Rayonier MDF NZ Ltd v Tasman Orient Line CV

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CP157-IM02

BETWEEN RAYONIER NZ MDF LIMITED
First Plaintiff

AND KARAKAWA FANCY PLYWOOD WORKS LIMITED
Second Plaintiff

AND HANA CORPORATION LIMITED
Third Plaintiff

AND TASMAN ORIENT LINE C.V.
Defendant

CP158-SD02

AND BETWEEN FLETCHER WOOD PANELS LIMITED
First Plaintiff

AND NEW ZEALAND DIARY INGREDIENTS LIMITED AND NIPPON NZMP LIMITED
Second Plaintiff

AND NORSKE SKOG TASMAN LIMITED
Third Plaintiff

AND WAIMEA SAWMILLERS LIMITED AND ITOCHU NEW ZEALAND LIMITED
Fourth Plaintiff

AND TACHIKAWA FOREST PRODUCTS (NZ) LIMITED AND TACHIKAWA FOREST PRODUCTS LIMITED
Fifth Plaintiff

AND MAINTOP LIMITED AND PARK SAEJONG PUMEX INTERNATIONAL MOVERS LIMITED
Sixth Plaintiff

AND TASMAN ORIENT LINE C.V.
Defendant

M461-SD02

AND BETWEEN NEW ZEALAND CHINA CLAYS LIMITED
First Plaintiff

AND IMERYS MINERALS JAPAN KK
Second Plaintiff

AND TASMAN ORIENT LINE C.V.
Defendant

M462-SD02

AND BETWEEN NEW ZEALAND DAIRY BOARD
First Plaintiff

AND NESTLÉ KOREA LIMITED
Second Plaintiff

AND CHONG KUN PHARMACEUTICALS
Third Plaintiff

AND NIPPON NZMP LIMITED
Fourth Plaintiff

AND MAEIL NEW ZEALAND CHEESE CO LIMITED
Fifth Plaintiff

AND DONG SUH FOODS CORP
Sixth Plaintiff

AND CHOHEUNG CHEMICAL IND. CO LIMITED
Seventh Plaintiff

AND TASMAN ORIENT LINE C.V.
Defendant

M463-SD02

AND BETWEEN ALLIANCE GROUP LIMITED
First Plaintiff

AND ZHEJIANG FUBANG GROUP CO LIMITED
Second Plaintiff

AND SHIN YANG LEATHER CO LIMITED
Third Plaintiff

AND SHIN OH CO LIMITED
Fourth Plaintiff

AND DSI COMPANY LIMITED
Fifth Plaintiff

AND KWANG SUNG HIGH-TECH CO
LIMITED
Sixth Plaintiff

AND ONG SEO TRADING CO LIMITED
Seventh Plaintiff

AND NEW ASIA TRADING CO LIMITED
Eighth Plaintiff

AND TASMAN ORIENT LINE C.V.
Defendant

M464-SD02

AND BETWEEN PPCS LIMITED
First Plaintiff

AND SUNGRIM ENTERPRISE CO
Second Plaintiff

AND KWANG SUNG HIGH-TECH CO LIMITED
Third Plaintiff

AND SHINYANG LEATHER CO LIMITED
Fourth Plaintiff

AND SHIN OH CO LIMITED
Fifth Plaintiff

AND SUNG JIN NEO TECH NO LIMITED
Sixth Plaintiff

AND TASMAN ORIENT LINE C.V.
Defendant

Hearing: 29 October 2004

Appearances: Phillip Rzepecky and Steve Keall for the Plaintiffs
Neil Beadle and Mary-Anne Low for the Defendants

Judgment: 16 November 2004

JUDGMENT OF WILLIAMS J

Solicitors: McElroys, PO Box 835 Auckland, for plaintiffs
Phillips Fox, PO Box 160 Auckland, for defendants

Copy for: Philip R Rzepecky, PO Box 105 521 Auckland
Mary-Anne Lowe, PO Box 37 971 Parnell, Auckland

Issues

[1] The principal matters in issue at this hearing were applications by the defendant, Tasman Orient Line CV, for summary judgment against a number of the plaintiffs in the various cases set out in the intituling or, in the alternative, to strike out the names of those plaintiffs.

[2] There were also claims for security for costs, particulars and, by some of the plaintiffs, for amendment of the names of the plaintiffs under r 11.

Facts

[3] All these claims (and a number of others) arise from the grounding on 3 May 2001 of the "Tasman Pioneer" off Biroushima Island in the Japan Inland Sea. "Tasman Pioneer" was then sub-chartered by the defendant in these claims, Tasman Orient. (The "Tasman Pioneer" [2003] 2 Lloyds Rep 713,714-7).

[4] All the plaintiffs claim to have had interests in containers or their contents lost or damaged in the grounding of "Tasman Pioneer". The point which is central to the summary judgment/striking out application is whether those interests are such as to enable the plaintiffs to maintain these claims.

Evidence

(1) CP157-SD02

[5] The application in this claim is to strike out the name of the first plaintiff, Rayonier MDF New Zealand Limited. The amended claim avers that Rayonier entered into a contract with the second plaintiff, Karakawa Fancy Plywood Works Limited, for the sale of packets of wood products with Rayonier paying the cost, insurance, freight (CIF) of shipping the goods and with risk in them passing to Karakawa as the goods passed over the ship's rail. The claim asserts that Rayonier entered into a contract of carriage with Tasman Orient on the terns of Karakawa's bills of lading which Karakawa then negotiated and:

"As a result, the first plaintiff transferred to and vested in the second plamtiff all rights of suit in accordance with section 13B of the Mercantile Law Act 1908."

[6] The claim asserts that Karakaways bill of lading defined "merchant" as including the consignee, namely Karakawa, and that "as a result, both the first plaintiff and the second plaintiff are parties to the second plaintiff's bills of lading."

[7] Tasman Orient's defence was conditional on the plaintiffs establishing their title to sue and in the affidavits supporting the striking out/sumrnary judgment application, Captain Rao, Tasman Orient's General Manager, said discovered invoices show Rayonier shipped the cargo CIF with payment pursuant to letters of credit, a notice of abandonment was signed by Karakawa and the subrogation receipt and discharge was executed by the third plaintiff, Hana Corporation.

[8] Karakawa's notice of abandonment is dated May 2001 and directed to Tasman Orient. Karakawa warrants in the notice that it is the sole owner of or party entitled to possession of the cargo shipped by Rayonier and Karakawa abandoned "all right to property and interest" in the cargo and undertook to deliver the bills of lading to Tasman Orient.

[9] The one exception in all this litigation in relation to a New Zealand plaintiff was the claim in CP157-SD02 by Maintop Limited and Park Saejong Pumex International Movers Limited, which appeared to be a claim arising out of the shipping of Park Saejong's household effects from Auckland to Inchon, Korea under which those plaintiffs appeared to come within the definition of "merchant" in those plaintiffs' bill of lading.

[10] Other than in relation to Maintop, the pleadings in CP157-SD02 are a paradigm for the other claims subject to the summary judgment/striking out application.

(2) CP158-SD02

[11] The application here is to strike out or obtain summary judgment against the first to fifth plaintiffs, namely, Fletcher Wood Panels, New Zealand Dairy Ingredients, Norske Skog Tasman, Waimea Sawmillers and Itochu New Zealand and Tachikawa Forest Products (NZ) Limited (but not Tachikawa Forest Products Limited). Again, the amended claim asserts the goods were shipped CIF with risk passing as the goods passed the ship's rail, the consignee negotiated the bills of lading and, as a result, all rights of suit were vested in the consignee under the Mercantile Law Act 1908 s 13B. The result, it was asserted, is that both Fletcher Wood Panels and the consignee are parties to Fletcher's bills of lading.

[12] In the New Zealand Dairy Ingredients' claim, again the consignee negotiated the consignor's bills of lading and acquired rights under s 13B.

[13] In Norske Skog Tasman's case, the goods were shipped CFI with risk passing over the ship's rail and again with the consignee negotiating Norske Skog's bills of lading and being vested with rights of suit under s 13B.

[14] Waimea Sawmillers sold goods to Itochu New Zealand Limited under a contract FOB Nelson with risk passing over the ship's rail. Itochu New Zealand negotiated Waimea's bills of lading and was vested with rights of suit under S 13B.

[15] Tachikawa Forest Products (NZ) Limited sold to Tachikawa Forest Products Limited in Japan under a contract CFI Osaka with risk passing over the ship's rail and again with the rights of suit vesting in Tachkawa Japan under s 13B on negotiation of the bills of lading.

[16] Captain Rao put the various discovered documents in evidence. He said all plaintiffs whose claims were under attack were insured by Yasuda Fire & Marine Insurance Co Limited who have paid out the overseas purchasers and received receipts and discharges by way of subrogation.

(3) M461-SD02 - M464-SD02

[17] The claims here are that Imerys Tableware New Zealand Limited (formerly New Zealand China Clays Limited) sold goods to Imerys Minerals Japan KK on terms CIF Kokura with risk passing over the ship's rail, Imerys Minerals negotiated the bills of lading and became vested with all rights of suit under s 13B. In M462 02, the application is brought against the New Zealand Dairy Board. The claim said it sold to Nestlé Korea Limited on terms CIF Busan with risk passing over the ship's rail and again with rights of suit being vested in Nestlé Korea under s 13B. In M463-SD02, the striking out/summary judgment application is again against the first plaintiff, on this occasion Alliance Group Limited which sold goods to the second plaintiff CIF with risk passing over the ship's rail and again with rights of suit being vested in the second plaintiff under s 13B on negotiation of the bills of lading. In M464-SD02, the striking out application is against PPCS Limited which is said to have sold goods to the second plaintiff, Sungrim Enterprise Co CIF Inchon Korea with risk passing over the ship's rail and with s 13 B vesting rights of suit in Sungrim's favour on negotiation.

[18] In all those cases, Captain Rao puts in discovered documents showing that all claims are brought by way of subrogation on behalf of the plaintiffs' insurer Vero Marine Limited (formerly International Marine Insurance Agency Limited) with delivery in each case made by the seller or shipper to the purchasers at the ship's rail in New Zealand and with risk then passing. Vero paid settlement sums under the cargo insurance to the overseas purchasers.

Mercantile Law Act 1908 s 13B

[19] Since S 13B is plainly central to the present applications, it is helpful to recount its terms. They read:

"13B Rights under shipping documents -

(1) Subject to this section, a person who becomes-

(a) The lawful holder of a bill of lading; or
(b) The person who (without being an original party to the contract of carriage) is the person to whom delivery of the goods to which a sea waybill relates is to be made by the carrier in accordance with that contract; or
(c) The person to whom delivery of the goods to which a ship's delivery order relates is to be made in accordance with the undertaking contained in the order,-

shall (by virtue of becoming the holder of the bill or, as the case may be, the person to whom delivery is to be made) have transferred to and vested in him or her all rights of suit under the contract of carriage as if that person had been a party to that contract.

...

(4) Where, in the case of any document to which this Part of ths Act
applies,-

(a) A person with any interest or right in or in relation to goods to which the document relates sustains loss or damage in consequence of a breach of the contract of carriage; but
(b) Subsection (1) of this section operates in relation to that document so that rights of suit in respect of that breach are
vested in another person,-

the other person shall be entitled to exercise those rights for the benefit of the person who sustained the loss or damage to the same extent as they could have been exercised if they had been vested in the person for whose benefit they are exercised.

(5) Where rights are transferred by virtue of the operation of subsection (1) of this section in relation to any document, the transfer for which that subsection provides shall extinguish any entitlement to those rights that derives,-

(a) Where that document is a bill of lading, from a person's having been an original party to the contract of carriage; or
(b) In the case of any document to which this Act applies, from the previous operation of that subsection in relation to that document;-

but the operation of that subsection shall be without prejudice to any rights which derive from a person's having been an original party to the contract contained in, or evidenced by, a sea waybill and, in relation to a ship's delivery order, shall be without prejudice to any rights deriving otherwise than from the previous operation of that subsection in relation to that order."

Submissions

[20] For Tasman Orient, its leading counsel, Mr Beadle, submitted that on the face of the pleadings and the discovered documents, none of the New Zealand plaintiffs against which the summary judgrnent/striking out applications were brought, have title to sue in breach of contract nor have they suffered any loss which would entitle them to judgment in bailment or negligence, those being the three causes of action pleaded.

[21] In support of an application for leave, he submitted these applications could only be brought on completion of discovery. He noted the amended claims were only filed on 3 May 2004 after these applications were issued. He submitted Tasman Orient was able to discharge the requirement of r 136(2) showing all the claims by the plaintiffs, the subject of the applications, were incapable of success (Attorney-General v Prince and Gardner [l9981 1 NZLR 262; Westpac Banking Corp v MM Kembla New Zealand Limited [2001] 2 NZLR 298).

[22] Mr Beadle submitted that, risk having passed in all cases other than Maintop when the goods crossed the ship's rail, none of the New Zealand plaintiffs suffered loss, particularly having regard to s 13B, all rights of suit were vested in the overseas plaintiffs pursuant to s 13B(1), and it was the overseas plaintiffs who were entitled to exercise those rights following loss or damage for the benefit of the person who could have exercised them (s 13B(4)). The transfer of rights of suit to the overseas plaintiffs extinguished any entitlement to rights of suit on the New Zealand shippers' part (s 13 B(5)). No residual right of suit in contract was accordingly retained by the New Zealand shippers (East West Corporation v DKBS (1912) and AKTS Svendborg [2003] 1 Lloyds Rep 239).

[23] Mr Beadle also made the point that the NZ Dairy Board, Alliance Group, PPCS and Fletcher Wood Panels' claims particulars of loss were contained in schedules where the "consignee/owner" was throughout said to be the overseas plaintiffs.

[24] In opposition, Mr Rzepecky, leading counsel for the plaintiffs, submitted Tasman Orient's position was a technical one and that these were claims where, because of tight limitation requirements, the usual practice was for marine insurance underwriters to join all parties with potential rights of suit, leaving those with clear title to sue to proceed to trial. He submitted that procedure should be followed in this case, particularly if the documentary record as discovered proved incomplete, later documents turned up which might evidence the New Zealand plaintiffs' right to sue, but where, if their claims had been terminated, they would be time-barred. He suggested the claims by the New Zealand plaintiffs should be stayed pending outcome at tnal.

Discussion

[25] It is clear from the pleadings, s 13B and Mr Rzepecky's limited concession, that all rights of suit formerly vested in the New Zealand plaintiffs whose claims are under consideration have been vested in terms of the bills of lading and s 13B in the overseas plaintiffs. The New Zealand plaintiffs' rights to sue are accordingly extinguished under s 13B(5).

[26] The question accordingly becomes whether those plaintiffs' claims should be stayed, as Mr Rzepecky suggested, struck out or summary judgment entered against them, the course for which Mr Beadle contended.

[27] Pursuant to R 136, a defendant can only obtain summary judgment if "none of the causes of action in the plaintiff's statement of claim can succeed". Here, given there is no challenge to the overseas plaintiffs' right to sue, Tasman Orient is only able to demonstrate that some of the causes of action in the statement of claim cannot succeed in the sense the New Zealand plaintiffs are unable to obtain relief. Accordingly, it would be inappropriate to grant the application for summary judgment.

[28] Rule 186 gives the Court power to strike out "the whole or any part of the pleading". Given that the overseas plaintiffs' claims will continue, it would be difficult to separate allegations by the New Zealand plaintiffs from those of the overseas claimants. Accordingly, it would be difficult to strike out those parts of the pleading under R 186.

[29] Rule 477 gives the Court power to stay or dismiss a claim generally or to dismiss "any claim for relief in the proceeding" if no reasonable cause of action is disclosed. It is accordingly open to the Court to direct that all claims for relief by the New Zealand plaintiffs be stayed or dismissed. However unlikely it may be that the New Zealand plaintiffs' claims can advance, having regard to the common practice to which Mr Rzepecky referred and limitation difficulties that would otherwise arise, it would appear that staying the New Zealand plaintiffs' claims to relief rather than dismissing them is the appropriate course.

[30] There will accordingly be orders staying all claims to relief by the New Zealand plaintiffs in the above intituled litigation other than that brought by Maintop Limited and Park Saejong Pumex International Movers Limited in CP158-SD02.

Security for costs

[31] Tasman Orient sought orders for security for costs against all overseas plaintiffs.

[32] Shortly before the hearing, the plaintiffs' solicitors advised that the underwriters will accept ultimate responsibility for any costs awarded against their named insureds in claims underwritten by New Zealand insurers.

[33] In light of that assurance, Tasman Orient did not pursue the claim for security for costs other than the parties in CP158-SD02 who are insured offshore.

[34] Mr Rzepecky noted that Tasman Orient did not allocate the costs for which it sought security between the various plaintiffs even though all these proceedings are being run in parallel with two firms of solicitors and counsel appearing for the respective plaintiffs and one firm of solicitors and counsel for the defendants. It therefore submitted the suggested order was unequal in its application. He also submitted that the claim for security covered the whole period of litigation, not just that since the application was made. There is force in Mr Rzepecky's submissions.

[35] In light of that, there will be an order that the defendant is entitled to security for the costs of the proceeding against the overseas plaintiffs or those who are insured offshore but the form of the order and the amount are to be discussed between counsel and, if not settled, dealt with at the next conference concerning these claims.

Particulars

[36] Tasman Orient sought particulars relating to the pleaded incompetence of the master of the "Tasman Pioneer". Those having been furnished in a letter between solicitors, that application was not pursued.

Rule 11 application

[37] Following assemblage of the documents required for discovery, it became clear that four of the plaintiffs in this litigation had been misdescribed. In CP157-SD02 Rayonier NZ MDF Limited should have been described as Rayonier MDF New Zealand Limited, in CP158-SD02, Fletcher Wood Panels Limited's correct name is Fletcher Building Products Limited and Nippon NZMP Limited's name should now be Nippon NZMP (Japan) Limited. In CP157-SD02 Maintop Ltd had been restored to the register under its correct name of Main Top Ltd.

[38] There being no opposition, there will be orders amending those plaintiffs' names accordingly.

Result

[39] In the result, there will be orders:

a) As set out in paras [30], [35], [37] and [38] of this judgment.

b) There will be a telephone conference with all counsel, including Mr Stewart of Izard Weston, on Wednesday, 15 December 2004 at 9.00 am. to discuss future progress of these claims and any outstanding matters of costs relating to this hearing.