Birkenfeld v Kendall
IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY
CIV 2004-485-1657
BETWEEN KIMBERLY BIRKENFELD
Plaintiff
AND ANTHONY BRUCE KENDALL
First Defendant
AND YACHTING NEW ZEALAND INCORPORATED
Second Defendant
Hearing: 7 June 2007
Appearances: Plaintiff in Person
N S Gedye for First Defendant
N A Beadle for Second Defendant
Judgment: 27 September 2007
RESERVED JUDGMENT OF RANDERSON J
This judgment was delivered by me 27 September 2007 at 12 noon, pursuant to r 540(4) of the High Court Rules
Registrar/Deputy Registrar
Solicitors: Beca & Co, PO Box 91441, Auckland
DLA Phillips Fox, PO Box 160, Auckland
Counsel: N S Gedye, PO Box 2097, Shortland Street, Auckland
Copy To: K Birkenfeld, 2475 Brickell Avenue, Miami, Florida 33129 USA
Introduction
[1] This judgment deals with several interlocutory applications in this proceeding brought by Ms Birkenfeld. She sustained serious injuries in a collision at sea off the coast of Greece on 8 August 2002. In the collision, Ms Birkenfeld’s windsurfer collided with a rigid inflatable boat (RIB) owned by the second defendant, Yachting New Zealand, and driven by the first defendant, Mr Kendall.
[2] The plaintiff claims some $15 million in general damages for her injuries along with special damages of over $55,000. But under Part VII of the Maritime Transport Act 1994 (the MTA), the owners of ships and other defined parties may be entitled to a limitation of liability fixed by reference to the tonnage of the offending ship.
[3] In a separate proceeding (CIV 2005-404-438), Yachting New Zealand sought a decree limiting its liability to Ms Birkenfeld to 250,010 “units of account” under the MTA. In a reserved decision issued on 22 July 2005, Keane J granted the decree. An appeal brought by Ms Birkenfeld was subsequently dismissed by the Court of Appeal (reported as [2007] 1 NZLR 596) and her application for leave to appeal to the Supreme Court was also later dismissed.
[4] On 15 August 2005 Venning J made an order in the separate proceedings that service of the limitation decree made by Keane J be effected on Mr Kendall and the International Sailing Federation Inc. Venning J also ordered that the making of the decree be advertised in a prescribed manner in Greece. The advertisement called for any other person with claims arising from the same incident to enter an appearance and file their claims and, if they thought fit, to apply to set the limitation order aside. Any such steps were to be taken by 14 November 2005. There is affidavit evidence that the advertisements were duly placed and that no further claims have been lodged.
[5] On 13 November 2006, solicitors representing Yachting New Zealand wrote to Ms Birkenfeld making an open offer to settle her claim in the total sum of $734,003 calculated as follows:
Limitation fund NZ$560,099.64
Interest NZ$182,070.73
Scale costs NZ$ 9,910.00
Allowance for disbursements incurred by you NZ$ 5,000.00
Sub-total NZ$757,080.37
Less – costs awards in favour of YNZ NZ$ 23,077.37
Total NZ$734,003.00
[6] The limitation fund of $560,099.64 was calculated in accordance with s 88 MTA. Interest was added with effect from 8 August 2002 (the date of the collision) to 4 December 2006 (which was considered to be a reasonable time for Ms Birkenfeld to decide whether to accept the offer). The interest rate was 7.5% being the rate applicable for the relevant period under the Judicature Act 1908. None of these figures have been challenged by Ms Birkenfeld.
[7] The letter from the solicitors for Yachting New Zealand concluded with an undertaking given to Ms Birkenfeld by the insurer of Yachting New Zealand:
Vero Marine Insurance Limited (Vero), hereby undertakes that, in the event:
15.1 you accept this offer; or
15.2 the Court orders YNZ and/or Mr Kendall to pay to you NZ$734,003 together with such further sum as the Court may order by way of further interest upon the Limitation Fund;
Vero will pay you on demand NZ$734,003, together with such further sum as the Court may order by way of further interest upon the Limitation Fund, provided always that the total sum Vero shall be required to pay shall not exceed US$500,000 at the date of such order.
I am authorised by and as agent only for Vero to give this undertaking to you. Security for the payment has therefore been given pursuant to section 88(1)(a) above, and the limitation amount fixed in accordance with the calculation above.
[8] Ms Birkenfeld has not accepted the offer, submitting to the Court that she is entitled to have liability for the collision determined.
[9] In the meantime, by judgment delivered on 21 March 2006, MacKenzie J ordered Ms Birkenfeld to pay the sum of $50,000 as security for costs for both defendants. An order was made that the proceeding be stayed if the security was not provided by 30 June 2006. The period for payment of the security was later extended until 10 November 2006 but has still not been paid.
Applications
[10] Against that background, four interlocutory applications were made:
a) An application by Yachting New Zealand for an order that the limitation fund be distributed to Ms Birkenfeld and for an order permanently staying the proceeding.
b) An application by Mr Kendall for a permanent stay of the proceeding.
c) An application by Ms Birkenfeld for an order striking out Mr Kendall’s application for stay.
d) An application by Ms Birkenfeld for directions as to discovery.
[11] At the commencement of the hearing, there was some discussion about the order in which the applications should be heard. Ms Birkenfeld submitted that her application to strike out Mr Kendall’s application for stay should be heard first. After hearing the parties, I determined I would hear the applications in the order stated above. I took the view that the application by Ms Birkenfeld to strike out Mr Kendall’s stay application could properly be considered as part of her opposition to Mr Kendall’s application. I made it clear to Ms Birkenfeld that I would allow her ample time to respond to the submissions made on behalf of the defendants so that she would not be disadvantaged in any way.
[12] I had intended to hear from both defendants in support of their applications first, before hearing from Ms Birkenfeld. However, at her request, I allowed her to respond separately to each application after each counsel had made their submissions. The hearing occupied one day and Ms Birkenfeld was heard fully. I also allowed her to file after the hearing copies of certain authorities she wished to rely upon. Those authorities were provided and have been considered.
The application by Yachting New Zealand for orders for distribution and permanent stay
[13] The application by Yachting New Zealand seeks orders that the limitation fund be distributed by payment to Ms Birkenfeld of the amount of the settlement less the costs of this application. Yachting New Zealand also seeks an order that this proceeding be permanently stayed except for the purpose of enforcing payment of the amount of the settlement.
[14] On behalf of Yachting New Zealand, Mr Beadle submitted that, upon distribution of the fund, Ms Birkenfeld will have achieved all that she could lawfully achieve on the pleadings against Yachting New Zealand and Mr Kendall. He submitted it would be inequitable to require the defendants to continue to incur the cost of defending these proceedings and that, in terms of r 477 High Court Rules, to maintain the proceeding in the circumstances would be frivolous or vexatious and an abuse of the process of the Court.
[15] As to jurisdiction to make the orders sought, Mr Beadle relied by analogy on s 89 MTA, the provisions of the Convention Limitation of Liability for Maritime Claims 1976, and the inherent jurisdiction of the Court.
[16] Ms Birkenfeld opposed the application on the basis that liability for the collision was contested and no determination of liability had been made. She pointed out that neither Yachting New Zealand nor Mr Kendall had admitted liability. The incident had not been reported to Maritime New Zealand by any of the parties involved; there was no tonnage certificate as required by s 87(5)(c)(i) MTA in relation to the RIB; and s 89 MTA did not apply in the circumstances of the case. Ms Birkenfeld also submitted that the public and her family had a right to know what caused the accident. The recovery of damages was either of no importance or only a secondary consideration.
[17] The starting point is that the decree made by Keane J has conclusively established that Yachting New Zealand is entitled to a limitation of liability under s 86 MTA in respect of Ms Birkenfeld’s claim. The liability of Yachting New Zealand is also conclusively established to be limited to 250,010 units of account calculated in terms of s 87 MTA. There is no dispute that the value of the units of account expressed in New Zealand currency is $560,099.64 as at the relevant date in terms of s 88(1) MTA. The “relevant date” is the date on which the limitation fund is constituted, or payment is made on the claims, or satisfactory security for any such payment is given. Mr Beadle submitted that satisfactory security was given on 13 November 2006 when Vero Marine Insurance Limited gave the undertaking already mentioned. This Court has recognised that an undertaking of this kind constitutes the giving of satisfactory security in order to constitute a limitation fund: Tasman Orient Line CV v Alliance Group Limited & Ors [2004] 1 NZLR 650 at [58].
[18] I record that Ms Birkenfeld does not allege, in terms of s 86(2), that either of the defendants intended to cause loss, injury or damage or acted recklessly with knowledge that such loss, injury or damage would probably result. If she were able to establish that either of the defendants had acted on that basis, the limitation of liability would not be available. Ms Birkenfeld made it clear in her notice of opposition dated 6 June 2005 filed in the proceedings before Keane J that she made no such allegation and she confirmed in the hearing before me that this remained the case.
[19] Ms Birkenfeld earlier raised in the Court of Appeal whether the RIB was a “ship” for the purposes of the MTA and whether it was a vessel of less than 300 tonnes. The Court of Appeal determined these issues against Ms Birkenfeld at [29] to [45] of its decision of 9 August 2006.
[20] There was evidence before Keane J that the RIB was weighed at the Ports of Auckland weighbridge at Freyberg Wharf on 10 June 2003 and found to weigh 520 kgs (para 32 of the affidavit of Simon Wickham sworn 31 March 2005). This is not a case therefore where the gross tonnage of a ship is “unable to be ascertained” for the purposes of s 87(5)(c).
[21] I do not regard Ms Birkenfeld’s submission that there was a failure to report the accident to Maritime New Zealand as having any relevance to the issues I am required to determine. However, she is on firmer ground in submitting that there is no jurisdiction under s 89(2) for the Court to order that the limitation fund be constituted and payment distributed. Williams J so found in the Tasman Orient case at [69] to [71]. I respectfully agree with his conclusion for the reasons he gave.
[22] Section 89 MTA provides:
89 Court may consolidate claims
(1) Where 2 or more claims are made or expected against any person who is alleged to have incurred liability in respect of any claim of a kind referred to in section 86(2) of this Act, that person may apply to the High Court to have the claims consolidated.
(2) On any such application, the Court may—
(a) Determine the amount of the applicant's liability, and distribute that amount rateably among the several claimants; and
(b) Stay any other proceedings pending in the same or any other Court in relation to the same matter; and
(c) Proceed in such manner and give such directions relating to the joining or excluding of interested persons as parties, the giving of security, the payments of costs, or otherwise, as the Court thinks just.
[23] On its face, s 89 applies only to claims of a kind referred to in s 86(2) MTA. It is accepted that Ms Birkenfeld’s claim does not fall under s 86(2). Rather, it falls under s 86(1)(a)(i) being a claim in respect of personal injury. Williams J accepted that the reference to s 86(2) was not a simple drafting error which the Court was entitled to correct. I agree. I would add that, the main purpose of s 89 is to enable the Court to consolidate claims where two or more are made and to make consequential orders. Here, Ms Birkenfeld’s claim is the only claim. Rule 792(11) High Court Rules does not extend the scope of s 89. It merely permits the Court to make orders authorised by s 89 when making an order limiting liability.
[24] Despite the absence of jurisdiction under the MTA to make an order for distribution, I am satisfied the Court does have jurisdiction to make an order for stay under r 477 High Court Rules, subject to terms providing for the uplifting or distribution of the settlement offered in this case. I accept Mr Beadle’s submission that no good purpose would be served by permitting this proceeding to continue when one of the defendants to it has offered to pay to the plaintiff the maximum amount she could lawfully recover if the claim were successful. That would be wasteful of the Court’s resources. While I fully understand Ms Birkenfeld’s wish that there be a determination by the Court of responsibility for the collision, it cannot be overlooked that this is, in essence, a claim for damages. Yachting New Zealand is properly entitled to rely on the limitation of liability and has offered to pay the sum so calculated to Ms Birkenfeld in full, along with interest and costs.
[25] For the purposes of this application, Yachting New Zealand accepts Ms Birkenfeld’s allegations against it in terms of her amended statement of claim of 10 May 2005. Yachting New Zealand has said it recognises that her claim greatly exceeds the amount of the limitation of liability and, in making the settlement offer, accepts the commercial realities and risks of continuing to a hearing on the merits. It is not for the Court to make any judgment on the reasons said to justify Yachting New Zealand’s offer. It is enough to observe that it amounts to the maximum sum Ms Birkenfeld could lawfully recover in the proceedings.
[26] I conclude that, in the circumstances of this case, it would be an abuse of process to permit Ms Birkenfeld to proceed further with her claim against Yachting New Zealand. I therefore intend to make an order for permanent stay of the proceedings at least in relation to Yachting New Zealand. In reaching this conclusion, I have not found it necessary to determine the effect of Ms Birkenfeld’s failure to pay the amount ordered for security for costs but, self-evidently, this would constitute a further ground supporting a stay.
[27] I have considered the terms upon which the order should be made given the unusual circumstance that Ms Birkenfeld has declined or refused to accept the offer made by Yachting New Zealand even though she could recover no greater sum. It seems at least doubtful that the Court could make an order for payment or distribution to a reluctant plaintiff even if the offer amounts to the maximum sum lawfully recoverable.
[28] I have decided the proper course is to make an order permanently staying the proceeding against Yachting New Zealand on terms allowing Ms Birkenfeld six weeks to decide whether she will accept payment of the amount and, in default, directing Yachting New Zealand to pay the amount of the settlement offer to the Public Trust, to hold the settlement sum on her behalf, and to pay it to her at her request or direction. I will allow the parties the opportunity to make submissions as to the precise terms of any such trust.
[29] The amount paid would include interest on the limitation fund at the Judicature Act rate up to the date of payment to Ms Birkenfeld or to the Public Trust as the case may be.
The application by Mr Kendall for a permanent stay of proceedings and Ms Birkenfeld’s application for an order striking out Mr Kendall’s application
[30] It is convenient to deal with these issues together. The principal matter for determination is whether Mr Kendall is a person entitled to limit his liability under s 85(1) MTA which provides:
85 Persons entitled to limitation of liability under this Part
(1) Subject to subsection (2) of this section, the following persons are entitled to limit their liability in accordance with this Part of this Act:
(a) Owners of ships, and any master, seafarer, or other person for whose act, omission, neglect, or default the owner of the ship is responsible:
(b) Salvors, and any employee of a salvor or other person for whose act, omission, neglect, or default the salvor is responsible:
(c) Insurers of liability for claims subject to limitation of liability, to the extent that the person assured is entitled to such limitation.
[31] Mr Gedye submitted that Mr Kendall fell within the extended definition of “owner” in s 84 MTA:
Owner, in relation to a ship,—
(a) Means every person who owns the ship or has any interest in the ownership of the ship:
(b) In any case where the ship has been chartered, means the charterer:
(c) In any case where the owner or charterer is not responsible for the navigation and management of the ship, includes every person who is responsible for the navigation and management of the ship:
[32] Mr Gedye submitted that Mr Kendall fell within subpara (c) of the definition of owner, on the footing that Yachting New Zealand, as the legal and beneficial owner of the RIB, was not responsible for the navigation and management of the ship. Rather, at the relevant time, Mr Kendall was responsible for the navigation and management of it.
[33] There is some circularity between s 85(1)(a) and the definition of “owner” in s 84. However, I am satisfied that where the expressions “owner” and “charterer” are used in subpara (c) of the definition of “owner”, those expressions refer to the owner or charterer respectively under subparas (a) and (b) of the definition. Read in this way, the persons who are entitled to limit their liability under Part VII of the MTA are:
a) The legal or equitable owner of the ship (or anyone having an interest in the ownership of it);
b) A charterer;
c) A master, seafarer or other person for whose acts, omissions, neglects or defaults the owner or charterer is responsible;
d) Where the owner or charterer is not responsible for the navigation and management of the ship, every person who is so responsible.
[34] Keane J determined that Mr Kendall was responsible for the navigation and management of the RIB at the time of the collision and that Yachting New Zealand did not have any responsibility in that respect. The Court of Appeal has already found there is nothing to suggest the RIB was not used in navigation in the sense of planned movement: Birkenfeld v Yachting New Zealand Inc (above) at [38].
[35] Against that background, I agree with Keane J. The fact that the RIB was a “ship” capable of navigation implies that the only person physically in charge of it at the material time was responsible for its navigation and management. Indeed, Ms Birkenfeld pleads in her amended statement of claim that Mr Kendall was navigating and managing the RIB at the relevant time. On this basis, it follows that Mr Kendall is entitled to limit his liability as an “owner” in terms of subpara (c) of the definition in s 84.
[36] If on the other hand, as alleged by Ms Birkenfeld, Yachting New Zealand is responsible for Mr Kendall’s acts, omissions, neglects or defaults in relation to the collision, then Mr Kendall is entitled to the limitation of liability on that basis under s 85(1)(a) as “a person for whose act, omission, neglect, or default the owner of the ship is responsible”. That is consistent with the position under the Convention on Limitation of Liability for Maritime Claims 1976 (the Convention), upon which the MTA is based, which enables any crew member (whether a master or otherwise), for whom the owner is responsible, to avail themselves of the limitation of liability: Marsden Collisions at Sea (13ed 2003) at 594. I conclude that, on either basis, Mr Kendall is entitled to limit his liability under s 85(1) in the same way that Yachting New Zealand is entitled to do.
[37] Ms Birkenfeld’s opposition to the first defendant’s application for stay and her separate application for an order striking out the first defendant’s stay application raised several issues. The first was that Mr Kendall was not a party to the separate proceedings before Keane J and was not therefore entitled to rely on the decree. Rather, she submitted that Mr Kendall should have raised the limitation as a defence in his pleadings and should have counter-claimed for a declaration that he was entitled to limit his liability. In that respect, Ms Birkenfeld relied on r 792 High Court Rules.
[38] Rule 792 provides a mechanism for a party seeking to obtain relief in the form of a limitation of liability under Part VII MTA. If it is relied upon, then the proceeding must be in the form of an admiralty action in personam: r 792(2). Within stipulated time limits, the party seeking relief must thereafter file an interlocutory application for an order limiting liability or, in default, directions as to further proceedings: r 792(8).
[39] Rule 792 is a useful mechanism if there are multiple claimants or where, as here, a party seeks a decree limiting liability before final determination of the substantive proceeding. But as noted in the commentary in McGechan on Procedure at HR 792.02:
Where there is only one claimant, or all claimants are plaintiffs in one action, a shipowner will usually plead the right to limitation by way of defence or counterclaim: Meeson, at p 263, para 8-070: Toh, at p 430, both cited at HRPt14.Intro.03. This completely avoids the need to invoke r 792. However, if there is any prospect of other claims surfacing, the prudent course is to proceed under the rule.
[40] In his statement of defence dated 17 February 2005 (paras 12-14) Mr Kendall expressly pleaded as an affirmative defence, that he was a person entitled to limit his liability under s 85(1)(a) of the MTA and that his liability was limited to 205,010 units of account in terms of ss 86 to 88 MTA.
[41] He has not filed a counterclaim seeking a declaration of his entitlement but despite this, I do not consider there is any impediment to this Court now deciding, in the context of the present applications, whether Mr Kendall is also entitled to the limitation of liability enjoyed by Yachting New Zealand. The fact that a defendant has not sought to limit its liability in its pleadings does not preclude the Court from restricting the amount payable by that defendant to the applicable statutory limit: The “Waltraud” [1991] 1 Lloyds Rep 389. Moreover, it is always open to a shipowner to raise his right to limitation as a defence in an action brought against him: Polish Steam Ship Co v Atlantic Maritime Co and others [1984] 3 All ER 59 at 68.
[42] Nor is any further information needed in terms of r 792(8)(d) to enable Ms Birkenfeld to decide whether to dispute Mr Kendall’s entitlement to limit his liability. Ms Birkenfeld submitted, for instance, that she did not have any evidence that Mr Kendall was navigating or managing the RIB and that no “preliminary acts” had been lodged under r 785. However, as already noted, Ms Birkenfeld pleads in her amended statement of claim that Mr Kendall was navigating and managing the RIB. “Preliminary acts” are not necessary to determine the limitation of liability issue.
[43] Yachting New Zealand’s entitlement to the limitation has been conclusively determined at the highest levels and it is a pure question of law whether Mr Kendall is also entitled to the limitation. For the reasons I have given, it does not matter whether Yachting New Zealand was or was not responsible for Mr Kendall's admitted navigation of the RIB at the time of the collision. Either way, I have found he is entitled to the limitation of liability under the MTA.
[44] It has not been suggested that Ms Birkenfeld could claim up to the limit of liability from both Yachting New Zealand and Mr Kendall. In other words, if she recovers in full from one of them, then that is the maximum sum to which she is entitled. That is clear from both s 84 and s 86(3). The former provision defines “limitation of liability” as meaning:
limitation of the aggregate amount of liability of any one or more persons in accordance with this Part of this Act. (emphasis added)
Consistent with that theme, s 86(3) records that the limitation applies to the aggregate of relevant claims arising on any distinct occasion “against the owner of the ship, and any seafarer or other person for whose act, omission, neglect, or default, the owner is responsible.”
[45] As well, Article 11(3) of the Convention provides that a fund constituted under the Convention is deemed to be constituted by all persons mentioned in Article 9(1)(a), (b) or (c) or Article 9(2). These articles incorporate a reference to Article 1(2) which defines “ship owner” as meaning the owner, charterer, manager and operator of a seagoing ship. As the authors of Shipping Law (2ed 1995) state at p 455:
The fact that several different parties are entitled to limit their liability under the Convention does not mean that the limited amount is available several times over.
[46] Ms Birkenfeld also submitted it had not been proved Mr Kendall was a “master” of the RIB in terms of s 85(1)(a). In particular, she submitted there was no evidence that he held the relevant certificates required for that purpose. However, for the reasons already given, I am satisfied it is not necessary for Mr Kendall to rely on his being a “master”.
[47] I conclude that Mr Kendall is also entitled to rely on the limitation of liability decreed by Keane J in respect of Yachting New Zealand. There are no grounds upon which a stay of proceedings should not also be granted in the terms proposed in respect of Yachting New Zealand. Nor is there any basis to allow Ms Birkenfeld’s application to strike out the first defendant’s stay application.
Ms Birkenfeld’s application for discovery
[48] In the light of my conclusions on the other applications, there is no longer any live issue in the proceeding and there is no valid basis for discovery to be ordered against either or both defendants.
Summary
[49] This proceeding is permanently stayed against both defendants upon the terms which follow.
[50] The plaintiff shall have six weeks from the date of delivery of this judgment to decide whether she will accept the sum of $734,003.00 together with interest accruing at 7.5% on the amount of the Limitation Fund ($560,099.64) from 4 December 2006 (up to which date, interest is already included in the sum of $734,003.00). She must notify the Court and the defendants’ solicitors in writing of her decision by the expiry of the six week period.
[51] If the plaintiff accepts the sum offered then the total sum with accrued interest up to the date of payment shall be paid by the defendants to her or at her direction forthwith, subject to any outstanding costs issue.
[52] If the plaintiff declines to accept the sum offered, then the total sum with accrued interest up to the date of payment shall be paid to the Public Trust to be held for the plaintiff upon terms to be fixed by the Court. The defendants shall pay the total sum and accrued interest forthwith upon the Court fixing the terms of the trust, subject to any outstanding costs issue. In the event of the plaintiff declining to accept the sum offered, the defendants are to apply to the Court as soon as practicable for an order fixing the terms of the trust.
[53] Costs are reserved. If the defendants seek costs, they shall file and serve memoranda within 14 days of this decision and the plaintiff within 28 days after receipt of the defendants’ submissions.