On 3 May 2001 the Tasman Pioneer grounded in Japanese waters on a dark and stormy night and much cargo was lost. Controversy arose from the post-grounding conduct of the master, which is described in New Zealand court judgments as 'selfish', 'outrageous' and 'reprehensible' and said to have caused the loss of deck cargo. Cargo interests asserted that such conduct disentitled the carrier from reliance on the defence under Article 4 rule 2(a) of the Hague Visby Rules.
Last week, in Tasman Orient Line CV v New Zealand China Clays Limited & Ors  NZSC 37 the Supreme Court of New Zealand ruled in favour of the carrier and clarified the scope of the carrier's exception to liability under the Rules for nautical fault by the master and crew.
The relevant part of Article 4(a) of the Hague Visby Rules is as follows:
2. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from-
(a) Act, neglect or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship.
The Court has confirmed that the ordinary meaning of the words in the exception apply, save that carriers are to be denied the defence in the event of barratrous conduct of the master or crew (ie intentional damage to the ship or cargo).
Trouble at sea
Following the grounding, two of the vessel's holds were open to the sea. At first instance in the High Court cargo interests alleged that the vessel was unseaworthy. It was said seawater flowed from the holds to other tanks within the vessel (independent of the grounding damage) so as to cause her to go down by the head quicker than she should otherwise have done. That allegation failed.
The remaining issue was whether the defence under Article 4.2(a) was available to the carrier when the master, having grounded the vessel while steaming through a narrow channel at 15 knots, failed properly to assess the rapid ingress of water into two holds of the vessel, notify the coastguard or owners, slow down, or seek to beach the vessel. Instead he steamed on for a couple of hours to a point where he would have rejoined an alternative route. The master also falsified charts and had the crew lie to conceal what had happened to suggest the ship had struck an unidentified object in open water. Cargo interests asserted that the misconduct by the master was sufficient to deny application of the Article 4.2(a) defence. Specifically, it was said that his conduct 'intended to allow him to misrepresent and lie about the true circumstances of the casualty so as to absolve himself from blame'. The carrier admitted that intention.
Ruling on Article 4.2(a)
The High Court found that the Article 4.2(a) defence was not available because the master's conduct after the grounding was not 'bona fide' in the navigation or in the management of the ship. That was the position advocated by cargo interests in reliance on the House of Lords in The Hill Harmony.1
The finding of seaworthiness of the vessel was not appealed. On appeal, the High Court's characterisation of the Article 4.2(a) defence was rejected but, by majority, the Court of Appeal found that the carrier should be denied the defence on other grounds. In substance, because the master's conduct was 'outrageous' it was not in the navigation or in the management of the ship. The Court said Article 4.2(a) was designed to change the prior common law position and that the result was justified by a purposive approach to interpretation of the Rules.
The Supreme Court rejected the approach of both the High Court and the Court of Appeal. As to the scheme of the Rules, the Court observed that:
What is barratry under the Rules?
The carrier argued that the motive of the master is irrelevant in determining whether his conduct is an act, neglect or default in the navigation or in the management of the ship under Article 4.2(a). However, the exception is not available to the carrier if the master's conduct is barratrous. That is because an exception for barratry had formerly appeared in bills of lading and was proposed by ship owners at the Hague conference in 1921, but rejected as part of the negotiated compromise. What amounts to barratry for the purpose of the Hague Visby Rules is apparent from a review of those parts of the Rules themselves which are directed to damage with actual or imputed intent, which is the essence of barratry2, ie whether the master intended or was reckless with knowledge that damage to cargo would probably result. That also reflected the test applied to conduct barring limitation under the Convention on Limitation of Liability for Maritime Claims 19763. English decisions addressing the construction of the Rules and decisions of superior Courts in Germany and the Netherlands directed specifically to the issue were consistent with that approach.
As to the master's alleged intention in this case, the carrier said it fell well short of an allegation the master intended or was reckless with knowledge that the damage to the deck cargo would probably result, and in the circumstances it was not open to the Court to find the master guilty of barratry. The exception under Article 4.2(a) therefore applied.
The Court agreed.
The Article 4.2(a) defence has long been viewed as controversial but it remains to be construed by reference to the ordinary meaning of the words in the exception, the scheme of the Rules and in light of the negotiations at the Hague in 1921. Of course the Rotterdam Rules do not include the exception, but while the Hague Visby Rules continue to apply, this decision provides a useful structural analysis of them and the application of this exception in particular.
As the Court said, the allocation of responsibility between the carrier and the ship on the one hand and the cargo interests on the other promotes certainty and provides a clear basis on which the parties can make their insurance arrangements and their insurers can set premiums. This clarification of the application of the exception fulfils that objective. DLA Phillips Fox represented the carrier, Tasman Orient Line CV.
For more information, please contact:
Neil Beadle, Special Counsel
Tel +64 9 300 3865
© DLA Phillips Fox
1 Whistler International Ltd v Kawasaki Kisen Kaisha Ltd
(the 'Hill Harmony')  UKHL 62,  1 AC 638.
2 Article 4.5(e) dealing with limitation, which employs the same formula and Article 4bis (4) does likewise.
3 E nacted as Part VII of the Maritime Transport Act 1994 in New Zealand, in particular section 85(2).
DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit www.dlaphillipsfox.com