Daina Shipping Company v Te Runanga O Ngati Awa
[2013] NZHC 500
•15 March 2013
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IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV-2012-470-838 [2013] NZHC 500
IN THE MATTER OF a claim for limitation under Part 7 of the
Maritime Transport Act 1994
BETWEEN DAINA SHIPPING COMPANY First Plaintiff
ANDCOSTAMARE SHIPPING COMPANY SA Second Plaintiff
ANDCIEL SHIPMANAGEMENT SA Third Plaintiff
ANDTHE SWEDISH CLUB Fourth Plaintiff
ANDTE RUNANGA O NGATI AWA First Defendant
Hearing: 7 December 2012 (Heard at Auckland)
Counsel: M Ring QC, P David and M McCarthy for the Plaintiffs
No appearance for the First Defendant, Second Defendant or other claimants
N Davidson QC, M Heard and R Makgill for the Third Defendant
Judgment: 15 March 2013
JUDGMENT (NO. 2) OF WOODHOUSE J
This judgment was delivered by me on 15 March 2013 at 4:00 p.m. pursuant to r 11.5 of the High Court Rules 1985.
Registrar/Deputy Registrar
……………………………………
DAINA SHIPPING COMPANY V TE RUNANGA O NGATI AWA HC TAU CIV-2012-470-838 [15 March
2013]
Cont …
ANDTE RUNANGA O NGATI TE RANGI IWI TRUST
Second Defendant
ANDNEVAN LANCASTER Third Defendant
ANDALL PERSONS CLAIMING OR BEING ENTITLED TO CLAIM DAMAGES BY REASON OF THE GROUNDING OF THE CONTAINERSHIP MV RENA ON THE ASTROLABE REEF OFF THE BAY OF PLENTY, NEW ZEALAND, AT 0218
HOURS NEW ZEALAND TIME ON 5
OCTOBER 2011
[1] On 5 October 2011 the ship Rena ran aground on Astrolabe Reef (Otaiiti) when en route to the port of Tauranga. Astrolabe Reef is about 13 nautical miles northeast of Mount Maunganui, near Tauranga. The Rena was a container ship with a gross weight of 37,209 tonnes. She could not be removed from the reef. Sometime after the grounding she broke in two. In addition to the loss of the ship, and loss of or damage to cargo, containers were lost overboard and oil was discharged into the sea. Some of the oil was washed ashore onto nearby beaches.
[2] The plaintiffs have applied for an order under Part 7 of the Maritime Transport Act 1994 (the Act) that they are entitled to limit their liability in respect of claims arising from the grounding of the Rena. I will refer to this as the “limitation application”.
[3] The first plaintiff was the registered owner of the Rena. The second and third plaintiffs are joined as companies which provided management services for the owner and for the ship respectively. The fourth plaintiff is the liability insurer of the first plaintiff.1
[4] The third defendant, Mr Lancaster, has filed a notice of appearance. Mr Lancaster claims he suffered loss as a result of the grounding. He has not given notice of opposition to the plaintiffs’ application for a limitation order. He has applied, under r 25.26(5) of the High Court Rules, for directions requiring the plaintiffs to provide a number of documents on the grounds that he does not have enough information to enable him to decide whether or not to dispute the plaintiffs’ application. The plaintiffs oppose Mr Lancaster’s application. I will refer to Mr Lancaster’s application as the “disclosure application”.
[5] The fourth plaintiff also applied for an order authorising it to constitute a limitation fund for all claims falling within Part 7 of the Act. An order to that effect was made on 14 December 2012.2 Reasons for the order were not given at the time.
They are provided in this judgment.
1 There is an evidential issue discussed below at [20] relating to the standing of the plaintiffs.
2 Daina Shipping Company v Te Runanga O Ngati Awa [2012] NZHC 3411.
Outline of issues
[6] The limitation and disclosure applications are linked in two ways. The first is procedural in nature. The disclosure application needs to be disposed of, one way or the other, to determine the scope of the limitation application. If, in the end, there is no opposition to the limitation application the Court “must” make a limitation order. If Mr Lancaster opposes the limitation application there will need to be a further
hearing.3 The other link between the two applications is that, to decide whether Mr
Lancaster does not have sufficient information, regard must be had to the substantive law relating to, and the policy underlying, the entitlement of ship owners and others to limit liability, and to the test to be met by a party contending that there should be no limitation of liability.
[7] The broad issue that arises on Mr Lancaster’s disclosure application is whether the information that is already available to him is sufficient to enable him to decide whether to dispute the limitation application having regard to the substantive limitation law, the policy underlying that law, and the rules of Court, and with these matters further assessed in relation to Mr Lancaster’s claim.
[8] The primary question that arose on the limitation fund application was whether there is jurisdiction to make an order for the establishment of a limitation fund. I concluded that there is jurisdiction. In coming to this conclusion I have not followed another New Zealand decision.4
The casualty: why the Rena ran aground
[9] Following the grounding of the Rena, Maritime New Zealand undertook an investigation into the circumstances leading to the casualty. Subsequently the master and second officer of the Rena were charged with two offences: an offence against s 65(1)(a) of the Act of operating a ship in a manner which caused unnecessary
danger or risk; and an offence under the Resource Management Act 1994 related to
3 High Court rr 25.26(4) and (6).
4 Tasman Orient Line CV v Alliance Group Ltd [2004] 1 NZLR 650 (HC), [2003] 2 Lloyd’s Rep 713
(HC). I will refer to this case as The Tasman Pioneer, the name of the ship in question.
the discharge of contaminants from the ship into the sea. Maritime New Zealand obtained a substantial amount of information for the purpose of the prosecutions. The summary of facts for the prosecution is 46 pages in length.
[10] The master and the second officer pleaded guilty and were sentenced by Judge Wolff in the District Court at Tauranga on 25 May 2012.5 The summary of facts and the Judge’s sentencing notes record that it was the acts and omissions, including decisions, of the master and second officer that led to the grounding. The Rena was sailing from Napier to Tauranga. On the voyage, as the Judge put it, the master became “obsessed with the need to arrive at the pilot station outside Tauranga Harbour by 3.00 am”. The Judge said that this “set in train a … series of events that ultimately resulted in” the grounding on the reef.6
[11] I will summarise the relevant facts from the summary of facts. This is taken from a summary in the submissions for the plaintiffs, which I am satisfied sufficiently captures the essential facts of relevance. In order to ensure the 0300hrs arrival, the master had sanctioned various shortcuts that departed from the vessel’s passage plan. At 0018hrs the vessel’s course was back consistent with the passage plan, and on track to arrive at the pilot station by 0300hrs, although this would have been close. At 0027hrs Port of Tauranga radioed the Rena for an update on the vessel’s progress and suggested that the vessel proceed at full speed. The second officer gave Port of Tauranga an ETA of 0300hrs. At about 0135hrs the second officer, without the prior knowledge of the master, as a further shortcut initiated what was the last course change. This put the vessel on a direct collision course with the reef. Self-evidently, this was a substantial deviation from the passage plan. The master then failed to identify the problem until the vessel actually struck the reef at
0214hrs, some 40 minutes later. Factors in the final casualty included failing to plot the Rena’s position accurately or at all, relying on GPS, and failing to consult charts and other resources available on board which clearly and accurately showed the reef
and its position.
5 Maritime New Zealand v Balomaga and Relon DC Tauranga CRI-2011-070-7734, 25 May 2012.
6 Maritime New Zealand v Balomaga and Relon, above n 5, at [5].
[12] The first plaintiff was also charged with an offence under the Resource Management Act arising out of the spillage of oil. The first plaintiff pleaded guilty and was also sentenced by Judge Wolff.7 At the beginning of his sentencing comments the Judge said:
[3] The actual cause of the collision with the reef was the result of poor navigational skills of the captain and second mate and a rush on their part to reach Tauranga, which proved to be an unnecessary rush. At no point during the course of the hearing in relation to them, or this, has there been any suggestion that the present defendant had put any pressure of time, or of operational requirements, on those persons actually responsible for the ship running aground, and that needs to be borne in mind.
[4] It also needs to be borne in mind that this is a single charge and that it is one of strict liability. That means that the owner cannot escape liability in such circumstances.
The information available to Mr Lancaster: the information he seeks
[13] The information referred to in the preceding section, being the summaries of facts prepared by Maritime New Zealand and the sentencing notes, is all available to Mr Lancaster. Copies of the documents were in fact annexed to an affidavit in support of his application. The deponent, a law clerk employed by Mr Lancaster’s solicitors, records that investigations into the grounding of the Rena had been instigated not only by Maritime New Zealand but also by the New Zealand Transport
Accident Investigation Commission and the Liberia Maritime Authority.8 An interim
report of the Transport Accident Investigation Commission was released in February
2012. The law clerk records her understanding that the interim report is not admissible in the present proceedings, but of course the information still remains available to Mr Lancaster.
[14] Mr Lancaster sought production of 18 documents or categories of documents. Four of these were deleted in the course of the hearing. The documents he still seeks
are as follows and listed under the headings in Mr Lancaster’s application:
7 Maritime New Zealand v Daina Shipping Company DC Tauranga CRI-2012-070-001872, 26
October 2012.
8 The Rena had Liberian registration.
“Immediate causes of the grounding”
(1) The navigational passage plan from Napier to Tauranga and the Rena’s draft and trim stability condition before leaving Napier. (2) All witness statements and investigation reports and records from investigations into the incident including those by Maritime New Zealand, Liberian authorities, local authority investigations and any investigation carried out for or by the plaintiffs. (3) “Records of all communications in any way relating to the causes of the grounding between the vessel or persons on board the vessel and the plaintiffs, or between each of the plaintiffs or their representatives” covering the period 48 hours before to 78 hours after the grounding. (4) “All communications regarding the fraudulent alteration of the vessel’s records by the crew.” (5) A list of all persons on board the Rena at the time of the grounding and their roles. (6) The deck log book, the Bell Book and a range of other information recorded on the Rena over a period of 48 hours up to the
grounding, including automatic recordings of a technical nature.
Safety management
(7) The class certificate and class surveys for the Rena. (8) “All documents from and relating to the Rena’s Safety Management System that deal with navigation systems and operations”, including a wide range of itemised aspects of this. (9) The Rena’s Safety, Security and Environmental Protection Policy. (10) The Rena’s Document of Compliance and Safety Management Certificate and any interim certificates. (11) All port state control inspection
records. (12) A list of all paper and electronic charts carried on the Rena.
Operational and safety management responsibilities of the plaintiffs
(13) “Documents evidencing the persons designated by each of the first, second and third plaintiffs from time to time as having responsibility for ISM and the Safety Management System for the Rena (both on-shore and on- board the Rena).” (14) “Records evidencing the plaintiffs’ claim to be within the classes of person specified in Part 7 of the Maritime Transport Act 1994
as entitled to seek limitation of liability” with examples of such documents
provided in the schedule.
Mr Lancaster’s claim: other possible claims
[15] Mr Lancaster owns a business hiring kayaks and catamarans to members of the public from Mount Maunganui beach. He has owned and operated this business since 2007. Mr Lancaster was operating the business when the Rena ran aground.
[16] In an affidavit Mr Lancaster said that after the Rena grounded “there was significant oil and other pollution on Mount Maunganui beach and elsewhere”. He said the beach was shut to the public for approximately six weeks because of the pollution and that over this period he could not trade. He said that he lost an estimated $3,000 in rental income.
[17] On 8 October 2012 North South Environmental Law, a law firm, wrote to the solicitors for the plaintiffs. The letter is signed by a director of the firm, Mr Makgill. Mr Makgill is Mr Lancaster’s solicitor in this proceeding. The plaintiffs were advised that North South Environmental Law was acting for the first and second defendants, “and around 100 Bay of Plenty businesses”. The letter includes the following:
4.The aforementioned clients have all suffered economic loss and/or property damage resulting from the MV Rena grounding and oil spill.
5.We have instructions to file legal proceedings against the MV Rena owners and insurers for compensation in respect of those losses and damages once we have completed an assessment of quantum.
…
LIMITATION
11. You will be aware from previous discussions, and statements in the media, that our legal team considers that there are strong grounds for opposing any application the MV Rena’s owners and insurers might make for a declaration that their liability is limited in the present circumstances.
12.We would be grateful if you could provide us with prior written notice if the owners and insurers intend to make an application for limitation in New Zealand (or other jurisdiction) before we file proceedings in respect of our client’s claims.
The legal team referred to in paragraph 11 is listed in the letter. It includes three Queens Counsel, two from the New Zealand Bar and one from the Bar of England and Wales.
Part 7 of the Act: limitation of liability
[18] Part 7 of the Act contains provisions for limiting the amount of the liability of ship owners, and others, in respect of claims arising from a casualty in relation to the operation of a ship. These provisions are broadly in line with numbers of the provisions in the 1976 Convention on Limitation of Liability for Maritime Claims.
[19] Section 85(1) of the Act provides that those entitled to limit their liability include owners of ships and insurers. Section 84 defines “owner” as “every person who is responsible for the navigation and management of the ship”. In this judgment the word “owner” is used to include all others who are entitled to limit liability.
[20] The submissions of Mr Davidson QC, for Mr Lancaster, raise questions as to whether there is admissible or adequate evidence of the standing of all four plaintiffs. It is unnecessary at this stage of the proceeding to make a definitive finding. I am sufficiently satisfied for present purposes that all four plaintiffs have standing.
[21] The pivotal provision in respect of the present issues is s 85(2). This prescribes the circumstances in which limitation of liability will be excluded, as follows:
85 Persons entitled to limitation of liability under this Part
…
(2) No person shall be entitled to limitation of liability in respect of claims for loss or injury or damage resulting from that person's personal act or omission where the act or omission was committed, or omitted, with intent to cause such loss or injury or damage, or recklessly and with knowledge that such loss or injury or damage would probably result.
The High Court Rules
[22] Rules 25.25 to 25.28 of the High Court Rules prescribe the procedure on a limitation application. The proceeding is commenced with a notice of proceeding and application for the limitation order. A statement of claim is not required. At least one of the persons with a claim against the plaintiffs is required to be named as a defendant. It is apparent that the first and second defendants have been named because of the advice from North South Environmental Law. Mr Lancaster was added as the named third defendant after he filed an appearance.
[23] Paragraphs (4) and (5) of r 25.26 provide:
(4) If, at the hearing of the application, it appears to the court that it is not disputed that the plaintiff has a right to limit the plaintiff's liability, the court must make a decree limiting the plaintiff's liability and fix the amount to which the liability is to be limited.
(5) If, at the hearing of the application, it appears to the court that any defendant does not have sufficient information to enable the defendant to decide whether or not to dispute that the plaintiff has a right to limit the plaintiff's liability, the court must—
(a) give such directions as appear to be appropriate for enabling the defendant to obtain such information; and
(b) adjourn the hearing.
The law and policy relating to limitation of liability
[24] An order for limitation of liability puts a cap on the amount payable to successful claimants against the owner. Limitation of liability may be seen as a risk allocation mechanism. An important part of the rationale is that limiting liability provides a balance between the benefits of shipping and trade, and the interests of
those who may suffer loss from casualties relating to shipping operations.9 The
effect is not to remove the right of claimants who prove liability to recover compensation, but to reduce the quantum of recovery if all successful claims exceed
the cap on the owner’s liability.
9 See the commentaries cited in The Tasman Pioneer, above n 4, at [26].
[25] Limitation of liability has a long history. From obscure origins it first became clearly established through European statutes in the early 17th century, with the first English statute being in 1733. At the turn of the 20th century there were three different but widespread systems of limitation in operation in the world.10
Three international conventions were entered into in the 20th century designed to
provide uniform rules for limitation of liability; conventions of 1924, 1957 and 1976.
[26] The 1976 Convention brought about a “dramatic change”.11 Under the 1957
Convention the owner claiming an entitlement to limit liability had to establish that the occasion giving rise to the claim occurred without the owner’s actual fault or privity.12 Article 4 of the 1976 Convention shifted the burden. The owner was no longer required to establish an absence of fault and an absence of privity. Article 4 requires a claimant opposing limitation to establish that the owner intended to cause the loss suffered by the claimant, or was reckless in that regard and acted with
knowledge that the loss would probably result.
[27] Article 4 of the 1976 Convention was enacted in the Act, with some added words, as s 85(2). It will assist to set out the text of Article 4 beside the text of
s 85(2):
Article 4 Conduct barring limitation
A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.
Persons entitled to limitation of liability under this Part
(2) No person shall be entitled to limitation of liability in respect of claims for loss or injury or damage resulting from that person's personal act or omission where the act or omission was committed, or omitted, with intent to cause such loss or injury or damage, or recklessly and with knowledge that such loss or injury or damage would probably result.
10 See Meeson & Kimbell Admiralty Jurisdiction and Practice (4th ed, Informa, London, 2011) at
[8.2]-[8.12].
11 The Bowbelle [1990] 1 WLR 1330 at 1334, [1990] 1 Lloyd’s Rep 532.
12 See the discussion of the 1957 convention in The Bowbelle, above n 11, at 1334. In The Bowbelle Sheen J compared the relevant provisions of the 1957 convention with those of the 1976 convention. This survey of the development of the law was cited at length and with approval by the Court of Appeal of England and Wales in Schiffahrtsgesellschaft MS Merkur Sky mbH & Co KG v MS Leerort Nth Schiffahrts GmbH & Co KG (The Leerort) [2001] EWCA Civ 1055, [2001] 2 Lloyd’s Rep 291 at [9].
[28] In The Bowbelle, Sheen J described Article 4 as imposing “a very heavy burden” on the claimant.13 In The Leerort Lord Phillips of Worth Matravers MR, immediately after citing the observation of Sheen J, commented: “It is worth pausing to consider just how heavy that burden is.”14 His Lordship then considered the extent of the burden and concluded: “[W]hen a claim is made for damages resulting from a collision, it is virtually axiomatic that the defendant ship owner will be entitled to limit his liability.”15
[29] The extent of the difficulty faced by a claimant seeking to break the limitation is reflected in numerous expressions similar to those just cited. Sheen J expressed it differently, but to the same effect, when he said that the owner has an “almost indisputable right to limit”.16 In The Saint Jacques II and Gudermes Gross J said that “it is likely that only truly exceptional cases will give rise to any real prospect of defeating an owner’s right to limit”.17
[30] In The Tasman Pioneer Williams J cited with approval an observation of Dr Jackson that “it seems accepted that the limits will normally be unbreakable – a trade off for the higher limits established in the 1976 Convention”.18 The Travaux Préparatoires of the 1976 Convention, and 1996 Protocols, makes it clear that this was the express intention.19 That this was the intention can also readily be inferred by comparing Article 4 with the provisions of the 1957 Convention. Under the 1957
Convention it was more difficult for the owner to secure a limitation of the amount of liability but, if secured, the cap was low. It was a “derisory” limit as one commentator has noted.20
[31] The strength of the general right to limit liability is reflected, to an extent, by the fact that the plaintiffs, in respect of the grounding of the Rena, applied to the
13 The Bowbelle, above n 11, at 1335.
14 The Leerort, above n 12, at [11].
15 The Leerort, above n 12, at [19].
16 The Bowbelle, above n 11, at 1335.17 Margolle v Delta Maritime Co Ltd (The Saint Jacques II and Gudermes) [2002] EWHC 2452 (Admlty), [2003] 1 All ER (Comm) 102, [2003] 1 Lloyd’s Rep 203 at [18].
18 The Tasman Pioneer, above n 4, at [36] citing Jackson Enforcement of Maritime Claims (3rd ed,
LLP Professional Publishing, 2000) at [24.51].19 The Travaux Préparatoires of the LLMC Convention, 1976 and of the Protocol of 1996 (Comité
Maritime International) at p 125.
20 See the introduction to the High Court Rules of procedure for limitation of liability under Part 7 of the Act in McGechan on Procedure (looseleaf/online ed, Brookers) at [HRPt25Subpt4.01].
High Court in London for a limitation decree and this was granted without opposition. The limit on the amount of liability is GBP27,444,037.87 for claims in respect of loss of life or personal injury and GBP13,722,018.94 for all other claims.21
[32] The reason why a claimant will find it very difficult to break the limit is readily apparent when s 85(2) is broken down into the elements which must be established by the claimant. These are the matters that bear most directly on Mr Lancaster’s disclosure application. The essential elements are discussed in the
following paragraphs. In summary:
The disentitling act or omission must be that of an identified person.
If the owner is a corporation the identified person must be an alter ego of the corporation.
Theidentified person must have one of the states of mind stipulated in s 85(2): either an intention to cause “such loss or injury or damage”, or a combination of recklessness at the time of the conduct accompanied by
knowledge that “such loss or injury or damage would probably result”.
The“loss or injury or damage” alleged to have been intended or known about must be the actual loss or injury or damage claimed by the claimant to have
occurred.
In the case of knowledge, where accompanying recklessness, there must be
knowledge that such loss or injury or damage would probably result.
[33] The disentitling act or omission must be that of an identified person or identified people. Conduct by an agent or a servant, or another person whose relationship with the plaintiff might give rise to vicarious liability in other areas of
the law, is insufficient.22 In cases involving a corporate owner, the law was that the
21 A further application was made in New Zealand because of some differences between the 1976 convention given effect in New Zealand and the UK legislation.
22 The Tasman Pioneer, above n 4, at [51]; The Leerort, above n 12, at [13]; The Saint Jacques II and
Gudermes, above n 17, at [16].
conduct would have to be that of the alter ego of the corporation; a person of sufficient seniority in the management structure of the company for that person’s actions and state of mind to be equated with that of the company itself. Usually this restricted the class of eligible people to the board of directors, or the managing director, or an equivalent officer of the company.23 The judgment of the Privy Council in Meridian Global Funds Management (Asia) Ltd v Securities Commission may require a review of the earlier decisions.24 It is unnecessary to explore this issue in this judgment beyond recording general agreement with the written submissions of Mr Ring QC and Mr David for the plaintiffs. They submitted that, notwithstanding the decision of the Privy Council:
[T]he search is still for a person whom Parliament intended to be the alter ego of the company in the particular statutory context. [In] this context, given the clear intention of the [1976] Convention to exclude vicarious liability, this must be someone whose functions in the company, in relation to the cause of the loss, are the same as those to be expected of the individual ship-owner.25 So this is still likely to restrict the relevant personnel for the consideration of any claim to break limitation to [no lower than] chief management level.26
[34] The identified person must have one of the states of mind stipulated in s 85(2): either intention to cause “such loss or injury or damage”, or recklessness at the time of the conduct accompanied by knowledge that “such loss or injury or damage would probably result”. There was no suggestion on behalf of Mr Lancaster that there is any basis for arguing actual intent; the focus was on the alternative of recklessness accompanied by knowledge. However, for the purposes of interpretation particular aspects requiring proof in relation to actual intent may also have to be proved in relation to recklessness with knowledge. This applies, firstly, when considering the time at which the person must have knowledge. If the contention was an actual intention to cause loss, that would have to be intention at the time the loss was caused. This is because s 85(2) says in as many words that the conduct must occur in conjunction with the intent – “where the act or omission was
committed, or omitted, with the intent …”. Although recklessness might not have a
23 See for example Grand Champion Tankers Ltd v Norpipe A/S (The Marion) [1984] AC 563 (HL)
per Lord Brandon at 572-573.
24 Meridian Global Funds Management (Asia) Ltd v Securities Commission [1995] 3 NZLR 7, [1995]
2 AC 500 (PC).
25 The Tasman Pioneer, above n 4, at [41].
26 The submission refers to MSC Mediterranean Shipping Co SA v Delumar BVBA (The MSC Rosa M) [2000] 2 Lloyd’s Rep 399, where the person in question was the fleet technical director.
time specific element of that nature, the time specific element does appear to apply to the requirement of knowledge – “the act or omission was committed, or omitted
… with knowledge …”. Both elements are linked to the same outcome – “such loss or injury or damage”. It seems unlikely that s 85(2) was drafted with the intention that the time element for the knowledge associated with recklessness could be different from the time element associated with actual intent.
[35] This approach to interpretation also bears on the question as to the nature of the loss, injury or damage that must be intended or known about. This is an important question bearing, in the first instance, on Mr Lancaster’s disclosure application and, more broadly, on the plaintiffs’ limitation application. For the plaintiffs, Mr Ring and Mr David initially submitted that the loss referred to in s 85(2) is in this case the grounding of the Rena on Astrolabe Reef. In my judgment this is not what is meant by any of the words “loss”, “injury”, or “damage” in s 85(2). Where the expression first appears in the subsection it might be arguable that it is a reference to the casualty – in this case a reference to the grounding on the reef. However, the composite expression “loss or injury or damage” is used twice more in the subsection and in ways which make clear that it refers to the harm that is caused to the claimant as a result of the casualty with the ship. In his oral submissions Mr Ring, as I understood him, submitted that loss, injury or damage is not directed to what happened to the ship but, in this case, what happened to Mr Lancaster. As I have just indicated, I agree that it is not directed to what happened to the ship. The question that remains is whether it is confined, when applied to the facts of this case, to what happened to Mr Lancaster. In other words, is it necessary for Mr Lancaster to prove that the senior management person, for each of the plaintiffs, at the relevant time acted, or omitted to act, not only recklessly, but also with knowledge that the harm that Mr Lancaster says he has suffered would probably result from the act or omission?
[36] Mr Davidson and Mr Heard, for Mr Lancaster, submitted that Mr Lancaster does not have to establish knowledge of the actual loss, injury or damage he says he has suffered. They submitted that it will be sufficient to establish knowledge of loss or injury or damage of the same character as that which occurred. This was a submission for Mr Lancaster in response to the original submission that there had to
be knowledge that the Rena would run aground on Astrolabe Reef. For Mr Lancaster it was argued that knowledge of a risk of grounding was sufficient. This was amplified by a submission as follows:
It is in each case a matter of fact, but it is submitted that s 85(2) would also bar limitation if relevant knowledge was established that elementary safety procedures were not put in place to prevent a known routine hazard of a particular type.
This was in turn related to a proposition that the grounding of the Rena may have resulted not only from the immediate acts and omissions of the master and second officer but also from defective navigational systems and “systemic” operational practices known to senior personnel of the first to third plaintiffs.
[37] The nature of the loss of which there must be knowledge was considered in some detail by the Court of Appeal of England and Wales in The Leerort.27 Lord Phillips of Worth Matravers MR said:
[13] … It seems to me that this requires foresight of the very loss that actually occurs, not merely of the type of loss that occurs. That certainly appears to have been the conclusion of Mr Justice Steele in The MSC Rosa M,28 where he held:
The authorities make it plain that, absent as in the present case, any allegation of intent, the person challenging the right to limit must establish both reckless conduct and knowledge that the relevant loss would probably result.
[38] The Leerort was a collision case. Lord Phillips noted a submission that “such loss” required proof only of the general types of loss specified in Article 2 of the
1976 Convention.29 His Lordship rejected that submission as running counter to the
clear meaning of Article 4. He continued:
[15] … The words “such loss” in that Article clearly refer back to the loss that has actually resulted and which is the subject matter of the claim in which the right to limit is asserted.
[16] It seems to me that where the loss in respect of which a claim is made resulted from a collision between ship A and ship B, the owners of ship A, or cargo in ship A, will only defeat the right to limit liability on the owner
27 The Leerort, above n 12.
28 The MSC Rosa M, above n 26, at 401.
29 The Leerort, above n 12, at [14]. Article 2 was generally enacted in New Zealand in s 86(1) of the
Act.
of ship B if they can prove that the owner of ship B intended that it should collide with ship A, or acted recklessly with the knowledge that it was likely to do so.
[17] The alternative, which is perhaps arguable, is that the claimant merely has to prove that the owner of ship B intended that his ship should collide with another ship, or acted recklessly with the knowledge that it was likely to do so.
[18] On the facts of this case it is not necessary to decide which alternative is correct. In either event the reality is that when damage results from a collision the ship owner will only lose his right to limit if it can be proved that he deliberately or recklessly acted in a way which he knew was likely to result in the loss of or damage to the property of another in circumstances where, inevitably, the same consequences would be likely to flow to his own vessel. Maritime history has many instances of scuttling, but I am not aware of one involving deliberate collision with another vessel. More pertinently, [counsel] has been unable to point to any collision case in any jurisdiction where the right to limit under the 1976 convention has been successfully challenged.
This led to the conclusion, earlier cited, that in cases of damage resulting from a collision, “it is virtually axiomatic that the defendant ship owner will be entitled to limit his liability”.
[39] In my judgment the opinion expressed at [13] of The Leerort applies to the interpretation of s 85(2). The opinion of the Master of the Rolls in relation to Article
4 is reinforced in relation to s 85(2) by the slightly different wording. This applies, in particular, to the composite expression “loss or injury or damage” which removes any uncertainty as to whether the provision is dealing with general types of loss or with actual damage to a claimant.
[40] If this interpretation is applied to the circumstances of this case, on one construction of s 85(2) it may be said that there would have to be knowledge of the probability of loss or injury or damage to Mr Lancaster or to his business. This may be seen to follow not only from the use of the very specific expression “such” in relation to the loss or injury or damage, but also by considering what knowledge would have to be proved if actual intent to cause loss was the allegation. If actual intent was the allegation and applied to the facts of this case, there would have to be conduct with the intent to cause to Mr Lancaster, or to his business, the loss which is the subject of his claim.
[41] At the least, the senior management person, for each of the plaintiffs, would have to have known not only that it was probable that the Rena would collide with the Astrolabe Reef, but also that oil would be discharged, float ashore, and cause loss to business owners operating from the beaches.
[42] The conclusion to this point is based on construction of the statutory provision. This interpretation is not inconsistent with broader considerations. To the contrary, in my judgment, an obligation to prove knowledge of the very loss that actually occurred is consistent with a primary objective of the 1976 Convention; the objective of making it very difficult to break the limit as the trade-off for a substantial increase in the amount of the limit.
[43] For the purposes of this proceeding it is unnecessary to determine whether there must be knowledge of the identity of the claimant. I am satisfied that there must at the least be knowledge, when related to the facts of this case, of the probability of loss or injury or damage to business owners operating from the beaches and with this arising from oil pollution arising from grounding on the Astrolabe Reef.
[44] I have come to this conclusion having taken account of the more detailed submissions for Mr Lancaster and the cases referred to by counsel.30 Following the hearing, counsel for Mr Lancaster referred in a memorandum to a further decision as authority in support of the submission for Mr Lancaster as to the meaning of “loss or injury or damage”. This is a decision of the Federal Court of Appeal of Canada in Peracomo Inc v Sociétè Telus Communications.31 That decision does not support the argument for Mr Lancaster. Counsel referred, in particular, to paragraph [50] in the judgment. However, the Court was referring there not to its conclusion but to a
submission for the appellant.
30 These include: Goldman v Thai Airways [1983] 1 WLR 1186 (CA); The MSC Rosa M, above n 26; Blue Nile Shipping Co Ltd v Iguana Shipping and Finance Inc (The Happy Fellow) [1997] 1 Lloyd’s Rep 130 (Admlty), and on appeal [1998] 1 Lloyd’s Rep 13 (CA); and The Saint Jacques II and Gudermes, above n 17.
31 Peracomo Inc v Sociétè Telus Communications [2012] FCA 199. The Supreme Court of Canada granted leave to appeal on 24 January 2013.
[45] The central issue in Peracomo, and the particular finding on appeal, is not relevant to the issues that arise in the present case. In Peracomo, Mr Vallé, a fisherman, had deliberately cut an underwater telecommunications cable. It was not in issue that the act was deliberate. Mr Vallé said that he had understood that the cable was abandoned. It was in fact in use. Mr Vallé and his company, of which he was the directing mind, sought to limit liability. The limitation application was dismissed at first instance. On appeal by Mr Vallé and his company it was contended, amongst other things, that the right to limit liability could only have been lost in that case if Mr Vallé had known “the totality of physical damage along with
the resulting or consequential financial loss”.32 This argument was rejected on
appeal, but the decision does not assist Mr Lancaster. In considerable measure the issue that arose was the extent of the knowledge of the actual financial loss that had to be proved. The plaintiffs in this case have not argued that there would have to be knowledge to that extent, and in my judgment rightly so. What is of more relevance is that in Peracomo the Court of Appeal discussed the decisions referred to in this judgment. The Court observed, with apparent approval, that in all the cases “the Courts made it clear that these words [such loss] referred back to the loss that has actually resulted and which is the subject matter of the claim in which the right to
limit is asserted”.33
[46] The final point to note, in relation to the significant hurdles faced by Mr Lancaster, is that the directing mind or minds of the plaintiff companies would have to have knowledge that the loss would probably result. This is knowledge of the likelihood of an outcome to a high degree.
Conclusion on the disclosure application
[47] I am satisfied that the application for disclosure should be dismissed. There are several reasons.
32 Peracomo Inc v Sociétè Telus Communications, above n 31, at [50].
33 Peracomo Inc v Sociétè Telus Communications, above n 31, at [57].
[48] Firstly, the pursuit of disclosure can be seen as being “an expensive expedition up a blind alley”.34 This is so when the information sought by Mr Lancaster is considered in relation to the extensive information already available as to the cause of the loss that Mr Lancaster says he has suffered, and with this then assessed in relation to the matters Mr Lancaster would have to prove under s 85(2).
[49] Mr Lancaster’s theory is that directions from one or more of the first to third plaintiffs, and being directions from a person at a senior management level of the companies, were in some way causative of the grounding of the Rena. Assuming for the moment that some evidence to support the theory might be disclosed, this would take Mr Lancaster only a few steps towards, and leave him a long way from, what he would have to prove to break liability.
[50] This assumed disclosure would also be no more than evidence of what in a conventional action, rather than a challenge to limitation of liability, would be evidence of causation. Part of the theory seems to be that senior management directives caused the captain and other senior officers on the ship to cut corners, literally and figuratively. But that would come nowhere near to establishing the knowledge that would have to be established in terms of s 85(2).
[51] The considerations to this point assume in Mr Lancaster’s favour that there may be information relevant to the theory. That, however, must be weighed against the conclusions already reached as a result of the enquiries by Maritime New Zealand and the prosecution of the first plaintiff as well as the prosecution of the master and the second officer. As recorded by Judge Wolff, the investigations leading to the prosecutions did not result in any suggestion that the first plaintiff had done anything suggesting some form of responsibility for the actions of the master
and the second officer.35 The statutory bodies in New Zealand with responsibility for
investigating what occurred had, and have, full statutory powers of investigation. This includes power to obtain all of the ship’s documents and electronic records,
including records of communications.
34 The Leerort, above n 12, per Lord Phillips of Worth Matravers MR at [29] summarising the conclusion of Steel J at first instance.
35 Maritime New Zealand v Daina Shipping Company, above n 7, at [3].
[52] A further consideration is that r 25.26(5) is not the equivalent of a right to discovery of documents in the course of a conventional action. However, Mr Lancaster has approached the disclosure application on the basis that it is much the same as a discovery application. This is made sufficiently clear by the fact that it is not simply a request for information; it is a request for a large number of documents in a wide range of categories. If there was a paucity of information for Mr Lancaster there should have been a request for information with the nature of the information clearly defined. This did not occur. This in turn suggests that Mr Lancaster has embarked on a fishing expedition to see what emerges. That is not a proper basis for an application under r 25.26(5).
[53] The inappropriateness of the disclosure application is given further emphasis by Mr Lancaster’s evidence that he lost “an estimated $3,000 in rental income”. The exercise Mr Lancaster is asking the plaintiffs to embark on, in relation to disclosure, is wholly disproportional to the quantum of his claim, and becomes more so when it appears that the estimate of $3,000 is a gross sum. The lack of proportion increases when regard is had to the fact that, notwithstanding the advice in the letter from North South Environmental Law that they acted for the first and second defendants and around 100 Bay of Plenty businesses, Mr Lancaster is the only person who has indicated the possibility of opposing the limitation application, in this jurisdiction and in the United Kingdom.
[54] There is also the statement in the letter from North South Environmental Law that the legal team, including three senior counsel, had already concluded that there were “strong grounds for opposing any application” for limitation. I agree with Mr Ring’s submission that that statement supports a conclusion that Mr Lancaster does have sufficient information to decide whether or not to dispute the limitation application.
Result on disclosure application
[55] Mr Lancaster’s application for disclosure is dismissed.
[56] The plaintiffs are entitled to costs on the application. As a further hearing will be required, memoranda on costs can be deferred.
[57] There are the following directions in respect of the limitation application:
(a) No later than 15 working days after delivery of this judgment Mr Lancaster is to file and serve a memorandum stating whether or not he opposes the plaintiffs’ application for limitation of liability.
(b)If Mr Lancaster advises that he does not oppose the plaintiffs’ application for limitation of liability there will be an order that the plaintiffs are entitled to limit their liability, and consequential orders, in terms of the draft order filed with the plaintiffs’ application.
(c) If Mr Lancaster gives notice that he opposes the plaintiffs’ application for limitation of liability a telephone conference is to be scheduled before me on the next available date with the registrar to confer with counsel and then with me to fix a time.
Limitation fund application: introduction
[58] A limitation fund is security for a ship owner’s maximum liability when there is a limitation of liability. The right to constitute a limitation fund can be seen to be an important feature of the right to limit liability and of the policy underlying limitation of liability. If a limitation fund is constituted, this will enable ships, and shipping businesses, to continue to operate, but with claimants at the same time having security for their claims while they are pending together with a source of recovery if the claim is successful. There may be financial advantages in fixing the amount of the fund at a particular date and thereby avoiding risks of adverse movements in the value of the special drawing rights of the International Monetary
Fund which are used as part of the mechanism for fixing the value of the fund.36
36 Section 88 of the Act. And see Meeson & Kimbell Admiralty Jurisdiction and Practice, above n
10, at [8.138]-[8.139].
Constitution of a limitation fund may also have practical utility in some cases in encouraging settlement without protracted and expensive litigation.
[59] Article 11 of the 1976 Convention expressly provides a right for an owner to constitute a limitation fund with the Court or other competent authority in any state which is a party to the Convention. There is no provision in the Act, or in the Rules, which expressly provides that the Court may authorise the constitution of a limitation fund. This has given rise to some uncertainty as to whether there is jurisdiction for the Court to do so. In The Tasman Pioneer Williams J held that the Court does not have jurisdiction to direct a ship owner to constitute a fund when the
owner is opposed to doing so.37 The Tasman Pioneer might also be read as a
conclusion that there is also no jurisdiction when the owner entitled to limitation of liability wishes to constitute a fund. Before considering the reasons for the decision in The Tasman Pioneer it will assist to provide an historical review of relevant New Zealand legislation and a review of the provisions of Part 7 of the Act bearing on the issue.
Historical review
[60] The jurisdiction of the Court to make an order for the constitution of a limitation fund is long-standing. It was discussed by the High Court of Australia in James Patrick and Co Ltd v Union Steamship Co of New Zealand.38 The Court there was considering a case under legislation including the Merchant Shipping Act 1894 (UK). That Act was in force in New Zealand as well as Australia. It contained provisions which are statutory forerunners in New Zealand of a sequence of provisions leading to Part 7 of the Act. Dixon J said:39
But the foundation of the relief, administered first in Chancery and afterwards in Admiralty, is the provision on the part of the shipowner of the fund representing his maximum liability. The court then administers the fund brought into court by the shipowner. The court ascertains the claims upon it, marshals them and distributes the fund rateably among the claimants. In principle the title to relief of such a nature is a substantive right enforceable by independent proceedings.
37 The Tasman Pioneer, above n 4, at [70].
38 James Patrick and Co Ltd v Union Steamship Co of New Zealand (1938) 60 CLR 651 (HCA).
39 James Patrick and Co Ltd v Union Steamship Co of New Zealand, above n 38, at 673.
[61] The Merchant Shipping Act 1894 (UK) contained, in s 503, a provision for limitation of liability and, in s 504, provisions giving the Court jurisdiction to make a range of orders, including orders that the owner provide security pending determination of claims and for rateable distribution amongst claimants. Sections
503 and 504 were replaced, in much the same terms, by ss 460 and 461 of the Shipping and Seamen Act 1952 (the 1952 Act). These sections were in Part XIII of the 1952 Act, a part headed “Liability of Ship Owners”.
[62] Section 460 made provision for limitation of liability in respect of claims defined in the section. The opening words of s 460(1), preceding itemisation of the types of claims covered, are as follows:
The owner of any ship, whether or not she is a Commonwealth ship, shall not be liable in damages to a greater extent than an aggregate amount, determined by reference to the tonnage of that ship in accordance with the next succeeding subsection, where all or any of the following occurrences take place without his actual fault or privity, that is to say:—
[63] Section 461 was as follows:
Where any liability is alleged to have been incurred by the owner of any ship, whether or not she is a Commonwealth ship, in respect of loss of life, personal injury, or loss of or damage to any ship or cargo or other property, and several claims are made or apprehended in respect of that liability, the owner may apply to the Supreme Court, and that Court may determine the amount of the owner’s liability, and may distribute that amount rateably among the several claimants, and may stay any proceedings pending in any other Court in relation to the same matter, and may proceed in such manner and subject to such regulations as to making persons interested parties to the proceedings, and as to the exclusion of any claimants who do not come in within a certain time, and as to requiring security from the owner, and as to payment of any costs, as the Court thinks just.
[64] In 1975 the Admiralty Rules 1975 were made. These were the rules regulating the practice and procedure of the High Court and the Court of Appeal for the purposes of the Admiralty Act 1973 and the 1952 Act. Rule 31 of the Admiralty Rules 1975 contained provisions regulating the practice and procedure for applications for limitation of liability. The sub-rules in r 31 are the rules now
contained in rr 25.25 to 25.28 of the High Court Rules.40 Rule 31(11) of the
Admiralty Rules 1975, as originally enacted, provided:
Save as provided in this rule, any order limiting the plaintiff’s liability may make any such provision as is authorised by section 461 of the Shipping and Seamen Act 1952.
In other words, if there was a limitation order, the Court could also make one or more of the orders prescribed in s 461. As a result, as part of a limitation order, the Court could do the following: (1) determine the amount of the owner’s liability; (2) distribute the amount rateably amongst several claimants; (3) stay any other proceedings relating to the same matter; (4) direct the owner to provide security; (5) make orders as to costs. Section 461, at least by necessary implication, also gave the Court power to consolidate claims which were subject to limitation.
[65] The Shipping and Seamen Amendment Act 1987 repealed Part XIII of the
1952 Act and substituted a new Part XIII. The provisions of the new Part XIII were re-enacted without any material changes as Part 7 of the current Act. The difficulty that has arisen in relation to a limitation fund, identified in The Tasman Pioneer, came with this amendment. The amendment constituted the first enactment in New Zealand of provisions of the 1976 Convention. The technique adopted for the incorporation of provisions of the 1976 Convention into New Zealand law has been described by one New Zealand commentator as a “peculiar and unsatisfactory
technique of paraphrasing elements of the Convention in the text of the statute”.41
This technique may be compared with the incorporation of a convention into New Zealand law by including the convention as a schedule to an Act, as was in fact done in the Act in relation to the two other conventions. It may be that the technique used for the 1976 Convention was adopted because the changes were enacted in 1987, but New Zealand did not accede to the 1976 Convention until 1994. It seems that this indirect approach has at least contributed to the uncertainty as to whether the Court
now has jurisdiction to authorise the constitution of a limitation fund.
40 Rules 25.25 to 25.28 are Sub-Part 4 of Part 25 of the Rules. Part 25 contains all of the rules for the practice and procedure of the High Court in its Admiralty jurisdiction.
41 Tom Broadmore, “New Zealand” in Griggs, Williams & Farr (eds) Limitation of Liability for
Maritime Claims (4th ed, LLP, London, 2005) at p 327, [3].
Sections 89 and 86(2) of the Act
[66] The problematic provision in the Act is s 89. Section 89 empowers the Court to make the same orders that were provided for in s 461 of the 1952 Act as originally enacted. However, the powers contained in s 89 appear to be confined to cases where there is no limitation of liability because of a cross-reference in s 89 to s 86(2). Section 86(2) defines claims which are not subject to liability. Section 89 is in the same terms as s 464 inserted in the 1952 Act by the 1987 amendment.
[67] Section 89 is as follows:
89 Court may consolidate claims
(1) Where 2 or more claims are made or expected against any person who is alleged to have incurred liability in respect of any claim of a kind referred to in section 86(2) of this Act, that person may apply to the High Court to have the claims consolidated.
(2) On any such application, the Court may—
(a) Determine the amount of the applicant’s liability, and distribute that amount rateably among the several claimants; and
(b) Stay any other proceedings pending in the same or any other
Court in relation to the same matter; and
(c) Proceed in such manner and give such directions relating to the joining or excluding of interested persons as parties, the giving of security, the payments of costs, or otherwise, as the Court thinks just.
Limitation fund provisions in the Act
[68] Although Part 7 of the Act does not state, in as many words, that an owner may apply to the Court for an order authorising the constitution of a limitation fund, there are a number of provisions which refer expressly, or by necessary implication, to a limitation fund, in addition to what is contained in s 89(2). These other provisions are as follows:
(a) Section 86(1) defines the claims which can be subject to limitation of liability. The words of present relevance are the opening words as follows:
No person who is entitled to limitation of liability shall be liable for an amount greater than the relevant limit calculated in accordance with section 87 of this Act …
In substantial measure this is the same as s 460(1) of the Shipping and
Seamen Act 1952 as originally enacted.
(b)Section 87 makes provision for calculation of the limit of liability for different types of claim by reference to “units of account”, amongst other things.
(c) Section 88 makes provision for determining the monetary value of units of account. Section 88(1)(a) refers expressly to the constitution of a limitation fund, as follows:
(1) For the purposes of determining the monetary value of the number of units of account calculated in any case to be the relevant limit of liability under this Act,—
(a) The units of account shall be converted to their monetary value according to the value of the New Zealand currency at the date on which the limitation fund is constituted, or payment is made on the claims, or satisfactory security for any such payment is given; and
(emphasis added)
(d)Section 91 provides as follows, with emphasis added for matters related to a limitation fund:
91 Release of ship where security given
(1) Where any ship or other property is arrested or seized in respect of a claim that appears to be one for which liability is limited by this Part of this Act, or security has been given to prevent or obtain release from any such arrest or seizure, the High Court may,
on the application of the owner of the ship or other property or any other person having an interest in the ownership of the ship or other property, order the release of the ship, property, or security if the conditions specified in subsection (2) of this section are met.
(2) The conditions for the making of an order under subsection (1) of this section are as follows:
(a) That security of a kind that, in the opinion of the Court, is satisfactory (in this section referred to as the guarantee) has previously been given, whether in New Zealand or elsewhere, in respect of the claim; and
(b) That the Court is satisfied—
(i) That if the claim is established the amount of the guarantee will in fact be available to the claimant; and
(ii) That the amount, either by itself or together with any further security that the Court may require to be given, is at least equal to the maximum amount that may be allowed to the claimant in accordance with the provisions of sections 86 and 87 of this Act.
(emphasis added)
The Tasman Pioneer
[69] In The Tasman Pioneer the claimants sought an order that the plaintiff (a charterer) establish a limitation fund. The owner opposed this application although it sought and obtained a limitation order. The argument for the claimants as to the source of jurisdiction for the order sought appears, from the judgment, to have been confined to a proposition that jurisdiction was to be found in the former r 792(11) of the High Court Rules 1985 and s 89 of the Act. The response in opposition for the charterer appears to have been similarly limited.
[70] Rule 792(11) of the High Court Rules 1985 was in the same terms as r 31(11) of the Admiralty Rules 1975, except that the latter had been amended in 1987 by substituting a reference to s 464 of the 1952 Act in place of the original reference to
s 461. This was part of the 1987 amendment of the 1952 Act. This same reference to s 464 was in r 792(11) of the 1985 Rules and carried through to the current provision, to the same effect, in r 25.28. The current rule provides:
25.28 Order limiting plaintiff's liability
Any order limiting the plaintiff’s liability in an action in personam for relief under Part 7 of the Maritime Transport Act 1994 may make any provision authorised by section 89 of the Maritime Transport Act 1994.
[71] The reference in s 89(1) to s 86(2) caused obvious difficulty for the claimants in The Tasman Pioneer. They argued that there was a drafting error, that the reference should have been to s 86(2), and that the Court had power to correct the error. Williams J identified this as the “nub” of the issue.42 The Judge noted, but did not analyse, the earlier legislation, including provisions for security to be provided by owners. He referred to the substitution of the new Part XIII into the Shipping and Seamen Act 1952 by the 1987 Amendment Act and, in particular, to the new s 464(1) (now s 89(1)), and the reference to claims in s 461(2) (now s 86(2)).
[72] The Judge then said:
[66] Counsel suggested that the change in the scope of s464 and, now, s89 may have arisen through legislative error but a perusal of Hansard refutes that suggestion. It appears from most of the debates that Parliament’s concern was to ensure New Zealand’s liability provisions were updated, particularly as to amount (471 NZPD 2202-3, 479 NZPD 7894-5, 480 NZPD
8739, 482 NZPD 10530). However, it is equally clear from the amendment as reported back by the Communications and Road Safety Committee that it
was the Committee which, in s464(1), the equivalent of s89(1), deleted the
phrase “occurrence of a kind referred to in s461” and substituted the phrase “claim of a kind referred to in s461(2)”. Inquiries of the Clerk of the House of Representatives show the change was made by the Committee as a result of a submission made to it by the Ministry of Transport commenting on all other submissions on the Bill which said, in its solitary reference to the matter:
The committee should note that when a Supplementary Order Paper is prepared to incorporate any amendments agreed to by the committee it will be necessary also to make some minor amendments of a technical nature and consequential amendments to other legislation. These will be of a “machinery” type and non controversial.
42 The Tasman Pioneer, above n 4, at [60].
The change was included in the Supplementary Order Paper proposed to the Committee on behalf of the Minister of Transport and was adopted but if there were reasons given they have not been able to be ascertained.
[73] The Judge next referred to the limits on the power of the Courts to add, remove, or substitute words in a statutory provision. He cited the observations of Lord Nicholls of Birkenhead in Inco Europe Ltd v First Choice Distribution (a firm) as follows:43
A statute is expressed in language approved and enacted by the legislature. So the courts exercise considerable caution before adding or omitting or substituting words. Before interpreting a statute in this way the court must be abundantly sure of three matters: (1) the intended purpose of the statute or provision in question; (2) that by inadvertence the draftsman and Parliament failed to give effect to that purpose in the provision in question; and (3) the substance of the provision Parliament would have made, although not necessarily the precise words Parliament would have used, had the error in the Bill been noticed. The third of these conditions is of crucial importance. Otherwise any attempt to determine the meaning of the enactment would cross the boundary between construction and legislation.
[74] The Judge’s primary conclusion then followed. He said:
[69] Applying those tests to the reference to s86(2) in s89(1) (and the reference in the former s464(1) to s461(2)) the conclusion must be that there is no ground to conclude that the reference to s86(2) was an obvious drafting error for s86. Inquiries have failed to demonstrate any document evidencing Parliament's purpose for the change from s461 to s461(2) in the Shipping and Seamen Amendment Act 1987. It may have been officials’ intention to implement Article 3 of the 1976 Limitation Convention but that cannot have been the legislative intention if nothing was ever presented to Parliament in that respect. It accordingly could not be said that the reference to s461(2) arose through inadvertence and although the way in which the error, if error it were, would be corrected is obvious, because no material on the topic was presented to Parliament and there is no express reason for the change, there is no power for the Court to read the reference to s461(2) as a reference to s461, particularly when Parliament has effectively repeated the provision in its enactment of s89(1).
Discussion: drafting error in s 89?
[75] When the matters noted in The Tasman Pioneer, relating to the insertion of the reference to s 461(2) in the 1987 amendment, are considered in the light of the
full legislative history, and in the light of the other provisions in the current Act, it is
43 Inco Europe Ltd v First Choice Distribution (a firm) [2000] 1 WLR 586 at 592; cited in The
Tasman Pioneer, above n 4, at [68].
in my judgment apparent that reference to s 86(2) arose through a drafting error which can be corrected. My reasons follow. In this discussion I will refer to claims where there is no limitation of liability as “unlimited claims” and to claims where there is a limitation of liability as “limited claims”.
[76] Part 7 of the Act is concerned with limited claims. It is not concerned with unlimited claims, apart from the obvious need to define the claims that cannot be the subject to limitation, dealt with in s 86(2), and to define the circumstances in which the general right of limitation can be defeated, dealt with in s 85(2).
[77] Section 89 enables the Court to make a range of orders, some of which are procedural in nature and some more substantive. Certainly in relation to procedural rules there is no need, and there was no need, for such rules to be provided in the Act for unlimited claims. The reason for this is that the rules applying to ordinary actions, or Admiralty proceedings unrelated to limited claims, already applied to unlimited claims.
[78] The procedural rules of general application could, perhaps, have been applied, or adapted, to limited claims. However, there are features of limited claims requiring more particular procedural rules, and requiring particular substantive powers, of the type contained in s 89. The link between the provisions in s 89 and limited claims, rather than unlimited claims, is made clear historically by two things already noted. Firstly, s 89(2) is in material respects the same as s 504 of the Merchant Shipping Act 1894 (UK), and s 461 of the 1952 Act, before the 1987 amendment. The provisions in the Acts of 1894 and 1952 were plainly directed to limited claims, not to unlimited claims. The second is the original link between s 461 of the 1952 Act, as originally enacted, and r 31(11) of the Admiralty Rules
1975 as originally enacted.
[79] At a more fundamental level, in relation to a possible drafting error, s 89(2)(a) is a provision which cannot apply to unlimited claims, but one which will often be essential for limited claims. This is the provision for distribution rateably amongst several claimants. It is also to be noted that this provision is, in material respects, the same as Article 12, paragraph 1, of the 1976 Convention. This is one of
several articles in chapter III of the Convention concerned solely with the limitation fund. Article 11 is the first article in chapter III and it is Article 11 which contains the primary provision enabling a ship owner to apply to a Court to constitute a fund.
[80] Section 89(2)(b) is the provision for stay of other proceedings. This is one of the provisions contained in s 461 of the Shipping and Seamen Act 1952 as originally enacted, and going back to the UK legislation of the previous century. A statutory provision for stay is not, and was not, required or appropriate in respect of an unlimited claim which would be proceeding as an ordinary proceeding.
[81] Section 89(2)(c) gives the Court power to direct that security be provided. Unlike the original s 461 in the 1952 Act, this is not confined to an order against the owner. However, with an unlimited claim, the claimant against the owner can be required to give security for costs pursuant to the rules of general application, now found in r 5.45. A defendant owner, in an unlimited claim, could not be required to give security in the sense that that expression is used in r 5.45. And there would not appear to be any principled basis for requiring an owner defendant to an unlimited
claim to provide security in the nature of a guarantee.44 However, the giving of
security, if treated as an expression equivalent to the provision of a limitation fund, as it has historically been treated, is, and for a very long time has been, a feature of limitation of liability.
[82] Section 89(1) makes provision for a consolidation order where there are two or more claims. The making of the further orders provided for in subs (2), on the face of it, are dependent upon an order for consolidation having been made. An order for consolidation might be made for unlimited claims, but again that could be done pursuant to rules of general application. A statutory provision (rather than a procedural rule) for consolidation has much more relevance to claims subject to limitation. And again this is a feature which flows through from s 461 as originally enacted in the 1952 Act, and its predecessors, all concerned with limited claims, not
unlimited claims.
44 In in rem proceedings an owner can be required to give security for release of an arrested ship, but provision is already made in that regard in Sub-part 6 of Part 25 of the High Court Rules.
[83] A different but strong pointer to a drafting error is the provisions in Part 7 which refer expressly or by necessary implication to a limitation fund. The express statement in s 88(1)(a) to “the date on which the limitation fund is constituted”, by itself indicate strongly that s 89 was also intended to be a section concerned with limited claims and limitation funds.
[84] The statutory provisions that applied in New Zealand until the 1987 amendment of the 1952 Act consistently made provision essentially the same as that contained in s 89(2). The earlier statutory provisions, the most recent of which was s 461 of the 1952 Act as originally enacted, were clearly provisions to give better effect to the management and disposal of all limited claims faced by an owner. Had Parliament intended that these important provisions should no longer be available for limited claims it is likely that this would have been apparent from the parliamentary record. However, as noted in The Tasman Pioneer, the record that is available indicates that officials in the Ministry of Transport considered that the amendment to the Bill was “of a ‘machinery’ type and non-controversial”. Plainly it could not be described as non-controversial if it was removing the substantive powers that formally flowed from the making of a limitation order. Nor could it be described simply as a “machinery” type of amendment if it substantially altered the existing law. It could properly be described simply as a drafting clarification if the purpose was to make the section more focused. But in that event the focus had to be on limited claims, not on unlimited claims.
[85] For these reasons I am satisfied that the test for correction of an apparent drafting error in a statute is met. First, the intended purpose of Part 7 of the Act is clear; it is to make provision for limitation of liability and matters relating to a limitation fund. Second, effect was not given to that purpose through inadvertence in drafting. Third, the substance of the provision Parliament would have made, if not the precise words that would have been used, is clear. The substance would have been words stating that the provisions in both subsections of s 89 applied to limited claims.
Jurisdiction to authorise a limitation fund on an owner’s application
[86] In case the preceding conclusion is wrong, and it was correctly held in The Tasman Pioneer that there is no jurisdiction to direct an unwilling ship owner to constitute a limitation fund, it is appropriate to consider whether there nevertheless is jurisdiction to authorise a willing owner, as in this case, to constitute a fund. An alternative submission to this effect was made for the plaintiffs.
[87] I am satisfied that the Court does have this jurisdiction even if The Tasman Pioneer is correct. Much of the preceding discussion provides the foundation. There is, amongst other things, the express provision in s 88(1)(a) which contemplates that a limitation fund will already have been constituted. By implication Parliament was recognising the Court’s jurisdiction at least to authorise a willing ship owner to constitute a limitation fund. An experienced New Zealand
commentator considered that this followed from s 88(1)(a).45
[88] In addition, this is a jurisdiction which has been historically recognised in
New Zealand and which would ensure consistency in the application of the 1976
Convention to which New Zealand is a party. As the Convention recognises, the constitution of a limitation fund will often be a central part of the overall limitation process and designed to give better effect to the overall objectives of the limitation policy.
[89] Rule 25.4 of the High Court Rules, part of the rules for the Court’s Admiralty
jurisdiction, as earlier noted, is as follows:
25.4 Parties can apply for directions if procedure not prescribed
(1) A party or intending party who wishes to take a step in a proceeding for which a procedure is not prescribed by this Part or any other Part or by the general practice of the court may apply to the court or a Judge for directions.
(2) The court or a Judge may give any directions concerning the steps to be taken by the party that the court or Judge thinks just.
45 Tom Broadmore, “New Zealand” in Griggs, Williams & Farr (eds) Limitation of Liability for
Maritime Claims, above n 41, at p 330, [10(b)].
(3) A step in a proceeding is treated as having been properly taken if taken in accordance with the directions given under subclause (2).
[90] I am satisfied that r 25.4, in conjunction with the provisions of Part 7 already discussed, and in particular s 88(1)(a), provides jurisdiction to authorise an owner to constitute a limitation fund. To the extent that it might be required, the Court’s inherent jurisdiction can also be invoked for the purpose of giving better effect to the express statutory provisions for limitation of liability and constituting a limitation fund.
The fund
[91] The fourth plaintiff, as the applicant on the limitation fund application, proposed that the limitation fund should be constituted on the lodging of a letter of undertaking. Evidence was provided which satisfied me that such would provide proper security for the limitation sum.
[92] For all of the foregoing reasons the formal order already made was made.
Woodhouse J
Counsel:
Mr M Ring QC, Barrister, Auckland and Mr P David, Barrister, Auckland
Mr N Davidson QC, Barrister, Christchurch and Mr M Heard, LeeSalmonLong, Solicitors, Auckland
Instructing Solicitors:
Mr M McCarthy, Lowndes Associates, Solicitors, AucklandMr R Makgill, North South Environmental Law Ltd, Solicitors, Auckland
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