The "Tasman Pioneer"
Tasman Orient Line CV v New Zealand China Clays Limited and others Supreme Court of New Zealand (Elias CJ, Blanchard, Tipping, McGrath and Wilson JJ)  NZSC 37 (16 April 2010)
B D Gray QC and N A Beadle for the Appellant, Tasman Orient Line; P R Rzepecky and M A Flynn for the Respondents, New Zealand China Clays
CARRIAGE OF GOODS BY SEA: SHIP DAMAGED BY GROUNDING: SEAWATER ENTRY TO FORWARD COMPARTMENTS: DECK CARGO OF CONTAINERS DAMAGED BY INUNDATION: HAGUE-VISBY RULES: ART.IV RULE 2(a): DEFENCE OF ACT, NEGLECT OR DEFAULT OF THE MASTER… IN THE NAVIGATION OR MANAGEMENT OF THE SHIP: FAILURE TO NOTIFY AUTHORITIES OF CASUALTY: FAILURE TO PROVIDE TIMELY AND ACCURATE INFORMATION TO SHIP’S MANAGERS: CAUSE OF CASUALTY INITIALLY FABRICATED: ALL LEADING TO DELAY IN PROVISION OF SALVAGE SERVICES: WHETHER ELEMENT OF GOOD FAITH ESSENTIAL TO CARRIER’S ENTITLEMENT TO RULE 2(a) DEFENCE
The Supreme Court allowed the Appellant carrier’s appeal, finding that the exemption contained in Art.IV Rule 2(a) of the Hague Rules applied to all acts or omissions of masters and crew in the navigation and management of the ship, unless their actions amounted to barratry. In other words, the motivation or intention of the master or crew was irrelevant. Applying this conclusion to the facts of the case, the Supreme Court held that the carrier was protected from all claims by the Respondent cargo interests
Case note contributed by Sandra Healy, Counsel at Stone Chambers, Gray’s Inn, London
The claim concerned the loss of containers carried on the deck of the m.v Tasman Pioneer, consequent upon a casualty that the vessel suffered on 3 May 2001, in the course of a voyage from Japan to South Korea. The carrier denied liability for the loss, principally on the grounds of Article IV Rule 2(a) of the Hague-Visby Rules, namely that the carrier was exempt from liability where the loss was caused by an act, neglect or default of the master… in the navigation or management of the ship.
The Tasman Pioneer was built in Japan in 1979. She was described in the judgment as a typical tween-deck, multi-purpose general cargo vessel, of some 21,115 tonnes deadweight, equipped for the carriage of containers on her fo’c’sle deck and weather deck hatch covers. She had a service speed of some 16 knots. The ship left Yokohama, Japan, in the evening of 1 May 2001, bound for Pusan in South Korea, intending to sail west along Japan’s Pacific coast and then via the Japan Inland Sea across the Korea Strait. On 2 May, the master of the Tasman Pioneer, realising that the ship was behind schedule, decided that, rather than passing west of Okino Shima, the usual route for vessels entering the Inland Sea from the south, he would shorten steaming time by some 30-40 minutes by taking the channel between the island of Biro Shima and the promontory of Kashiwa Shima, the south-western extremity of the island of Shikoku.
Shortly after the master altered course to enter the channel at 0250hrs on 3 May, the ship lost all images on its starboard radar. It appeared that the master then tried to abort the passage through the channel. This manoeuvre was not successful and the ship struck bottom off Biro Shima with such force that her speed was immediately slowed to some 6 or 7 knots from her running speed of 15 knots. Shortly afterwards the ship took a list to port and water was discovered in the forward ballast tanks and in the forward cargo holds 1 and 2. On the orders of the master, the ship’s pumps were activated. However, the master did not alert the Japanese Coastguard, as he should have done, or seek other assistance. The ship then sailed at close to full speed for a further two hours (some 22 nautical miles), before anchoring in a sheltered bay. It was only then that the master contacted the ship managers in Greece, without, however, specifying the cause of damage or its full extent. The managers then arranged for the coastguard to be advised of the incident and for salvors to be engaged on LOF 2000. The master’s initial explanation of the casualty was that the ship had hit an unidentified floating object and he schooled the crew to adopt this explanation in the enquiry conducted by the Japanese coastguard, in the course of which the truth eventually emerged.
It was not until after 1900hrs on 3 May that the salvage tugs arrived at the casualty. By that time, by reason of the ship’s excessive trim by the head, the main deck at the forward holds was already under water. The salvors immediately commenced pumping the flooded compartments but they were not able to correct the vessel’s trim appreciably. They therefore decided to commence the discharge into barges of the containers stowed on the hatches of nos. 1 and 2 cargo holds. The cargo inside these containers was severely damaged by seawater. On 10 May, the ship was beached; unloading of cargo from holds 1 and 2 continued until, after temporary patching, the ship was refloated on 18 May and towed via Kanmon to the Onomichi dockyard for repairs.
Cargo interests sought to recover damages from the carrier. Their ability to do so turned on the interpretation and application of the Hague-Visby Rules. In particular it was necessary to determine whether the carrier was entitled to rely on the exemption of error in navigation and management of the ship under Art.IV Rule 2(a), which provides as follows: “(2) Neither the carrier not the ship shall be responsible for loss or damage arising or resulting from—(a) Act neglect, or default of the master, mariner, pilot or servants of the carrier in the navigation or in the management of the ship;”.
High Court and Court of Appeal
The Judge at first instance found in favour of cargo interests. Hugh Williams J held that the Art.IV Rule 2(a) exemption was only available where the actions of those in charge of the ship were “bona fide” (in the navigation or management of the ship) and those of the master in this case were not. (The Judge did, however, dismiss the claim of one cargo interest, the New Zealand Dairy Board. This issue is not explored in any length in this case note because the Court of Appeal and Supreme Court did not maintain the distinction between the Dairy Board and the other cargo interests.)
The carrier appealed and the New Zealand Dairy Board cross-appealed. The Court of Appeal divided. By a majority (Chambers and Baragwanath JJ), the appeal was dismissed and the cross-appeal allowed. Fogarty J, dissenting, would have allowed the appeal and dismissed the cross-appeal on the basis that he considered the phrase “act, neglect or default of the master” in art 4.2(a) to include intentional conduct, “be it laudable or culpable”, and that the application of the clause did not depend upon the motives of the master.
The majority concluded that the conduct of the Master was not an “act, neglect or default…in the navigation or in the management of the ship” for the purposes of art 4.2(a) because such “selfish” and “outrageous” behavior could not be conduct in the navigation or management of the ship. Four reasons were advanced in support of this conclusion: (1) “the raison d’être of the Hague Rules was to depart to a significant degree from the laissez-faire of the common law and to prohibit exorbitant exemption clauses.”; (2) there should not be a “narrow focus on text without regard to context”; (3) a “purposive” construction was now required; and (4) the domestic legislation was giving effect to an international convention.
The judgment of the Supreme Court
Wilson J gave the judgment of the Supreme Court. Before considering the decisions of the lower courts, Wilson J set out the relevant provisions of the Rules and stated that the scheme of the Rules was such that “Carriers are responsible for loss or damage caused by matters within their direct control (sometimes called “commercial fault”), such as the seaworthiness and manning of the ship at the commencement of the voyage. They are not however responsible for loss or damage due to other causes, including acts or omissions of the master or crew during the voyage (“nautical fault”).” Wilson J also recorded the Supreme Court’s view that the Art.IV Rule 2(a) exemption did not apply in the event of barratry, this being defined by the Supreme Court as, “where damage has resulted from an act or omissions of the master or crew done with intent to cause damage, or recklessly and with knowledge that damage would probably result.”
In relation to the decision of Hugh Williams J, the Supreme Court judges had difficulty understanding the basis on which had implied a requirement of good faith into Art.IV Rule 2(a). They concluded that the authorities relied upon by the first instance judge did not provide support for the introduction into the Article of a general requirement of good faith. [paras. 21-22]
The Supreme Court also disagreed with the reasoning of the majority of the Court of Appeal. In relation to the impact of the Hague-Visby Rules on the common law, the Supreme Court’s view was diametrically opposed to that of the Court of Appeal: “Far from changing the position at common law, the Hague Rules…reaffirmed that (in the absence of barratry) the owners’ exemption from liability at common law remained.” [paras. 23-25]
As for the question of whether the Article ought to be given a purposive construction, the Supreme Court first looked to the purpose of the Hague-Visby Rules, concluding that this was, “…to make carriers responsible for loss or damage caused by matters within their direct control, but not otherwise.” Then, turning to the wording of the Article, the Court held that there was no need to apply a purposive construction as the words already gave full effect to that purpose: “Giving full effect to the ordinary meaning of the words of Art 4.2(a) is entirely consistent with that purpose of the Rules. The opening words of the paragraph (“act, neglect or default”) are sufficiently wide to encompass all acts or omissions of master or crew. However culpable the conduct, and whether or not it is intentional, the owner or charterer is not, subject only to barratry, deprived of the benefit of the exemption conferred by the paragraph.” [para. 28]
As for the Court of Appeal’s reliance on the fact that the Hague-Visby Rules were an international convention, the Supreme Court turned this reasoning on its head. They concluded that the recent European decisions cited to them were consistent with their proposition that Art.IV Rule 2(a) exempted a shipowner from liability for the actions of master and crew unless the damage is intentional or the consequence of subjective recklessness [para. 26].
Wilson J summarised the position as follows: “…the text of Art. 4.2(a), the scheme of the Rules, the common law authorities, the travaux, cases on the Hague Rules, cognate definitions and the views of textbook writers all support the exemption of owners from liability for the acts or omissions of masters and crew in the navigation and management of the ship unless their actions amount to barratry.”
Applying this test to the facts of the case before them, the Supreme Court concluded that, whilst the actions of the master were reprehensible, they were actions in the navigation or management of the ship and accordingly, the Appellant carriers were entitled to rely on this exemption. Further, in circumstances where neither barratry nor the necessary elements of barratry (that is, an act or omission of the master or crew done with intent to cause damage, or recklessly and with knowledge that damage would probably result) had not been pleaded or evidenced, cargo interests were not entitled to rely on this qualification to the Art.IV Rule 2(a) exemption.
The decision of the Supreme Court of New Zealand is to be welcomed. Had the decisions of the High Court and Court of Appeal stood unchallenged, there would have been increased scope for uncertainty as to what navigational acts and acts in the management of the ship fall within the Art.IV Rule 2(a) exemption. In circumstances where the exemption already includes a clear definition of the types of act falling within its scope, it would not be in the interests of uniform interpretation to read in a further requirement that those acts be bona fides or not such that they could be classed as “selfish” or “outrageous”. After all, what is “outrageous” to a Nigerian court may not be so outrageous to a German court and vice versa.
The decision of the Supreme Court is also consistent with leading texts in the carriage of goods field. Passages from both Scrutton on Charter Parties and Bills of Lading and Carver on Bills of Lading were cited by Wilson J at para. 29. In particular, the authors of the Carver text state: “It seems that the exception extends to a wilful or reckless act of any person within the list, ie master, mariner, pilot or servants of the carrier (as opposed to the carrier himself) for the words of Art 4(2)(a) do not in fact refer to negligence, but to “act, neglect or default”.