Tasman Orient Line CV v Alliance Group Ltd (No 2)
IN
THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
AD31-SD02
BETWEEN TASMAN ORIENT LINE CV
Plaintiff
AND ALLIANCE GROUP LIMITED
First Defendant
AND COMALCO NEW ZEALAND LIMITED
Second Defendant
AND ALL OTHER PERSONS CLAIMING OR BEING ENTITLED TO CLAIM DAMAGES BY REASON OF OR ARISING OUT OF THE GROUNDING OF THE VESSEL "TASMAN PIONEER" OFF THE COAST OF JAPAN ON OR AROUND 3RD MAY 2001
Defendant
CP157-IM02
AND BETWEEN RAYONIER NZ MDF LIMITED & OTHERS
Plaintiff
AND TASMAN ORIENT LINE CV
Defendant
CP158-SD02
AND BETWEEN FLETCHER WOODPANELS LIMITED AND LYSAGHT FURNITURE CO LIMITED & OTHERS
Plaintiff
AND TASMAN ORIENT LINE CV
Defendant
M461-SD02
AND BETWEEN NEW ZEALAND CHINA CLAYS LIMITED & ANOTHER
Plaintiff
AND TASMAN ORIENT LINE CV
Defendant
M462-SD02
AND BETWEEN NEW ZEALAND DAIRY BOARD & OTHERS
Plaintiff
AND TASMAN ORIENT LINE CV
Defendant
M463-SD02
AND BETWEEN ALLIANCE GROUP LIMITED & OTHERS
Plaintiff
AND TASMAN ORIENT LINE CV
Defendant
CP464-SD02
AND BETWEEN PPCS LIMITED & OTHERS
Plaintiff
AND TASMAN ORIENT LINE CV
Defendant
CIV2002-485-1
AND BETWEEN COMALCO ALUMINIUM LIMITED & OTHERS
Plaintiff
AND TASMAN ORIENT LINE CV & OTHERS
Defendant
Hearing: 9 May 2005
Appearances: Neil Beadle for Tasman Orient Line CV
Philip Rzepecky for Alliance Group and other Plaintiffs
No appearance for Comalco New Zealand Ltd
Judgment: 12 May 2005
JUDGMENT OF WILLIAMS J
In accordance with r 540(4) of the High Court Rules I direct that the Registrar endorse this judgment with the delivery time of 10:00am on the 12 th day of May 2005.
Claims and Application
[1] At about 0255 hrs on 3 May 2001 (local time), the ship “Tasman Pioneer” sub-time chartered to the plaintiff, Tasman Orient Line CV, grounded in the Inland Sea of Japan. Salvors pulled her free and beached her. The cargo was unloaded, but much was damaged, and as a result cargo interests issued a number of claims totalling over $NZ21m. All those claims were issued out of, or have been transferred to, the Auckland Registry and are being case managed together.
[2] Tasman Orient applied for a decree pursuant to the Maritime Transport Act 1994 Part VII limiting its liability to the claimants and fixing the amount. At the same time, Alliance Group and Comalco, two of the plaintiffs, sought an order requiring Tasman Orient to establish a limitation fund, were it successful in its limitation application, by paying the registrar the amount determined under Part VII.
[3] Tasman Orient’s application was granted in a reserved judgment delivered on 21 August 2003 but the applications to establish the limitation fund were dismissed. That judgment is now reported as Tasman Orient Line CV v Alliance Group Ltd [2004] 1 NZLR 650. For present purposes, the relevant paragraphs of that judgment are :
[53] There will therefore be an order pursuant to the Maritime Transport Act 1994, Part VII that Tasman Orient Line CV has the right to limit its liability for claims against it as sub–time charterer of the vessel the Tasman Pioneer arising out of loss or damage to cargo containers and other property on board the vessel on 3 May 2001 to 2,880,416 units of account, the Court being satisfied, on the evidence adduced to date, that such loss or damage did not arise from the personal act or omission of Tasman Orient Line CV as “owner” pursuant to ss 85(1)(a) and 85(b) or that any act or omission of Tasman Orient Line CV was not committed or omitted with intent to cause such loss or damage or recklessly and with knowledge that such loss or damage would probably result.
Procedure henceforth
[54] That being a general decree and a number of those holding bills of lading not being represented by Mr Rzepecky or Mr Stewart, pursuant to R 792(9)(b) the decree limiting Tasman Orient’s liability is required to be advertised. That aspect of the matter is adjourned for counsel to confer as to the form of advertisement, the publications in which it is to appear and the time within which persons may without leave file claims against Tasman Orient.
[4] The limitation decree was advertised in Lloyds List and the “New Zealand Herald” both on 29 September 2003. No further claimants came to notice.
[5] Following the making of the limitation decree, all parties have been involved in preparing for trial. As might be expected during that phase of the matter, Tasman Orient and other claimants have been involved in settlement negotiations. None of the claims has settled as yet but Tasman Orient became concerned as to how any settlements it reached with claimants might impact on the limitation fund.
[6] Accordingly, in all the extant proceedings, it applied for an order that under R 418 the following question (or one differently worded but to the same effect) be argued before trial :
Whereas, on 21 August 2003, in AD31-SD02 the Court ordered that Tasman Orient Line CV is entitled to limit its liability for claims against it arising out of loss or damage to cargo, containers and other property on board the vessel on 3 May 2001 to 2,880,416 units of account (limitation amount); and
Without prejudice to the denial of any liability by Tasman Orient Line CV to any of the plaintiffs in these proceedings, if:
(a) any claim or part thereof in these proceedings is subject to a settlement agreement or deed of settlement between the parties or any of them; and
(b) it is a term of any such settlement agreement or deed of settlement that a sum of money be paid by or on behalf of Tasman Orient Line CV (settlement amount);
in the event of judgment against Tasman Orient Line CV and consequential orders for distribution of the limitation amount, the limitation amount available for distribution shall be reduced by an amount equivalent to any settlement amount or amounts that have been paid by or on behalf of Tasman Orient Line CV, but only to the extent that the settlement amount or amounts reflect the amount to which the person so compensated would have enjoyed upon distribution of the limitation amount.
[7] The application was opposed by all parties other than those known as the “Comalco plaintiffs” on the ground that resolution of the question would not expedite resolution of the claims or reduce the length of trial nor would it avoid inconvenience and expense. It was further submitted the application was premature, would lead to an inequitable distribution of the limitation fund since the negotiations would not be open to scrutiny by other parties, and the order sought to fetter the Court’s powers under the Maritime Transport Act 1994 s 89. The Comalco plaintiffs did not oppose the orders sought by Tasman Orient and abide the decision of the Court.
Maritime Transport Act 1994 s 89
[8] The Maritime Transport Act 1994 s 89 reads :
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 payment of costs, or otherwise, as the Court thinks just.
[9] None of the claims brought in the “Tasman Pioneer” litigation are under s 86(2). All are under s 86(1). For reasons discussed in Tasman Orient (paras [59]-[74] pp668-672), the conclusion was reached that the reference in s 89 to s 86(2) and the consequent exclusion of claims under s 86(1) was a deliberate choice by Parliament on at least two occasions. There was, accordingly, no jurisdiction in New Zealand for an order that a limitation fund be established.
Submissions
[10] For Tasman Orient, Mr Beadle made clear the company was seeking certainty as to how payment of settlement sums in relation to some of the plaintiffs would be treated by the Court if the remaining plaintiffs were to be successful in obtaining judgment and thereafter apply for distribution of the remainder of the fund. He made the point that the position in the United Kingdom under the Convention on Limitation of Liability for Maritime Claims 1976 (the London Convention) and earlier similar conventions reflects the common law position which antedated the earliest of the conventions but Tasman Orient was unsure whether the common law and Convention position would obtain in New Zealand and sought a decision in that regard. He accepted that if Tasman Orient settled with any plaintiff for more than that plaintiff’s ultimate entitlement from the limitation fund, Tasman Orient would only be entitled to a credit for the amount that plaintiff would have received on distribution. The risk of over-settlement accordingly lay with Tasman Orient.
[11] Art 10(2) of the London Convention says that if limitation of liability is invoked without the constitution of a limitation fund, Art 12 applies and Art 12(2) says :
2. If, before the fund is distributed, the person liable, or his insurer, has settled a claim against the fund such person shall, up to the amount he has paid, acquire by subrogation the rights which the person so compensated would have enjoyed under this Convention.
[12] Mr Beadle suggested plaintiffs in an action subject to the limitation decree should be under no obligation to seek the Court’s approval to any settlement, particularly given the Court would be in a disadvantageous position by comparison with the parties to assess the likely share of the fund to which that plaintiff might be entitled. Other mechanisms, such as making payment of the settlement conditional on an order of Court or payment only after trial required the parties to agree to postponed payment. He said Tasman Orient finds the current position inhibiting in its settlement negotiations. There being no New Zealand authority on the point, he submitted there was a general public interest in resolving the question since a similar situation would arise in any casualty involving multiple cargo interests if the limitation provisions of Part VII of the Maritime Transport Act 1994 applied.
[13] The position in the United Kingdom, he submitted, was as set out in “T” Steam Coasters (“Coaster”) v Owners of Cargo Laden in “Dokka” & Ors [1922] 10 Lloyds Rep 592. However, rather than cite at this point from that case, it is sufficient to recount the rather more succinct formulation adopted by the learned author of Meeson: Admiralty Jurisdiction and Practice (3 rd ed 2003 para 8.104 p 275) in the following terms:
Where a claimant has made a payment in respect of a claim whether by settlement out of court or by satisfaction of a judgment, he is entitled to have such a payment taken into account and to be given credit for it in the distribution of the fund.
[14] However, unlike the position in New Zealand where, as noted in Tasman Orient, (para [69] p671) the adoption of the London Convention has only been partial and through the enactment of comparable provisions as part of the Maritime Transport Act 1994, the position is clear in the United Kingdom: the London Convention appears as Schedule 7 to the Merchant Shipping Act 1995 (UK) and s 185 of that Act gives the Convention the force of law in that country.
[15] For various claimants, Mr Rzepecky submitted the current position concerning these claims did not fit the criteria for a R 148 question. Resolution of the question proposed by Tasman Orient would not shorten the ultimate trial, far less end the litigation. He submitted it would not even save expense to the parties (McGechan on Procedure para HR418.01 p1-1672-1673). Mr Rzepecky pointed to the lack of any formulation of a question for the Court to answer in Tasman Orient’s application. It sought, he suggested, no more than a declaration in an evidential vacuum. In addition, the application was for a purpose outside R 418 namely providing comfort to Tasman Orient that its payments of negotiated settlements would be accounted for against the limitation fund in due course in accordance with the London Convention and English practice. He suggested Tasman Orient could achieve the same result by settling claims conditional on the Court’s approval or applying for a Tomlin order (Practice Note [1927] WN 290; Green v Rozen [1955] 2 All ER 797, 799). The latter, he submitted, would be preferable since it would enable other claimants to participate in the approval process and assist the Court in deciding on the reasonableness of the settlement.
[16] Mr Rzepecky submitted that the terms of s 89 had been left deliberately wide to enable the Court, on an application for consolidation, to make such orders concerning the limitation fund as it considered appropriate.
Discussion
[17] As discussed in Tasman Orient, the form of s 89 and its limiting application to claims under s. 86(2) was deliberate. Since none of the claims relating to the “Tasman Prioneer” come within s 86(2) s 89 is inapplicable unless they may come in under R 792(11) which provides that :
“any order limiting the plaintiff’s liability may make any provision authorised by s 89 of the Maritime Transport Act 1994”.
[18] Although in the Court’s Minute in these proceedings following a conference on 6 April 2005 the observation was made (para [4]) that the R 418 application need only be filed in CP157-SD02 and would apply as a precedent across all the other cases relating to the Tasman Pioneer, the wording of R 792(11) suggests the R 418 question could only be argued in Tasman Orient’s limitation claim. And that, since it sought only the limitation decree, may well be regarded as spent. That provides a reason for declining Tasman Orient’s present application but, alternatively, it may be possible for Tasman Orient to apply under R 382 for all the current proceedings to be consolidated and endeavour to persuade the Court that it has power to decide the R 418 question proposed either under s 89(2) or pursuant to the Court’s ordinary R 418 jurisdiction. Against Tasman Orient’s application, however, is that there must be considerable doubt as to the Court’s jurisdiction to deal with the matter, at least under s 89.
[19] Secondly, there is force in Mr Rzepecky’s submission that Tasman Orient’s R 418 application is for an unconventional purpose, namely freeing a litigant from settlement constraints in advance of negotiations by advising what, if the Court is required to deal with the matter, the Court will do should those negotiations be successfully undertaken, payment made and the result total more than the value of 2,880,416 units of account. In a sense, it is akin to asking the Court to answer a hypothetical question, something the Court has long declined to do at least under the Declaratory Judgments Act 1908 (eg Wellington Harbour Ferries Ltd v Wellington Harbour Board (1910) 12 GLR 609). Following on from that, it is to be recalled that the Court took the view there is no jurisdiction to require the constitution of a limitation fund and accordingly there are no funds in respect of which the Court could make orders under the R 418 question.
[20] Next, for the reasons discussed in Tasman Orient, Parliament must be taken to have deliberately decided not to make the London Convention part of the law of New Zealand except to the limited extent the provisions of the Convention are part of the Act. That, too, tells against Tasman Orient’s application since it seeks the answering of a question effectively designed to import into New Zealand law the relevant provisions of the London Convention when Parliament has decided not to follow that course.
[21] The next point is that although the Court will, of course, be involved in the future trial of these claims, no reason was advanced as to why the Court should be involved in the sanctioning of settlements. True, there may be reason for the parties in due course to seek the Court’s assistance in relation to the division of the limitation amount if they are unable to agree but, currently at least, the Court has no part to play in that regard.
[22] Next, as Mr Rzepecky submitted, Tasman Orient’s R 418 application does not fit within the criteria pursuant to which such questions are normally ordered to be argued.
[23] For all those reasons, the appropriate conclusion must be that no case has been made out to grant Tasman Orient’s application at the present stage of these proceedings and accordingly the application should be declined.
[24] That does not, however, mean that settlement negotiations between the various claimants and Tasman Orient should not proceed or should be inhibited by lack of any view from the Court as to how Tasman Orient’s position may be dealt with in relation to the limitation amount should it settle and pay various claims.
[25] In the first place, as already mentioned, when the litigation is somewhat further advanced, the parties may consider it appropriate to seek the Court’s assistance in that respect. That may, in the event, prove unnecessary since the claimants may accept that the London Convention and English authority as to the common law and the operation of the Convention should apply. Apart from textbook summaries such as that on Admiralty Jurisdiction and Practice the practice, at least in England, is as was described by Brandon J in The “Giacinto Motta” [1977] 2 Lloyd’s Rep 221, 227 :
The right of a shipowner, who has already paid a claim arising out of a collision or other casualty caused by the fault of his ship, when limiting his liability under the Merchant Shipping Acts, 1895 to 1974, to have taken into account, in the distribution of the fund, the sum previously paid by him in respect of such claim, is well established. The right further exists whether the payment is made by way of settlement of the claim out of Court here or abroad, or in satisfaction of the judgment of a foreign Court.
This right of a shipowner cannot properly be described as a legal right to claim against his own limitation fund, since it is not possible for anyone to bring a claim against himself. It is rather an equitable right to be given credit, in the distribution of the fund, for a payment made by him in respect of a claim, which could have been brought against the fund but has not been so brought, and cannot now be so brought because it has been satisfied by the payment concerned.
[26] How such a right operates is perhaps best described in The Crathie [1897] P 178. There, following a collision between British and German ships and the loss of the latter with her cargo, the British vessel was found alone to blame and was sold in Holland following a claim in that country with the proceeds paid out rateably to the owners of the German ship, the “Elbe”, the Atlantic Mutual Insurance Co of New York and the British and Foreign Marine Insurance Co. The owners of the British vessel then obtained, in England, a limitation decree and the question arose as to the right of the Dutch plaintiffs to participate in distribution of the sum paid under the decree. Gorell Barnes J held (at 181) :
A discussion then took place as to the proper method of adjusting the claims against the sum of 3879l. 8s. in court, having regard to the payments made to the three claimants in Holland. I am of opinion that the amount to be paid to each claimant against his fund must be calculated in the first instance as if no payments had been made in Holland, and as if the Atlantic Insurance Company had claimed in this suit, but that the owners of the Elbe, and the British and Foreign Insurance Company, must respectively give credit as against the sums which such a calculation will shew to be payable in respect of their claims for the sum which they have respectively received in Holland. The amount will then work out thus – if the credits to be allowed by the two last-mentioned claimants respectively are equal to or less than their respective proportions of the fund, these two claimants respectively will have the differences, if any, to receive, and the plaintiffs will take out of the fund a sum equal to the amounts already received by these two claimants, and it follows that the plaintiffs will also take out of the fund a sum equal to the amount received by the Atlantic Insurance Company. If, on the other hand, the credits respectively exceed their respective proportions of the fund, these two claimants will take nothing out of the fund, and the owners of the Crathie will only take out of the fund the proportions which the three claimants in Holland should have received out of it if no previous payments had been made to them.
As the Atlantic Insurance Company make no claim in this suit, if the sum which would have been their proportion of the fund had they been claimants exceeds what they have received the difference will be distributed amongst the other claimants pro rata.
(See also Rankine v Raschen (1877) 4 Sess.Cas. 4th Series 725, 728-729; The Coaster (supra) at 593-594, 595; The Kronprinz Olav [1921] P 52 at 62 per Atkin LJ, at 67-68 per Younger LJ).
[27] Although, of course, the matter remains open to argument in this country, there is at least persuasive force in that accumulation of long-standing authority. There appearing to be no Australasian authority to the contrary and other countries following that practice, in the event the matter comes for decision, a court in New Zealand may well choose to follow the equitable principle discussed in the English cases. However, that must remain for the future.
Result
[28] In the result, therefore, Tasman Orient’s application for a decision on the preliminary question under R 418 is dismissed.
[29] All these matters are already scheduled to be dealt with at a telephone conference with counsel on 18 May 2005 at 9:00am. Should any matters of costs arise out of this application, they can be dealt with at that juncture.
Solicitors: Phillips Fox, (Neil A Beadle/Grant MacDonald) P O Box 160 Auckland, for Tasman Orient
McElroys, (M Flynn/Steve Keall) P O Box 835 Auckland, for Alliance Group
Izard Weston (Tony Stevens), P O Box 5348 Wellington, for Comalco Group
Copy for: Philip Rzepecky , P O Box 1015-521 Auckland, for Alliance Group.
Mary-Anne Lowe, P O Box 541 Auckland
Stewart Scorgie, Case Registry Officer, Auckland High Court