessel’s rudder. However, this does not affect the general principle that, where a dispute has been referred to arbitration, the Court will generally only make interim measures in circumstances of urgency.
[18] This may occur where an arbitral tribunal cannot make procedural orders or directions in sufficient time to provide a party with the necessary protection.1 In Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd, Lord Mustill observed:2
The purpose of interim measures of protection…is not to encroach on the procedural powers of the arbitrators but to reinforce them, and to render more effective the decision at which the arbitrators will ultimately arrive on the substance of the dispute…I prefer the view that when properly used
1 Marnell Carrao Associates Inc v Sensation Yachts Ltd (2000) 15 PRNZ 608 at [74].
2 Channel Tunnel Group Ltd v Balfour Beattie Construction Ltd [1993] AC 334 (HL) at 365-367, cited with approval in Marnell Carrao Associates Inc v Sensation Yachts Ltd, above n 1, at [74(d)].
such measures serve to reinforce the agreed method of dispute resolution, not to bypass it…the Court should approach the making of such an order with the utmost caution, and should be prepared to act only when the balance of advantage plainly favours the granting of relief…
[19] The preservation orders the Court has already made effectively constitute interim measures under art 17 (a) and (b). The issue now to be determined is whether the Court has the jurisdiction to grant the additional interim measures that CFGC and Norden seek. If jurisdiction exists it will be necessary to determine whether the Court should make those orders at this stage rather than leave it to the arbitral tribunal to determine whether and to what extent they are appropriate.
[20] I put to one side the submission for CFGC that the Court should take a cautious approach because difficulties may arise in enforcing arbitral orders and awards in the People’s Republic of China (PRC). As counsel for SEA points out, the vessel is registered in Panama even though it is owned by a state-owned entity based in the PRC. SEA is incorporated in Taiwan. It is speculative at this point to suggest that this connection with the PRC will make it difficult to enforce any procedural orders made by the arbitral tribunal in London.
Does the Court have jurisdiction to make the interim measures CFGC seeks?
[21] CFGC and Norden are obviously seeking to gain access to evidence that may shed light on the cause or causes of the rudder detaching from the vessel. The only provision in the definition of “interim measure” that may assist them is art 17(d).3 However, art 17(d) only relates to interim measures that preserve evidence. It does not extend to interim measures that give a party the right to inspect items that may constitute evidence. For this reason I do not consider jurisdiction exists under art 17(d) to make the order that CFGC and Norden seek.
[22] In the alternative, CFGC and Norden contend that the Court should make an order requiring SEA to leave the items in New Zealand after the vessel leaves New Zealand waters. They say this will preserve the evidence so that it remains available for inspection once the claims have been referred to arbitration. I accept that jurisdiction exists under art 17(d) for such an order to be made.
3 Set out above at [16].
Should the Court make an order that the items remain in New Zealand after the vessel leaves New Zealand waters?
[23] The argument for CFGC and Norden is based on the premise that there is a real risk that the items referred to in paragraph 1 of the application will be destroyed or lost once the vessel leaves New Zealand waters. At that point the Court will lose its ability to enforce the preservation orders it has made.
[24] However, there is no evidence to support the proposition that SEA is likely to destroy evidence once the vessel leaves New Zealand waters. It consented to the preservation orders being made and is therefore aware that it cannot take steps to destroy or conceal the items that are subject to those orders. Having consented to the orders SEA has also effectively acknowledged that the items exist. An arbitral tribunal is likely to be extremely sceptical of any subsequent claim by SEA that they do not exist.
[25] In the absence of evidence suggesting that SEA is likely to destroy or conceal evidence I do not consider the Court should involve itself further in the discovery and inspection process that the arbitral tribunal will no doubt direct.
Result
[26]The application is dismissed.
Costs
[27] CFGC succeeded in obtaining preservation orders but failed to obtain the remaining interim measures that it sought. My tentative view is therefore that costs should lie where they fall. If either party takes a different view they have leave to file concise memoranda on costs and I will deal with that issue on the papers.
Lang J
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