Birkenfeld v Yachting NZ Inc (CA)

IN THE COURT OF APPEAL OF NEW ZEALAND
CA171/05

BETWEEN KIMBERLY BIRKENFELD
Appellant

AND YACHTING NEW ZEALAND INCORPORATED
Respondent

Hearing: 28 June 2006

Court: Hammond, O'Regan and Ellen France JJ

Counsel: Appellant in person
N A Beadle for Respondent

Judgment: 9 August 2006 at 11 am

JUDGMENT OF THE COURT

A The respondent's application to adduce further evidence is declined.
B The appeal is dismissed.
C In this Court, the respondent will have costs of $3,000 and usual disbursements. The order for costs in the High Court will stand.

REASONS OF THE COURT (Given by Ellen France J)

Table of Contents Para No
Introduction [1]
Factual background [2]
The judgment in the High Court [6]
The statutory scheme [14]
The issues [22]
Compliance with r 792? [23]
The effect of the Limitation Convention [29]
Other matters [46]

Application for an adjournment [47]
Application to adduce further evidence [52]

Costs in the High Court [55]
Costs in this Court [61]
Result and costs [62]

Introduction

[1] This is an appeal from a decision of Keane J in the High Court at Auckland delivered on 22 July 2005 and now reported as Yachting New Zealand Incorporated v Birkenfeld [2005] NZAR 727. The case involved an application under s 85 of the Maritime Transport Act 1994 by Yachting New Zealand Incorporated, the respondent, to limit its liability to a figure less than $400,000 in relation to a claim against it by Kimberley Birkenfeld, the appellant. Keane J granted the application.

Factual background

[2] Ms Birkenfeld's claim arises from a collision in 2002 off the coast of Greece between a rigid inflatable boat (RIB) owned by Yachting New Zealand and a windsurfing board ridden by Ms Birkenfeld. The RIB was being driven by Bruce Kendall.

[3] The RIB is described by Simon Wickham, the former Chief Executive Officer of Yachting New Zealand as an SR5M Searider (rescue model) Avon. Mr Wickham continues:

It is approximately 5.4 metres long and is fitted with a 50.h.p.4-stroke Yamaha outboard motor. I am informed by Mr Steven Moyle and believe that the RIB weighed at the Ports of Auckland weighbridge on Freyberg Wharf on 10 June 2003 and found to weigh 520 kgs.

[4] The appellant was severely injured as a result of the collision and is now confined to a wheelchair. She brought proceedings in August 2004 against Mr Kendall, Yachting New Zealand, and the International Sailing Federation Limited claiming $15 million damages. Leave was granted to the appellant to discontinue as against the International Sailing Federation Limited (Birkenfeld v Kendall & Ors HC WN CIV-2004-485-1657 30 August 2005, Gendall J).

[5] Yachting New Zealand made its application in separate proceedings under the Maritime Transport Act 1994 for a decree limiting its liability.

The judgment in the High Court

[6] Keane J dealt, first, with the appellant's application for an adjournment. This was declined on the basis the appellant had been given sufficient notice of the application and of the fixture. An earlier fixture had been adjourned. Keane J could see no basis for a further adjournment. The appellant did not appear at the hearing.

[7] Keane J concluded that the various requirements of s 85 were met:

(a) Yachting New Zealand was the owner of the RIB;

(b) The RIB was a ship; and

(c) It was open to the respondent to rely on s 85.

[8] The focus of the decision was on two matters. First, whether any fault on Mr Kendall's part could be attributed to Yachting New Zealand disqualifying it from the right to limit its liability. Second, whether it was conceivable the appellant could show Mr Kendall was at fault in the high degree required.

[9] As to the latter, the appellant had indicated she was proceeding only in negligence. Therefore, there was no basis on which she could meet this part of the test. On the former aspect, the Judge concluded that at the time of the accident, Mr Kendall was acting in his own right and his acts or omissions could not be attributed to Yachting New Zealand. That conclusion was based on an analysis of Mr Kendall's various contractual arrangements and is not challenged.

[10] Keane J accordingly decided that Yachting New Zealand was entitled to limit its liability. There was an order made limiting Yachting New Zealand's liability to 250,010 units of account under Part 7 of the Maritime Transport Act 1994 in respect of claims arising out of the collision. Section 88 of the Act provides for how units of account are translated into dollar figures, but this process is not relevant to the question before the Court.

[11] The Judge indicated the respondent appeared to be entitled to costs on a 2B basis and disbursements. Keane J said he would make such an order unless a memorandum to the contrary was received from the appellant within ten days.

[12] The appellant did file such a memorandum and the respondent sought indemnity costs or costs on a 3C basis. In a decision delivered on 7 March 2006, Keane J awarded the respondent costs on a 2B basis and disbursements. The Judge noted that the award of costs was opposed by the appellant on the basis that in not acceding to Yachting New Zealand's wish to limit liability she relied on a misrepresentation from her former counsel. The appellant also criticised the Judge's failure to consider the fact Yachting New Zealand had not advertised under r 792(9).

[13] Keane J took the view Yachting New Zealand had to apply for the decree when the appellant, then represented, did not concede limitation although she knew exactly what Yachting New Zealand's grounds were. Rule 792(9), Keane J said, was designed to give information to other claimants who were not parties to the proceedings. The Judge also said he could not see on what basis the appellant argued that her former counsel misadvised her. The matter was not, however, seen as so difficult as to warrant an award above 2B.

The statutory scheme

[14] The purposes of the Maritime Transport Act 1994 include the following:

…
(b) To enable the implementation of New Zealand's obligations under international maritime agreements; and
(c) To ensure that participants in the maritime transport system are responsible for their actions; and
(d) To consolidate and amend maritime transport law …

[15] The relevant international maritime agreements are the Convention on Limitation of Liability to Maritime Claims, 1976 (the "Limitation Convention"), and the International Convention on Tonnage Measurement of Ships, 1969 (the "Tonnage Convention"). New Zealand has acceded to both conventions.

[16] The Limitation Convention enables ship owners to limit their liability. The Tonnage Convention provides for a universal tonnage measurement system.

[17] Part 7 of the 1994 Act deals with the liability of ship owners and others. In terms of s 83, Part 7 applies to every ship whether or not registered and whether or not a New Zealand ship in any case where the High Court has jurisdiction under s 4 of the Admiralty Act 1973. Importantly, s 85 provides as follows:

85 Persons entitled to limitation of liability under this Part

(1) Subject to subsection (2) of this section, the following persons are entitled to limit their liability in accordance with this Part of this Act:

(a) Owners of ships, and any master, seafarer, or other person for whose act, omission, neglect, or default the owner of the ship is responsible:
(b) Salvors, …:
(c) Insurers of liability for claims subject to limitation of liability, to the extent that the person assured is entitled to such limitation.

(2) No person shall be entitled to limitation of liability in respect of claims for loss or injury or damage resulting from that person's personal act or omission where the act or omission was committed, or omitted, with intent to cause such loss or injury or damage, or recklessly and with knowledge that such loss or injury or damage would probably result.

[18] Section 84 provides that an "owner" in relation to a ship:

(a) Means every person who owns the ship or has any interest in the ownership of the ship:
(b) In any case where the ship has been chartered, means the charterer:
(c) In any case where the owner or charterer is not responsible for the navigation and management of the ship, includes every person who is responsible for the navigation and management of the ship.

[19] A "ship" is defined for these purposes in s 84 as follows:

"Ship" means every description of vessel (including barges, lighters, and like vessels) used or intended to be used in navigation, however propelled; and includes any structure (whether completed or not) launched and intended for use as a ship or part of a ship; and also includes any ship used by or set aside for the New Zealand Defence Force.

[20] Section 86 sets out what types of claim may be subject to limitation of liability. There is no issue that the appellant's claim for loss is the type of claim which may be subject to a limitation of liability.

[21] Section 87 describes how limits of liability are to be calculated. Section 87(5)(b) states that for the purposes of the section:

(b) The tonnage of a ship shall be the gross tonnage calculated in accordance with the tonnage measurement rules contained in Annex I of the International Convention on Tonnage Measurement of Ships 1969, and regulations and maritime rules made under this Act:

The issues

[22] The appellant's case focuses on whether the limitation regime in Part 7 of the 1994 Act applies. There are three specific issues:

(a) Has there been compliance with r 792 of the High Court Rules?

(b) What is the effect of Article 15(2) of the Limitation Convention?

(c) Is the RIB a "ship" for the purposes of s 85 of the Maritime Transport Act 1994?

Compliance with r 792?

[23] Rule 792 of the High Court Rules deals with actions for limitation of liability. Rule 792(8)(d) is relied on by the appellant and provides:

(d) If at the hearing of the application it appears to the Court that any defendant does not have sufficient information to enable the defendant to decide whether or not to dispute that the plaintiff has a right to limit the plaintiff's liability, the Court must –

(i) Give such directions as appear to be appropriate for enabling the defendant to obtain such information; and
(ii) Adjourn the hearing:

[24] The appellant had sought directions and an adjournment in terms of r 792 in a memorandum dated 11 July 2005 to the High Court. In that memorandum she explained her difficulties as a lay person and said she would argue that the RIB was "neither a cargo (shipping) interest or a cruise industry interest." She said she wanted more information in terms of r 792(8)(d).

[25] Keane J in dealing with this aspect said there was no indication from the appellant as to what information she hoped to obtain. In the absence of any submissions from her and given her abandonment of the point about reckless action, the Judge could not see a basis for an adjournment.

[26] Before us, the appellant has clarified the information she sought. It relates to her legal argument that the RIB is not a ship which qualifies for limitation and, in particular, on the effect of the inter-relationship between the 1994 Act and the Tonnage Convention and on the effect of Article 15(2) of the Limitation Convention.

[27] This part of the Rules reflects the position in the United Kingdom (The Civil Procedure Rules Rule 61.11). The rationale for this provision is to put the defendant in the position to decide whether or not to dispute liability. In this case, the respondent put the appellant on notice by letter of 26 January 2005 of the respondent's intention to seek limitation of liability and as to the basis on which the respondent sought to do so. At that point, the appellant could have asked for further information but did not do so.

[28] It is also relevant that the matters the appellant now raises are matters of law, not fact, and cannot in our view have provided a basis for directions as to disclosure of information or for an adjournment.

The effect of the Limitation Convention

[29] We deal under this head with both aspects of the appellant's case relating to the applicability of s 85 of the Act as the arguments overlap. The argument for the appellant is that the rationale of the Limitation Convention is to facilitate commercial shipping and the commercial shipping trade. What is a "ship" has to be interpreted in that light. The appellant says this point is emphasised by the fact that New Zealand has not enacted specific legislation applying the limitation of liability to vessels which are ships of less than 300 tonnes as the appellant says is required by Article 15(2) of the Limitation Convention.

[30] The appellant also highlights that for the purposes of establishing the limitation on liability, ships are to be measured in terms of the Tonnage Convention. That Convention applies only to ships of more than 24 metres. As the RIB was less than 24 metres it could not have been measured in accordance with the Tonnage Convention and therefore the appellant says that the limitation of liability regime does not apply.

[31] In this context, the appellant argues that the cases relied on by the respondent to show that a ship can include, for example, a fishing coble (Ex parte Ferguson v Hutchinson (1871) QB 280), a barge (The Mac (1882) P 126), and a kayak (Thompson v Police HC WN AP250/92 21 December 1992 Gallen J); relate to legislation which defines a "ship" for purposes other than the limitation of liability.

[32] The appellant says that the only case pointed to by the respondent dealing with a small vessel is Smith v Perese [2006] NSWSC 288. That case dealt with a vessel of some five metres in length which was used for abalone fishing. In Smith v Perese, and in the other cases relied on by the respondent, the appellant says there is still some sort of commercial element involved, for example, the ship's master may be a professional. The appellant also says that Smith v Perese is preliminary in nature as there was no determination of the damages to be awarded. However, for present purposes, the relevance of the decision is that the Court found limitation of liability could be claimed in relation to this boat. It does not appear that there has been an appeal from this decision. We have not found any report of any subsequent decision as to the award of damages.

[33] The appellant is correct as to the initial rationale, at least, for the Limitation Convention. For example, Meeson Admiralty Jurisdiction and Practice (3ed 2003) at [8.1] observed:

The rationale for such a concept is the public policy in encouraging shipping and trade which overrides the competing public policy in compensating the victims of wrongdoing.

[34] There is a helpful discussion of the origins and developing rationale behind the limitation of liability in the maritime context by Lord Mustill "Ships are Different – or are They?" [1993] LMCLQ 490 and, Killengbeck "Limitation of Liability For Maritime Claims and its Place in the Past, Present and Future – how can it Survive?" (1999) 3 SCULR 1.

[35] However, it is plain that the critical definition for these purposes is the definition in s 84 of "ship".

[36] The Maritime Transport Act is to be read "in the context of the international law of the sea and, if possible, consistently with that law": Sellers v Maritime Safety Inspector [1999] 2 NZLR 44 at 57 (CA). In this case, that approach does not assist the appellant because the definition of "ship" in s 84 would include the RIB and, as we will come to shortly, the Convention does not warrant any different view.

[37] The best argument for the appellant is illustrated by R v Goodwin [2005] 1 Lloyd's Law Reports 432 where the Court of Appeal concluded that a jetski was not a vessel used in navigation under the Merchant Shipping Act 1995. The Court found that although it was not necessary that the vessel be used in transporting persons or property by water to an intended destination, a craft such as a jetski that was simply used for having fun on the water without the object of going anywhere "was not used in navigation". The Court put it this way:

What is critical in the present case, however, whether, for the purposes of the Merchant Shipping Act definition of "ship", navigation is "the planned or ordered movement from one place to another" or whether it can extend to "messing about in boats" involving no journey at all.

[38] This case, however, seems to turn on the particular issues involved with jetskis and the outcome has been the subject of some academic criticism: Grant "What is a "Ship": R v Goodwin in the Court of Appeal" (2006) 2 Web JCL 1. In any event, there is nothing to suggest the RIB is not used in navigation in the sense of planned movement.

[39] Article 15(2) of the Limitation Convention does not limit the matter in the way the appellant suggests.

[40] The Limitation Convention begins by setting out those persons who are entitled to limit liability and the claims which are subject to limitation. The next chapter in the Convention provides for the limits of liability by reference to the units of account and the related tonnage.

[41] The third chapter deals with the constitution of a limitation fund and its distribution. Article 15 is found in Chapter IV dealing with the scope of application of the Convention. Article 15(1) provides that the Convention shall apply whenever any of the persons referred to in Article 1 of the Convention seeks to limit his or liability before the court of a State Party. Article 15(2) provides:

A State Party may regulate by specific provisions of national law the system of limitation of liability to be applied to vessels which are:

a. according to the law that State ships intended for navigation on inland water ways;

b. ships of less than 300 tons.

A State Party which makes use of the option provided for in this paragraph shall inform the depositary of the limits of liability adopted in its national legislation or of the fact that there are none.

[42] The effect of Article 15(2) is correctly described by the Court in Smith v Perese in the following terms:

[185] … of significance that by Article 15 of the Convention adopted, the opportunity was provided for a State Party to limit the operation of the convention so as to exclude from its scope ships of less than 300 tonnes …

[186] There has been no relevant enactment to limit the application of the Convention so as to exclude ships of less than 300 tons. Hence the provisions of Article 15(2) suggest that, prima facie, in the absence of some enactment addressing the question, ships of less than 300 tons are within the scope of Convention.

[Our emphasis]

[43] In other words, despite the rationale for the Limitation Convention, the starting point is that does apply to ships of less than 300 tonnes unless provision is made otherwise.

[44] Finally, the reference to the Tonnage Convention does not advance the appellant's position either. Section 87(1) refers, first, to ships up to 300 tonnes. It is also relevant that s 87(5)(c) provides for an alternative procedure for measurement. where the gross tonnage of a ship is unable to be ascertained applying the tonnage measurement rules in the Convention. Section 87(5)(c) states:

(i) The Director, on receiving from or by the direction of the Court hearing the case in which the tonnage of the ship is in question, such evidence of dimensions of the ship as is available, shall estimate what the gross tonnage of the ship would have been, if the ship had been duly measured in accordance with the relevant tonnage measurement rules, and give a certificate of the tonnage as estimated by the Director; and

(ii) The tonnage so estimated shall be taken to be the gross tonnage of the ship:

[45] Keane J was accordingly right to conclude that the RIB was a ship and that s 85 applied. The RIB came within the broad definition in s 84.

Other matters

[46] We deal now with other matters which arose in the course of the hearing.

Application for an adjournment

[47] On the morning of the hearing of this appeal, the appellant filed a notice seeking an adjournment. She did so on the basis she needed more time to research matters given the complexity of the issues and the fact the respondent's submissions had only recently been received. The appellant was also critical of the fact the fixture had been allocated without consultation with the parties.

[48] The application for adjournment was declined and we now give our reasons for that.

[49] The appellant had earlier sought an adjournment. That application was declined by O'Regan J in a Minute dated 9 May 2006. In that Minute, O'Regan J sought to assist the appellant's difficulties in meeting the timetable in the Court of Appeal (Civil) Rules for the filing of submissions. The timetable for the filing and serving submissions was accordingly enlarged.

[50] We agreed with the respondent that the later application for an adjournment did not raise any new matters from those addressed by O'Regan J. There was no reason for us now to take a different view. The appellant had been given ample notice of the fixture.

[51] We also considered, having seen all of the material, that there was no prejudice to the appellant in refusing an adjournment.

Application to adduce further evidence

[52] The respondent sought leave to file further evidence in the form of an affidavit from Stephen Moyle, a marine surveyor. Mr Moyle had inspected the RIB in 2003 and his affidavit contained information about the specifications of the RIB.

[53] The appellant objected to admission of the affidavit primarily on the grounds the brochure attached to Moyle's affidavit about various models of RIB and their specifications post-dated by a number of years the RIB involved in the collision. The respondent argued the material has evidential value because the specifications in the brochure reflected what Mr Moyle had seen on his inspection of the RIB.

[54] We took in the affidavit on a de bene esse basis and said we would decide on its admissibility in reaching our judgment on the appeal. We have decided it is not necessary to admit this evidence and we decline the application. The matter can be determined without reference to this material and, indeed, if it had been admitted it would have made no difference to the outcome.

Costs in the High Court

[55] The appellant says no costs order should have been made against her in the High Court because she did not act unreasonably in her approach to the limitation claim.

[56] The appellant did not file an appeal against the costs award in the High Court so this matter is not properly before us. There were brief references to costs in the appellant's submissions but little, otherwise, to put the respondent on notice costs were an issue.

[57] As to the merits of this challenge, the appellant relies on cases such as The "Kingston Diamond" (Limitation) [1964] 1 Lloyd's Rep 384 (Admiralty). Hewson J in that case at 386 ordered the plaintiffs to pay the costs because the defendants had not acted unreasonably in resisting the limitation action.

[58] Meeson at [8.111] explains that cases like The "Kingston Diamond" reflected an earlier practice that the claimant pay the costs of limitation proceedings unless the defendant acted unreasonably in challenging the right to limitation. That practice changed in The "Alletta" (No.2) [1972] 2 QB 399 where Dunn J took the view that in contested cases, costs should follow the event.

[59] Meeson observes at [8.112] however that as the burden of proof in a contested limitation claim has now altered, there is no longer any justification for the earlier approach to costs. Hence, Meeson says:

… in a contested limitation claim the claimant is only required to pay the costs of obtaining a decree by establishing a prima facie right to limit his liability, and otherwise the costs follow the event in the limitation claim so that "the claimant must pay the costs of investigating and determining the facts which the Convention provides that he must prove if, at the end of the day, he fails to establish those facts".

[60] The latter quote is taken from The "Captain San Luis" [1993] 2 Lloyd's Rep 573 (QB Admiralty) which is also relied on by the appellant. In the present case, the respondent (the claimant) did prove the relevant facts in the High Court. In those circumstances, Keane J was right that costs followed the event.

Costs in this Court

[61] The appellant submitted she should not face an award of costs in this Court. There is no good reason why costs should not follow the event. Marsden on Collisions at Sea (12 ed at [19-18]) notes that the costs of an appeal in a limitation action "will normally" follow the outcome of the appeal. The most we can do is to recognise that the appellant's success in relation to the application to adduce further evidence in the circumstances will reduce the costs award otherwise applicable for a one day hearing. The respondent is entitled to costs of $3,000 together with usual disbursements.

Result and costs

[62] The respondent's application to adduce further evidence is declined. The appeal is dismissed. The respondent is entitled to costs of $3,000 with usual disbursements. The order for costs in the High Court will stand.

Solicitors: Phillips Fox, Auckland for Respondent