Carter and Wright v Western Viaduct Marine Ltd

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CP6-SD99

BETWEEN: NEIL CARTER and IRENE WRIGHT
Plaintiffs

A N D: WESTERN VIADUCT MARINE LIMITED
First Defendant

AND ATTORNEY-GENERAL sued on behalf of MINISTRY OF TRANSPORT (MARINE DIVISION)
Second Defendant

AND MARINE & INDUSTRIAL SAFETY INSPECTION SERVICES LIMITED
Third Defendant

Hearing: 2, 3 and 4 October 2001

Judgment: 20 March 2002

Counsel: Rodney Hooker and Lisa Rooney for plaintiffs
Paul Robertson for first defendant
Michael Ring for second defendant
Simon Penlington for third defendant

JUDGMENT OF WILLIAMS J

Solicitors: Vallant Hooker, DX CP30015 Auckland
Heaney & Co., DX CP24052 Auckland
Jones Fee, DX CP 18020 Auckland

Copy for: Michael G Ring, PO Box 105 521 Auckland

Preliminary and Procedure

[1] This judgment deals with applications by all three defendants to strike out the plaintiffs' claims against them, in each case coupled with applications for summary judgment.

[2] Some observations are warranted about the procedure adopted.

[3] Looking first at the summary judgment applications, since November 1998 defendants have had the right to apply for summary judgment against plaintiffs. However, by contrast with the test applying to plaintiffs' such applications - "the plaintiff satisfies the Court that the defendant has no defence" - the test for defendants' applications is steeper, namely, "the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed" (R 136(l) (2)). Building on its comments in Westpac Banking Corp v MM Kembla New Zealand Ltd [2001] 2 NZLR 298 and Bernard v Space 2000 Ltd (2001) 15 PRNZ 338, the Court of Appeal observed in Attorney-General v Jones (2001) 15 PRNZ 347 para [4] at 349 that "we begin with the broad proposition that plaintiffs have the right to have their claims disposed of following a fair hearing by the Court", particularly having regard to the New Zealand Bill of Rights Act 1990 s 27(3), going on to observe (para [5] p 349)

1. The court may grant the defendant summary judgment only if the defendant has satisfied it that "none of the causes of action" can succeed; by contrast the plaintiff’s application may be made in respect of the defence to a particular part of the claim as well as to the claim as a whole. 

2. The test is that none of the causes "can succeed" by contrast to the English rule considered for instance in Swain v Hillman [2001] 1 All ER 91 and Three Rivers District Council v Bank of England (No. 3) [2001] 2 All ER 513, which requires the showing that the particular claim or the whole claim has "no real prospect" of being successful; that may however be a distinction of no practical consequence and those judgments do valuably stress the need to see whether the plaintiff has a realistic, as opposed to a fanciful, prospect of success.

3. The power was added to the existing power to strike out proceedings, a power ordinarily exercisable without any reference at all to the evidence; it was plainly intended to enable proceedings to be brought to an end by reference to compelling evidence.

4. A summary judgment application will not however succeed where the court cannot confidently resolve disputed facts; the court must be satisfied that none of the claims can succeed; it is not enough that they are shown to have weaknesses; the assessment to be made is not one to be arrived at on the fine balance of the available evidence.

5. While the plaintiff does not have to put up any evidence at all, if the defendant supplies evidence which would satisfy the court that the claim cannot succeed, the plaintiff will usually have to respond with credible evidence.

[4] As the Court of Appeal there made plain, defendants have a substantial hurdle to surmount to obtain summary judgment. They must be able to prove not merely that a plaintiff’s case is weak, not merely that one or more of several causes of action cannot succeed and not merely that, on one view of the evidence or the law, the defendant will be successful. The hurdle which defendants must surmount in summary judgment applications is to prove to the required high standard that, on any view of the law and incontestably on the facts, the only view open is that the whole of the plaintiffs' claim against them is bound to fail. Whilst the jurisdiction will be undoubtedly useful in bringing hopeless cases to a rapid end, it is a jurisdiction which in the nature of factual and legal disputes is likely only to be sparingly successful. It is not one to be routinely invoked because defendants and their counsel think, as they habitually do, that the plaintiff’s case is weak.

[5] As the Court of Appeal recognised in Jones, the power for defendants to apply for summary judgments may well have been promulgated to complement the striking-out jurisdiction, particularly that under RR 186(a) and 477(a), which is usually determined on legal argument and without reference to evidence, or at least without reference to contestable evidence. But, in this Court's view, the amendment to R 136(2) was not intended to encourage defendants routinely to file dual applications for summary judgment and striking-out based on voluminous evidence ostensibly adduced in support of the summary judgment application but inevitably invoked in support of the striking-out application in order to circumvent the evidentiary restrictions in RR 186(a) and 477(a) applications and try to make the success of either application more likely.

[6] The approach to the jurisdiction to striking out a pleading under R 186(a) or a proceeding under R 477(a) is well-settled. All allegations in the statement of claim are assumed will 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 that it is 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 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 & Sheffield Young & Ellis [1983] NZLR 37; South Pacific Manufacturing Co Ltd v NZ Security Consultants & Investigations Ltd [1992] 2 NZLR 282). The observations appearing in McGechan (paras HR186.05(3) HRI86.11 (p3-354, 358) as to lengthy striking-out applications remain apposite to this claim.

Claim

[7] The claim revolves around the purchase and operation of a 120 ft cargo and passenger vessel the MV Nivanga by the plaintiffs or companies associated with them, Carter Wright Holdings Ltd and Great Barrier Shipping Co Ltd. The second amended statement of claim filed on 24 July 2000 - which reads more like a brief than a pleading - alleges in circumstances later described that the first defendant, Western Viaduct Marine (more commonly known as Dunsford Marine, the name by which it will be described in this judgment) breached a contract said to be between the plaintiffs and it relating to valuations of Nivanga dated 27 May and 18 October 1994. There is an additional cause of action in negligence relating to the same valuations. There are causes of action in contract, negligence and breach of statutory duty against the third defendant, the Ministry of Transport (MoT) and Marine and Industrial Safety Inspection Services (M & I) arising out of surveys of Nivanga which they are alleged to have undertaken negligently, indiligently or in breach of applicable statutory standards. There were also causes of action against the Maritime Safety Authority as fourth defendant but, as the Court understood it, all those claims have been discontinued.

[8] Losses claimed, particulars of which will require later consideration, include Mr Carter and Ms Wright's liability under loans, loss of income arising out of breaches of the vessel leased by Carter Wright Holdings and Great Barrier Shipping, loss of wages, directors' fees, shareholders' returns and moneys borrowed from various sources and legal expenses.

[9] Dunsford Marine sought summary judgment or striking-out of the claim against it on the basis that there were no contracts between Mr Carter and Ms Wright and it and the plaintiffs' losses did not arise from reliance on Dunsford Marine's reports and were in any event too remote, irrecoverable by the plaintiffs as opposed to Carter Wright Holdings and Great Barrier Shipping and were not caused by Dunsford Marine.

[10] MoT sought similar relief on the basis that its surveys were carried out according to statutory power not private contract; that the contract cause of action was out of time, MoT's survey functions having been transferred to M & I from 1 June 1994 and the contract pleading against MoT being raised for the first time in the second amended statement of claim; that it owed no duty to purchasers who purchased Nivanga in reliance on their own judgment and it is not fair, just or reasonable to impose a duty on MoT; that the Shipping and Seamen Act 1952 (the "1952 Act") and the Regulations made thereunder created no statutory duty on MoT enforceable by the plaintiffs and in any event that cause of action is also out of time having been first pleaded with the contract claim; that the plaintiffs did not rely on an MoT interim Certificate of Survey dated 16 May 1994; the losses were too remote and not suffered by the plaintiffs as opposed to their companies; and the claims for economic loss were not justified by authority.

[11] M & I's application raised assertions similar to those raised by MoT and in particular that any claim for breach of contract or statutory duty arising before 24 July 1994 was statute-barred.

[12] A number of other interlocutory applications were also outstanding but they were not pursued at the hearing. It is noted that Mr Hooker, leading counsel for the plaintiffs, advised that the plaintiffs would provide further particulars sought by the defendants if the claim survived the striking-out and summary judgment applications.

Facts

[13] On 8 February 1994 a minute kept by a Mr Chard, a surveyor appointed under the 1952 Act, then employed by MoT and now by M & I, apparently discussed Nivanga with one of the plaintiffs or their representatives. She was then in Suva, Fiji. The minute sheet suggests there were two other discussions with a Mr Rope, Operations Manager of Great Barrier Freight Services in March 1994 (one of which is described in the minute as "11/3/93", an obvious error). On 8 April Mr Rope sent MoT the ship's register and latest survey papers saying that "if everything is in order we anticipate that the vessel will be in Auckland in approximately three weeks" and continuing

As the Vessel had a Hull and Shaft Survey last year we would hope that all that is required from your Department is a Safety and Deck Survey. The Nivanga will be Surveyed for extended river limits

[14] MoT replied on 15 April 1994:

We can advise that the hull construction and machinery would be acceptable for survey as a vessel plying within Extended River Limits subject to our inspection.

Registration and the issue of an interim NZ Certificate of Survey are to be arranged before departure from Fiji. ...

Also, please note that our requirements regarding manning levels and life saving/fire appliances differ from those in Fiji.

[15] The claim says that between February and April 1994 Mr Carter and Ms Wright sought MoT's opinion whether Nivanga would be issued with an appropriate Certificate of Survey were she brought to New Zealand by them or their company and MoT was furnished "with documentation relating to the vessel including an ultrasonic fitness report on the hull". There appears to be nothing in the evidence filed on these applications supporting those assertions.

[16] In reliance, they plead, on the 15 April 1995 letter, on 20 April 1994 Carter Wright Holdings contracted to buy Nivanga from a Fijian company, JKS Holdings Ltd, for $F200,000 with the purchaser's obligations guaranteed by Mr Carter and Ms Wright. Settlement was to occur 7 days after completion of charter.

[17] For present purposes, amongst the terms of the agreement it is only pertinent to note that Carter Wright Holdings acknowledged that it was relying on its own judgment and examination of Nivanga in entering into the contract and that JKS Holdings warranted that at settlement she would be in "good and serviceable condition and up to the survey standard required by the Fiji Marine Board classification society ... and up to the operating and safety standards of the Fijian Government".

[18] The charterparty was a standard BIMCO Barecon 89 charter made between JKS Holdings and Carter Wright Holdings. It was for 12 months at $6000 per month. Mr Carter and Ms Wright were not parties. Boxes 10-12 spoke of her class as being "Fiji Marine Board" with the last specialist survey by her classification society being "16/7/93 & 30/01/94 sight" with a "requirement to carry out 12 monthly full survey to maintain class".

[19] The plaintiffs assert that it was implied in the purchase agreement and the charter that Nivanga's condition was sufficient to enable her to comply with New Zealand survey standards in the survey expected on her arrival. They plead that MoT and, later, M & I, knew that that "plaintiffs and/or any company operated by them would not have entered into binding agreements to charter and/or purchase of Nivanga if the Nivanga was not fit for its intended service in New Zealand and would not obtain the necessary Survey Certificate following her arrival in New Zealand waters".

[20] Mr Carter and Ms Wright plead that they and Carter Wright Holdings paid $58,000 deposit to JKS Holdings on 27 April 1994 and took delivery of Nivanga in Suva two days later. She arrived in New Zealand waters on 6 May.

[21] Mr Chard's minute sheet suggests that he inspected Nivanga in Auckland on 16 May 1994. He issued an Interim Certificate of Survey certifying that:

…the hull machinery and equipment of the above ship have been surveyed and found to be in accordance with the provisions of the Shipping and Seamen Act 1952, and a Certificate as prescribed in Section 219 of the said Act will be issued in due course.

That certificate will authorise the ship to ply as a CLASS IV VESSEL within the gazetted limits:

AUCKLAND EXTENDED RIVER LIMITS

and to carry the following passengers:

ONE HUNDRED (100) SUBJECT TO CONTINUOUS HULL & MACHINER Y SURVEYS

The Interim Certificate said that it remained in force until 16 August 1994 unless earlier cancelled or superseded.

[22] Mr Chard said the reason for issuing the interim Certificate of Survey was to permit Nivanga to operate lawfully carrying goods and passengers between Auckland and Great Barrier Island whilst the paper-work leading up to a fall Certificate of Survey was completed.

[23] During May, Mr Hawkins of Dunsford Marine was telephoned by Mr Carter who said he was acting on behalf of Great Barrier Shipping which had chartered Nivanga - though Great Barrier Shipping was not incorporated until 3 June 1994 and Carter Wright Holdings was the charterer - and required a valuation as it had an option to purchase. Mr Hawkins' valuation of 27 May 1994 was addressed to the BNZ and valued Nivanga at $485,000 on completion of ongoing major modifications. The passage entitled "hull plating" showed Mr Hawkins inspected "ultrasonic test results undertaken at Suva in July 1993 [which] revealed only small areas of wastage" and suggested above water-line steel was in "remarkably good condition". Maintenance records were inspected. The report cautioned against defects which were discoverable only through equipment removal and concluded:

This report does not expressly or impliedly warrant or in any way guarantee the condition of the vessel and Dunsford Marine Limited shall not be held liable or responsible for any errors, omissions or oversights in the valuation of the above vessel. This report should not be considered as a condition survey.

[24] With effect from 1 June 1994, MoT's inspection services were sold to M & I. The documents of sale were not in evidence. MoT claims M & I has had all responsibility for marine inspection and safety since.

[25] On 9 June 1994 Carter Wright Holdings wrote to the equivalent of JKS Holdings listing a set of latent defects raised in a telephone conversation six days earlier. The letter suggested a number of items had been "condemned by MoT" and said the Ministry and itself had "documented photos and records" though these were also not in evidence. The letter said that five weeks after the company had expected to be in operation "we are still not surveyed due to these defects". The plaintiffs plead that Nivanga commenced service in New Zealand on 27 June 1994.

[26] JKS Holdings replied on 14 June refuting the complaint and saying that Nivanga was "more than in an acceptable condition as approved by the Marine Department", that Carter Wright Holdings was "aware that some work would have to be undertaken to get the vessel up to MoT standard" and that the "concern is the difference in survey standard between Fiji and New Zealand".

[27] After further inspection between 25 May and 21 June including sea trials, Mr Chard issued a Declaration of Survey to Great Barrier Island Freight Services on the latter date relevantly reading:

I hereby declare that between 28-2-94 and 16-6-94 ...

(a) I/We inspected the hull, machinery, boilers and equipment of the above mentioned ship and the boats and other lifesaving appliances, lights, signals and other equipment on board the same, and

(b) The survey showed in all respects that the hull, machinery, boilers, lifesaving appliances, lights, signals and other equipment were in a satisfactory condition for the ships intended service and that the requirements of the Shipping and Seamen Act 1952 and regulations made pursuant thereto relating to survey had been satisfactorily complied with ...

(d) The ship is in my/our opinion fit to ply as a CLASS IV VESSEL within the following gazetted limits:

AUCKLAND EXTENDED RIVER LIMITS

Until the ……16th…… day of ……June…… 1993 [illegible: apparently sic] subject to annual surveys in accordance with section 206 of the Shipping and Seamen Act 1952 being carried out to the satisfaction of a Surveyor of Ships.

[28] Mr Chard's affidavit did not say why he chose 28 February 1994 as the commencement date in his Declaration.

[29] Mr Chard wrote to Great Barrier Freight Service the same day advising details of what was required for the "continuous survey requirements for the year leading up to the docking in 1995", detail which included making the hull and tanks available for internal examination and checking the deck for fitness.

[30] On the same day he also sought advice from the Maritime Safety Authority as to Nivanga's requirements for re-registration. The reply of 24 June said that it was "OK for a foreign registered vessel to be surveyed as a restricted limit ship but in this case you must give it a full survey as a first-timer" and that "you will need to start from square one for hull, machinery and equipment".

[31] On 24 August 1994 the Maritime Safety Authority issued Nivanga with a Certificate of Survey saying that she "complied satisfactorily in all respects with the applicable requirements of the Shipping and Seamen Act 1952 and regulations". The Certificate was to remain in force until 15 June 1998. Mr Chard said such certificates are subject to annual or intermediate surveys to ensure that ships continue in survey. The evidence also included a further Interim Certificate of Survey signed by Mr Chard, this one current for three months from 16 August 1994.

[32] Carter Wright Holdings and JKS Holdings agreed on 31 August 1994, following discussions, to reduce the sale price to $200,000 payable in full by 30 September.

[33] On 18 October 1994 Mr Hawkins again valued Nivanga. He was told by Mr Carter that another finance company required a report following completion of the modifications. Addressed to AGC Finance and Great Barrier Shipping it was essentially a repetition of the 27 May 1994 report with changes required by completion of the repairs. The report said that the "vessel is in apparently remarkably good condition" though noting that no tank or underwater inspections had been carried out. It concluded with the same caveat and disclaimer as in the earlier report. It valued Nivanga at $495,000. Mr Hawkins says that it was a report on Nivanga's value, not condition, and although he later discovered there were hull problems, "this was not something I could have known without the vessel having been placed in a dry dock so that I could properly inspect the hull".

[34] On 19 October solicitors acting for Mr Carter, Ms Wright and Carter Wright Holdings wrote to JKS Holdings' solicitors saying that AGC required Nivanga to be transferred to the New Zealand Register and proposing to reduce the purchase price for further work to be done. JKS Holdings refused to budge on price or transfer Nivanga to the New Zealand Register despite further complaints from Carter Wright Holdings at Nivanga's condition and the cost of repairs. The claim asserts that on 21 December 1994 Mr Carter and Ms Wright applied to enter Nivanga on the New Zealand Register as their ship. JKS Holdings claimed in a letter dated 7 February 1995 that the latent defect period in the contract was to delivery of the vessel in New Zealand under the charter and denied responsibility for defects found after that date.

[35] The claim asserts that Great Barrier Shipping, Carter Wright Holdings and the plaintiffs borrowed $250,000 from AGC on 1 February 1995 secured against Nivanga relying on Dunsford Marine's reports and the survey certificates. It also claims that under an oral assignment between Carter Wright Holdings and the plaintiffs of the former's rights under the agreement for sale and purchase, Mr Carter and Ms Wright purchased Nivanga from JKS Holdings on 8 February 1995 and leased her first to Carter Wright Holdings and, from 4 March 1996, to Great Barrier Shipping.

[36] Difficulties over Nivanga's condition continued both as between the plaintiffs and their companies and JKS Holdings on the one hand and between the plaintiffs and their companies and M & I on the other.

[37] The claim asserts that on 5 April 1995 Mr Chard again inspected Nivanga. He wrote to Great Barrier Freight Services on 21 April commenting on an ultrasonic hull thickness report he had been sent, saying that the periodic survey due for the three months beginning 15 May would not be undertaken until work set out in his letter of 21 June 1994 was completed.

[38] That letter followed diary notes showing that in January 1995 decking had been found to be "seriously wasted with large holes visible and whatever steel remaining being paper thin - only the plaster & linoleum in the passageway prevented crew or passengers from falling into the engine room" with leaking hull plating discovered on an emergency docking in April 1995 and a patch being installed to cover a "large indentation" in the bow. The report said that the "condition of the hull indicated a huge shunt sideways on the port side ... caused by heavy contact with an unknown object" plus indications that the vessel had sat on piles whilst in Fiji. There was also "serious thinning of the hull" and:

The whole hull, the decks, tanks & superstructure is in such a dilapidated condition that the vessel is bordering on being unseaworthy unless major repairs are carried out. The deterioration has not suddenly happened, it is the result of gross neglect over a long period of time & reflects the difference in acceptable standards between New Zealand & Pacific Island conditions.

On 16 June Mr Chard responded to a request from Great Barrier Shipping two days previously giving his opinion that the "thinning of the plating has been taking place over a long period of time and is not a recent occurrence".

[39] A complaint about hull thickness was rejected by JKS Holdings in early May on the basis of the ultrasonic test in July 1993, the terms of the charter and the agreement for sale and purchase.

[40] On 18 August 1995 M & I wrote to Great Barrier Freight saying Nivanga was out of survey because the periodic survey due on 15 August had not occurred. It detailed work required before a new survey certificate could be issued.

[41] On 12 September 1995 Mr Carter, Ms Wright, Carter Wright Holdings and Great Barrier Shipping extended their loan from AGC from $250,000 to $334,804.97. The plaintiffs plead that was a consequence of M & I's requirements in the letter of 18 August.

[42] Certain repairs were undertaken and a certificate as to the first annual intermediate survey was issued on 11 October 1995 but further work was required. On 13 March 1996 the Maritime Safety Authority carried out a Flag State Inspection and detained Nivanga until lengthy repairs listed in that report and a letter of 15 March 1996 were satisfied. Nivanga was released from the detention order provided all work was carried out within one month but on 20 March M & I again wrote to Great Barrier Freight with a lengthy list of repairs required by 15 June. They were not done. On 19 August 1996 a further detention notice was issued requiring all outstanding items and a new Flag State Inspection to be undertaken before survey could be revalidated. Again, the repairs were not done.

[43] The claim asserts that on 31 August 1997 the Auckland Harbour Board seized Nivanga and later sold her as scrap for $500.

[44] On 8 April 1999 (or possibly 9 May 1996) Carter Wright Holdings was placed in liquidation. It has now been struck off. Great Barrier Shipping was placed in liquidation on 7 May 1999.

[45] It remains to add that in the only evidence from the plaintiffs, an affidavit from Ms Wright, she confirmed the second amended statement of claim as being true and correct, said that plaintiffs relied on Mr Chard's surveys and would not have "entered into any of the financial arrangements without the survey of the ship" and that "we entered into the purchase of the Nivanga subsequent to leasing it in reliance on the Interim Certificate of Survey" apparently basing that assertion on discussions Mr Chard had with the plaintiffs before 20 April 1994 as reflected in the commencement date of his inspection in the Declaration of Survey. She continued:

The significant point to us is that Mr Chard issued an Interim Certificate of Survey on 16 May 1994. We proceeded with the charter and purchase based on that interim survey certificate. That interim survey certificate was the foundation stone for all the transactions and all the dealings. If Mr Peter Chard had done his job properly we believe he would not have issued the Interim Survey Certificate and we would not have proceeded with Carter Wright Holdings Ltd leasing the Nivanga and we would not have entered into the personal loan arrangements with AGC.

[46] As against Dunsford Marine, she said that "we would not have entered into in our own name the purchase of the ship nor would we have borrowed the money personally from AGC if the value of the vessel had not been as stated by the first defendant".

Contract Cause of Action against MoT and M & I: Limitation

[47] It is convenient to commence this consideration with the limitation defences raised by MoT and M & I against the contract cause of action.

[48] In the second amended statement of claim filed on 24 July 2000 the contract cause of action against MoT and M & I was pleaded that "in or about February 1994 and pursuant to an oral agreement" made between Mr Carter, Ms Wright and Carter Wright Holdings on the one hand and MoT on the other, MoT agreed in consideration of payment of fees to survey Nivanga as required by the 1952 Act. That pleading was plainly outside the six year limitation period for contract claims unless the contract and breach were pleaded prior to February 2000. It being common ground that they were not raised in the original statement of claim filed on 13 January 1999, such could only have been the case if they were pleaded in the first amended statement of claim filed on 17 January 2000. In that statement of claim, the only cause of action against MoT and M & I (and the Director of Maritime Safety) was headed "Tort" and alleged that MoT and M & I owed the plaintiffs a duty of care to survey Nivanga diligently in accordance with good survey practice under the 1952 Act and that they were negligent in the discharge of those duties and the issue of the Survey Certificates.

[49] Mr Ring and Mr Penlington submitted that such a cause of action could not possibly be regarded as a pleading in contract and accordingly should be struck out. Mr Ring additionally submitted that MoT has had no responsibility for marine inspections since 31 May 1994 and accordingly the plaintiffs could not factually plead breaches of contract against it after that date.

[50] Mr Hooker submitted that the differences between the two claims were no more than elaboration of detail raising the same causes of action because the 17 January 2000 claim pleaded the relationship between the parties, the sequence of events and the various statutory provisions and the present contract cause of action did not rely on new facts. He submitted that the same duty was alleged but was "now delineated between contract and tort and statutory duty". All those allegations were pleaded in the 17 January 2000 claim but the duties and breaches were now separated.

[51] As the Court of Appeal recently confirmed (The Ophthalmological Society of New Zealand Inc v Commerce Commission (CA168/01 26 September 2001 para [22] p 9):

A cause of action is a factual situation the existence of which entitles one person to obtain from the court a remedy against another person (Letang v Cooper [1965] 1 QB 232, 243-3 per Diplock LJ). Only those facts which are material to be proved are taken into account and the selection of those material facts is made at the highest level of abstraction (Paragon Finance plc v DB Thakerar & Co (a firm) [1999] 1 All ER 400, 405 per Millett LJ).

relying on Smith v Wilkins & Davies Construction Co Ltd [1958] NZLR 958, 961 and Gabites v Australasian T & G Mutual Life Assurance Society Ltd [1968] NZLR 1145.

[52] The Court of Appeal reiterated its support for the test appearing in Chilcott v Goss [1995] 1 NZLR 263, 273:

In Smith v Wilkins and Davies Construction Co Ltd at p 961 McCarthy J put the matter in this way:

"The issue is, I think, put as clearly as anywhere in the words of Lord Wright MR in Marshall v London Passenger Transport Board [1936] 3 All ER 83, as being whether the new pleading involves 'a new departure, a new head of claim, or a new cause of action' (ibid, 87). In other words, is it something essentially different from that which was pleaded earlier? Such a change in character may be brought about, in my view, by alterations in matters in law or of fact, or both. Alterations of fact could possibly be so vital and important as by themselves to set up a new head of claim. On the other hand, more often alterations of fact do not affect the essence of the case brought against the defendant ... In each case it must, I consider, be a question of degree."

That test was adopted by this Court in Gabites v Australasian T & G Mutual Life Assurance Society Ltd [1968] NZLR 1145, 1151 where North P also cited with approval the following passage from the judgment of Sholl J in Harris v Raggatt [1965] VR 779, 785:

"If we say that the law is that the plaintiff cannot be allowed, after the period of limitations has run, to set up a new cause of action, we use the term in a special sense as meaning a 'new case' varying so substantially from what has previously been set up that it would involve investigation of matters of fact or questions of law, or both, different from what have already been raised and of which no fair warning has been given, so that it would be unfair and unjust to the defendant to put him in peril of a judgment founded on the new matter. Certainly, if there is set up a 'new case' on the facts, upon which is based a new claim upon a new and different legal basis - a new cause of action in that sense - leave will ordinarily be refused."

[53] In Ophthalmological Society and a number of the other cases mentioned, the factual basis between the two claims remained essentially the same but the legal implications varied sufficiently to justify striking out the new claim.

[54] In this Court's view, the same applies in this instance. The factual background remains the same and it is, of course, commonplace for the same facts to give rise to differing causes of action but in the Court's view the contract pleading in the 24 July 2000 claim is essentially different from the tort claim pleaded on 17 January 2000. It involves different factual emphases, different elements, different defences, different remedies and different concepts including the ambit of the duty of care in negligence and, in the circumstances of this case, the question of privity in contract. No prior warning appears to have been given. An indicative factor against allowing the contract claim against MoT and M & I to continue is that because of the other causes of action, the plaintiffs are not left without remedy. As far as MoT is concerned, an additional matter in its favour is that, on any view of the matter, any contractual cause of action could only have arisen in the brief period between 28 February-31 May 1994 and it must be borne in mind that, although there may have been some discussion about the vessel in the earlier part of that period, she did not even arrive in New Zealand waters until 6 May 1994. Further, the nature of the contract relationship between the plaintiffs and their companies on the one hand and MoT and M & I on the other may be contrasted with the conventional contractual relationship between the plaintiffs and their companies on the one hand and JKS Holdings on the other and yet, as far as the Court is aware, Ms Wright and Mr Carter and their companies have not sued JKS Holdings. That, too, militates against permitting the plaintiffs' contract claim against MoT and M & I to proceed. In all those circumstances, plus those discussed in paras [56]-[62] of the next section of this judgment, the Court concludes that no contract cause of action was pleaded by the plaintiffs against MoT and M & I prior to the second amended statement of claim filed on 24 July 2000 and that, in addition, it would be unfair and unjust to MoT and M & I to hold that a contract cause of action exists against them.

[55] In this Court's view the contract causes of action against MoT and M & I in the 24 July 2000 claim were brought outside the limitation period and must accordingly be struck out.

Relationship between plaintiffs and MoT and M & I: Negligence cause of action

[56] It is next convenient to analyse the relationship between the plaintiffs on the one hand and MoT and M & I on the other in period February 1994-February 1995. That relationship bears on the remaining causes of action pleaded against MoT and M & I and also bears on the contract causes of action in the event the Court's conclusions on that topic come to be reconsidered.

[57] For parts of the relevant period up to 31 May 1994 and thereafter, MoT and M & I acted under the 1952 Act. It was repealed as from 1 February 1995 by the Maritime Transport Act 1994. The 1994 Act also partially repealed the Maritime Transport Act 1993 which, amongst other things, set up the Maritime Safety Authority but otherwise had no effect on this case.

[58] During the hearing, there was considerable debate as to whether the 1952 Act was one predominantly concerned with safety at sea or whether its objects were more diverse. Attention was drawn to the absence of reference to safety in the Long Title by comparison with references to safety in the Long Titles to the Civil Aviation Act 1990 and the Maritime Transport Act 1994. In the Court's view, however, the debate was arid. The 1952 Act was one of the longest on the statute book. Even a cursory review of its Analysis shows that it covered a vast range of what may generally be called maritime matters. They included safety (Part VII) but also dealt with other aspects bearing on safety at sea in a number of other provisions. The absence of reference to safety in the Long Title by comparison with later statutes may reflect no more than changes in drafting approach.

[59] The original Part IV was repealed by an Amendment Act in 1987 headed "Construction Survey and Equipment". Section 199 required ships of over 6 metres to be surveyed. Failure to comply was an offence. Section 206 required initial, intermediate and periodical surveys as prescribed by regulation to determine compliance with the 1952 Act rules and regulations and "whether or not the ship is in all respects satisfactory for the service for which the ship is intended to be used". Section 209 obliged owners and agents to co-operate with surveyors and supply information, it again being an offence to fail to comply. The Shipping (Survey) Regulations 1989 made under s 210 created ten classes of ships - Nivanga was in Class IV - and set out in considerable detail matters to be covered in initial, periodical and intermediate surveys. Part VI required continuous surveys of hull machinery and equipment and created an offence for default in compliance. Sections 211 and 212 made it mandatory for surveyors to give a Declaration of Survey or an Interim Certificate of Survey if the ship complied or to give written notice to the owner if it failed. Sections 214 and 215 gave owners rights of appeal to the Director of Maritime Safety and to the Minister if they were dissatisfied with surveyors' or the Director's decisions. Sections 216-219 prescribed forms of declarations and certificates of survey and interim certificates and s 220 made it an offence for ships covered by the regime to "proceed on any voyage" without an appropriate survey certificate. Section 501 empowered the fixing of fees for surveys and other matters. The details appeared in the Shipping (Fees) Regulations 1990.

[60] Mr Ring submitted that the mandatory nature of much of that scheme was antithetical to pleading that the relationship between Mr Carter and Ms Wright on the one hand and MoT and M & I on the other could be regarded as contractual. There were no mutual exchanges of promises, no offer and acceptance, no negotiations were possible over fees and the notions of failure to comply giving rise to criminal sanctions contrasted with normal contractual remedies for breach. It followed, Mr Ring submitted, that there was no freedom of contract; ship owners wanting to use their vessels for particular purposes had no option but to submit to survey and MoT and M & I had no option but to comply with prescribed standards and issue or decline the prescribed certificates, their actions being subject to appeal.

[61] Mr Hooker's response was to rely on Reg 5(3) of the Shipping (Survey) Regulations 1989 (applied to Class IV ships by Reg 19(2)) which provided that initial surveys were to include "such tests and trials including sea trials as are in the opinion of the surveyor necessary to ascertain that the hull equipment and machinery are in all respects satisfactory for the service for which the ship is intended". He submitted that the discretion in that regulation supported the causes of action in negligence, breach of statutory duty and contract.

[62] There may be an element of discretion in Reg 5(3) but it does not detract from the Court's view that the statutory and regulatory scheme cannot give rise to a contractual relationship in circumstances such as apply here. The notions of required submission, prescribed standards, breaches giving rise to criminal liability (considered important in Norweb plc v Dixon [1995] 3 All ER 952, 959) and rights of appeal against adverse decisions are wholly contrary to the notion of contract. That provides an additional reason for striking out the contract cause of action.

[63] Turning to negligence, there was general agreement between counsel that the test as to whether a duty should be imposed on MoT and M & I in favour of Mr Carter and Ms Wright was as described by the majority of the Court of Appeal in Attorney-General v Prince & Gardner [1998] 1 NZLR 262, 268 where the following appears:

The issue is whether a claim in negligence may lie. The ultimate question is whether in the light of all the circumstances of the case it is just and reasonable to recognise a duty of care by the defendant to the plaintiff. That depends on consideration of all the material facts in combination. It is an intensely practical question. For almost 20 years, and drawing on Anns v Merton London Borough Council [1978] AC 728, we have found it helpful to focus on two broad fields of inquiry. The first is the degree of proximity or relationship between the alleged wrongdoer and the person who has suffered damage. That is not a simple question of foreseeability as between parties. It involves consideration of the degree of analogy with cases in which duties are already established and reflects an assessment of the competing moral claims. The second is whether there are other policy considerations which tend to negative or restrict - or strengthen the existence of - a duty in that class of case (Fleming v Securities Commission [1995] 2 NZLR 514 at pp 527-528).

The exercise is "of an intensely pragmatic character well suited for gradual development but requiring most careful analysis" (Takaro Properties Ltd v Rowling [1987] 2 NZLR 700, 709). All circumstances, including precedent, are to be weighed. Many are discussed in the seminal judgments in South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282.

[64] Counsel accepted there is no New Zealand decision directly in point. The first task therefore is to analyse the degree of proximity or relationship at relevant times as between Mr Carter and Ms Wright and MoT and as between them and M & I.

[65] Mr Ring pointed out that the plaintiffs had no legal interest in Nivanga until February 1995. They merely guaranteed Carter Wright Holdings' performance of the agreement for sale and purchase and were both directors and shareholders of that company and Great Barrier Shipping. They were neither parties nor covenantors to the charterparty. They had no obligations under the agreement for sale and purchase as long as the charterparty continued. He submitted that the essential allegation in negligence was that MoT owed a duty of care to Mr Carter and Ms Wright to survey Nivanga diligently and in accordance with good practice and the 1952 Act and Regulations and only issue an Interim Certificate of Survey on compliance. That, Mr Ring submitted, went no further than claiming that a duty of care arose out of MoT's obligation to comply with its statutory duty. Having regard to the latest pleading, he submitted that what was asserted was that in complying with its statutory function MoT owed a duty of care not just to a company purchasing a chattel but to protect guarantors of its performance, its employees, directors, shareholders and financiers from economic loss.

[66] Mr Ring submitted that there was an insufficient degree of proximity between the parties, relying on the statutory scheme. However, MoT, Mr Ring said, acknowledged there was a sufficient degree of foreseeability in this case in that negligence in conducting its survey might cause pecuniary loss to parties induced to become financiers or guarantors but he submitted that the information contained in the Interim Survey Certificate as to Nivanga's condition was not advice given by MoT on which Mr Carter and Ms Wright were entitled to rely in deciding whether to guarantee Carter Wright Holdings' purchase or to buy the vessel themselves in February 1995. He relied on Caparo Industries plc v Dickman [1990] 1 All ER 568 where Lord Bridge held (at 576):

The salient feature of all these cases is that the defendant giving advice or information was fully aware of the nature of the transaction which the plaintiff had in contemplation, knew that the advice or information would be communicated to him directly or indirectly and knew that it was very likely that the plaintiff would rely on that advice or information in deciding whether or not to engage in the transaction in contemplation. In these circumstances the defendant could clearly be expected, subject always to the effect of any disclaimer of responsibility, specifically to anticipate that the plaintiff would rely on the advice or information given by the defendant for the very purpose for which he did in the event rely on it. So also the plaintiff, subject again to the effect of any disclaimer, would in that situation reasonably suppose that he was entitled to rely on the advice or information communicated to him for the very purpose for which he required it. ...

Hence, looking only at the circumstances of these decided cases where a duty of care in respect of negligent statements has been held to exist, I should expect to find that the 'limit or control mechanism ... imposed on the liability of a wrongdoer towards those who have suffered economic damage in consequence of his negligence' ... rested on the necessity to prove, in this category of the tort of negligence, as an essential ingredient of the 'proximity' between the plaintiff and the defendant, that the defendant knew that his statement would be communicated to the plaintiff, either as an individual or as a member of an identifiable class, specifically in connection with a particular transaction or transactions of a particular kind ... and that the plaintiff would be very likely to rely on it for the purpose of deciding whether or not to enter on that transaction or on a transaction of that kind.

And, to similar effect, Lord Oliver first held (at 589):

What can be deduced from the Hedley Byrne case, therefore, is that the necessary relationship between the maker of a statement or giver of advice (the adviser) and the recipient who acts in reliance on it (the advisee) may typically be held to exist where (1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the adviser at the time when the advice is given, (2) the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose, (3) it is known, either actually or inferentially, that the advice so communicated is likely to be acted on by the advisee for that purpose without independent inquiry and (4) it is so acted on by the advisee to his detriment. That is not, of course, to suggest that these conditions are either conclusive or exclusive, but merely that the actual decision in the case does not warrant any broader propositions.

then continued (at 600):

In seeking to ascertain whether there should be imposed on the adviser a duty to avoid the occurrence of the kind of damage which the advisee claims to have suffered it is not, I think, sufficient to ask simply whether there existed a 'closeness' between them in the sense that the advisee had a legal entitlement to receive the information on the basis of which he has acted or in the sense that the information was intended to serve his interest or to protect him. One must, I think, go further and ask, in what capacity was his interest to be served and from what was he intended to be protected? A company's annual accounts are capable of being utilised for a number of purposes and if one thinks about it, it is entirely foreseeable that they may be so employed. But many of such purposes have absolutely no connection with the recipient's status or capacity, whether as a shareholder, voting or non-voting, or as a debenture-holder. Before it can be concluded that the duty is imposed to protect the recipient against harm which he suffers by reason of the particular use that he chooses to make of the information which he receives, one must, I think, first ascertain the purpose for which the information is required to be given. Indeed, the paradigmatic Donoghue v Stevenson case of a manufactured article requires, as an essential ingredient of liability, that the article has been used by the consumer in the manner in which it was intended to be used ...

[67] In this Court's view there is some force in the submission that an Interim Certificate of Survey is, in terms of s 217, a statement of the use to which the ship may be put with its purpose under the Shipping (Survey) Regulations 1989 being to determine whether the ship has been constructed in accordance with approved plans and its equipment complies with ss 197, 235 and 236. But it is also, pursuant to s 206, a determination "whether or not the ship is in all respects satisfactory for the service for which the ship is intended to be used", phrases which are reflected in Mr Chard's Interim Certificate of 16 May 1994. What may be crucial on this aspect of the case may be what occurred prior to 16 May 1994 and what MoT actually or inferentially knew as to the purpose of the plaintiffs or of their companies in conducting the discussions and correspondence with Mr Chard. In the Court's view, the possibility cannot be excluded that during discussions between the parties MoT came to know that the plaintiffs might be likely to rely on whatever Mr Chard may have told them about Nivanga's satisfactoriness for her intended service and on the later issue of the Interim Certificate when they or Carter Wright Holdings were entering into the April 1994 transactions with JKS Holdings. Given the cautionary way in which the April 1994 correspondence was phrased and given that the Interim Certificate was dated 16 May 1994, the position may have been otherwise in relation to transactions before the latter date were it not for Mr Chard's records showing discussions concerning Nivanga from 28 February 1994 onwards and the Declaration of Survey speaking of inspections from that date. However, whether Mr Chard knew the particulars of the transactions into which the plaintiffs and their company were contemplating entering and thus the purpose to which they might put the information given and their knowledge of the likelihood that an Interim Certificate of Survey would later be issued may depend on evidence as to the plaintiffs' experience and the reasonableness of their reliance on that information, topics on which no conclusions are possible at this stage. It follows that, looking at the matter to this stage as a broad issue of principle, no firm conclusion in MoT's favour can be reached and accordingly the Court is not prepared to rule in MoT's favour at this point.

[68] However, counsel relied on a number of English decisions dealing more precisely with maritime and other transport issues and discussing relationships such as those now under review. Those, they submitted, indicated or negatived the imposition of a duty of care in circumstances such as apply between the plaintiffs, MoT and M & I. The Court now turns to consider whether those authorities countermand the view already expressed as a matter of broad principle.

[69] Mariola Marine Corporation v Lloyds Register of Shipping (The "Morning Watch") [1990] 1 Ll.LR 547 centred round whether Lloyds owed a duty of care not to cause pecuniary loss to persons other than the owner of Morning Watch who were likely to rely on a Lloyds survey. Morning Watch had been surveyed by a Lloyds surveyor who issued an Interim Certificate to owners who then advertised her for sale, saying she had "passed current special survey". The buyers, to whom the Interim Certificate was not shown, claimed the survey was negligent. Acknowledging lack of precedent as to whether a classification society surveyor owes a duty of care not to cause pecuniary loss by survey to persons other than owners and that Lloyds accepted that it foresaw that purchasers might be influenced by the classification status of a vessel when deciding on purchase, Phillips J (as he then was) held (at 557) that the forseeability test was satisfied as the surveyor knew that his survey was being done for purposes of sale.

[70] Turning to proximity, the learned Judge held, (at 559) in reliance on Lloyds' constitution, that its classification system entitled parties other than owners to rely on the fact that a vessel in class was maintained in good condition though Lloyds' classification was more focused on safety than economic interests. He held there was "no general ground for distinguishing between the economic interests of the charterer, the mortgagee and the purchaser" as "all are foreseeably liable to rely upon the class status of the vessel … and all are at risk of being caused economic loss if classification surveys are not carried out with proper skill and care".

[71] The learned Judge then (at 560) rejected the general proposition that Lloyds owed a duty of care to those foreseeably liable to suffer economic loss through reliance on a negligent classification. He went on to hold that no duty of care was disclosed on the facts on the basis that Mariola did not pay for the survey, the survey was carried out as part of a system of regular inspection, and that because the survey was not for a particular purchaser Mariola fell into the indeterminate class of those who might rely on it. That a possible purchaser of Morning Watch would buy on the strength of her having passed survey was not an "overwhelming probability" relying (at 562) on that test as enunciated in Smith v Eric S Bush; Harris v Wyre District Council [1990] 1 AC 831 Phillips J went on to observe (at 562) that because of Morning Watch's size, value and age:

If a yacht surveyor had been asked for his advice he would have urged the wisdom of a condition survey rather than simple reliance on a periodic classification survey.

[72] Philcox v Civil Aviation Authority (25 May 1995 The Times 8 June 1995) was a claim by a shareholder, director and funder of a company which owned an aircraft for which, following maintenance, the Civil Aviation Authority issued a Certificate of Airworthiness. The relevant regulatory regime prohibited aircraft flying without such a certificate but mandatorily required the Authority to issue such if satisfied the aircraft was fit to fly. The aircraft crashed, injuring Mr Philcox and a passenger. After suing and settling with the repairer, Mr Philcox sued the Authority for various items of economic loss claimed to flow from the negligent issue of the airworthiness certificate. In what would appear to have been an oral judgment, Staughton LJ first considered (p 5) whether a duty of care should be imposed on a "body which is entrusted by Parliament with the duty of supervising the activities of others particularly when it is said that that duty is owed to the person who is to be supervised" and considered whether (ibid) "Parliament intended the Civil Aviation Authority to be responsible for protecting the owners of aircraft from a failure to maintain them properly", holding, in reliance on authority including the Morning Watch, that no such duty existed (p 6) :

It is the task of the owner of an aircraft to maintain it properly. He can do it himself or engage others to do so. The Air Navigation Order itself provides for a class of licensed maintenance engineers. It is the owner's job to engage one of these and to see that the task is properly carried out. The Civil Aviation Authority supervises in order to make sure that the owner has done what he, the owner, ought to have done and what it is his responsibility to do. The Civil Aviation Authority is there to protect the public against the owner's failures and not to protect the owner against his own errors.

[73] Millett LJ (as he then was) declined to accept (p 7) that the owner or operator of an aircraft which was not airworthy was entitled to rely on a Certificate of Airworthiness and held "if the defendant was negligent in issuing the Certificate of Airworthiness its culpability lay in its failure to prevent the aircraft from flying when not fit to do so". Holding that the statutory relationship was between the "regulatory body established to supervise the airworthiness of aircraft and the owner of an aircraft who ex hypothesi wishes to fly the aircraft but is prohibited from doing so unless he obtains a Certificate of Airworthiness from the regulatory body" the learned Judge held (p 7) :

It is clear, to my mind, that the risk which the scheme of the legislation is designed to prevent is the risk that the owner or operator of an aircraft will fly the aircraft even when it is unfit to fly; and that the persons for whose protection the scheme has been established are the passengers, cargo-owners, and other members of the public likely to be harmed if an unfit aircraft is allowed to fly.

The owners and operators of the aircraft are not within the class of persons for whose protection the scheme has been established; they are the persons against whose imprudent activities the scheme is designed to protect the public. They are not entitled to rely on the issue of the certificate to exonerate them from their own responsibility to ensure that their aircraft are fit to fly.

[74] The decision of the House of Lords in Marc Rich & Co AG v Bishop Rock Marine Co Ltd [1996] AC 211 concerned a bulk carrier which developed a hull crack during a voyage. A classification society surveyed the damage whilst she was at anchor and recommended dry docking for permanent repairs. That would have required unloading. The owners instructed that temporary repairs only be effected. That was done and the surveyor amended the initial recommendation to one that the vessel be retained in class for the balance of the voyage provided she was permanently repaired after discharge. The vessel left on her voyage but soon afterwards the temporary repairs cracked and she sank with total loss of cargo. The claim before the House of Lords was between cargo owners and the classification society on a preliminary point as to whether a duty of care lay. For the purpose of the hearing, it was agreed that loss of the vessel and cargo resulted from surveyor carelessness in reversing his initial recommendation and permitting her to continue on her voyage.

[75] Lord Steyn, speaking for the majority, examined the classification society's rules, stressing the case was concerned with an occasional not a periodic survey and noting that maintenance of class was conditional on compliance with the rules for various surveys with an appeal being available to challenge surveyors' recommendations. Factors considered important in holding against the imposition of a duty of care included the shipowners' primary responsibility to maintain seaworthiness with the role of the classification society being described as subsidiary and not involving direct infliction of physical damage and lack of reliance arising out of the lack of contact between cargo owners and the classification society. Cargo owners were unaware the society had been brought in to survey the vessel and relied on owners to keep the vessel seaworthy. The terms of the Bills of Lading, the Hague Rules, the Hague-Visby Rules and the contract between the classification society and the shipowners were all relevant factors, as was the fact that classification societies were not set up for profit-making purposes but hold a "public and quasi-judicial position" (at 240 citing W Angliss & Co (Australia) Pty Ltd v Peninsular & Oriental Steam Navigation Co [1927] 2 KB 456, 462 per Wright J). Lord Steyn disapproved the "quasi-judicial" label but accepted that classification societies act in the public interest "operating for the sole purpose of promoting the collective welfare, namely the safety of lives and ships at sea" (at 241). Policy factors indicating against imposition of a duty also included that such a duty would apply to all varieties of surveys, would impose extra insurance obligations with additional difficulties for international trade in the settling of disputes and might result in societies becoming unwilling to conduct surveys thus diverting them from (ibid) "the prime function of classification Societies, namely to save life and ships at sea". Even assuming sufficient proximity, his Lordship held that it was not fair just and reasonable to impose a duty of care.

[76] Mr Ring placed considerable reliance on Reeman v Department of Transport [1997] 2 Ll.LR 648 where for some years prior to the Reeman's purchase of a fishing vessel DoT issued certificates for her based on an erroneous survey. The error was discovered after the Reemans bought her but the modifications required were beyond them. They sued DoT for negligence. The Court of Appeal held no duty of care arose.

[77] The applicable statutory provisions included an Act which provided for the safety of fishing vessels, a regulatory scheme for regular surveys somewhat akin to those in the 1952 Act including mandatory issue of certificates to complying vessels and a prohibition including criminal liability on uncertificated vessels putting to sea. Phillips LJ described it (at 675) as a "complex regime of primary and subordinate legislation designed to ensure that merchant vessels of all descriptions are constructed and maintained in seaworthy condition".

[78] After noting DoT's acceptance that potential purchasers would likely rely on the certificate and that it was reasonably foreseeable that surveyor negligence might cause pecuniary loss to a future purchaser, the learned Judge embarked on consideration of authority including Caparo and Marc Rich (in the Court of Appeal). The learned Judge commenced his discussion on proximity by observing (at 678-679):

The facts of this case raise the question of the liability that attaches to the performance of statutory duties in a type of situation that has distinguishing features that are readily identifiable and commonplace. The duties relate to the regulation of the performance of obligations of owners of property designed to be used for commercial purposes that involve potential risks to third parties. The properties involved in the present case are fishing vessels. The duties of the owners of those vessels, that are regulated by the department, are designed to ensure that those vessels are seaworthy for the protection of those who put to sea in them. Regulation of similar duties owed by owners of cargo vessels would seem designed to protect not merely crew, but the owners of cargo carried in the ships, and those at risk of being damaged by pollution in the event of escape of cargo. Similar regulatory functions are carried out by designated authorities in relation to the safety of premises frequented by the public such as hotels, theatres and dance halls. Vehicles are required to be regularly tested to ensure that they are roadworthy. In most of these cases, potential purchasers of the property in question are likely to be influenced, when deciding whether and for how much to purchase the property, by the certificate which appears to demonstrate compliance with the relevant regulations, indicating that the property is in a condition in which it can lawfully be used for its commercial purpose. Equally, those advancing finance on the security of such property, or agreeing to insure it, are likely to be influenced by the existence of such a certificate.

If those who are charged with survey and certification of such property fail to exercise proper skill and care, a number of consequences may follow: 1. The danger which the regulations are designed to guard against may result in loss of life, injury or damage to third parties. 2. The owner of the property concerned, with whom the authority is in direct relationship, may suffer pecuniary damage as a result, for instance, of being prohibited from using his property for its commercial purpose, or spending money on unnecessary modifications to it. 3. Third parties induced to purchase, hire, insure or finance the property in question may suffer prejudice.

[79] Turning, as part of proximity, to whether there was any duty owed by DoT to owners not to cause them pecuniary loss by "imposing requirements that go beyond those justified by the regulations", the learned Judge held (at 679):

Having particular regard to the fact that many aspects of the task of survey and certification involve the exercise of discretion and that the rules make provision for a right of appeal against a refusal to issue a certificate, I consider it at least arguable that no duty of care is owed to the owner of a vessel in relation to the process of survey and certification.

The relevance of these considerations is simply that, if there is insufficient proximity of relationship to give rise to a duty of care in respect of death or injury to the skipper or crew of a certificated vessel or in respect of economic loss directly caused to the owner of the vessel at the time of the certification, it is hard to accept that such proximity exists between the department and those who may rely on the existence of a certificate in relation to commercial transactions that involve the risk of economic loss.

[80] The judgment then turned to consider the purpose of certification concluding that the judgment at first instance confused the roles of potential purchasers as investors and owners responsible for safety. Certification was directed only at the latter as shown by the following passage (at 680):

The statutory framework in the present case is one designed to promote safety at sea. The scheme adopted to achieve this is to impose duties as to seaworthiness on the owners of vessel and then to provide for the department to check and certify that these duties have been complied with. The purpose of issuing certificates is not really to encourage skippers or others to rely upon them by putting to sea, or in any other manner. Somewhat paradoxically, the purpose of issuing certificates is to help to prevent fishing vessels which are uncertified, and which may be unseaworthy, from putting to sea. More broadly, one can say that the purpose of issuing certificates is the promotion of safety at sea. ...

I accept that there may be more than one purpose for which an advice is given. What I cannot accept is ... that, in the case of fishing vessel certificates, a subsidiary purpose for which the certificate is issued is to inform those who may, in the future, consider entering into commercial transactions, such as purchase or charter, in relation to the certified vessels. No trace of such a purpose is to be found in the statute under which the rules are issued ... nor in the rules themselves. The protection of those whose commercial interests may foreseeably be affected by unseaworthiness of vessels forms no part of the purpose of the legislation and no part of the purpose for which fishing vessel certificates are issued.

[81] Considering the class of persons to whom advice was given, Phillips LJ held that the decision in Caparo spoke of a (at 681) "class of persons the membership of which was capable of ascertainment at the time the advice was given", leading him to conclude (ibid.):

When a British fishing vessel certificate is issued those who may in the future place reliance on that certificate when deciding whether to purchase the vessel do not form part of a class that is capable of definition and delimitation by identifiable characteristics. The vessel may not be sold during the currency of the certificate; she may be sold to someone in her home port or she may be advertised for sale and sold to a buyer from anywhere in the United Kingdom, or an even wider geographical area. ... Not only did potential future purchasers not form an identifiable class when the certificate was issued, the certificate was not issued for the purpose of providing information to assist them in deciding whether or not to purchase the vessel. The fishing vessel certificate was not provided in order to convey information to possible future purchasers, any more than to possible future mortgagees or insurers. It was issued as part of a scheme designed to prevent fishing vessels putting to sea when unseaworthy. Foreseeability that information may, or probably will, be relied upon by others than those for whom it is provided does not suffice to constitute such persons part of a class in a proximate relationship with those providing the information.

[82] The learned Judge also held that the imposition of a duty of care would not be fair just and reasonable in the case because (at 683):

In a case such as the present, however, it will always be open to a party entering into a commercial transaction in relation to a certificated vessel to take steps, such as surveying the vessel or stipulating for contractual warranties, that will provide protection against the risk that the certificate does not reflect the true condition of the vessel. ...

[83] Then, agreeing with the Morning Watch and Marc Rich, Phillips LJ held (ibid):

In each case the Court held that the duty of care was not established. In each case the Court attached importance to the fact that classification societies are non-profit-making organizations which exist for the purpose of furthering safety at sea rather than for the protection of commercial interests. [Counsel] submitted that the Department of Transport, when performing its regulatory functions under the Merchant Shipping Acts, performs a very similar role and, indeed, often delegates to classification societies the performance of some of its duties. In my judgment this point has force. It reinforces my conclusion that, for the reasons that I have given, to impose on the Department of Transport the duty ... would be neither fair, just nor reasonable.

[84] Delivering a concurring judgment, Lord Bingham CJ held (685):

The cases show that before a plaintiff can recover compensation for financial loss caused by negligent misstatement his claim must meet a number of conditions. Among these are three particularly relevant here. The statement (whether in the form of advice, an expression of opinion, a certificate or a factual statement) must be plaintiff-specific: that is, it must be given to the actual plaintiff or to a member of a group, identifiable at the time the statement is made, to which the actual plaintiff belongs. Secondly, the statement must be purpose-specific: the statement must be made for the very purpose for which the actual plaintiff has used it. Thirdly, and perhaps overlapping with the second condition, the statement must be transaction-specific: the statement must be made with reference to the very transaction into which the plaintiff has entered in reliance on it. If these conditions are met, it is necessary to turn to other conditions which the plaintiff must satisfy.

But it seems to me inescapable that the Reemans cannot meet these three conditions. When the certificate was issued and reissued they were in no way involved; nor did they form part of any then identifiable group to whom the certificate was issued. The purpose of the certificate (and the tests which preceded, or should have preceded, it) was to safeguard the physical safety of the vessel and her crew; it was not directed in any way to the market value of the vessel. When the certificate was issued and reissued, no sale to the Reemans was in the offing; the certificate was not issued with reference to that transaction.

[85] Reeman was recently followed in Todd v Adams & Chope (T/A Trelawney Fishing Co) the "Maragetha Maria" [2001] 2 Ll.LR 443 where the question was whether owners of a fishing vessel which sank with the loss of all hands were liable to the personal representatives of crew under the Fishing Vessels (Safety Provisions) Act (1970) (UK) and rules made under it. The claim was brought in breach of statutory duty. Aikens J held that although the Act and Regulations were passed to ensure safety of operation (para 24 p 449) "there is no room for a further intention of Parliament that a breach of the statutory obligations created by the Rules should give rise to civil liability on owners" in favour of private individuals in the event of owners' breach because (para 25 p 449) "it would mean that the owner was strictly liable only as a result of the acts of another over whom he has no control" that is to say the surveyor who granted the vessel a certificate.

[86] Mr Hooker placed firm reliance on Perrett v Collins [1988] 2 Ll.LR 255 where Mr Collins built a kitset aircraft substituting a better gear-box during construction for the type supplied but not substituting the propeller supplied for one compatible with the new gear-box. An inspector with a flying association to which Mr Collins belonged was required to inspect and approve the aircraft before a Certificate of Airworthiness could be obtained. He knew of the changed gear-box but certified the aircraft as fit to fly. Under the applicable statutory scheme Mr Collins was thereby authorized to fly with a passenger. It went out of control on the test flight, hit the ground and injured the passenger, Mr Perrett. The preliminary issue for decision was whether the association, being approved by the Civil Aviation Authority, owed a duty of care to the passenger.

[87] The Court of Appeal upheld a finding that the inspector and the association owed Mr Perrett a duty of care. Foreseeability was acknowledged and no argument was raised that there was any overriding principle of public policy preventing the imposition of liability. The case was argued solely on proximity and what was fair just and reasonable within the statutory scheme.

[88] Hobhouse LJ (as he then was) reviewed the statutory framework and concluded the aircraft could not have taken off without the inspector's certification because the scheme's purpose was safety of air navigation. He held the inspector's role was independent of the constructor's, notwithstanding the fee paid although each had responsibility for safety and airworthiness. The learned Judge concluded that denial of a duty of care owed to injured passengers in relation to aircraft safety would leave a gap in the law of tort. After discussing economic loss, the learned Judge concluded on proximity that (at 262):

Where the plaintiff belongs to a class which either is or ought to be within the contemplation of the defendant and the defendant by reason of his involvement in an activity which gives him a measure of control over and responsibility for a situation which, if dangerous, will be liable to injure the plaintiff, the defendant is liable if as a result of his unreasonable lack of care he causes a situation to exist which does in fact cause the plaintiff injury.

[89] The learned Judge considered Marc Rich at length before concluding that it did not assist the inspector and the association because it was (at 264) directed to economic loss not personal injury; was based on broad policy considerations concerning maritime trade; the inspector "had an independent and critical role in the granting of a Certificate of Fitness for flight for this aircraft without which it could not take off"; denying a duty of care would leave a gap in the law; passengers were entitled to assume that aircraft met safety requirements; and the decision should be regarded as irrelevant to personal injury cases. Philcox did not assist the defendants because it was a claim by aircraft owners and operators, not passengers. Reeman was held to be conformable with his views as to Mr Perrett's position because it held liability of the Department for personal injury aboard an unsafe vessel different from finding a duty of care to owners for economic loss. Morning Watch was also held to be confined to economic injury.

[90] Swinton Thomas LJ distinguished Marc Rich in that the surveyor did not issue a permit to sail whereas the inspector in the case before him issued a permit to fly. He held that a duty should be imposed on the defendants who had (at 270) "undertaken to discharge the statutory duty for the protection of the public and in my judgment no injustice is done by imposing such a duty on them in respect of a negligent act". Reeman, the learned Judge considered, was distinguishable on different statutory frameworks, the Civil Aviation Act 1982 (UK) being (ibid) "for the protection of those who may be injured if an aircraft is certified as fit to fly when it is not". Philcox was distinguished on the basis that Certificates of Airworthiness were designed to protect the public including passengers but not to protect owners and operators from their responsibilities. The learned Judge also took the view that dangers inherent in flying meant that the public would expect a regulatory system to ensure their safety.

[91] Buxton LJ also drew the distinction between infliction of economic loss and physical injury. In the latter there was no need to look beyond foreseeability of result to establish proximity. The learned Judge also distinguished Marc Rich on the basis that it was a cargo not a personal injury claim, the learned Judge holding that the fact that Mr Perrett's was a physical injury claim was (at 276) a "potent factor pointing to the existence of a duty".

[92] Counsel also referred to decisions from other jurisdictions. They included Yuen Kun-yeu v Attorney-General of Hong Kong [1987] 2 All ER 705 where, because of the statutory scheme under which he operated, the Commissioner of Deposit-taking Companies in Hong Kong was held not to owe a duty of care to depositors and Swanson v The Queen in right of Canada (1991) 80 DLR (4th) 741 where Transport Canada, the regulatory authority, was held to owe a duty of care to airline passengers where it had failed to act on reports listing serious deficiencies in the airline concerned and failed to exercise its statutory power to cancel licences. The Federal Court of Appeal held that airline inspectors implemented rather than made policy and whilst exercising some discretion were not required to weigh social, political or economic questions. The factual differences in Yuen Kun-yeu and the personal injury aspect of Swanson mean that they fit the pattern shown by the English cases discussed but do not require detailed consideration.

[93] The diligence of counsel drew the Court's attention to what would appear to be the only New Zealand case in which Reeman has been discussed. In Oceania Aviation Ltd v Director of Civil Aviation (HC Wellington CP 162/98 9 August 2000) the plaintiff imported and distributed aircraft parts. Following a fatal crash, its Certificate of Approval was suspended and parts recalled. It unsuccessfully sued the Director of Civil Aviation for negligence amongst other causes of action. Gendall J held there was proximity between the parties because Oceania was governed by the Civil Aviation Act 1990 and was subject to the Director's regulation but, having considered the statutory regime including the power to grant, suspend or revoke certificates and the power of appeal against revocation or suspension, the learned Judge held that there were overwhelming policy reasons for denying the existence of a duty of care observing (pp38-39):

[89] There can be no one simple test. If the underlying purpose or policy of the statute conferring the functions on the regulator is consistent with a duty being owed to the individual harmed then it is likely that a duty of care exists, e.g. Swanson Estate v Canada (supra). So too if a plaintiff has suffered physical damage or loss as a result of the regulator's failure to pursue statutory functions e.g. Dorset Yacht Co Ltd v Home Office [1970] 2 WLR 1140 (HL). Counsel for the defendant submits that where a person has suffered only economic loss as a result of a regulator's failure to properly pursue statutory functions then the aggrieved person is unlikely to be able to establish a duty of care unless such arises out of a clear indication in the statute (e.g. Williams v Attorney-General [1990] 1 NZLR 646 (CA) at 669) or there has been an assumption of responsibility by the regulator upon which a plaintiff has relied: Comptroller of Customs v Martin Square Motors Ltd [1993] 3 NZLR 289, 294).

[90] It may be that where a statute raises matters of obligation rather than the exercise of a discretionary power a plaintiff may be more likely to establish that a duty of care is owed. Where a relevant statute confers rights of appeal in respect of any actions complained about or where there is judicial review or other remedies available so as to provide some form of accountability then a plaintiff may have difficulty in being able to establish a duty of care, see for example Morrison v Upper Hutt City Council [1998] 2 NZLR 331, 338 (CA).

[91] A very significant feature relevant to determining whether or not a duty of care exists upon a regulatory body is, in my view, whether such duty potentially conflicts with the wider public duty owed to intended beneficiaries of the legislation, or otherwise cuts across the statutory scheme. This can be seen, for example, in B v Attorney-General [1999] 2 NZLR 296 (CA) at 305:

"The legislative judgment, as we read it, is that the greater public good in ensuring so far as possible that children who may be at risk are cared for is to prevail over possible instances of individual injustice; the harm which is claimed is contemplated by the Act. The law not uncommonly strikes such a balance..."

See also Attorney-General v Prince and Gardner (supra at p276) as to the impact of a common law duty cutting across a statutory regime; and Reeman v Department of Transport [1997] 2 Lloyd's Rep 648 (CA).

[94] An appeal was unsuccessful (Oceania Aviation Ltd v Director of Civil Aviation (CA163/00 13 March 2001) the Court of Appeal observing (paras 66-67 pp 21-22):

[66] Counsel was, not surprisingly, unable to point to any case in which a public official charged with responsibility for public safety had been found to owe a common law duty of care to those who were being regulated in that public interest. The analogies which he attempted to draw with officials concerned respectively with the care of mental patients and with the safe construction of buildings, who may well owe duties to the general public as well as to the patients and building owners, were remote from the present facts and unconvincing.

[67] It was entirely foreseeable that the appellant would suffer loss as a result of the Director's action. There was also the necessary proximity or closeness of relationship between the Director and the appellant, to whom his notices and directives were addressed. But, against these factors, there was a very strong policy argument that it would not be just and reasonable to impose any duty of care. The Judge was in our view right to conclude that, even if the postulated duty were to be confined to situations not involving an emergency exercise of power, the imposition of a duty to take care for the interests of suppliers of aircraft parts - the persons being regulated would be likely to conflict with the Director's primary duty to those potentially affected by the use of those parts in an aircraft. It might well, as the Judge said, promote undue caution or reticence on the part of the Director and so impede his role as a protector of public safety. This is an area where to err on the side of caution in the interests of the suppliers of a part might be to place the lives of pilots and passengers at some risk.

[95] Because some reliance was placed on it by counsel brief consideration needs to be given to the decision of this Court in Rutherford v Attorney-General [1976] 1 NZLR 403 where Mr Rutherford agreed to buy a truck if it could pass a Certificate of Fitness, something that could only be issued by the Ministry of Transport. One was issued but, it later appeared, carelessly and the truck failed a later test. Cooke J (as he then was) held the Ministry liable largely, it would appear, because Parliament had provided no remedy for negligence in the issue of a Certificate of Fitness thus making it in the public interest for the common law to impose a duty because of the Ministry's monopoly. Not only were possible prospective purchasers proximate but it was fair and reasonable to impose a duty of care.

[96] Finally, the Court notes the discussion on liability of public bodies for negligence in Todd et al, The Law of Torts in New Zealand (3rd ed 2001 para 5.6.2(b)) and in particular the review of cases imposing or declining to impose a duty of care because of statutory content. The learned authors conclude (p 349):

Perhaps the nature of the inquiry that needs to be undertaken is better expressed in terms of whether a duty of care is consistent with what the statute requires or empowers the public body to do. So understood it can cut both ways. A duty may well be imposed if it would buttress and support the legislative policy, but denied if it would be likely to cut across or discourage performance of the statutory functions.

[97] In the light of those authorities, what should be the Court's decision on whether a duty of care in negligence should be imposed in this case?

[98] In relation to the striking-out applications, the Court is required to assume that the surveys of Nivanga were not conducted carefully and in accordance with good survey practice and the 1952 Act and that MoT and M & I failed to advise the plaintiffs of Nivanga's poor condition in accordance with Mr Chard's view prior to April 1995.

[99] In the first place, it is to be borne in mind that Nivanga could not operate commercially without an Interim Certificate of Survey, a Declaration of Survey and ultimately a Certificate of Survey but, as the authorities demonstrate, that is more indicative of a cause of action for breach of statutory duty than negligence.

[100] Secondly, whilst the Interim Certificate and other documents contain certifications that the hull and other equipment were in accordance with the 1952 Act, s 206 makes it clear that such survey goes no further than determining compliance with the Act and Regulations and certifying that the "ship is in all respects satisfactory for the service for which the ship is intended to be used" at survey date. That is also reflected in the Shipping (Survey) Regulations 1989 reg 5. The Court's view is that a survey as to compliance with statutory or regulatory standards as to construction and equipment leading to a declaration that she is satisfactory for service at survey date should not be regarded as going further. The Declaration of Survey said as much. The surveys merely said that Nivanga complied at survey date with the regulatory requirements for a Class IV vessel plying the Auckland extended river limits. It would not be reasonable to elevate certification that the hull construction and equipment complied with regulation and were satisfactory for use into a general and continuing obligation in negligence to prospective purchasers, charterers, employees, shareholders, directors and financiers. As the authorities show, holding they owe a duty of care to parties such as those just mentioned as opposed to certification to owners would expose MoT and M & I to liability not just to those who have an interest in the vessel at the time survey certificates are issued but to any person proposing to have any category of interest in the vessel to whom the certificates might be shown and for whatever purpose, including, in the plaintiffs' contention, persons who were shown the certificates after their expiry. Given the number of possible varying interests in a vessel, that is a strong indicator against finding a duty of care. It would expose MoT and M & I to liability which is indeterminate as to class, amount and, to a lesser extent, time. This is particularly the case when MoT and M & I cannot limit the class of person who might seek to hold them liable under the certificates nor control that class or the actions they take in claimed reliance on them.

[101] The Interim Certificate and the Declaration and Certificate that followed, whilst an acknowledgment to owners that independent and expert examination had found the construction and equipment in satisfactory condition at that date, did not free the owners from their primary and continuing responsibility, both generally and under the 1952 Act especially s 220, to ensure that the ship was seaworthy if they wished to use her for purposes requiring survey. MoT and M & I had no responsibility or right to insist on repairs or modifications or to carry them out. Their role was limited by the 1952 Act and regulations to granting or withholding the appropriate certificate that Nivanga's owners had discharged their responsibility to ensure that certain aspects of the vessel's construction and equipment were or were not up to regulatory standard. Their decision was subject to appeal. Philcox, Beeman and Oceania Aviation all make clear that a duty of care is less likely to be found where responsibility for compliance with regulation is of those being regulated or entities controlled by them, particularly where the duty of care of the certificating body is asserted by precisely those whose responsibility it is to carry out the work required to obtain certification. If Mr Carter and Ms Wright had concerns about Nivanga wider than those with which it was their duty and that of Carter Wright Holdings to comply under the Shipping (Survey) Regulations, it was always open to them, as Mariola and Reeman make plain, to have her surveyed or to protect themselves by contract to overcome those concerns. The pleadings and their letter of 8 April 1994 said they intended to have "Nivanga" surveyed on arrival in New Zealand.

[102] Next it is to be noted that the 1952 Act and Regulations contain no indemnity for MoT and M & I. Holding them liable would require MoT and M & I to insure against liability with likely consequent increases in fees charged under the Regulations to those seeking certificates. That would involve an additional impost on all owners arising because the Court holds a duty of care to exist in relation to other interests. Those factors might inhibit the discharge of MoT and M & I's statutory and regulatory functions. MoT and M & I are bodies operated in the public interest in ensuring compliance by owners and others with statutory and regulatory requirements principally relating to seaworthiness and safety. They operate a statutory scheme subject to appeal. They are not profit-making bodies accepting liability in negligence to other persons which replaces the primary responsibility of vessels' owners and operators.

[103] Then, in this case, there is the important fact that Mr Carter and Ms Wright were not the owners of Nivanga until February 1995 and had no legal interest in her before that date. Their only legal obligation was guaranteeing Carter Wright Holdings' performance of the agreement for sale and purchase and that only came into operation on termination of the charter. Further, given that the Interim Certificate was not issued until 16 May 1994, by which time Carter Wright Holdings had entered into a binding agreement for sale and purchase and a binding charterparty, it cannot have been the case that the company, still less the plaintiffs, relied on the Interim Certificate to enter into those obligations. Even though, for some currently unexplained reason, the Declaration of Survey certified that inspections had taken place between 28 February and 16 June 1994, and even though the inference is open that Mr Chard may have been aware that the plaintiffs' companies as opposed to the plaintiffs may have been contemplating purchase or charter, there is no evidence that Mr Chard's actions went beyond his statutory and regulatory functions. In those circumstances, it cannot have been the case that Mr Carter and Ms Wright - or Carter Wright Holdings for that matter - undertook the charter and purchase on the basis of the Interim Survey Certificate or that it was the "foundation stone for all the transactions and all the dealings". Reeman (at 681) makes it clear that potential future purchasers are not amongst the class for whose protection a survey certificate is issued.

[104] In addition, it is very difficult to accept that Mr Carter and Ms Wright would undertake the transactions which occurred in February 1995 in reliance on the MoT and M & I surveys and certificates. The Interim Certificate and Declaration expired well before that date and the Final Certificate was then six months old. By February 1995, they knew Nivanga's condition. That is particularly the case as far as MoT is concerned as it had no responsibility for such matters after 1 June 1994.

[105] All those factors would appear, on the authorities, to extend the test of foreseeability and proximity to an unreasonable degree. Though, given the close relationship between Mr Carter and Ms Wright on the one hand and Carter Wright Holdings on the other, proximity may not be a major issue in relation to the striking-out applications, foreseeability is a much more difficult issue in the circumstances of this case. The factors just discussed appear, on the authorities, to militate against the reasonableness of this Court finding a duty of care to exist.

[106] It is also to be borne in mind that the cases draw a sharp distinction between claims for personal injury and those for economic loss with Courts being much more likely to impose a duty of care in the former. In New Zealand, the Accident Compensation Scheme renders the distinction of less weight but it remains of relevance.

[107] Finally, in this Court's view, decisions such as Mariola, Philcox, Marc Rich and Reeman are more directly referable to the situation arising in this case than the decision in Perrett and ought to be followed. In terms of the judgment of Lord Bingham CJ in Reeman the declaration and certificates in this case were not plaintiff-specific in the sense of not being directed to Mr Carter and Ms Wright in the various capacities they held at various times as opposed to their companies; they were not purpose-specific in the sense that they were created to certify compliance with statutory and regulatory standards and not for any other purpose; and they were not transaction-specific in the sense of relating to the transactions undertaken some months after some of the certificates had expired, and when the plaintiffs must have been well aware of Nivanga's condition for which Mr Carter and Ms Wright were primarily responsible but would now seek to hold MoT and M & I liable.

[108] As noted in the authorities, a final consideration is that it is not the position that holding no duty of care existed in the circumstances of this case will leave the plaintiffs without remedy. Subject to the important qualification as to whether it was Mr Carter and Ms Wright who suffered loss as opposed to Carter Wright Holdings and Great Barrier Shipping, they may be left with the claim for breach of statutory duty.

[109] In the light of all of that, there are strong policy arguments leading to the conclusion that it would not be fair just or reasonable to impose a duty of care on MoT and M & I in relation to the preparation of initial intermediate and periodical surveys.

[110] The claims for negligence against MoT and M & I accordingly require to be struck out.

Breach of statutory duty: MoT and M & I

[111] Mr Carter and Ms Wright also sue MoT and M & I for breach of statutory duty in allegedly failing to properly assess the Fijian documentation supplied to them and breaching the 1952 Act and the various Regulations in conducting their surveys. They specifically allege breach of duty in failing to advise the plaintiffs of the view of the poor condition of Nivanga Mr Chard is said to have formed in or before April 1995 and failing to conduct his surveys in a manner that would promote safety at sea and ensure that Nivanga would not put to sea unless seaworthy. They say that they were members of a class including owners of vessels required to be submitted to survey who were intended to be benefited by the 1952 Act and Regulations.

[112] MoT and M & I acknowledge that the 1952 Act and Regulations imposed statutory duties on them in carrying out surveys but denied that Parliament intended those obligations to be enforceable by members of the public such as Mr Carter and Ms Wright. They also asserted that the claim is out of time because no part of the plaintiffs' loss or damage, particularly as far as MoT is concerned, occurred prior to the filing of the second amended claim on 24 July 1994 and breach of statutory duty is only actionable once damage commences.

[113] Whilst the plaintiffs claimed losses under such headings as loss of wages, directors' fees and shareholders' returns commence on 20 April 1994 they run to 31 August 1997 and all other heads of claim post-date 24 July 1994. On that view of the matter, some modest parts of these claims might be thought to be statute-barred but, more generally, the first amended statement of claim filed on 17 January 2000 included claims against MoT and M & I arising out of alleged failure to survey Nivanga in accordance with the 1952 Act and the Regulations and issuing Interim Survey Certificates and Declarations of Survey in breach of what are pleaded as tortious breaches of a duty of care or in negligence. This is an area where, in the Court's view, it is at least arguable that the common facts alleged have given rise to two closely-associated causes of action of which at least the factual basis and the elements have been pleaded from 17 January 2000 onwards. It is not, in essence, a new head of claim. It follows that no new cause of action for breach of statutory duty in terms of the authorities earlier discussed was pleaded for the first time on 24 July 2000. Whilst, subject to ultimate disclosure, the terms on which MoT disposed of its inspection service business to M & I will need careful apportionment of the claims between those two defendants, the limitation ground for striking out the breach of statutory duty cause of action is not made out.

[114] The more major question is whether MoT and M & I's admitted duties under the 1952 Act and Regulations are enforceable by Mr Carter and Ms Wright. Prof Burrows, writing the chapter "Breach of Statutory Duty " in Todd (op. cit.) says (para 7.2.1 p 419) that this branch of the law is "one of the least principled in the books". Authorities demonstrate that the answer tends to turn on Courts' construction of the relevant statute to decide whether Parliament intended that duties imposed by an Act should be owed to individuals as well as the public. If the statute is construed as being for the benefit of an ascertainable class of persons it is more likely to be actionable at the suit of members of the class (Todd para 7.2.3 (a) p422). If the statute does not provide for enforcement by penalty or other remedy, it is more likely that a damages action would be held to have been intended (Todd para 7.2.3 (b) p425). But both those tests are said by the learned authors of Todd not to be conclusive or reliable predictors.

[115] Not the same extended coverage of this point was argued by counsel. The 1952 Act and Regulations make it obligatory for owners and operators of vessels such as Nivanga to have the required certification in order to ensure safety at sea for the persons and property of all those having an interest in the vessel. Putting to sea without appropriate certification is not merely prohibited, it is a criminal offence. Whilst refusal of certification is subject to limited rights of appeal, it would be strange if discharging duties in breach of statutory and regulatory requirements causing economic loss by debarring the use of a profit-earning chattel should not give rise to an action in damages by persons having an interest in the chattel. They would otherwise be left without remedy unless they issued a private prosecution or were able to persuade authorities to prosecute. When owners and operators are entitled to participate in an appeal process challenging surveyors' compliance with statutory and regulatory obligations, it does not seem unreasonable to permit them the right of private action to recover losses arising from the same breach. If a statutory scheme and regulations made under it as construed by a Court lead to a conclusion that persons claiming to be affected by functionaries' failure to comply with their statutory and regulatory obligations have no claim against those functionaries in negligence, that may be taken as an indication that Parliament intended that those functionaries and their employer could be made civilly liable for their failure to comply with the obligations which are theirs alone to discharge under the statutory scheme. The purpose of surveys, identification of the persons for whose protection the statutory scheme exists and the granting of a right of action to those whose livelihood is jeopardised by failure to comply with the statutory scheme, coupled with lack of any clear statutory indication that personal rights of action against the regulators by those regulated are excluded all indicate that MoT and M & I should be regarded as legally open to actions by persons claiming to be damaged by the breach of the statutory function conferred exclusively on them.

[116] While actions by passengers or cargo interests may be more problematical, it is arguable that actions by owners, operators, directors and financiers for breach of statutory duty should be able to proceed. They are not cases of a private individual seeking to enforce a statutory obligation imposed on a section of the public (Gardiner v McManus [1971] NZLR 475, 478-480). They are cases of conferring a right of action on private individuals to remedy breach of a statutory obligation imposed to benefit a section of the public including themselves by attesting the seaworthiness of vessels by issuing survey certificates.

[117] Claims for negligence and breach of statutory duty tend to be obverse and reverse of the same coin. As the Privy Council held in Deloitte Haskins & Sell v National Mutual Life Nominees [1993] 3 NZLR 1, 7 when considering the scope of the duty of care by comparison with a statutory duty, it would be strange if "a common law duty of greater scope should be imposed upon the statutory duty". Even if that be not generally correct, it would appear to be so in the circumstances of this matter so far as the claims for breach of statutory duty are concerned. The factors and authorities discussed in the section of this judgment holding that MoT and M & I should not be liable in negligence are much the same factors indicating they should be liable to persons affected, such as the plaintiffs, for their breach of statutory duty.

[118] In those circumstances, the Court declines to strike out the causes of action against MoT and M & I based in breach of statutory duty. Accordingly, those parties' applications for summary judgment also require to be dismissed.

Claims against Dunsford Marine

I: Contract

[119] Mr Carter and Ms Wright sue Dunsford Marine in contract and negligence claiming that it breached an implied term of valuation agreements between them that Dunsford Marine would conduct an adequate inspection of Nivanga, report accurately on her condition and correctly estimate her value, exercising reasonable care and skill in those respects. The pleaded failures include failures to make inquiries of the Fijian authorities or JKS Holdings concerning Nivanga's maintenance and failure to take differing standards between the two countries into account plus relying on an outdated ultrasonic hull survey. They plead that in reliance on the reports they operated the shipping service between Auckland and Great Barrier, executed the loan agreement with AGC, completed the agreements with JKS Holdings, bought Nivanga and leased her to Carter Wright Holdings and then to Great Barrier Shipping and lent money to those companies.

[120] Dunsford Marine's striking-out application was based on assertions that its reports were prepared after Mr Carter and Ms Wright - not Carter Wright Holdings - were contractually bound to purchase Nivanga, it was the plaintiffs' decision to buy the vessel and they did not act in reliance on the reports, and the losses sought were too remote or were claims by Mr Carter and Ms Wright to recover losses only recoverable by Carter Wright Holdings and Great Barrier Shipping and were not caused by Dunsford Marine's omissions.

[121] With particular reference to the contract claim, the pleading is that there was an oral agreement between the plaintiffs and Dunsford Marine in or about May 1994 under which they instructed the company to provide an independent professional valuation of Nivanga to finance her and a pleading of a further oral agreement between the plaintiffs and Dunsford Marine in or about October.

[122] Mr Robertson for Dunsford Marine submitted that in the circumstances there could have been no contracts between Dunsford Marine on the one hand and Mr Carter and Ms Wright on the other in relation to the reports of 27 May and 18 October 1994, pointing to Mr Hawkins' affidavit as to the circumstances in which he came to prepare both and to the addressees of each. Ms Wright's response was simply to confirm the claim.

[123] Those factors plus the fact that it was Carter Wright Holdings which purchased and chartered Nivanga from JKS Holdings and was, at least up to and beyond the date of the reports, the purchaser, is, in this Court's view, sufficient to dispose of the contract claims against Dunsford Marine. Despite the assumption that the claim's allegations are provable, there simply appears to be no basis on which Mr Carter and Ms Wright can claim that the Dunsford Marine reports were furnished as a result of contracts with them personally. There is no evidence of any contact between Ms Wright and Mr Hawkins. There is no pleading of agency in the formation of the contracts by Mr Carter or on the couple's behalf. It is to be noted that they nowhere plead that any contracts between Dunsford Marine and Carter Wright Holdings were enforceable by them pursuant to the Contracts (Privity) Act 1982. The claims in contract against Dunsford Marine accordingly require to be struck out.

II: Negligence

[124] In relation to the negligence claim, Mr Robertson also relied on the three specific conditions which must exist before sufficient proximity in relation to negligent statements can be found as listed by Lord Bingham CJ in Reeman (supra), on Caparo and the following passage from the judgment of Richmond P in Scott Group Ltd v McFarlane [1978] 1 NZLR 553, 566-567 adopted in Caparo :

All the speeches in Hedley Byrne seem to me to recognise the need for a "special" relationship: a relationship which can properly be treated as giving rise to a special duty to use care in statement [sic.]. The question in any given case is whether the nature of the relationship is such that one party can fairly be held to have assumed a responsibility to the other as regards the reliability of the advice or information. I do not think that such a relationship should be found to exist unless, at least, the maker of the statement was, or ought to have been, aware that his advice or information would in fact be made available to and be relied on by a particular person or class of persons for the purposes of a particular transaction or type of transaction. I would especially emphasise that to my mind it does not seem reasonable to attribute an assumption of responsibility unless the maker of the statement ought in all the circumstances, both in preparing himself for what he said and in saying it, to have directed his mind, and to have been able to direct his mind, to some particular and specific purpose for which he was aware that his advice or information would be relied on. ... As I have said, I believe it to be essential to the existence of a "special relationship" that the maker of the statement was or should have been aware that his advice was required for use in a specific type of contemplated transaction. This requirement has not always required emphasis in the course of judicial discussion as to the nature of a special relationship. Probably this is because in most cases the purpose for which the information was required was, on the facts, quite obvious. But certainly this particular point was made very clear indeed in Lord Denning's judgment in Candler v Crane, Christmas & Co. I would think that it must almost inevitably follow, once the maker of the statement is aware of a specific purpose for which his information will be used, that he will also have in direct contemplation a specific person or class of persons, even though unidentified by name.

(See also Boyd Knight v Purdue [1999] 2 NZLR 278, 293 paras 44-57; Price Waterhouse v Kwan [2000] 3 NZLR 39, 43-47 paras 16-30 and R M Turton & Co Ltd (In Liquidation) v Kerslake & Partners [2000] 3 NZLR 406, 409-417 paras 732).

[125] In reliance on those authorities Mr Robertson submitted that the provision by Dunsford Marine of its reports was not plaintiff-specific in being furnished to identifiable persons or an identifiable group, not purpose-specific in not being made for the purpose the plaintiffs used it, and not transaction-specific in not being directed to the transactions into which the plaintiffs entered in claimed reliance on it, particularly when the evidence suggests no contact before Mr Carter's request to Mr Hawkins just prior to the 27 May report and no further contact until the phone call which led to the 18 October document.

[126] In the Court's view, there is force in those submissions. Mr Carter and Ms Wright plead that the purpose of the 27 May report was to raise finance to purchase the Nivanga to enable Great Barrier Shipping to buy her. In fact, the charterer and buyer was Carter Wright Holdings but, even so, the plaintiffs do not claim that the 27 May report was prepared for the purpose of their purchasing the vessel or that they relied on it for that purpose. Given that they had no personal obligation in the matter beyond their guarantee of Carter Wright Holdings' purchase and did not buy Nivanga for a further nine months, it does not seem possible for them to claim otherwise. In this Court's view, the negligence claim against Dunsford Marine in relation to the 27 May 1994 report is only barely plaintiff-specific for Mr Carter but not Ms Wright but is neither purpose-specific nor transaction-specific and accordingly requires to be struck out. An additional reason for reaching the same conclusion is that it would neither be just nor reasonable to hold Dunsford Marine arguably negligent in the preparation of its 27 May 1994 report in respect of a binding transaction entered into a month beforehand in which Mr Carter and Ms Wright were only secondarily involved or in relation to transactions they entered into nine months later when the vessel had undergone major modifications in the interim and the 27 May 1994 report had been supplanted by that dated 18 October.

[127] In relation to the 18 October report, the plaintiffs plead that by that time Dunsford Marine ought reasonably to have been aware that they would rely on the report as to Nivanga's position to raise finance and enter into a loan agreement in relation to her and buy the vessel. Mr Hawkins said the second valuation arose because Mr Carter told him that a finance company required a valuation report following completion of modifications. Ms Wright says that they would "not have entered into in our own name the purchase of the ship nor would we have borrowed the money personally from AGC if the value of the vessel had not been as stated".

[128] The 18 October 1994 report may conceivably be regarded as plaintiff-specific since a copy of it was sent to Mr Carter and may be assumed to have been shown to Ms Wright and used by both. As to whether it was purpose and transaction-specific, the evidence, incomplete as it is, shows negotiations over Nivanga's value, purchase price and refinancing from at least August 1994 onwards. Since Mr Hawkins knew Nivanga was chartered and was to be later purchased, - though he did not know by whom - it is not unreasonable to accept as arguable the view that he might have expected his copy report as to her value following repair would be shown to Carter Wright Holdings' directors and possibly others such as shareholders and guarantors of the small private company and that they may rely on it for purchase and the other purposes pleaded some four months later. Though further particularisation would appear to be required, the Court concludes that for striking-out and summary judgment purposes it has not been demonstrated that the plaintiffs' claim in negligence against Dunsford Marine in respect of the 18 October 1994 report is incapable of success.

III: Disclaimers

[129] It is convenient next to consider the possible effect on Dunsford Marine's position of the disclaimer in each of the reports.

[130] Mr Hawkins asserts that the reports were valuations, not reports as to condition, and he points to the disclaimers at the end of each of the reports in that regard.

[131] The difficulty facing that assertion on a striking-out application is that both reports expressly say in their first paragraph that they were an "appraisal of her condition and valuation". That conflicts with the disclaimer at the end of the report and on a striking-out application would be sufficient, if other aspects were satisfied, to allow the claim to proceed. If Mr Hawkins wanted the reports to relate to valuation only, the standard form of the first paragraph should have been amended.

[132] As far as the standard disclaimers at the end of each Dunsford Marine report are concerned, the determining question as to their effect is whether a defendant has given reasonable notice of the disclaimer to the plaintiff even if the defendant cannot demonstrate that the plaintiff knew of the disclosure and voluntarily assumed the risk of harm from it (Todd et al op cit para 4.8.8 p 241). The leading case is Smith v Eric S Bush (supra para [71]). In that case the House of Lords decision was affected by an English statute for which there is no local equivalent. Nonetheless, the House of Lords held that a valuer instructed by a prospective mortgagee to value a house to decide whether a mortgage should be offered, owed the prospective mortgagor a duty of care if the valuer was aware the mortgagor would probably purchase the house in reliance on the valuation without obtaining their own unless there was a disclaimer of liability. Since Ms Wright does not comment on the disclaimers and the question of reasonable notice may be a question of fact, that aspect of the matter is one for trial.

Losses:

[133] The losses claimed against all defendants were:

[a] Liability under the 12 September 1995 loan from AGC following judgment being entered against the plaintiffs for $435,191.01 on 23 April 1998 plus interest from that date at 17.5% p.a.;

[b] Loss of income due to breaches of the lease by Carter Wright Holdings and Great Barrier Shipping ($160,000) plus loss of wages presumably from Carter Wright Holdings - for the period 20 April 1994-31 August 1997 for both plaintiffs ($100,961 and $84,134 respectively), loss of directors fees for the same period ($50,480), shareholders' returns of $25,000 each over the same period ($168,269), legal expenses ($15,000) and monies lent by M Hughes to the plaintiffs and on-lent to Carter Wright Holdings of $95,000 used towards payments of the deposit and charter fees and bank and private borrowings over an unstated period totalling $159,000 said to have been applied towards repairing Nivanga and other expenditure.

[134] Ms Wright said that all the losses were directly caused by and attributable to the defendants' actions - though neither she nor the latest claim differentiated between the three.

[135] All defendants assert that the claimed reliance by Mr Carter and Ms Wright on their statements is unsubstantiable either because they did not actually rely on the documents pleaded or, if such is arguable, such reliance was not reasonable.

[136] As the Court of Appeal observed in Price Waterhouse v Kwan (supra at para 28):

[28] There is a material, indeed a crucial difference between causing a loss and providing the opportunity for its occurrence. The line between these concepts can often be difficult to draw but the distinction is vital. ... Plaintiffs in this field must show that the defendant's act or omission ... constituted a material and substantial cause of their loss. It is not enough that such act or omission simply provided the opportunity for the occurrence of the loss. The concept of materiality denotes that the act or omission must have had a real influence on the occurrence of the loss. The concept of substantiality denotes that the act or omission must have made a more than de minimis or trivial contribution to the occurrence of the loss. Looking at the question in this dual way is both a reminder of the difference between opportunity and cause, and a touchstone for distinguishing between them. In some instances the words used have been material or (as opposed to and) substantial. It is preferable, for the reasons just mentioned, to focus on both concepts for they are each relevant to causation issues. No form of words will ultimately provide an automatic answer to what is essentially a question of commonsense judgment.

[137] With particular reference to the claims being made by Mr Carter and Ms Wright as opposed to their companies, Mr Robertson submitted that it was well established that a claim in negligence did not lie in favour of directors of a company where the company itself could sue (Takaro Properties Ltd v