Australia: Transport: A New Zealand Perspective

Insurance Update (Australia)
Last Updated: 15 April 2013
Article by Neil Beadle

From a legal perspective, in 2012 the New Zealand maritime scene has been dominated by the consequences of the grounding of the Rena at Tauranga on 5 October 2011. An environmental oil pollution disaster was threatened but largely averted, but that grounding has proved to be the most costly maritime event in New Zealand's history.

On a different topic, transport operators and their insurers averted changes in the law that would have seriously impacted upon New Zealand's domestic legislation governing carriage of goods, though some changes will be made.

Lastly, while the courts have not been busy with transport matters, of international interest, the law was clarified in relation to enforcement of possessory liens by reference to English and Singaporean authorities.


The master and second officer of the Rena were prosecuted under the Maritime Transport Act 1994 (NZ) (Maritime Transport Act) for operating a ship in a manner which caused unnecessary danger or risk, and also under the Resource Management Act 1991 (NZ) (RMA) for the oil pollution. However, the most serious charge was that of perverting the course of justice arising from their alteration of the ship's documents and computer system to try and make it look as though the accident had not occurred as a result of their poor navigation. In May, upon guilty pleas, they were each sentenced to seven months' imprisonment, but served half the term and were released in September. The ship owner was also prosecuted under the RMA but its guilty plea was deferred until the anniversary of the grounding, and it was fined NZ$305,000 for its part in the incident.

Meanwhile, the clean-up costs were finally estimated at NZ$47 million. As we reported last year, the limitation of liability under the Convention of Limitation of Liability for Maritime Claims 1976 (1976 Convention), as enacted in New Zealand, meant that any liability on the part of the carrier was limited to about NZ$12 million. The 1996 International Maritime Organization (IMO) Protocol would have applied a limit of about NZ$28 million, but had not been enacted. Early in the year, the ship owners constituted a limitation fund under the 1976 Convention in London. While falling short of the money spent, to its credit, the Crown negotiated payment by the ship owners of a sum equivalent to the value of the fund in London: NZ$27.6 million with a possibility of over NZ$10 million more if the ship owners gain a resource consent to leave part of the wreck on the reef, rather than remove it.

Meanwhile, on 30 August the Marine Legislation Bill was introduced to Parliament. That is an omnibus Bill dealing with numerous matters, including enacting the higher limits applying under the 1996 IMO Protocol. It will also enable a simple mechanism for applying any future higher limits under the Convention and avoid the need for Parliamentary intervention to do that – which appears sensible, given competing priorities for Parliamentary time.

Of interest, the amendments create a greater limit of liability than that which ordinarily applies under the 1976 Convention. They do that by enacting the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001, but with a twist. Clause 25 in the Bill is to amend the Maritime Transport Act to say that the limits of liability for claims for pollution damage must not be aggregated with other claims that arise on that occasion.

The purported effect of the amendments is to create an additional liability for ship owners for bunker pollution, over and above the limits of liability under the 1976 Convention and the 1996 IMO Protocol.

The Bill does not require a limitation fund to be constituted in New Zealand as a precondition of invoking limitation of liability, which might be seen by some as opportunity missed.


Early in the year, changes were proposed by the Consumer Law Reform Bill to extend statutory guarantees for consumers to domestic carriers, even though there is already a well-developed and longstanding legal code that applies to domestic carriage in New Zealand.

Following submissions to the Parliamentary Select Committee, the revised Bill no longer tinkers with the Carriage of Goods Act 1979 (NZ), with the Committee recognising that this would have unintended consequences. The limit of liability to NZ$1,500 per unit of goods also remains unaltered.

Instead consumers will have a new right of redress against the supplier of goods that are to be delivered, rather than a right of recovery against the carrier.


The Global Financial Crisis has highlighted the importance to creditors of establishing their right to priority over others in line to be paid. Ship repairers can retain possession of a ship as security for unpaid repairs, but a recent case in the High Court at Auckland highlights the importance of adopting the correct process to secure payment in priority to other secured creditors. In this case sense prevailed to enable the repairer to recover on arrest and sale of the ship, in priority to the bank, but old English case law had to be distinguished to achieve that.

The established position in admiralty law is that the holder of a possessory lien over a vessel will not lose its right to have unpaid repair costs reimbursed if a third party (such as a mortgagee) commences litigation against a vessel (The "Tergeste" [1903] P 26 (CA)). However, in order to retain priority, the lien holder must be in possession of the vessel at the relevant time. On arrest, the admiralty registrar only assumes custody of the arrested ship, while the possessory lien holder continues to maintain possession and the claim is then paid out by way of a notional lien against the ship's sale proceeds.

In this case, Babcock had undertaken repairs to the ship, had maintained possession and so had a possessory lien, but then had the vessel arrested. The question was whether by the process of arrest Babcock had surrendered possession of the ship and so its possessory lien.

Priestley J considered the Singaporean authorities cited by Babcock to be compelling. One of these cases was The "Dwima 1" [1996] SGHC 83, a dispute between a ship repairer (the possessory lien holder) and a mortgagee. The court noted that although the plaintiffs parted with possession of the ship for the purpose of the sale, the parting of possession was without prejudice to their possessory lien, and it indicated that the plaintiffs did not intend to abandon their possessory lien. Other cases that also supported the right of a repairer to enforce a statutory in rem right against the sale proceeds included The "Opal 3" ex "Kuchino" [1992] 2 SLR 585 and Pan-United Ship Yard Pte Ltd v Chase Manhattan Bank (National Association) [1999] 1 SLR (R) 703. He decided Babcock was entitled to ask the court for an order that its possessory lien be preserved by a notional lien over the sale proceeds of the vessel and as a result would have priority over the sum owing to the mortgagee.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

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