Lorjona Pty Ltd v Lyttelton Engineering Ltd
IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY
CIV 2004-409-000683
BETWEEN LORJONA PTY LTD
First Plaintiff
AND CAPE HOOD PTY LTD
Second Plaintiff
AND LYTTELTON ENGINEERING LIMITED
Defendant
Hearing: 3, 4, 5, 6 and 7 October 2005
Appearances: N Campbell and M R Underdown for Plaintiff
P Barratt and R Hart for Defendant
Judgment: 28 November 2005
JUDGMENT OF FOGARTY J
INDEX Paragraph Number
Introduction [1]
The design and function of the rudder [7]
The repairs [13]
Use of the trawler prior to jamming [18]
The tow to Auckland [19]
The competing causation theories [20]
Onus and burden of proof [25]
The chronology in more detail [28]
Work done in the defendant’s workshop [13] [14] [29]
Installation of the rudder [15] [32]
Testing the rudder in dry dock [34]
The jamming [37]
Information obtained alongside Auckland wharf [61]
Laboratory inspection [64]
Conclusions [92]
The merit of the action in contract
Relevant contract obligations [102]
Breach of contract or not [108]
Limitation of liability for loss [113]
Interest on the debt to the defendant [133]
Fair Trading Act
The representations [140]
Whether misleading conduct [155]
Contingent consideration of quantum issues [167]
Agreed losses [168]
Disputed repair cost [169]
Disputed lost catch [170]
Number of lost days [174]
Utilisation of catch histories [177]
Conclusion on lost catch [195]
Price [197]
General conclusions on quantum [203]
Conclusion [204]
Introduction
[1] The Kap Farvel is a trawler. It was fishing on the high seas when its rudder
jammed. It was towed to port and repaired. It then returned to its fishing ground.
As a result it lost about 10 days fishing at that locality. The trawler had been fishing
in the Tasman Sea for Orange Roughy. These fish can be caught relatively easily in
great quantity when they gather to spawn. They do this only once a year at about the
end of June and beginning of July. The best fishing lasts only a few weeks.
[2] The Kap Farvel’s rudder jammed on 7 July, during the spawn period. It is
reasonably apparent that the peak fishing had ended by the time the trawler got back
to the fishing ground, on 17 July.
[3] The claims by the second plaintiff were not pursued, as the parties are now
agreed that the first plaintiff (hereafter the “plaintiff”) was the contracting party and
the party that suffered loss.
[4] The plaintiff is the owner of the trawler. It had just purchased the trawler.
Immediately before it sailed for the Tasman Sea the trawler had been in dry dock at
Lyttelton being repaired by the defendant. The rudder had been removed and parts
of it had been rebuilt.
[5] It is the plaintiff’s case that the rudder jammed because of defective
workmanship by the defendant. The plaintiff sues in contract and under the Fair
Trading Act 1986. It seeks to recover:
-
Costs of towing the trawler to Auckland for repair
-
The cost of the temporary repairs and other miscellaneous costs incurred in Auckland
-
The future cost of permanent repairs to the rudder
-
The loss of fishing income.
[6] The defendant denies that it was the cause of the rudder failure. Second, even if it was, it relies on an exemption clause in its “Conditions of Sale”. Third, it denies that any of its conduct during its dealings with the plaintiff was misleading conduct for the purposes of the Fair Trading Act 1986. By way of counterclaim the defendant sues for the balance of its invoices rendered to the plaintiff for the work done while the trawler was in dry dock and afterwards, before it sailed.
The design and function of the rudder
[7] It is not possible to understand the issues between the parties in this case without first grasping the design and function of the rudder of the trawler. The rudder was a “Becker rudder”. The Becker rudder presents as having a conventional rudder blade to which is attached a flap. This is a narrower blade hinged to the rear of the main blade of the rudder. As the main blade turns the mechanism attached to the rudder flap rotates the rudder flap by a greater amount. So when the trawler is moving the flap accentuates the rate of turn.
[8] The operation of the flap is difficult to describe in words, but easy to understand once it is illustrated by a model or a drawing. The defendant built a model of the Becker rudder which has proved very helpful in the trial. One of the defendant’s experts, Mr Nelligan, produced a diagram which is attached as Appendix A to this judgment.
[9] As the diagram shows, the flap is hinged to the main rudder. This is in a similar fashion to the way a door is hinged. There are a number of bushes, some attached to the flap and some attached to the main rudder. These bushes are held together by rods. Unlike a door, there are a number. One witness said four. The rods are held from falling out by a plate at the bottom.
[10] The top or boss of the flap is higher than the top of the main rudder. Through the boss a spear or pin penetrates and is attached firmly to the flap. This spear is a stainless steel cylinder. Its free end slides through a tiller sleeve known as the crosshead or trunnion. This crosshead is fixed to the hull. As the steering mechanism of the trawler turns the rudder the sideways movement of the main blade takes with it, of course, the hinged flap. But the boss of the flap restrains the spear and the end of the spear in the sleeve or crosshead slides, to a degree, trapped within the crosshead, which is fixed to the hull. The consequence is that the spear slides progressively out of the crosshead as the rudder is turned. It matters not which direction. As the spear slides out it pushes the flap away from the crosshead. This has the effect of turning the flap relative to the blade to a greater degree.
[11] The blade can turn a maximum of 45 degrees. At 45 degrees the flap is about perpendicular to the sides of the hull or about parallel to the stern. This accentuated movement is depicted in the four drawings on the right hand side of the attached diagram. The spear is the cross hatched cylinder ending at a point. It can be seen that when the rudder is midships or near to midships the spear protrudes out of the forward end of the crosshead (see the top drawing). As the propeller turns the spear travels through the crosshead so that by the time the rudder is fully turned to 45 degrees the free end of the spear is at the centre of the crosshead. This is known as the centroid position. The crosshead has swivelled with the spear but otherwise remains attached in one position to the hull.
[12] It should be obvious by now that for the Becker flap of the rudder to function two parts have to move. They are the spear, which has to slide through up to half of the crosshead backwards and forwards, and the hinge of the flap.
The repairs
[13] The Kap Farvel was originally dry docked for a hull examination. That examination also revealed that the rudder needed work. An inspection of the rudder showed that there was a bend in the flap. The bend in the flap was not repaired. Rather the bushes, or some of them, constituting the piano hinge, were removed and replaced. To do this the rudder flap had to be taken off.
[14] Second, the bronze bearings within the crosshead were replaced. The stainless steel spear runs through a bronze sleeve in the crosshead. It is bronze for two reasons. First, it is good practice in a marine environment not to have the same metal moving one part to another. Second, the bronze is softer than the stainless steel spear. So it can more naturally operate as a bearing or bush to hold the spear in alignment but allow the spear to move backwards and forwards. The movement, in time, wears away the softer bronze.
[15] To do all this the rudder was taken from the trawler to the defendant’s workshop and disassembled. After the bushes on the flap had been repaired and replaced, and a new bronze lining placed in the crosshead, the rudder was reassembled, at least partly, within the workshop and then later on the trawler. It is not clear from the evidence as to whether it was fully tested in the workshop, but certainly the flap was turned by hand in the workshop, and the clearance of the spear in the sleeve was measured.
[16] When the rudder was reattached to the hull in the dry dock the spear had to be inserted through the crosshead into the Becker flap boss. Within the boss is one or more rubber O rings. These are deliberately intended to be a tight fit to prevent the intrusion of water. The spear when being fitted has to be driven through the O rings. When the spear was being fitted the fitters hammered the spear in. It is not known whether they placed a dolly on the end of the spear. A dolly is another piece of metal intended to take the initial impact of the blow transmitting the force on to the spear, but protecting the end of the spear from being marked by the impact of the hammer.
[17] After the rudder was reassembled on the hull the trawler’s hydraulic system was used to turn the rudder to its maximum turn of 45 degrees in both directions. There were only two turns made. This is partly, if not wholly, because the trawler was in dry dock and that affected the safe functioning of the hydraulic system.
Use of the trawler prior to jamming
[18] When the work was completed the dry dock was filled and the trawler was manoeuvred out into the inner Lyttelton Harbour where it stayed for a few days. During this time it was manoeuvred at least four times from berth to berth in the harbour under its own power. This necessitated use of the rudder. The trawler left Lyttelton for the Tasman Sea on 29 June. It was steaming from that time until 6 July when while fishing the rudder jammed.
The tow to Auckland
[19] The crew were not able to unjam the rudder. As a result the trawler could only motor in circles. It remained adrift until it was taken into tow to Auckland where it arrived on 12 July. The crosshead was removed and the rudder flap was pulled back in line with the main rudder. Metal bars were welded to the rudder and flap to hold both in one plane. After sea trials the trawler returned to its fishing grounds arriving back on 17 July.
The competing causation theories
[20] The plaintiff’s case is that the rudder jammed because of faulty work repairing the crosshead and particularly when reinstalling the spear. The plaintiff’s case was that the hammering of the spear into position caused the end of the spear, about 20 millimetres in length to swell or mushroom. The spear jammed in the crosshead on 6 July due to the mushroom effect. As a result the rudder jammed to starboard.
[21] In support of this theory for the jamming the plaintiff called two experts in metallurgy who both measured the internal dimensions of the sleeve in the crosshead and the external dimensions of the spear. One of these witnesses, Dr Ted Clansey gave expert evidence as to the significance of markings discernible on the inside of the sleeve. The experts also commented upon the significance of the tight fit of the spear. The crosshead was removed at Auckland by divers cutting the spear away from the boss of the flap. The crosshead and the balance of the spear were then unbolted and removed to the wharf. The spear did not slide from the crosshead. It was removed from the crosshead by force, by being driven through the balance of the crosshead (the free end already being inside the crosshead as is shown in the attached plan to occur when the rudder is turned to starboard about 30 degrees or more). The spear was driven out of the sleeve by the use of a dolly with a pipe handle and a sledgehammer.
[22] The defence theory is that the rudder jammed because of manoeuvres of the trawler immediately prior to the jamming. At the time the trawler had its net more than 900 metres below on the sea floor, about 1200 to 1400 metres astern. The gear had become stuck on the bottom, as fishermen would say, become pinned or fast. The skipper had been trawling on autopilot. The autopilot was left on with forward revs that, but for the pinning, would have taken the trawler ahead at a speed of about 3 knots. The winches were then activated to winch the trawler back to the net. So the trawler moved astern. The purpose of leaving it on autopilot was so that the trawler would remain on the same heading. The defence say that the consequence of leaving the trawler on autopilot is that the autopilot sought to maintain its heading and to that end turned the rudder to starboard by at least 25 degrees. An alarm went off. The defence say that the rudder should have been returned to midships but was not (there is a factual issue as to whether that could be done) and the rudder continued to turn to 45 degrees where it jammed. It jammed because force was applied to the flap, now facing the swell. The force was probably by the effect of the swell impacting on the trawler moving astern. This force both bent the spear causing it to jam in the crosshead, and at the same time, or by similar forces later, pushed the flap against its hinges, causing the hinge to jam, a fact which also jams the spear and so the rudder.
[23] The defence theory goes on to contend that subsequent attempts to move the rudder midships after this jamming drove the free end of the pin into the wall of the sleeve.
[24] The defendant says that this theory accounts for all the facts, including the fact that after the crosshead was removed in Auckland the flap would not move. The flap was freed by a hawser being attached to it and then round a bollard and up to a higher crane on the trawler. The crane then pulled the flap round to midships.
Onus and burden of proof
[25] Two competing theories of causation have been advanced. However, that does not change the question for resolution. This is whether the plaintiff has proved on the balance of probabilities that the damage to the rudder was caused by the defendant in the manner pleaded?
[26] The defendant has denied the causation by denying the pleadings and then adding the following pleading “and says further that the rudder failed as a result of an impact at sea”.
[27] I agree with Mrs Barratt that this positive pleading does not mean that the plaintiff succeeds by default in the event that the Court is not persuaded by the defendant’s theory. The positive finding that the rudder failed as the result of an impact at sea might have the effect also of disposing of the plaintiff’s theory and such a finding would be made on the probabilities. However, the defendant’s theory may have sufficient weight to question the plaintiff’s theory. In that sense the matters raised by the defendant go into the balance when determining whether or not the plaintiff has discharged its burden of proof.
The chronology in more detail
[28] The narration of fact in paragraphs [12]-[19] above is a non-contentious summary. It is now necessary to go into the detail and to resolve conflicts in the evidence along the way. The following narrative endeavours not to repeat the summary. However, to enable the reader to follow it I cross reference the detail to paragraphs [12]-[19].
Work done in the defendant’s workshop [13] [14]
[29] A new bronze lining for the crosshead was manufactured in the workshop. This work was done under the supervision of Mr Ian Cooper. He supervised the fabrication and machining of the new crosshead and installation of the new bush. He explained that when manufacturing the bush the engineers had a choice either to finish the internal bore of the bush first or last. They choose to finish the exterior of the bronze bush first thereby giving the exterior the best finish. By giving the exterior the best finish they prevented water and grease getting in between the steel housing and the bronze bush. The consequence of this was that when machining the inside of the bearing a pattern was induced in the bronze as a result of harmonic vibrations occurring as part of the machining process, because of the long thin wall of the bush.
[30] The surface of the bush was of no concern to Mr Cooper because the bush is a low speed bush. Dirt gets trapped and oxidation occurs in the bottom of the grooves and the top of the grooves ended up polished as the spear moves slowly backwards and forwards.
[31] Mr Cooper said that because the pin or spear and the bearing are such a close fit suitable care has to be taken as to the size of the respective parts. The defendant reused the existing pin. Mr Cooper said that after shrinking the bronze bush into the fabricated housing with liquid nitrogen there was a clearance of 0.25-0.35 millimetres for the stainless steel pin. He said he confirmed this himself and remembers clearly passing the pin through the bush in the workshop prior to the assembly of the components in the dry dock.
Installation of the rudder [15]
[32] Mr Cooper did not personally install the rudder. He found the next day that the shift he relieved had discovered that the pin was difficult to install into the boss of the flap (the shaft), as it had to fit into a rubber O ring. They had opted to force the pin into position. Mr Cooper explained that these fittings need to be tight and thus pins often require knocking with a sledgehammer in order to fit them. He said you would generally use a soft dolly to protect the end of the pin. This was common practice. The Court does not know whether a dolly was used or how much force was used to force the pin into position. None of the persons who installed the pin in the earlier shift were called as witnesses.
[33] Mr Cooper did not have any part himself in forcing the pin into position. When he arrived on the site he checked for “indentation” after installing the pin. He noticed there were some minor marks that he said were likely already present on the pin prior to working on the rudder. He said he was able to repair these marks by grinding and filing and by the use of a straight edge. He confirmed that some of the marks appearing in the top 20 millimetres of the open end of the pin were made by him. Indeed he said generally the marks that could be seen were those of his grinding and filing.
Testing the rudder in dry dock [17]
[34] Mr Cooper said that after completing the fitting in the workshop he decided that they needed a substantial testing period given the increased scope of the work that had been performed. He said testing was done at least three to four times and he was present the entire time closely observing the tests and inspecting the rudder during the process. The testing process took approximately 90 minutes and was initially done by hand operation in the workshop before they connected the rudder back to the trawler and performed at least 40 lock to lock manoeuvres using the hydraulics. This description has to be of the testing process in the workshop as there was clear evidence that in the dry dock the rudder was turned full lock to starboard and full lock to port twice only. I infer that the testing in the workshop involved testing the ability of the spear to pass through the bush and the quality of the new bushes on the flap. There is no evidence, and it is unlikely, that the spear was driven into the boss of the flap through the O ring(s) in the workshop.
[35] Putting the rudder hard lock to hard lock in the dry dock was done by using the ship’s hydraulics. The hydraulics were operated by Mr Peter Whalan, then the Kap Farvel’s sole engineer. He said that he was operating the rudder from the wheelhouse, being in radio contact with the people inspecting the rudder, that he only moved it lock to lock twice and the reason for that was that there was no water cooling for the hydraulics.
[36] When the rudder is moved to a full lock, as explained previously, the pin travels through the crosshead so that the free end of the pin reaches the centroid of the head. This means that the end of the pin which has been hit by the sledgehammer has to pass through half the length of the crosshead.
The jamming
[37] On 29 June Nathan Collins skippered the Kap Farvel from Lyttelton and sailed about 500 miles into the Tasman to fish for Orange Roughy. The crew did not experience any problem with the rudder on the trip to the fishing grounds. They commenced fishing on 2 July. From 2 to 4 July they fished in one part, then steamed a little over 100 miles to a new position on 5 July. On 6 July their first shot was at 1630 hours. A shot is the casting of trawling gear and lifting the gear back in, hopefully with a catch. On the next shot at 1830 hours they were fishing in about 950 metres of water. The fishing gear became fast on the seabed. At that time there was a 5-10 knot wind and a 3 metre rolling swell. At the time the gear became fast it was therefore about 950 metres below the trawler on the surface and to get down to that depth behind the trawler was likely to be 1200-1400 metres astern. Nathan Collins, as skipper, was on the bridge and he started to back the boat up onto the pinned gear using the trawl winches with the propeller on forward propulsion and the autopilot on to keep the trawler in line with the gear. While he was doing this an alarm on the autopilot sounded. So far these facts are common ground.
[38] The first record of what happened next is contained in the trawler’s log book which I quote in its entirety. It was handwritten by Nathan Collins:
1830 hrs. Pinned up. Used Pilot to keep vessel straight while winching. Half way through winching alarm went off on Auto-Pilot, I looked at rudder indicator it was instantly at 25°.. Still fast .. Stopped winching, whilst investergating [sic] steering gear, the net unfastened causing the vessel to do 3 full 360° turns. Was decided to winch gear onboard, whilst winching another 3 turns were done. Gear came up twisted but not too bad. Once finished stowing gear the steering gear was investigated more.
Whilst investergating [sic], rudder angle increased to 45° but could not be returned either by hydraulics or chain block.
[39] Mr Nathan Collins said that the alarm that came on was the steering alarm. Mr Whalan, now the second engineer, said that the autopilot and steering alarm sounded. He confirmed there were two different audio alarms. His evidence was that the steering alarm was first and an off course alarm second. He said the trawler is equipped with a paging system and his pager went off when the alarm went off. He was not on the bridge at the time. He said he got to the bridge within 20 seconds. There was now another engineer on board, Mr Jack Cooper, the first engineer. When the alarm went off he was off watch and in his bunk. He gave no evidence about the alarms. The defendant called a very experience mariner, Mr Michael Connolly. It was his opinion that the alarm the skipper heard was almost certainly the autopilot off course alarm. He believes it would be the off course alarm because the rudder would have been struggling to keep the trawler on its predetermined course ahead.
[40] I do not think I can resolve the sequence on probabilities. The skipper’s evidence seems to counter-balance that of the expert, Mr Connolly. I should add there is no comparison in expertise. The skipper, Mr Nathan Collins, is the owner’s son and was 29 years old at the time. Mr Connolly is about as experienced a fishing skipper as one could expect to have as a witness, having skippered his first trawler in 1976, when Nathan Collins was two years old. What is, however, probable is that both alarms went off very close together. Mr Whalan distinguished two alarms but thereafter referred to the alarm singular.
[41] It was Mr Connolly’s interpretation of the log book that when the alarm went off the steering had not jammed and that the skipper should have immediately put the rudder midships. However, it was the skipper’s evidence that the rudder was “stuck” at 25° to starboard. He said that they stopped winding back (he was not operating the winches personally) and that while they were looking into the problem the boat became free. Mr Whalan said that after the alarm went off he carried out an immediate inspection and found that the rudder was stuck at 25-35° to starboard. He was not challenged in cross-examination on that evidence. Mr Cooper said that he thought the rudder was at about 35° when he first arrived. As I have noted, he was not on shift at the time. He said that Mr Whalan had told him that there were problems with the steering and that the rudder was hard over to starboard.
[42] Mr Cooper and Mr Whalan carried out unsuccessful attempts to free the rudder using bypass systems and manual systems. It is not clear from the evidence as to when they did that, relative to getting the gear up.
[43] Mr Nathan Collins said that while they had stopped winding back and were looking into the problem the boat became free. By that he meant the gear was no longer pinned to the bottom. He said that the trawler then did three complete circles as the rudder jammed on 45° to starboard. They winched the net on board. He said that shot had only lasted a few minutes. He said Mr Whalan advised him that the rudder was frozen hard over between 35° and 45° starboard and he was unable to correct the problem through bypassing the ram solenoids. Mr Whalan and Mr Cooper then, after the net was up, tried a variety of other ways to centre the rudder using the hydraulics and chain block, without success.
[44] This evidence of Mr Nathan Collins is consistent with the log book. In cross- examination Mr Nathan Collins elaborated that before the alarm went off and the last time he had looked at the rudder it had been on 3°. He turned around and it was on 25. A minute before it was on 3°. He said the digital readout on the autopilot was saying a steering “alarm failure”. He was unable to be specific. He said:
Steering, I can’t recall exactly. It was telling me something was wrong with our steering.
[45] Mr Nathan Collins was cross-examined as to whether he was writing the log entry while all the drama was going on. He replied:
As soon as I started having trouble yeah.
He reiterated that.
[46] The question as to whether the rudder was jammed at 25° or at 35 to 45° is an important issue of fact. This is because the defendant’s theory is supported principally by a very experienced marine engineer, Mr Nelligan. He was a very impressive witness, not only because of his qualifications and experience, but from the measured way he gave his evidence and the fairness of his answers.
[47] Here is the defence theory in his words:
32. The log goes on to describe the net wire was winched in to try and free it and the vessel was run astern. In effect the vessel was pulling itself astern into the seas [3 metre rolling swell] with the steering still on autopilot. In these circumstances it is probable that the Becker rudder was pushed over to starboard as far as it would travel, and then thumped by waves hitting the stern. To explain that a little further: The “Kap Farvel” was going backwards with the autopilot turned on at the same time as the pinned net was trying to swing her down wind and sea. The autopilot would have been trying to correct this movement to keep the ship on her set course. It would have done so by moving the rudder in the direction opposite to that in which she was being pulled by the pinned net. The result was that the autopilot took the rudder hard to starboard. In that position the maximum surface area of the Becker flap was directly facing into the oncoming waves. The forces on the flap were sufficient to push the flap hinge back past the point where it was able to return.
33. The outcome was that the rudder became jammed as soon as it was attempted to bring it from starboard 35° towards midships. However it was free to turn from 35° out to 45°. This necessitated a tow to Auckland.
[48] It was also Mr Nelligan’s opinion that the same force would have bent the spear to a degree. He calculated that a load of approximately 20 tonnes on the flap is sufficient to cause yielding in the spear. He summed it up in this way:
39. I am on the opinion that the vessel was subjected to several large wave actions whilst it was pinned to the bottom by the trawl, and was running astern to try and clear the snag but with the wheel over to starboard rather than midships. One or more wave actions were sufficient to slam the Becker flap on the trailing edge of the rudder, distorting the end of the spear as well as bending it slightly, and causing dents in the bush. At the same time, or subsequently, wave actions on the flap forced it to the full rotation of the piano hinge and it seized. Thereafter, attempts to move the rudder with a seized flap hinge were restricted to between 45° and 35° of starboard wheel. The sea conditions described by Nathan Collins at paragraph 24 of his brief would have been sufficient to cause this result.
[49] Mr Nelligan did not take an opportunity given in cross-examination to say that these forces would have impacted on the rudder when turned to 25° starboard. Indeed, he positively said:
I cannot envisage the spear bending with 25 degrees of wheel then going out to 35 and not being able to come back. I would have expected that if the jamming occurred at 25 then that is where the minimum angle that it would have been able to maintain that is from 25 out to 45. However, the evidence is that the movement was only from 35 to 45. So I cannot envisage the situation as you’ve described it.
[50] Whether the log book entry was made contemporaneous with events or shortly after, I consider it more probable than not that it is a reliable summary of events. For example, the sentence: “I look at rudder indicator it was instantly at 25°” reflects the surprise expressed in the oral evidence of Nathan Collins at the rudder going from 3° to 25°. The word “instantly” has meaning once one appreciates that it was a surprise.
[51] Whether or not the rudder had jammed at 25° the totality of the evidence of the two engineers and the skipper indicates that a steering problem was identified immediately after the alarm sounded. The trawler stopped winching. It would appear that the skipper kept some forward propulsion going as the trawler did three complete circles during which time the net came free. The trawler was travelling in circles because the rudder was jammed. It is quite clear from the evidence that Mr Whalan was looking at the steering very shortly after the alarm. He said:
I carried out an immediate inspection and found that the rudder was stuck 25° to 35° to starboard.
And he advised the skipper of the jammed rudder.
[52] The first engineer, Jack Cooper, said in his evidence that when he first arrived on the scene the rudder was at about 35°. The engineers unsuccessfully tried to free the rudder using bypass systems and manual systems. During these attempts there was no movement back to the central position so the engineers checked to see if it would go the opposite way and the rudder kept increasing in degrees and not being returned back to the central position. The rudder ended up at 45°. It was possible to bring it back to 35° but Mr Whalan said:
… it wouldn’t stay at the 35 degrees° angle and those numbers [35 to 45] are approximate.
He was asked how easy it was to move the rudder between 45 and approximately 35 and he said:
… very difficult very difficult 2 power packs and chain blocks
He said:
… when the power packs and chain blocks were not applied .. the rudder would spring back to approximately 45 degrees.
[53] Mr Whalan presented as a reliable witness and was not cross-examined on his evidence as to what he found on his first and immediate inspection namely that the rudder was stuck 25-35° to starboard. I interpret that proposition in the light of his later comments as to the 35-45° that he is giving an estimate of where it was stuck.
[54] It was common ground between the parties, particularly in the light of the expert evidence of Mr Nelligan that the rudder was definitely stuck at 35° to starboard. It is possible that the rudder stuck short of 35°, was pushed by the engineers back past 35° to 45° and could be pulled back to 35° but no further. It needs to be kept in mind that it took a good deal of force to bring the rudder from 45° back to 35°.
[55] I prefer Mr Connolly’s opinion that the autopilot alarm would sound before the steering alarm. But I also accept the evidence of Mr Whalan that both alarms went off. On the probabilities then, what happened was that the trawler went off course, the rudder went over to at least 25° to endeavour to compensate, the autopilot alarm went off, the rudder kept moving past 25° and jammed. This set off the steering alarm. This all took place in a very short space of time, certainly within the time that it took Mr Whalan to come to the bridge and go immediately to the steering gear.
[56] Mr Connolly considered that a possible reason for the steering failure may have been an impact on some of the trawl gear on the steering. That is not possible on these facts. For at that time the trawling gear was 800 – 900 metres behind the trawler, on Mr Whalan’s estimate, and in any event on the sea floor, 900 or so metres below the trawler. Mr Connolly’s opinion had been based I think on the possibility that the steering did not jam until the gear was being lifted. But on the evidence of the two engineers and the skipper the jamming occurred very shortly after the autopilot alarm.
[57] However, it also needs to be noted that the steering jammed while the trawler was pinned to the ocean floor and going astern. This meant that the hull was not riding the swells. Rather it was pulling on the wires of the pinned trawl gear. So it was going stern down back into an oncoming 3 metre swell.
[58] By reference to the attached diagram, it can be seen that the when the rudder has moved from 15° to 30° the flap begins to become more square on to the oncoming sea in these conditions. From 30° and on the flap was obviously exposed more and more to the force of the waves which would push the flap back on its hinges.
[59] It is common ground that the rudder would jam either if the flap seizes or if the pin seizes and certainly if both seize.
[60] To take the analysis further it is necessary at this point to move forward in time to the information obtained about the rudder when the trawler came alongside the Auckland wharf on 12 July.
Information obtained alongside Auckland wharf
[61] On arrival back at Auckland divers went into the water beside the rudder and the ship’s hydraulic system was applied to try to turn the rudder. The hydraulic system was operated by the chief engineer, Mr Cooper, and Mr Le Warne from Lyttelton Engineering. The divers watching from the water reported that the rudder would start to move getting about 8°-10° movement. Then the hydraulic relief valves would open to relieve the pressure and the rudder would spring back to 45°. The divers also reported that there was no visible damage or problem. However, two bolts holding the lower pintle bearing of the crosshead had loose nylock nuts.
[62] It was agreed by all present that the crosshead be removed. The divers cut the shaft and unbolted the crosshead. The crosshead was then lifted on to the wharf still containing the balance of the spear inside the sleeve. It had been an expectation that from that point the rudder would be able to move. It was able to be brought amidships, but the flap remained in the same position. The divers in the water were not able to move it by hand amidships. A wire from the trawler’s Hiab crane was taken around a bollard into the water, fixed to the flap, and power was applied. This was sufficient power to move the trawler’s hull towards the wharf. The flap then released and was pulled to the amidships position.
[63] There was conflict in the evidence as to the time it took to remove the spear (slider) from the sleeve. It was mainly as to a difference in time. The plaintiff witnesses said it took about 45 minutes, the defendants about five. The difference in estimates of time is remarkable. There is also a difference of opinion as to whether an 8 pound or 20-30 pound sledgehammer was used. The difference in time can be partly explained by the difference between the total elapse of time and the total time during which force was applied. There was likely to be a bit of messing around on the wharf, as the crosshead was simply lying on the wharf and not braced. It was braced in the end by the feet of some of the people in attendance while a person was driving the sledgehammer. The sledgehammer was driven onto the handle of a pipe to which a dolly was attached. The free end of the spear was inside the sleeve, when the crosshead was removed. This is consistent with the evidence that when the power was taken off the hydraulics the rudder sprang back to 45°. We know from the diagram which is an appendix to the judgment that at 45° the free end of the spear is at about the centroid point. The chatter marks referred to in the surveyor’s report are indicated by an arrow in the photo that the surveyor took and they are down the other end of the crosshead, away from the flap, some millimetres short of the end. That is also consistent with the fact that full power on the hydraulics could force the spear past the centroid point to a certain area but no further.
Laboratory inspection
[64] The crosshead and pin were removed and examined by experts. They were measured by Mr Allan Patterson and (much later) Ms Lenice Evergreen of Measurement and Calibration Centre Ltd. After measurement of the internal bore, and of the rod there was further examination by Dr Ted Clansey. The sleeve was cut in half. Next the parts were examined by Mr Nelligan in the course of his investigations and finally there was further measurements by Ms Evergreen. For convenience I deal with the measurements first, then with Dr Clansey’s findings and opinion, and finally with Mr Nelligan.
[65] It is useful to keep in mind that the crosshead is 300 mm in length, based on Mr Nelligan’s diagram at a scale of 1:30. At full lock the free end of the pin has travelled 150 mm through to the centroid of the pin, based on the examples contained in the same diagram.
[66] Mr Patterson observed hammering at the end of the shaft. He found that this hammering had “mushroomed” the diameter of the shaft for about 20 millimetres of the length measured from the end. He found that an attempt had been made to repair the damage by grinding and/or filing but high spots still remained around the diameter. He measured diameters at three points around the shaft at positions 50, 150, 250 and 350 millimetres from the end. It may be noted that these measurements are past the mushroomed area, which extended only 20 millimetres. Mr Patterson found that the maximum diameter of the spear was 125.78 (at the 50 mm mark).
[67] Next Mr Patterson measured the internal diameter of the sleeve or trunnion. He noted that he considered the surface finish of the bore very rough for a machined surface. He took measurements at 25, 50, 150, 250 and 350 millimetres. The maximum diameter he found at 25 millimetres of 126.32 and the minimum at 250 millimetres of 126.05. At a 95% confidence level at ± 0.01 millimetres for the diameter of the shaft and spear and ± 0.05 millimetres for the internal diameter of the bearing he found that minimum measured clearance between the shaft and the bearing was 0.27 millimetres. This compares favourably with Mr Ian Cooper’s assessment in the workshop and LEL before the rudder was remounted at a clearance of 0.25 and 0.3 millimetres. Mr Patterson also found that the shaft rotated freely within the bearing when the top 20 millimetres of the shaft, the damaged section, was exposed. This is also consistent with Mr Cooper’s findings in the workshop, before the spear was hammered into place.
[68] The report of Mr Patterson has the obvious deficiency that he did not provide a diameter measurement of the spear between 0 and 20 millimetres. This may have been because the high spots still remaining around the diameter meant that that part of the shaft was not a cone and so no reliable diameter could be provided. But he gave no guide as to the extent to which the diameter had been mushroomed.
[69] This task was undertaken quite late in the piece by Ms Evergreen. She was asked to undertake a metallurgy survey of the mushroomed end. She obtained a centreline, using the undamaged section of the shaft. The damaged section of the shaft was then measured for radial distance from that referenced centreline. She found the maximum radial distance measured was 63.17 millimetres at a 95% confidence level of ± 0.01 millimetres. Altogether she took 40 measurements for radial distance. It needs to be kept in mind but it cannot be assumed that at any point the radial distance can be multiplied by two to obtain the diameter, because the damaged end of the shaft has high points. What Ms Evergreen did was to ‘construct’ a cylinder from the 40 points and calculate the minimum circumscribed diameter at 126.21 millimetres. She concluded that the damaged section of the shaft will not fit into a bore with a diameter of 126.21 millimetres or smaller.
[70] Mrs Barratt did not cross-examine Ms Evergreen. However, she submitted in closing that her measurements had to be wrong because they suggest it was simply not possible for the damaged end of the shaft to pass through the sleeve. I go on to analyse, from the evidence, whether this did occur as a matter of fact.
[71] I have no doubt that each of Ms Evergreen’s 40 measurements of radial distance were accurate within her 95% confidence level of 0.01 millimetres. It needs to be kept in mind that she then “constructed” a cylinder from the 40 points and derived a minimum circumscribed diameter at 126.21. Her opinion was that these results “indicate” that the damaged section of the shaft will not fit into a bore with the diameter of 126.21 millimetres or smaller. On this point it is useful to refer to some observations of Mr Nelligan. He referred to an inspection and measurement of the shaft upon the wharf by Mr Le Warne and recorded in Mr Le Warne’s notebook. There Mr Le Warne noted there was a deformation down one segment of the end which was 20 millimetres wide at its widest point and deformed the end of the spear by 3 millimetres at the end. Mr Nelligan said this created a “localised interference fit in the crosshead sleeve”. (I put to one side for the moment Mr Nelligan’s opinion that this deformation was likely to have occurred after the jamming of the flap and when the engineers were applying force on the rudder trying to get it to return to midships.) It is also relevant that Mr Le Warne’s same notes do suggest a clearance between the shaft of 0.35 to 0.37 below the interference but do not record any clearance above the interference. Those quite rough measurements of Mr Le Warne outside the laboratory broadly confirm Ms Evergreen’s more sophisticated finding.
[72] There was also evidence before the Court from Dr Ted Clansey that the bronze bush is of a softer metal than the stainless steel spear. Mr Campbell submitted essentially that somehow the bronze must have been giving in order to have allowed the stainless steel through. Whether the hammering and thereby any deflections or bruising of the end of the spear were or were not corrected by the subsequent filing by Mr Ian Cooper on the one hand or whether the deformation was caused by the repeated attempts to bring the rudder back to midships on Mr Nelligan’s theory on the other hand, it is a fact that the damaged end of the spear as measured by Ms Evergreen was inside the sleeve which had an initial diameter less than the spear, when it was lifted from the wharf. This explains why considerable force was needed to remove the shaft. It also explains why the bolts on the lower pintle were loose and the whole crosshead had been juddering when full power was applied to the hydraulics. Ms Evergreen’s measurements are corroborated by Mr Le Warne’s. I reject Mrs Barratt’s submission that her measurements were wrong. It is a fact that the damaged end of the spear was inside the sleeve, yet the end was wider than the internal width of the sleeve.
[73] Dr Clansey is a consultant metallurgist. He was asked to test whether in his opinion there was sufficient evidence to suggest that the repair work carried out on the trawler was questionable in quality. His brief did not require him to go any further than to look at the pieces from the trawler that were supplied to him. He did not have before him Mr Nelligan’s theory that the top end of the shaft had been damaged at sea when the engineers were trying to bring the rudder back to midships.
[74] He reported that he was informed by Measurement and Calibration Centre (MCC) that although the dimensions and straightness of the shaft and trunnion bearing were generally adequate, when the top 20 millimetres of the shaft was engaged in the trunnion bearing, shaft rotation was prevented. MCC also reported that the top of the shaft had been mushroomed by hammering.
[75] Dr Clansey reported the now clearly evident facts that there was damage to the top 20 millimetres of the shaft and heavy uneven hand grinding marks. He also examined the interior of the trunnion after it had been sectioned by MCC. He noted the presence of heavy machine marks and very heavy longitudinal scoring. He concluded that the latter score marks appeared to have been introduced by the action of engaging and disengaging during the several examinations this assembly had been subjected to since its removal from the trawler. This latter report confirms the inference I would otherwise draw from his report that MCC did endeavour to reintroduce the shaft into the bearing and it was in that context it was reported that shaft rotation was prevented. Mrs Barratt criticised the rotation reports as irrelevant because the shaft does not rotate when it functions but moves along its actual length. That is true. But the significance of the fact that the shaft would not rotate is relevant to the tightness of the fit of the shaft in the bearing. What MCC and Dr Clansey never reported was that it was impossible to get the shaft back into the bearing. On the contrary, the longitudinal scoring shows that the shaft was reintroduced into the bearing during the work by MCC. What is not known is whether MCC passed the shaft, including the tight end, right through the bearing.
[76] Dr Clansey also noted the heavy machine marks, already discussed, and that they had been heavily burnished during its short service life (one trip). His opinion was:
Although I have not been advised of the details of the work carried out on the rudder during the repair of the vessel prior to the voyage on which the rudder seized, in my opinion there is little doubt that the combination of a “mushroomed” shaft end and an extremely rough bush bearing surface led to the flap on the rudder becoming jammed during the voyage.
[77] After forming that opinion and prior to the trial Dr Clansey read the brief of evidence prepared by Mr Nelligan. The following questions and answers are relevant:
q. Mr Nelligan has suggested that the heavy machine marks that you’ve described on the trunnion bearing did not cause the jam because the movement of the shaft tends to wear away the bronze trunnion. What’s your comment on that view?
a. Well eventually this shaft was pushed backwards and forwards time after time after time over a considerable period of time and eventually that, the spear would eventually wear the bush away. What I believe has happened here is that when the end the mushroomed end was forced into and over the rough machining it became locked in place. It acted similar to a ratchet.
q. Mr Nelligan also says that the, what you’ve described as the mushroomed end of the shaft may have dug into the brass trunnion bearing and that that may have been the cause of the mushrooming or swelling at the end of that shaft.
a. I totally disagree with that opinion. Certainly there are dents in the bore surface of the bush but the material from which the shaft was made is considerably harder than the bush material and there is no way that the bush material being forced onto the shaft would deform the shaft. It’s impossible.
[78] In cross-examination Dr Clansey clarified that he was using the word “seized” in the sense of jammed rather than suggesting component parts actually welded together. It was put to Dr Clansey in cross-examination that even after the problem at sea the shaft was able to move in the bearing enough to move the rudder about 10°. Dr Clansey accepted that the shaft was still able to be moved in the bearing to some extent. But he strenuously maintained his view that the damage to the end of the shaft would not have occurred by ongoing impacts into the walls of the bush. In that respect he also observed that he thought the bending of the shaft was relatively slight. He thought that the damage to the walls of the bush from the ends of the spear shaft would occur whether the shaft was bent or not although bending would probably aggravate those marks. He agreed with Mr Nelligan that there were marks in the trunnion caused by the end of the spear. He also disagreed that the efforts to bring the rudder midships could have exacerbated the deformation at the end of the spear:
I would totally disagree with that. It’s to be remembered that the strength of the stainless steel is almost three times that of the bronze. It’s very difficult to be precise here but if one was measuring the hardness of the relevant materials stainless steel would be say 300 vickers, which is a form of hardness measurement. The hardness of the bush would be round about 100 vickers. So it’s approximately 3 times as strong and Bob Nelligan’s idea that contact between the two could result in the deformation of the end of the spear has no sense at all.
[79] Dr Clansey reiterated in his view that the presence of the mushrooming and the extremely rough machining were the critical factors.
[80] Dr Clansey did not elaborate on the use of the word “ratchet”. However, it has a plain meaning being a set of teeth on the edge of a bar or wheel which engages to ensure motion in one direction only. In the context I understood him to be saying that while it was possible to drive the spear in one direction (and thus ultimately out of the trunnion) there was a point at which it was not possible to drive the spear in the opposite direction. This was due to the rough finish of the bush acting as a set of teeth and at some point in the bush the ratchet effect took.
[81] Mr Nelligan agreed, of course, that bronze does not have the same hardness as stainless steel. However, it was his view:
In the same way it’s been suggested if you hit the flat end of the shaft with something it will deform, similarly it is possible to deform the shaft by crushing it in the bearing housing. Whilst I agree with Dr Clansey that the bush is softer than the stainless steel there will be a point at which the large surface area of bush will have deformed as far as it can and the reaction will be back onto the bush, I’m sorry onto the pin. So it is possible to deform the free end of the pin by trying to twist it inside a bush.
[82] That precise explanation was given by Mr Nelligan after Dr Clansey had given his evidence.
[83] In respect of this difference of opinion between Mr Nelligan and Dr Clansey I prefer the opinion of Dr Clansey. Dr Clansey is a consultant metallurgist. This point is within his expertise.
[84] Mr Nelligan’s expertise is as a marine engineer, and as I have said before, it is considerable. That expertise would include both a theoretical and working knowledge of the hardness of metals and the play of one metal on another, particularly the workings of bearings. That said, however, on this particular point Dr Clansey is clearly more expert.
[85] I am left with the conclusion that the deformation at the end of the spear occurred when the spear was being driven into the boss of the flap at the time it was being installed in the dry dock. Some remedial work was done at the time by Mr Ian Cooper, but that was not completely effective. It was, however, possible for the hydraulic system to turn the rudder full lock in both directions and thus pull the damaged end of the spear through approximately 150 mm in length to the centroid position of the crosshead, in the dry dock. There may or may not have been a number of full locks applied during the manoeuvring in the inner Lyttelton Harbour.
[86] At the time the trawler left Lyttelton the spear was tight. During the manoeuvre on the high seas when the trawler was going astern and got off course the rudder was sufficiently deflected to receive a significant jolt or force when backing into the swell and that force was sufficient to cause enough deflection of the shaft to generate the ratchet effect. The deflection of the shaft could be quite minor because the axial function of the shaft when it left dry dock, as distinct from the workshop, had to be tight. Mr Nelligan was cautious and did not suggest that the deflection of the shaft could occur with the rudder at 35° lock. In his calculations it would have to be at a 55° lock. However, Mr Nelligan was also of the view that the jam had occurred at 35°.
[87] Mr Nelligan’s view was that a load of 20 tonnes would be sufficient to cause yielding in the spear. He did this calculation with the full surface of the flap exposed to the forceful pressure of the wave so that the rudder would be at 45° and the flap perpendicular to the boat. He did calculations at 35° and, as you would expect, the force applied by the pressure of the wave reduces as the angle changes. He did not report on the results of these calculations at 35°. But he was of the view that at the time the rudder jammed the rudder was not at 25 degrees. Rather:
No no clearly the rudder was at 35 or 45 degrees because that’s where it jammed.
[88] I take it from that answer that Mr Nelligan, although he did not report his calculations at 35°, could envisage a jamming at somewhere between 35 to 45° and on his theory that jamming involves a deflection or bending of the spear as well as the flap.
[89] On the subject of deflection of the spear he said:
26. The free or floating end of the spear moves in and out of the crosshead or trunnion. Usually a large force such as a wave smashing into the flap, will cause it to try and rotate around the piano hinge but it is restrained from doing so by the spear. Any elastic deflection of the spear can be accommodated by the cross head as it simply pivots to align itself. It is like a pin joint that is free to rotate. There are also in this particular installation, rubber O rings in the boss of the flap that help to cushion the shock of large impacts on the rudder.
27. However, at the extremes of rudder angle, the end of the spear can be in line with the centroid of the crosshead. At this position, if the flap is subjected to one or more large impacts caused by waves, the spear will deform. I have calculated that a load of approximately 20 tonnes is sufficient to cause yielding in the spear.
[90] Mr Nelligan said he noticed a slight deflection in the part of the shaft he inspected. He thought the larger deflection would be in the part left attached to the boss of the flap. He did not measure the deflection he noticed, or recall at which end it was.
[91] From this expert evidence I move to draw conclusions.
Conclusions
[92] There is a possibility that there were two simultaneous causes, each of them sufficient to bring about the same harm: these being the distortion of the end of the spear and slight bending of the spear on the one hand and seizing of the flap on the other. The latter is more a possibility if the jamming occurred at 45°. Simultaneous causation problems are discussed by Professors HLA Hart and Tony Honoré in their classic text “Causation and the Law”, (second edition, Oxford University Press 1985) from page 122 under the heading “III. WHEN CAUSALLY RELEVANT FACTORS ARE NOT CONDITIONS SINE QUA NON”. The writers adopt the view of Professor Glanville Williams that a condition may rank as a cause in fact if it either is a sine qua non (without which the event would not have occurred) or would have been a sine qua non had no other conditions sufficient to produce the effect been present. Professor Prosser comes to a similar conclusion by a different route (see page 124).
[93] Mr Nelligan never suggested the flap could have jammed before the spear jammed. I accept Mr Nelligan’s findings as follows:
I am of the opinion that the vessel was subjected to several large wave actions whilst it was pinned to the bottom by the trawl, and was running astern to try and clear the snag but with the wheel over to starboard rather than midships. One or more wave actions were sufficient to slam the Becker flap on the trailing edge of the rudder, distorting the end of the spear as well as bending it slightly, and causing dents in the bush. At the same time, or subsequently, wave actions on the flap forced it to the full rotation of the piano hinge and it seized. Thereafter, attempts to move the rudder with a seized flap hinge were restricted to between 45° and 35° of starboard wheel. The sea conditions described by Nathan Collins at paragraph 24 of his brief would have been sufficient to cause this result.
(My emphasis)
[94] It is not possible to distinguish on Mr Nelligan’s theory whether the deflection of the spear occurred at the same time as the jamming of the flap or before. But the log book and crew evidence suggests the jamming occurred at 35° degrees, not at full rudder and Mr Nelligan’s evidence suggests the flap would jam under an impact at full rudder or after earlier jamming. It is quite possible that the spear was further deflected after the initial jamming and while the rudder remained jammed at 45° during the winching up of the gear. This is probably less likely as the trawler would have been moving in a forward motion around in circles.
[95] The jamming of the spear and the flap are likely to have occurred while the trawler was pinned and thus stern down into the on coming swells. However, this was obviously for a period of time after the rudder failure first occurred until the trawl gear freed itself. There was time for repeated force being loaded both onto the spear and onto the flap.
[96] Mr Nelligan’s opinion does not allow for the deformity at the end of the spear being present within the bearing at the time. Only a very slight deflection of the spear was necessary before it jammed because of the deformity. The degree of deflection is not known. The part of Mr Nelligan’s opinion which I have not accepted was the opinion which followed that above quoted:
41. Progressive attempts to force the rudder past 35° exacerbated the dent and further deformed the segment at the end of the spear.
[97] Reflecting on this problem I am of the view on these particular facts that it is more probable that the spear jammed at 35°, before jamming at 45°. The spear was tight due to the deformity at the free end. Logically the presence of the distortion in the free end reduced the amount of deflection of the pin required before it would seize. This suggests a lesser degree of force was required absent the defect in the pin. The amount of force is not known. But what is known is that there was sufficient force to deflect the pin, which coupled with the distortion in the free end, and the internal grooves generated a ratchet like effect, preventing the pin travelling further into the bearing and so jamming the main part of the rudder.
[98] For these reasons, I consider that the deformity of the free end of the pin is properly considered as a material cause of the jamming. This conclusion is justified by probability, and, independently, by adopting Professors Hart, Honoré, Glanville Williams and Prosser’s views above.
[99] I prefer the evidence of Mr Connolly to the effect that the vessel should have been taken off autopilot and the rudder turned midships before engaging the winches to winch the trawler back over the pinned gear. In that respect I prefer his opinion to that of the skipper, Mr Nathan Collins, who considered leaving the autopilot on to be a standard and appropriate practice. It may be that it is an adequate practice in vessels with traditional rudders. But certainly in this particular instance where the stern was not riding freely with the swell, but was rather being pulled down into the swell to a degree by reason of the effect of the winching, leaving the autopilot on led to the flap being exposed to the force of the swell when the rudder was turned more than 30 degrees to starboard. In that sense the decision by the skipper to leave the autopilot on was also a contributing cause to the jamming.
[100] It has long been recognised that often it is a set of contributing factors which lead to an accident or damage. The law of contract does not recognise contributions by both parties to the damage, unless the contract provides for that event. It does not do so here.
[101] The next issue is whether or not the distortion of the end of the spear occurring in the dry dock, is as the result of a breach of contract. That issue will be considered in the next part of the judgment. There is then a later issue as to whether or not statements were made by representatives of the defendants which were misleading and deceptive and which were the occasion for the distortion in the end of the spear not being identified and rectified before the vessel left the dry dock. That issue will be examined as part of the consideration of the Fair Trading Act cause of action.
The merit of the action in contract
Relevant contract obligations
[102] The plaintiff claims breach of contract on the grounds that the rudder seized because of poor workmanship by the defendant.
[103] Counsel for the defendant agreed that the contract required the defendant to provide the goods and services that were free from defects of workmanship and materials and to undertake works in a proper and workman like manner. Counsel for the defendant did not explain that formulation. But it is consistent with the “conditions of sale” of the defendant.
[104] Prior to the vessel being placed in dry dock the defendant sent to the plaintiff a letter dated 24 April 2003 submitting their prices for dry docking, waterblasting the hull and painting it. These prices were offered in accordance with their conditions of sale, a copy of which was attached. Clause 4 of the conditions of sale reads as follows:
4 WARRANTIES
4.1 The Company covenants that any goods are manufactured in accordance with the usual practice of the industry and are free from all defects of workmanship and materials. Where no written warranty is given the Company shall not be liable:
(a) For loss caused by factors beyond the Company’s control.
(b) For failure to deliver the goods by any specified date.
(c) For any indirect or consequential loss of any kind.
4.2 The Company’s total liability in respect of the supply of any goods under these terms and conditions is limited at the Company’s option to either:
(a) Replacing the defective or damaged goods; or
(b) Refunding the price of the defective or damaged goods.
4.3 Except under clauses 4.1 and 4.2 above the Company has no liability for any goods supplied and gives no representations and warranties in relation to them other than any express warranties given in writing. All other warranties expressed or implied by law are excluded to the full extent permitted by law.
4.4 Where no written maintenance warranty is provided the Company shall not be liable to the Customer for any loss arising in relation to the provision of any services by the Company, and all warranties are excluded to the full extent permitted by law.
[105] Clause 4.1 addresses goods which are manufactured. Clause 4.2 addresses goods which are supplied. Clause 4.3 also addresses goods supplied. Clause 4.4 addresses the provision of any services.
[106] It may be noted that Clause 4.1 refers to goods being manufactured “in accordance with the usual practice of the industry and are free from all defects of workmanship and materials”. It may also be noted in respect of the provision of services that Clause 4.4 says that no written maintenance warranty is provided. But it does not set aside the normal implied term that it would undertake works in a proper and workman like manner.
[107] Accordingly, I read the concession by the defendants as to the agreed obligation set out above as an amalgam of implied term and expressed term. The principal function of Clause 4 is not to exclude obligations to provide goods and services free from defects of workmanship and materials or to remove an obligation to undertake works in a proper and workman like manner, but rather to limit the liability and consequence of breach of those obligations.
Breach of contract or not
[108] Although there was some criticism in the trial of the quality of the internal surface of the bearing, by Dr Clansey, I accept the evidence of Mr Cooper that it was an appropriate surface given the need for a decision to choose between the respective merit of giving a premium to the surface of the exterior of the bearing and to the interior. See [29] above. The most critical task was, however, to ensure that the pin would travel freely. Mr Cooper was well aware of this and as he said of the need to test this thoroughly, which he did in the workshop. See [31], [34].
[109] It was also a proper and workman like method to apply force to the pin to force it into and through the rubber O rings when installing the fixed end of the pin into the boss of the flap. Workmanship would include using a dolly to protect the end of the pin. Having done that though, it was important to ensure that as a consequence of that exercise the pin still functioned appropriately. Mr Cooper did take steps to check this, and to repair the marks. (See [38].) The pin was reused. It was not a new good supplied or a new good manufactured. I regard the installation of the pin through the new bearing into the boss as a service or work.
[110] The critical question becomes whether that installation, and the subsequent repairing of the free end of the pin was done in a proper and workman like manner. Mr Cooper presented as a well qualified engineer with a pride in his work. But he was not present when the pin was installed into the boss of the flap. Other workmen on a previous shift had done that. He did not know whether a dolly had been used. He had not witnessed the force being applied. He did not report that he had re- measured the marked end of the pin when he inspected it in the dry dock after the installation. He was of the view that these minor marks were likely already to have been present on the pin prior to the work done by his client on the rudder. Nonetheless he agreed he did grind and file the end of the pin in the dry dock. He had earlier identified the need for what he called a substantial testing period of the reconstructed rudder, when it was reassembled in the workshop. He knew about the compromised interior of the bearing. The defendant did not call any of the workmen who installed the pin in the earlier shift.
[111] The obligation to prove a failure to undertake works in a proper and workman like manner remained at all times on the plaintiff. [112] However, once I found that the damaged pin had contributed to the seizing, and that the pin had had further work done on it after it had been forced into the boss of the flap, I regard the evidential burden to have shifted. So it became material that the first defendant did not offer a complete description as to how the pin had been inserted. It also became material that Mr Cooper’s rectification work appears to be confined to grinding and filing and then seeing whether or not the pin would pass into the bearing under pressure from the ship’s hydraulics. Given the critical functioning of the pin to the seaworthiness of the vessel, in the circumstances I regard the first defendant as not having discharged the evidential burden and the finding of contribution carrying with it a finding that the defendant had not completed the reinstallation of the rudder in a proper and workman like manner.
Limitation of liability for loss
[113] The next question is to what extent Clause 4 of the warranties limits liability for loss.
[114] The plaintiff argued that inasmuch as Clause 4 was an exclusion clause it was not part of the contract between the parties. This was because prior to the contract being entered into the defendant did not give reasonable notice of the clause. It was argued that a high degree of notice was required where the exclusion is far reaching and counsel submitted that Clause 4.4 was an absolute exclusion of liability.
[115] The defendant argued that the plaintiff had given clear notice of the terms when they were faxed with the original quote. Second, that such limitations of liability are standard in Australasia.
[116] I am satisfied that clear notice was given of these terms, when the quote was given.
[117] It is quite material that it is usual for ship yards and marine engineering companies in Australasia to have terms like this. I accept the evidence in this regard of Mr Cockerell, the general manager of the defendant. Looking on the internet he found that Southern Marine Shiplift, a company in Tasmania that has been approached by the plaintiff to do the permanent repairs on the rudder, is a member of the Australasian Ship Repair Group. The ASRG lists 39 members throughout Australia, including four in Tasmania. The website has their standard trading terms and those include exclusions and limitations similar to those used by LEL.
[118] The plaintiff is an experienced operator of trawlers. It has a number in its fleet. It will, as a matter of course, have regular dealings with marine engineering companies in Australasia.
[119] I also take into account the fact that the plaintiff wanted the vessel to be put “in class” and to that end had retained surveyors to assess the vessel and monitor the work done on it. Consistent with the typical shipping industry practice the ship’s engineer kept a watchful eye on the work being done at the time.
[120] The retention of the surveyor and monitoring of the work by the ship’s engineer fit into a context where the ship owner does not expect the ship repairer to guarantee and be liable for all the consequential losses of any defect in the work done. There are plainly reasonably foreseeable enormous losses likely to flow from the failure of a vessel on the high seas. That is a risk usually covered by the ship owner by placing insurance. There is nothing in the industry practice that assumes that risk is taken by the dockyard repair companies as part of the incidents of contracts for repair.
[121] For these reasons I conclude that Clause 4 is part of the terms of contract. It remained in place when the parties decided to do work on the rudder.
[122] The next question is the meaning and application of the words of limitation in Clause 4. Clause 4.4 provides:
4.4 Where no written maintenance warranty is provided the Company shall not be liable to the Customer for any loss arising in relation to the provision of any services by the Company, and all warranties are excluded to the full extent permitted by law.
[123] The plaintiff submitted that if this subclause excludes all liability then the performance of services is essentially optional for the defendant. If a party wishes to exclude fault based liability as opposed to strict liability it must use clear language.
[124] The clause has to be read as a whole. It is focussed on ensuring that there is no warranty provided. The company is not assuming any liability for claims consequent upon any loss arising. The language does not expressly exclude making good the poor workmanship. It does not render performance optional.
[125] So, for example, had the deficiencies in the pin been identified before the vessel left Lyttelton, the owners of the vessel would be able to go back to the defendant and require the defendant to make good the work done to bring it up to the promised contractual standard. The phrase “any loss” in the context of excluding warranties, is intended to exclude loss consequential upon poor workmanship. Any risk in that respect is assumed by the owner of the vessel.
[126] It is apparent from the earlier analysis that Clauses 4.1, 4.2 and 4.3 do not apply because the pin was not manufactured. Nor was it a good that was supplied. It was reused. It was taken out of the boss when the rudder was dismantled and returned to the boss when it was reassembled. The breach of contract was in the reinstallation. That was a service.
[127] The consequence of this interpretation is that the defendant is obliged to make good the defective work either directly or by engaging another firm to do so. If it does it is entitled to recover from the plaintiff its initial charge for repairing the rudder, but not the additional cost for making good.
[128] The vessel is located currently in Tasmania. There is a dispute as to the cost of making good in Tasmania. This is complicated by the fact that the pin was cut in half, to remove it, and the crosshead also cut for more detailed inspection. In the circumstances making good means replacing the pin and the crosshead. The defendant agreed in Auckland that the pin and crosshead be removed, by the pin being cut. The internal surface of the crosshead was scored. The most cost effective way of making good would be for the defendant to arrange for a Tasmanian marine engineering firm to provide and install a replacement crosshead and pin.
[129] If the defendant refuses to make good the plaintiff is entitled to damages equivalent to the cost of making good. The current estimate of costs for repairing the rudder includes numerous other aspects such as the repair to the flap.
[130] Leave is reserved to both parties to file submissions directed to the question as to whether the defendant will resume the responsibility of replacing the pin and crosshead and installing the same, either directly or by using another firm, or pay a sum to meet that cost.
[131] The defendant has counterclaimed in contract for payment of its outstanding invoices. The amount outstanding is $61,198.97. Of that sum $31,237.93 relates to work performed on the rudder. As already noted that work on the rudder included replacing the bushes on the flap. Part of the sum must include the cost of installing the rudder. As discussed, if the defendant makes good, the defendant is entitled to recover the original charge for manufacturing the crosshead and reinstalling the pin. However, until the defendant agrees to make good the defective work, it cannot pursue judgment for the cost of that work. There is no particular efficiency in making a judgment now for the balance of the account relating to other work though that balance is due, and in arrears. Final quantification of the sum due on the counterclaim should wait until and unless there are any complications in establishing the cost of making good, which if met by a liability for damages may be set off against the judgment sum on the counterclaim.
[132] Accordingly, leave is reserved to both parties to address the final judgment sum on the counterclaim at the same time as filing submissions on the issue of making good. There is more detail as to final submissions at the end of this judgment.
Interest on the debt to the defendant
[133] The conditions of sale provide in Clause 1.1(b) as follows:
Payment for the goods and services supplied is due on the 20th day of the month following the date of the invoice (“the Due Date”). If full payment is not made by the due date then without prejudice to any other remedies available to the Company:
…
(b) Interest on monies overdue may be charged on a daily basis and be calculated by adding 5% per annum to the overdraft rate payable by the Company to its bankers at the time of and during such default and interest shall continue to accrue both before and after judgment.
[134] The plaintiff protests that this is a penalty and so is unenforceable.
[135] Under cross-examination the general manager of the defendant, Mr Cockerell, agreed that if accounts were paid a week or nine days later instead of the 20th all the firm would really be losing was the overdraft interest and that the 5% margin was really just the defendant trying to deter that sort of late payment. He agreed that yes, he was discouraging companies from using them as a bank.
[136] This provision in the agreement is drafted in a way that enables the defendant to use its discretion as to whether or not to apply it. That discretion is more likely to be exercised when the payments for invoices are well overdue, not just by a matter of a few days.
[137] When debts are well overdue the cost to the company is likely to be significantly greater than the overdraft interest the company pays to the bank. The loss of revenue from such overdue accounts generate head office administration costs of recording the overdue balance and efforts to obtain payment. On top of that there may also be a lost opportunity cost. The overdraft facility may be better used.
[138] Against these obvious considerations I do not think that the plaintiff has proved that the contract interest rate is a penalty, rather than an arrangement of payment to be imposed to cover the cost of delay.
[139] The lowest interest rate applicable for the relevant period (based on Westpac’s overdraft rate to the first defendant plus 5%) is 11.55%; the highest is 13.5%. I do not think that is unconscionable for the above reasons. I think it is the range of being a fair pre-estimate of the probable damage. See Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at page 86-87. In sum I think that the clause is closer to being a pre-estimate of damage than it is to being a penalty. It is not a stipulation in terrorem. These comments are to a degree discursive because, as Lord Dunedin pointed out in Dunlop, the test is stated in various ways. Ultimately it is a judgment made by the Court. It is a judgment of this Court that the stipulated interest rate is enforceable by the defendant.
Fair Trading Act 1986
The representations
[140] The plaintiff pleads a Fair Trading Act cause of action based on representations that it says were made by employees of the defendant to employees of the plaintiff that use of a sledgehammer to put the pin into the trunnion bearing was proper and workman like and would not cause any defect in the rudder. Second, on a different occasion, that the work done would see the vessel through to its next out-of-water survey in four years time.
[141] They say that these representations were misleading and deceptive in breach of s 9 of the Fair Trading Act. Section 9 provides:
9 Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[142] They also pleaded another representation that after carrying out the repair work Mr Mark Collins said that the defendant had taken rudder stock and pintle bearing measurements and made a report. They did not pursue that allegation as part of the Fair Trading Act cause of action in this Court. Measurements were taken by Mr Cooper in the workshop but they were not reported to the plaintiff because at that time the plaintiff was not the owner of the vessel.
[143] The argument was that the representations were causative of loss because had the employees of the defendant given a correct answer, namely that the use of the sledgehammer had not been proper and workman like and that there was a defect, the damage would have been made good before the vessel sailed and the consequential loss avoided.
[144] Section 43(1) and (2)(d) of the Fair Trading Act provides:
43 Other orders
(1) Where, in any proceedings under this Part of this Act, or on the application of any person, the Court finds that a person, whether or not that person is a party to the proceedings, has suffered, or is likely to suffer, loss or damage by conduct of any other person that constitutes or would constitute—
(a) A contravention of any of the provisions of Parts 1 to 4 of this Act; or
(b) Aiding, abetting, counselling, or procuring the contravention of such a provision; or
(c) Inducing by threats, promises, or otherwise the contravention of such a provision; or
(d) Being in any way directly or indirectly knowingly concerned in, or party to, the contravention of such a provision; or
(e) Conspiring with any other person in the contravention of such a provision—
the Court may (whether or not it grants an injunction or makes any other order under this Part of this Act) make all or any of the orders referred to in subsection (2) of this section.
(2) For the purposes of subsection (1) of this section, the Court may make the following orders— …
(d) An order directing the person who engaged in the conduct, referred to in subsection (1) of this section to pay to the person who suffered the loss or damage the amount of the loss or damage:…
[145] The defendant denied vigorously that the representations were made. Second, they argued that the plaintiff must also prove the defendant did not properly repair the rudder. There is a conflict of evidence as to whether these representations were made.
[146] I start with the vessel’s engineer, Mr Peter Whalan. He says he was on site with the skipper, Mr Nathan Collins, when the rudder was being installed and observed Lyttelton Engineering men knocking in the new shaft with a sledgehammer. He said they queried this and were advised this was not a problem. He says the persons who advised him of this were Mr Mark Collins and a Lyttelton Engineering worker called Frank.
[147] Mr Whalan said after the repairs were completed, and inferentially after the vessel was refloated he had another conversation with Mr Mark Collins and Frank and questioned the standard of repairs. He said Mr Collins assured him all was in order and would suffice until the next out of water survey in four years time.
[148] Under cross-examination he was not sure when these conversations were made. He thought the first conversation would have been the same day the dry dock was flooded or the day before. He did recall he was on the top side of the dry dock. He was not 100% sure whether Frank was there. He thought the second conversation also took place on the side of the dry dock but he was not 100% sure. He thought the skipper was present with Mr Mark Collins from the defendant.
[149] The skipper, Mr Nathan Collins, said he was with Mr Whalan and they went to inspect the work on the boat. When the defendant’s workers were putting the new shaft into the bush on the rudder crosshead, they knocked it in with a sledgehammer. He said he queried this but they said it was not a problem. It may be noted he places the representations from unknown employees.
[150] He also said that when all the work had been finished Mr Mark Collins advised that all was good and the repairs would see them through to the next out of water survey. He thought this conversation was on or about 3 May.
[151] In cross-examination Mr Nathan Collins thought the person they were talking to when knocking it in with a sledgehammer was the operations manager, Frank. However, he was not sure and said there were two engineers hitting it in. He could not recall whether his second conversation with Mr Mark Collins was before or after the dock was flooded. It was put to him that Mr Mark Collins was going to deny the second conversation ever took place. He answered that he spoke to him and that he can recall it because they were both at that stage happy with what had happened.
[152] Mr Mark Collins and Mr Frank Shepherd both denied the relevant conversations took place. However, Mr Mark Collins did accept that he often had conversations with customers. He was asked these questions:
q. Mr Collins you must often be asked by customers whether the work that Lyttelton Engineering has done has addressed the problems or has repaired whatever had to be done on a particular vessel.
a. Yes.
q. And presumably when you are asked those sorts of questions you will tell them that the work has been done properly.
a. Yes.
q. Isn’t it possible that you had just that sort of conversation with Nathan Collins and Mr Whalan but you simply can’t recall it.
a. No.
[153] Counsel for the plaintiff submitted that both sets of conversations were inherently likely. I agree. It is more probable that the first set of conversations were with the workers actually forcing the sledgehammer in, than with the operations manager.
[154] On the probabilities I accept that both sets of representations were made. The first by one of the two engineering staff installing the pin and the second by Mr Mark Collins.
Whether misleading conduct
[155] It is another question as to whether these representations are misleading conduct as that standard is intended to be used by Parliament in s 9 of the Fair Trading Act. These conversations do not amount to more than the usual sort of remarks one would expect from talking to a tradesman while work was being done or after it had been completed. It is not suggested that the conversations were anything but honest at the time. There was evidence that the job was being rushed because of the fact that there were other vessels booked to use the dry dock. As soon as the installation of the rudder had been completed the chocks were opened to refill the dry dock. There was no suggestion that either set of remarks were made with the intent of deflecting the plaintiff from following up any concerns it may have had as to the installation of the pin. Mr Cooper and the expert marine engineer, Mr Nelligan, gave evidence that it was a workman like method to use a hammer to force the pin into the head of the boss. The deficiency in providing services in a normal and workman like manner that I have found related not to the forcing of the pin in but to a substandard repair work to the free end of the pin subsequently.
[156] Counsel for the plaintiff submitted that as a matter of law it was sufficient to show that the representations were misleading or deceptive in that they were incorrect; that the plaintiff did not have to show that the defendant knew that the representations were incorrect. Counsel relied on the Court of Appeal decision of Bonz Group (Pty)Ltd v Cooke (1996) 5 NZBLC 104, 188 at 104,193-104,194. They relied upon a dictum from the judgment of the Court delivered by Gault J:
It is of course clear that there is no element of intention necessary for contravention of s 9. There will be breach where the conduct results in a substantial section of the public being misled or deceived or a likelihood of that. Where misrepresentation is said to be required, that is to exclude from the ambit of the prohibition wholly accurate indications which, in particular circumstances, give rise to misunderstanding (as was in issue in Unilever v Cerebos Gregg’s) - not to introduce an element of intention.
All of this demonstrates the importance of what was said in this Court in Taylor Bros Ltd v Taylors Group Ltd and reiterated in Trust Bank Auckland Ltd v ASB Bank Ltd (1989) 2 NZBLC 103,558 at p103,562; [1989] 3 NZLR 385 at p 388 that judicial exegesis probably can do little at a general level to expand upon the ordinary words of the section and obviously cannot be allowed to supersede them.
[157] Accordingly the question is whether objectively the representations were misleading and deceptive. When applying the words to the facts one needs to keep in mind that the words are a standard raising a question of degree and need to be applied to achieve the purpose of the Act. Relevantly this is “to prohibit certain conduct and practices in trade”. See the long title.
[158] The learned editors of “Gault on Commercial Law” Vol 1 at FTIntro.01 say in introducing the Act:
… the Honourable French J has said of the most important section in Part V of the Australian Trade Practices Act 1974 on which the New Zealand Act is based that “it might be argued that s 52 was necessary to establish minimum standards of commercial probity in the way in which the developmental processes of the common law could not accommodate.”
[159] The remarks that were made would not be naturally found to be misleading or deceptive conduct. They are the sort of conversations that are typical of workmen after finishing a job. They were casual responses to casual questions. They were not the sort of conduct that can have engendered the legislature whether in Australia or New Zealand to pass this legislation.
[160] There is a danger in leaping from a finding that it is not necessary for the statements to have been deliberately misleading and deceptive to concluding that any incorrect statement is misleading and deceptive. The Courts have sensibly declined to gloss the statute as requiring any kind of judgment of culpability. But equally the Court of Appeal has reiterated the need to leave the words as they are and simply apply them to the facts. I am simply not persuaded, recognising that it is a question of degree, that these conversations were misleading or deceptive conduct in trade, in the context in which they were made.
[161] Mr Campbell submitted that the limitation clauses in the contract cannot exclude liability under the Fair Trading Act. See Smythe v Bayleys Real Estate Ltd (1993) 5 TCLR 454, 472, per Thomas J. I agree. But it does not follow that prior notice of those clauses has no relevance to the context of the conversations between engineers and the ship’s representatives.
[162] The context is important. Here that includes the contractual setting, where the parties appreciated that the defendant was not giving a warranty. See Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, 605:
In applying those principles, it is important that the agent’s conduct be viewed as a whole. It is not right to characterise the problem as one of analysing the effect of its “conduct” divorced from “disclaimers” about that “conduct” and divorced from other circumstances which might qualify its character. Everything relevant the agent did up to the time when the purchasers contracted to buy the Rednal land must be taken into account.
(Per Gleeson CJ, Hayne and Heydon JJ)
[163] It is relevant that the conversation about use of the hammer happened after the work was done. It is relevant the statements were made at the end of a process in which the plaintiff was taking its own steps to monitor the quality of the work. The questions were asked casually. That is not to say that the question as to the use of the hammer was not a serious one, or one naturally made in the circumstances. But it was not a “we are going to depend on your answer” question. They could easily have raised the matter with the surveyor as well. The rudder was tested. One could not have expected any other answer.
[164] Mr Mark Collins’ observation that the work would see the vessel through to its next survey, was just that, an observation. In the context the vessel had had its hull inspected, cleaned, painted, the rudder rebuilt and a miscellany of other jobs done, after it came out of dry dock. The plaintiff’s witnesses would not have expected for a moment that Mr Collins was guaranteeing the life of the work.
[165] In any event moving onto s 43, I do not think that the statements were the occasion of the loss or damage. The representatives of the defendants could hardly say anything else. If they had possibly declined to comment, I do not think the plaintiff’s representatives would have taken the matter further. The surveyor accepted the work.
[166] For these reasons the cause of action under the Fair Trading Act fails.
Contingent consideration of quantum issues
[167] In the event that any of the foregoing reasoning is reversed, on any appeal, and the question of the amount of damage suffered by the plaintiff needs to be considered, I go on to make findings in this respect.
Agreed losses
[168] The parties have agreed that the plaintiff incurred the following expenses as a result of the rudder jamming:
Costs of towing FV “Kap Farvel” by FV “Saxon Onward” $220,308.00
Cost of towing by tug “Christine Mary” $31,781.25
Diving and removal of rudder $19,411.65
Berthage and port services $2,777.00
Miscellaneous, including electrical services $1,850.00
Disputed repair cost
[169] The parties have not agreed on the cost of permanent repairs for the rudder, as I have averted to before. The plaintiff produced a quote for $306,809 but the defendant alleges that it covers more than simply replacing the crosshead and that the cost is more likely to be something in the region of $20,716. As already noted I am leaving that matter for further submissions.
Disputed lost catch
[170] The parties have not agreed on the amount of fish catch lost and its value. The plaintiff pleaded a loss of catch value at $906,980.74 but in the evidence led by its expert, Ms Hall, this was reduced to a range between NZ$719,224 to NZ$790,579. The defendant’s expert, Mr Fawcett, placed the probable loss in the range of NZ$240,060 and NZ$329,609.
[171] Both parties called well qualified experts to assess the loss. Ms Hall is a forensic chartered accountant specialising in fisheries related matters including loss of fishing claims. She has specialised in forensic accounting in fisheries since 1989.
[172] Mr Fawcett is a senior loss adjuster with an impressive career in the quantification and settlement of business interruption claims and other economic losses over a wide range of industries since 1973.
[173] Both experts used much the same approach to their calculations. They assessed the loss of fish catches by looking at available data for all vessels fishing for Orange Roughy in the same vicinity. Both experts seem to have had access to much the same set of data. They varied in the selection of the data. From the historic data they formed judgments as to how much the vessel would have caught had it stayed in the fishing ground. They have a slight difference in the number of lost days fishing, Ms Hall at 11.25 days, and Mr Fawcett at 10.9 days. But the main difference between them is in the selection of the historic data in order to obtain data which is the best available indicator of the likely catch. I will refer to that evidence shortly in more detail. They also differed on the values per kilo to be placed on the fish, another difference to which I will refer to shortly. Essentially they agreed the deducted expenses being variable costs, that is costs which would have occurred had the fish been taken.
Number of lost days
[174] The rudder failed on 6 July. The vessel arrived back at the fishing ground on 17 July. The rudder failure was at about 1835 hours on 6 July and the vessel was back on the fishing ground at 1600 hours on the 17th.
[175] Ms Hall said the elapse of time difference between her and Mr Fawcett was that he assumed that because 1835 hours was late in the day the plaintiff would not likely have done another shot (letting the net out again). Ms Hall said fishermen will fish on into the evening if the fish are there. She was of the view the fish were there because the shot which became pinned to the seabed immediately before the jamming was a shot collecting fish.
[176] That seems to me to be a reasonable point of difference and accounts for Ms Hall’s additional hours. However, it also identifies what I think is a general weakness in her approach, which is to assume that during the lost fishing time, the vessel will readily be able to find fish to catch. Other evidence suggests that fishing vessels can spend a considerable period of time on a fishing trip locating the fish and can lose touch with fish located quite quickly. These reflections reinforce the importance to appreciate that this is essentially a hypothetical exercise and needs to be tempered with a degree of conservatism if it is going to be in any way realistic.
Utilisation of catch histories
[177] It was common ground between the experts that the Orange Roughy fishing has peaks as the fish gather for spawning and then rather like the back end of a bell curve, the fishing falls off quite rapidly. For that reason Mr Fawcett observed that the fact that another vessel in the same grounds took a single 20 tonnes shot on 6 July is not persuasive evidence of the expected catch over the next 11.25 days, even if it were an accurate statement by one fisher to another about how big his catch was.
[178] I think for these sort of reasons the approach of Mr Fawcett was to take all the data available from fishing in these areas and to average them. It needs to be commented that this data in itself is relatively sparse. Fishing data has to be reported to the Government authorities but is confidential. Most of the data relied upon by the experts was derived from other vessels in the plaintiff’s fleet and some other data available from colleagues.
[179] By contrast, Ms Hall reasoned this way: she noted that having spent four or five days searching and achieving minimal catches before the rudder jamming, it would appear that the vessel had located a good fishing position on 6 July. The first shot that day achieved a catch of 1500 kgs H and G (headed and gutted). The second shot which caused the gear to be pinned onto the floor was of only five minutes duration but still achieved a catch of 500 kgs H and G. Ms Hall assumed that at the point of jamming they had located a good quantity of fish which could be consistently caught for a period of some days at the rate of three to four shots per day. She analysed the catch of a vessel sent to replace the Kap Farvel by the plaintiff. This is a vessel called the Corvina which arrived about 12 July and caught 42,000 kgs in two days. However, on the assumption that historic records show that the likely spawning peak was about a week before, this catch should be understood as during the tapering off period. As to the lost fishing opportunity between 6 and 14 July, Ms Hall looked at a similar period of time in 2001 and the fish taken by another of the plaintiff’s vessels, the Cape Hood.
[180] However, Mr Fawcett criticised this form of logic because it depends on the proposition that the fish are peaking at approximately the same time every year, 4 July. They certainly do gather to spawn at approximately the same time each year. Scientific records show this. A relevant scientific paper by NIWA co-authored by a scientist from NIWA and a scientist from Bureau of Resource Scientists, Australia, said of the fishing ground that the ripe running stages peak at about day 185 (4 July). However, on the basis of this logic Ms Hall assumed that the vessel would have five days of best fishing then 2.25 days of reduced catch and then four days of a tapering off period.
[181] By taking all the fishing data available to him Mr Fawcett looked at a much longer period from late June through until the latter part of July. He took dates from 23 June through to 16 July.
[182] In this respect some of his data showed significant catches at the end of July. For example by the Corvina on 14 July 2004, 24,000 kgs green (ie before being headed and gutted), and by the Cape Hood on 16 July, 30,000 kgs green. His data tended not to show peaks around 4 to 10 July. This was complicated by the fact that the vessels he was looking at were not freezer trawlers so they had to return. For example, the Cape Hood in 2001 caught 50,000 kgs green on 2 July but had to leave the waters on that day. When it came back on 13 July it did not achieve significant catches until 15 and 16 July. The same vessel, the Cape Hood, did not achieve particularly significant catches on 6, 8, 9 and 10 July.
[183] Ms Hall’s evidence relies a lot more on the scientific observations of the peak of spawning, around 4 July, rather than on a catch history for the plaintiff’s vessels peaking around that period. By contrast, Mr Fawcett’s approach tends to simply average out the catch history and in that respect does not focus on a peak period of fishing. Both perspectives have their strengths and their weaknesses.
[184] The scientific observations as to the spawning and run peaking are more probably than not correct. But it does not follow that the plaintiff’s vessel is going to be able to locate fish at the peak of the spawn. It spent four or five days before it found them on 6 July. Mr Fawcett’s data suggests that the plaintiff did not actually plan its trip so that the vessels would be over the fishing ground at what the scientists said were to be the peak of the spawn. The Corvina was not there at the peak in 1999, nor in 2002, nor in 2003, nor in 2004. Similarly, the Cape Hood was there during the peak in 1999 and for part of the peak in 2001. However, the fact is that the plaintiff’s vessel the Kap Farvel was there around about the period the scientists would say was the peak on 6 July. But it had not had much luck in the four to five days beforehand.
[185] These sort of reflections reinforce in my own mind that here we have two experts trying to make the best use they can of what data is available. It is a frequent observation by the Courts that the task of assessing damages which is necessarily on a “what if” basis is difficult. Nonetheless, the Courts have to do their best with the data that is available, just as the experts have to.
[186] Overall, I gained the impression during the trial that Ms Hall’s method was to a degree optimistic as to the ability of the Kap Farvel to tap into the peak of the run and not to lose contact with the fish during that run and to regularly take fish at three or four shots over the peak and thereafter. It did not allow for losing the fish or for example, problems with the fishing gear failing. Second, I gained the impression that the approach of Mr Fawcett did not allow sufficiently for the fact that he was looking at data from vessels which had to leave the fishing ground after a period of a few days because they did not have freezer capacity so that the catches were not a good guide of what could have been achieved by a vessel with freezing capacity. Mr Fawcett, more than Ms Hall, seemed to be alive to all these problems with the data. Although I think his method is a tad too conservative, I think it is also closer to a more realistic assessment than Ms Hall’s, whose assessment seems to be too optimistic by assuming that once found, the fish would not be lost.
[187] Mr Fawcett was not aware originally that the plaintiff’s vessels had the custom of fishing in one part of the fishing grounds and then moving about 100 miles to a second part, always in that order. Fishing in the first location tended to be at the end of June and fishing in the second, in July. The Kap Farvel was in the second of those two locations when it jammed. Inasmuch as the expert’s method was to collect data from the subject fishing ground, the data could be, and was criticised as including the data from the first location and not being confined to the second. However, Mr Fawcett pointed out that Ms Hall, while aware of the distinction between the two locations, did take data from the Cape Hood’s first trip in 2001 at the end of June, which in the absence of more specific information, is likely to have been from the first rather than the second location.
[188] There was no particular evidence that the second location tended to fish better than the first. Rather the evidence was that the Orange Roughy gathered for spawning in the first location at one period of time and then there was a second spawn in the second location at a different time.
[189] Another complication with the utility of the data is that it is natural that the seasons will vary considerably. Mr Fawcett could see that in the data. He criticised Ms Hall for using the Cape Hood’s 2001 trip which was two years before the season with which we are concerned and which did not coincide with the days in the season. He noted it happens to be the best trip for any of the plaintiff’s vessels in any trip.
[190] Mr Fawcett looked at three different ways of estimating the daily catch of vessels. In Table 1 he took those days where the vessels reported catch totalled the weight and divided it by the days reported and produced average for the Corvina of 5363 and for Cape Hood of 7793. This is a favourable analysis because it does not allow for time searching, except possibly two days for the Corvina on 29 June and 13 July 2004. He then averaged those days to 6252 across both vessels.
[191] He then did an adjustment to allow for searching time by assuming that both vessels were actually in the fishing grounds seven days per trip. Thereby by taking the total days per trip and dividing it against the total catch per trip he arrived at a lower average of 4577. However, he went to say: I acknowledge that my use of 7 days per trip in Table 3 is not very authoritative and this inclines me to the view that the higher daily average is more realistic. However, I have also expressed some reservations that this figure might be too high.
[192] Ms Hall focussed on three fishing trips. This was because she considered it important to take catches from the second location. In this respect I read her evidence as indicating that the Cape Hood 2001 catch referred to by Mr Fawcett as likely being at the first location was in fact at the second location.
[193] Her estimate was, however, optimistic inasmuch as she inferred that the Kap Farvel would have taken similar sort of catches consistently in the first week from 6 July; that the vessel would not lose touch with the mass of fish gathering for spawning; that nothing would go wrong with the gear; and indeed that the gathering of fish would be continuously from 6 July on, for at least a week. She assumes that the fishing would be as successful as the Cape Hood fishing trip in 2001 and that the reported catch of the Tasman Viking, while the Kap Farvel was on the ground was repeatable. She had the vessel catching 20 metric tonnes headed and gutted per day for five days and then for two and a half days at 15 metres per tonne and then tapering off for four days at 7.5 metres. This would be a very successful trip.
[194] Ms Hall’s evidence as to the peak fishing period seems to be justified principally by the evidence of Mr Boote as to the catch of his company’s vessel, Tasman Viking, on the fishing ground approximately 20 nautical miles from where the Kap Farvel was fishing. This was a take from fishing between the 4 and 9 July. The Tasman Viking landed approximately 104,000 kg of Orange Roughy (green). That averages out at 20,000 (green) per day. But that is half the estimate of Ms Hall for best fishing at 20 metric tonnes H and G per day. The Cape Hood 2001 figures for a period of five days between 28 June and 2 July approximated 29,000 kgs or 14,500 H and G per day. Ms Hall assumed that the Kap Farvel in its peak catch period would have taken an average of 21,000 green weight per day. Ms Hall was cross-examined on the proposition that her figures per day at peak were approximately double the available evidence.
Conclusion on lost catch
[195] In the end I have concluded that it would be totally artificial to try to draw some sort of third assessment as an amalgam of the two approaches. Given their differences in approach that is not easily done. But the safer and more reliable course would be to take the higher end of Mr Fawcett’s range of catch per day. He took a range of 4577 kg per day low and 6252 kg high.
[196] I take the higher figure, as the most likely of the figures proffered by Ms Hall and Mr Fawcett.
Price
[197] The experts also differed on how best to use the pricing data. The price for Orange Roughy differs depending on whether it is green (entire fish) or head and gutted and where it is landed, Australia or New Zealand, as different ports have different markets on any one day and the same port can have a different market price from day to day.
[198] As to the sales value per kilo of lost catch, Ms Hall used a projected profit and loss document of the plaintiff together with opinions from fishing agents financially related to the plaintiff.
[199] Mr Fawcett’s view was the only figure with any authority is the value actually paid for the Kap Farvel’s fish landed at the conclusion of its affected voyage in early 2003.
[200] I agree that actual market prices are better than internal company projections or opinions expressed by companies which are financially related to the plaintiff. There is a complication because there is a possibility that the Kap Farvel would have sold its Orange Roughy to the shipping agent with which it had a business/financial relationship and obtained a higher price than it might have otherwise obtained on the market.
[201] Because of the jamming there was 11,000 odd kilo off-loaded in Auckland to Sanfords at NZ$6.50. But of course that it not a good number because it does not reflect the price that would be obtained were the vessel to have stayed on station for at least another fortnight. Fish was sold to Racovolis at the end of the interrupted trip at AU$6.40. Mr Fawcett takes this figure. That seems to me to be a reliable figure.
[202] As I have indicated there is no significant difference in adjustment for variable expense. I do not think that the difference in assessment of lost fishing time between 10.9 and 11.25 or 11.5 is significant, because of the inherent variables over that period of time anyway.
General conclusions on quantum
[203] For these reasons I think the most reliable indicator of loss is to take Mr Fawcett’s revised higher figure which estimates a loss of catch of 68,145 kgs H and G and a loss in NZ dollars of $329,609.
Conclusion
[204] The defendant has substantially succeeded in the issues placed by the parties for trial. It is not possible to settle upon the judgment sum to which the defendant is entitled until the question of the defendant’s position as to making good the damage or the parties agreeing to a sum in lieu and/or set off is resolved. In that respect the parties have one calendar month from this judgment to either settle the matter or to exchange and file submissions. On receipt of submissions I will then issue as a minute as to whether or not there are to be submissions in reply and/or a hearing on the point.
[205] Costs are reserved. If the parties cannot agree on costs submissions should be exchanged and filed at the same time with the submissions on making good. Those two issues of making good and costs are accordingly reserved.
Solicitors:
Hamish Fletcher Lawyers, Nelson, for Plaintiff
Jones Fee, Auckland, for Defendant
APPENDIX A [Not reproduced]