Australia: No Right To Trial Where Limitation Fund Offered

Last Updated: 13 February 2009
Article by Neil Beadle

In Birkenfeld v Kendall and Yachting New Zealand Inc [2008] NZCA 531 the New Zealand Court of Appeal has confirmed that, having established a limitation fund under legislation enacting the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC), and having offered that fund to the plaintiff, the defendants are entitled to a permanent stay of the action, without admission of liability on their part. There will be no trial solely to determine the cause of a collision.

While the facts are unusual, the case is of interest given that the offer to pay the limitation fund brings finality to litigation without admission of liability and the burden of trial costs.


Ms Birkenfeld sustained serious injuries after her wind surfboard collided with a rigid inflatable boat (RIB) off the coast of Greece in 2002. The RIB was owned by Yachting New Zealand Limited (YNZ) and was being driven by Mr Bruce Kendall at the time of the collision. Ms Birkenfeld sued both YNZ and Mr Kendall in New Zealand for NZ$15 million in damages for her injuries. Both YNZ and Mr Kendall asserted that Ms Birkenfeld had collided from an overtaking position and denied liability.

YNZ was previously successful in limiting its liability, if any, under the New Zealand enactment of the LLMC (section 86(1)(a)(i) of the Maritime Transport Act 1994 (MTA)). YNZ offered the limitation fund of a little over NZ$700,000 to Ms Birkenfeld, but she refused to accept it and attempted to proceed to trial.

In the Court of Appeal Ms Birkenfeld sought to overturn the permanent stay of the proceeding essentially on the basis that she was entitled to seek a ruling at trial as to who was responsible for the collision. Though a claim under section 2 of the Declaratory Judgments Act 1908 was not pleaded, the Court deliberated upon whether that remedy was available to Ms Birkenfeld such as to justify a trial.

Section 2 states:

'No action or proceeding in the [High Court] shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the said court may make binding declarations of right, whether any consequential relief is or could not be claimed or not.'

The decision

The Court found that a declaration is available as a remedy in a tort action but that this was not appropriate in this case. The Court was influenced by the following factors:

  • The policy underpinning the LLMC (and limitation of liability in other areas of law more generally) was for the encouragement and fostering of commercial enterprise. In the context of maritime law this public policy had particular relevance in relation to encouraging shipping and trade by capping liability at a fixed sum.
  • Determination on issues of causation would only be relevant in cases where limitation was broken and the defendant was liable for the full extent of the loss (eg - where there is 'actual fault or privity' of the shipowner). But imposing added burden and costs of litigation on a defendant that had succeeded in a limitation application and had put forward the award, would be unjustified in light of the LLMC regime.
  • The MTA specifically deals with a master's obligation to notify Maritime New Zealand (the governing body in New Zealand) in relation to serious accidents. Therefore through that statutory channel, Parliament had given the governing authority the power to investigate an incident if it decided that it had implications on transport safety.
  • More generally New Zealand has a no fault personal injury regime which discourages litigants from seeking declarations of similar effect.
  • While acknowledging Ms Birkenfeld's argument that the law also protects reputation interests in various ways, the Court was reluctant to develop a cause of action in negligence for that purpose, as to do so would cut across the proper scope of established causes of action.

In summary [at 55] it was said:

'Here we are satisfied that, Parliament having established both the limitation regime and a system for the investigation of mishaps, including means for experts to establish findings which may increase transport safety, it is neither necessary nor desirable for the judiciary by exercise of discretion under the Declaratory Judgments Act to impose a parallel system of investigation by lay judges which is not required for the purpose of compensation for injury. Nor does the claim of injury to reputation justify that course.'

DLA Phillips Fox acted for YNZ in this case. It appears this decision will be the subject of further appeal to New Zealand's highest court.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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