Twin Bright Shipping Co v Tauwhareparae Farms Ltd

IN THE HIGH COURT OF NEW ZEALAND
GISBORNE REGISTRY
CIV 2003-416-000001

BETWEEN TWIN BRIGHT SHIPPING CO., S.A. AND SOKI KISEN CO LTD
Plaintiff

AND TAUWHAREPARAE FARMS LTD
First Defendant

AND GISBORNE DISTRICT COUNCIL
Second Defendant

Hearing: 31 October 2003

Appearances: J R Gresson for plaintiffs to oppose
No appearance first defendant
L J Taylor for second defendant in support

Judgment: 4 December 2003 at 3:33pm

JUDGMENT OF WILLIAMS J

Solicitors:

Norton White, P O Box 6623 Auckland, for plaintiffs (Fax:09 302 8393)
Langley Twigg, P O Box 446 Napier, for first defendant (Fax: 06 835 3712)
Minter Ellison Rudd Watts, P O Box 2793 Wellington, for second defendant (Fax: 04 498 5001)

Copy for:

Colin R Carruthers QC, P O Box 305 Wellington (Fax: 04 471 1195)
Michael McCarthy, Hesketh Henry, Private Bag 92093 Auckland, for Adsteam (Fax: 09 375 8771)
Nellie Brooking, Registrar, Gisborne High Court
Registrar, High Court, Auckland

Issues

[1] On Waitangi Day, 6 February 2002, the Panamanian-flagged bulk carrier Jody F Millennium departed the Port of Gisborne but soon afterwards went aground off the beach at Gisborne. A professional salvor was engaged to salve the vessel.

[2] The plaintiffs, Twin Bright Shipping Co S.A, the owner, and Soki Kisen Co Ltd, the ship's manager, have sued Tauwhareparae Farms Ltd (formerly Port Gisborne Ltd) the owner and operator of the port, and Gisborne District Council, as the statutory authority responsible for the regulation and maintenance of safe navigation in the port for damage suffered for salvage, towage, bunkers, repairs, loss of hire under the time charterparty, crew repatriation expenses, cargo claims and other items totalling $US3,785,736, JPY948,909,011 and $NZ2,431,504.

[3] This judgment deals with applications by Gisborne District for additional particulars of the second amended statement of claim and striking out paras 40 and 48. During the hearing, Mr Taylor, counsel for Gisborne District, forecast the possibility of a further application to strike out parts of the second amended statement of claim if, after particulars were ordered, the second defendant's view was that the claim was "hopeless" and incapable of success against the Council.

Claim and Application for Particulars

[4] The second amended statement of claim is an amplified version of the original filed in February 2003 and amended twice since as a result of R185 notices. It alleges that by its conduct Gisborne District "held out" the port and its facilities as suitable for vessels such as the Jody F Millennium, the conduct being pleaded to include port particulars in the New Zealand Pilot and the appointment of a pilot. It claims the ship was ordered to sail by the pilot as a result of prevailing weather conditions. She did so, touched bottom in the channel, lost steering and later went hard aground and drifted to the point from which she was salved. There follow causes of action against Tauwhareparae Farms in breach of contract, breach of the Contracts (Privity) Act 1982, the Fair Trading Act 1986, and negligence.

[5] The claims against Gisborne District are for breach of statutory duty and negligence. The former alleges that under Parts 1A and 39A of the Local Government Act 1974, the Harbours Act 1950, and the General Harbour (Nautical and Miscellaneous) Regulations 1968, Gisborne District was under a statutory duty to regulate safety of navigation at the port and therefore owed a duty to users that the port was safe, properly regulated and its pilots properly licensed. Pleaded breaches of this duty include :

a) Failing to enact adequate bylaws, codes, or harbourmaster's directions governing safe operation of the port;

b) Failing to appoint an adequate harbourmaster;

c) Failing to take sufficient steps to maintain safety at the port;

d) Failing to monitor activities relating to shipping and navigation safety by Tauwhareparae Farms and in particular permitting or acquiescing in that company "holding out" to port users that the pilot had power to direct vessel movements.

[6] The body of paras 34-39 and 44-47, the principal paragraphs in contention, then alleges that Gisborne District's "holding out" of the port as suitable, adequate and safe or its failure to disclose the true condition of the port and its ongoing breaches of duty, induced the plaintiffs to send the vessel into the port, prevented her from being safely handled, berthed or managed there and caused her to be sent from the port in unsafe circumstances where damage was likely, those matters leading to her being damaged. Particulars sought of those paragraphs include how the failures listed caused the vessel to enter the port, be prevented from being safely handled there and caused her to be sent from the port in unsafe and unsuitable conditions. The identity of persons and the actions they would have carried out were sought "if it is alleged that but for the alleged breaches of duty ... any person would have carried out particular actions or course of conduct that would have avoided the grounding". Particulars are also sought of how the grounding caused the plaintiffs to suffer loss and how the alleged unsafeness caused the damage "if it is alleged that, separately from the grounding, the port being unsafe caused the plaintiffs ... to suffer the loss".

[7] The negligence cause of action alleges (para 41) Gisborne District owed the plaintiffs duties of care implied by law in respect of the regulation and management of the port, including duties to:

a) Take reasonable care so long as the port was open for public use that all who navigate it might do so without danger to lives or property;

b) Survey and re-survey to find the best navigable channels;

c) Keep vigilant watch for changes in the sea-bed affecting channels and move or renew navigational marks and advise port users;

e) Properly licence pilots operating at the port.

[8] Apart from a general allegation of failure to regulate safety for vessels entering, berthing and exiting the port, the particulars pleaded largely mirror those in the negligence cause of action plus allegations of breach of an obligation to inform port users as to conditions and operation of the port and safety management systems. There were also allegations of failure to appoint an adequate harbourmaster, failure to monitor channel depth, failure to give reasonable warning of weather conditions and a plea that the vessel was induced to enter the port because of Gisborne District's "holding out" of the port as safe. Again there are allegations that the breaches of duty prevented the vessel from being safely handled or berthed and being sent from the port in unsafe circumstances where damage was likely, all those matters causing the grounding and the pleaded losses.

Striking-out application

[9] Gisborne District seeks an order striking out paras 40 and 48 of the current claim. They read :

40. FURTHER or alternatively, as a consequence of the second defendant's failure to reasonably regulate safety standards at the Port ... the Port was unsafe, and the second defendant is liable to the plaintiff for the adverse consequences for the Vessel of entering, remaining in and being sent from the Port.

...

48. FURTHER or alternatively, as a consequence of the second defendant's neglect ... the Port was unsafe, and the second defendant is liable to the plaintiffs for the adverse consequences for the Vessel of entering, remaining in and being sent from the Port.

[10] The approach to the jurisdiction to striking out a pleading under R 186(a) or a proceeding under R 477(a) is well-settled. Subject to what later appears, all allegations in the statement of claim are assumed to be admitted or be capable of proof. The pleading is then considered against the test of deciding whether, on material which can be properly considered, it has been shown to be so clearly untenable in fact and law as to be incapable of success. That test has been set by the Courts as being deliberately difficult to attain to preserve citizens' access to the Courts. The jurisdiction is to be exercised sparingly and in clear cases only. Pleadings or proceedings may be struck out even though such applications raise difficult questions of law requiring extensive argument provided the Court can be persuaded that the claim is unsound, the pleading cannot be amended satisfactorily and such an order will obviate the necessity for trial (Peerless Bakery Ltd v Watts [1955] NZLR 339; McKendrick Glass Manufacturing Co Ltd v Wilkinson [1965] NZLR 717; R Lucas & Son (Nelson Mail) Ltd v O'Brien [1978] 2 NZLR 289; Takaro Properties Ltd v Rowling [1978] 2 NZLR 314; Gartside v Sheffield Young & Ellis [1983] NZLR 37; South Pacific Manufacturing Co Ltd v NZ Security Consultants & Investigations Ltd [1992] 2 NZLR 282).

Submissions

[11] Mr Taylor submitted the current pleadings were prolix, imprecise, and were extremely difficult for the second defendant to plead to. He drew attention to the frequent use of the phrase "holding out" in the statement of claim as indicating a misrepresentation action. He therefore sought to know whether the plaintiffs were pleading a misrepresentation cause of action, and if they were, the details of such. He also stressed the importance of particulars in respect of causation where he said the plaintiffs are relying on a "but for" test. That test was said to be insufficient in the sense that, even if the port was unsafe (which was not conceded), the putting to sea of the Jody F Millennium did not cause the grounding, rather merely created the opportunity for the grounding to occur (Price Waterhouse v Kwan [2000] 3 NZLR 39, 46-47 para [28]). The burden was on the plaintiff to prove the breach caused the loss (Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664, 681-682).

[12] Elaborating, he submitted it is not enough merely to establish that a breach of duty has occurred, as there must be a causative link between damage suffered and breach of the duty (Christchurch Pavilion Partnership No 1 v Deloitte & Touche Tohmatsu Trustee Co Ltd [2002] 3 NZLR 289, 306-307 paras [56]-[59]). Reliance was also placed on the decision of the Privy Council in Wharf Properties Ltd v Eric Cumine Associates (No.2) (1991) 52 BLR 8, 19 where an amended statement of claim, 155 pages in length with attached schedules covering another 300 pages arising out of a building dispute and involving 18 defendants was struck out because it failed to "establish any relationship at all between what is alleged and the damages claimed".

[13] More generally, Mr Taylor relied on the decision of the Court of Appeal in Price Waterhouse v Fortex Group Ltd (CA179/98 30 November 1998) that a statement of claim is not a "minimum which a defendant needs so as to be able to plead" but is "intended to supply an outline of the case advanced sufficient to enable a reasonable degree of pre-trial briefing and preparation".

[14] Mr Taylor submitted a proper particularisation of the claim would link alleged breaches to the causes of the loss and state how they were material to the loss. Further, he took the view that Gisborne District is entitled to know particulars of what action would have been taken and by whom in relation to assertions that, had there been no breaches of duty, actions avoiding the loss would have occurred. He instanced para 34.3.2 which sets out some 13 steps which the plaintiffs allege Gisborne District should have taken to ensure safe navigation and mooring within the port, they being followed in paras 36-39 by allegations that those breaches of duty prevented safe handling, caused the ship to be sent from the port in unsafe circumstances and caused the grounding without asserting what the various standards and systems should have included and how the failure to provide them caused the loss.

[15] As to paras 40 and 48, Mr Taylor submitted it was inadequate to plead liability for all the adverse consequences of Jody F Millennium entering, remaining in and being sent from the port without saying how that liability could arise in law. In reliance on BNZ and Price Waterhouse he submitted the plaintiffs' obligation was to show a clear link between alleged negligence and loss and that the negligence was a material and substantial cause of the loss. Paras 40 and 48 were no more than "but for" pleadings.

[16] For the plaintiffs, Mr Gresson submitted the current pleading complied with the R108 requirement of giving particulars sufficient to inform the parties of the cause of action.What Gisborne District sought, he submitted, was a statement of the plaintiffs' evidence, statements of law and factual consequences, none of which the plaintiffs were obliged to give. In response to the submission that the pleaded causation of the losses flowing from the alleged breaches was inadequate, Mr Gresson pointed to a number of instances in the current pleading containing criticisms of Gisborne District's regulation of the port tied to objective standards which it ought to have observed, that in its turn leading on to the factual consequences of the breaches and the way in which they affected the plaintiffs.

[17] Mr Gresson said Mr Taylor had misconstrued the use of the phrase "holding out". Holding out was intended not to be a claim in misrepresentation but a "manifestation of the breaches of statutory or tortious duty alleged".

[18] Mr Gresson said the pleadings made clear the plaintiffs' allegation that the Jody F Millennium entered the port because it was open to business when such should have not been the case and because users were not clearly alerted to what the plaintiffs say was an unsafe port.

[19] Paras 40 and 48 were not specific causes of action in themselves but were intended to give "fair notice‚ of a further basis on which causation arguments would be advanced at the trial". That aside, he submitted those paragraphs pleaded a "sufficient legal basis for the alternative proposition" they raised, relying on South Australia Asset Management Corporation v York Montague Ltd (also indexed in three other names) [1997] AC 191, 212, 214. The passage on which Mr Gresson relied is too long to cite in full but the following extracts capture the gist (per Lord Hoffmann at 212-213) :

There is no reason in principle why the law should not penalise wrongful conduct by shifting onto the wrongdoer the whole risk of consequences which would not have happened but for the wrongful act.

Rules which make the wrongdoer liable for all the consequences of his wrongful conduct are exceptional and need to be justified by some special policy. Normally the law limits liability to those consequences which are attributable to that which made the act wrongful. In the case of liability in negligence for providing inaccurate information, this would mean liability for the consequences of the information being inaccurate.

I can illustrate the difference between the ordinary principle and that adopted by the Court of Appeal by an example. A mountaineer about to undertake a difficult climb is concerned about the fitness of his knee. He goes to a doctor who negligently makes a superficial examination and pronounces the knee fit. The climber goes on the expedition, which he would not have undertaken if the doctors had told him the true state of his knee. He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing to do with his knee.

On the Court of Appeal's principle, the doctor is responsible for the injury suffered by the mountaineer because it is damage which would not have occurred if he had been given correct information about his knee. He would not have gone on the expedition and would have suffered no injury. On what I have suggested is the more usual principle, the doctor is not liable. The injury has not been caused by the doctor's bad advice because it would have occurred even if the advice had been correct.

[20] Mr Gresson submitted forewarning Gisborne District of an alternative basis of legal argument to be advanced in relation to causation was unlikely to cause prejudice, embarrassment or delay.

[21] Finally, in a general comment, Mr Gresson noted the grounding of the Jody F Millennium has already resulted in major inquiry reports prepared by the Maritime Safety Authority and the Transport Accident Investigation Commission. In light of those inquiries, he submitted, the Court should be sceptical about accepting Mr Taylor's submission of an inability to know of or understand the claims against Gisborne District.

Discussion : Particulars Application

[22] It is helpful to begin a discussion of this matter by reference to two further cases. First, in Fortex Group (supra pp17-18) a case where particulars were sought of steps which would have been taken to avoid loss, the Court of Appeal held :

It has become fashionable in some quarters to regard the pleadings as being of little importance. Any such view is misguided. Pleadings which are properly drawn and particularised are, in a case of any complexity, if not in all cases, an essential road map for the Court and the parties. They are the documents against which the briefs of evidence are or should be prepared. They are the documents which establish parameters of the case, not the briefs of evidence.

Pleadings should be read as conveying what they would reasonably convey, in the context of the case, to a sensible legal mind. Even less are we advocating prolixity of pleadings, or the raising of every conceivable cause of action irrespective of its potential for success; this type of pleading often contains the additional flaw of overlooking R114 which requires each cause of action to be separately pleaded.What we are saying is that both the Court and opposite parties are entitled to be advised of the essential basis of a claim or defence, and all necessary ingredients of it, so that subsequent processes and the trial itself can be conducted against recognisable boundaries. Neither the Court nor opposite parties should be placed in the position of having to deal with a proposition of whose substance adequate notice has not been given in the pleadings.

[23] Then, in Speedy Parcels Ltd v Johns (1 December 1989 HC Auckland CP265/89) Master Hansen (as he then was) approved the six functions of particulars recognised in English practice, three of which are :

The first is to enable the other side to know what evidence they ought to be prepared with and to prepare for trial (per Cotton LJ in Spedding v Fitzpatrick (1888) 38 Ch.D 410 page 413).

The second is to limit the generality of pleadings (per Thesiger J in Saunders v Jones (1877) 7 Ch.D 435).

Thirdly, to limit and define the issues to be tried and as to which discovery is required (per Vaughan Williams LJ in Millbank v Millbank [1900] 1 Ch.D 367 page 385).

(See also that under-regarded text Beck: Principles of Civil Procedure 2^nd ed 2003 paras 5.3.1 pp121-122 and 5.4.2 pp126-128).

[24] Seen in light of those authorities, the current pleading must be regarded as a discursive document, doubtless made more so by defendants' repeated R185 notices. It gives the impression the pleader may have worked methodically through the Maritime Safety Authority and Transport Accident Investigation Commission reports and incorporated all the more substantial criticisms and shortcomings listed therein as allegations in the claim. This is entirely understandable given the comprehensive nature of the inquiries which led to those reports. But that approach, if the impression given is in any way correct, does not necessarily result in a claim which complies with the Rules or the cases. Given the numerous matters raised in those reports and the divided responsibilities discussed, in the circumstances of this matter the preferable approach may have been to work backwards from the damage to the vessel to identify each material factor which the plaintiffs can justifiably allege was a material and substantial cause of the damage occurring. Such approach would identify not merely what occurred in the hours and days immediately before damage first occurred and why, but also any regulatory failures or other breaches which led to persons and organisations acting as they did which in their turn were also loss-causing in substantial and material ways. Following that course would result in the plaintiffs precisely identifying and pleading the necessary causative links between breaches and loss.

[25] Put another way, for present purposes there may be little contention that the monetary losses claimed were losses occurring after the Jody F Millennium was hard aground off Wainui Beach at Gisborne. But what needs to be analysed and pleaded is what were the substantial and material acts and omissions which led to her ending up in that position? If, by way of example, the acts or omissions of the pilot or the tug crews or those responsible for the mooring line are thought to be substantial and material causes or contributors to the vessel finishing up hard aground, they should be pleaded as such. Similarly, if the actions or omissions of those responsible for the safety and management of the port or of channel dredging or movements in the channel or navigational marks or entries in the New Zealand Pilot are thought to be substantial or material factors causing or contributing to the grounding then they, too, should be pleaded as such. More broadly, if some of the general matters earlier mentioned which are the responsibility of the defendants are regarded as directly causing or contributing to the grounding then those factors should be identified and the claim should plead how they are substantial or material factors causing or contributing to the casualty.

[26] Seen in that light, it may be difficult for the plaintiffs to assert that what they apparently see as the generally unsafe nature of the port at Gisborne was a substantial and material factor causing or contributing to the loss. Similarly with their assertions the port should not have been open for business. After all, vessels such as the Jody F Millennium safely entered and used the port. Whatever may be the plaintiffs' misgivings about the port's general suitability and safety, reconsideration needs to be given to whether any deficiencies in that regard contributed or caused the Jody F Millennium to ground and thus for the plaintiffs to suffer the claimed financial losses.

[27] Seen in that light, the pleadings in paras 34-39 and 44-47 that the factors earlier detailed caused the grounding of the Jody F Millennium and as a consequence of the port's lack of safety and her grounding the plaintiffs have suffered loss, must be seen as inadequately tied to the details alleged. Given the facts of the grounding and the losses flowing from that, Gisborne District and entitled to know the links by which the plaintiffs allege the grounding resulted from the pleaded details of failures and breaches. Put another way, if this alleged breach of statutory duty or that alleged negligent act or omission were material causes of the Jody F Millennium's grounding and contributed to it, Gisborne District is entitled to a pleading of the link between the two. An omnibus pleading over 5-8 pages of the claim of all Gisborne District's suggested shortcomings, breaches, failures and the like and an omnibus pleading that all caused the grounding does not satisfy the tests in the authorities. Similarly, omnibus pleadings of the port being unsafe coupled with an omnibus pleading of loss or damage flowing from that pleaded lack of safety and the grounding also fails the tests as set out in the authorities. In either case, Gisborne District is entitled to have pleaded the causative links claimed between the two. To that extent the application must succeed.

[28] It is realised that direction leaves the matter somewhat open-ended from the plaintiffs' viewpoint. However, amendments now required may well lead to a fairly wholesale revision of the claim, perhaps adopting a fresh approach. That is a matter for the plaintiffs and their advisers, not for the Court itself and, once the exercise is completed, it will be for the defendants to decide what course of action they will follow.

[29] Finally, the suggested misrepresentation cause of action was based on a misreading of the claim. Although the phrase "holding out" is a term of art in misrepresentation actions, it is also a piece of English which, as now explained by Mr Gresson, conveys to the plaintiff what is alleged. Accordingly, Gisborne District's application for further particulars based upon a misrepresentation cause of action is not made out.

Discussion : Striking-out Application

[30] Mr Gresson's submission made clear the form of paras 40 and 48 were not intended to give rise to separate causes of action but to plead a causation argument.

[31] There are a number of observations which need to be made in that respect. In the first place, Lord Hoffman's speech in South Australia Asset Management makes clear that the imposition of liability for all consequences of wrongful conduct is exceptional. Indeed, on one reading, His Lordship's speech indicates a divergence between English law as defined by him and New Zealand law as enunciated in Price Waterhouse v Kwan (supra) para 28 pp46-47 which notes the "crucial difference between causing a loss and providing the opportunity for its occurrence". If Mr Gresson wishes to plead the exceptional case to which Lord Hoffman referred, the pleading needs to make that out and plead a factual basis on which the Court can be asked to reach that conclusion. Currently, it lacks significantly in that regard.

[32] Further, even as currently pleaded, paras 40 and 48 attract the observations made in relation to the paragraphs earlier discussed that they plead no link between the failure to regulate safety standards and the unsafety of the port and the loss, still less the legal and factual basis for Gisborne District being liable to the plaintiffs for all adverse consequences. The paragraphs are currently contrary to Kwan in not adequately pleading the causes of loss rather than opportunity for its occurrence.

[33] However, as the authorities make clear, an opportunity to amend the pleadings in accordance with the authorities will always be given in preference to striking-out and accordingly the second defendants' application to strike out is dismissed pending re-pleading.

Result

[34] The result is accordingly as follows -

(a) The second defendant's application for particulars is granted in part in terms of this judgment and dismissed in part.

(b) The second defendant's application to strike out paras 40 and 48 of the second amended statement of claim is dismissed.

(c) The plaintiffs are to file and serve a further amended statement of claim in accordance with this judgment by 16 December 2003.

(d) There will be a further conference relating to this claim before Williams J on 19 December 2003. Counsel may attend by telephone if they advise the Court beforehand.

(e) Each of the plaintiffs and the second defendant having been partially successful and partially unsuccessful, the Court's inclination is that costs of this application should lie where they fall. If counsel wish to dissuade the Court from that view, memoranda may be filed by the second defendants and the plaintiffs within 21 and 28 days respectively of delivery of this judgment, with counsel certifying, if they consider it appropriate so to do, in their memoranda that matters of costs may be determined without a further hearing.