Tasman Pioneer Clarifies Scope of Master Navigation/Management Exception

Sandra Healy discusses the decision of the New Zealand Supreme Court in Tasman Orient Line CV v New Zealand China Clays Limited, which brings welcome clarification to the scope of the master navigation/management exception in the Hague and Hague-Visby Rules. The article was first published in Lloyd's List (1 September).

Summary

The New Zealand Supreme Court allowed the Appellant carrier's appeal, finding that the exemption contained in Art.IV Rule 2(a) of the Hague Rules and Hague-Visby Rules applied to all acts or omissions of masters and crew in the navigation and management of the ship unless their actions amount 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 decided that the carrier was protected from all claims by the Respondent cargo interests.

Facts

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 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 the ship struck bottom off Biro Shima and took a list to port and water was discovered in the forward ballast tanks and in the forward cargo holds.  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, 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.

By the time salvage tugs arrived, the main deck at the forward holds was already under water and some of the cargo was severely damaged by seawater.  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, holding that the Art.IV Rule 2(a) exemption was only available where the actions of those in charge of the ship are "bona fide" (in the navigation or management of the ship) and those of the master in this case were not.

The carrier appealed and the Court of Appeal was divided on this issue.  Fogarty J, dissenting, would have allowed the 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 motive 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.

The judgment of the Supreme Court

Wilson J gave the judgment of the Supreme Court, which found in favour of the carrier.  The Supreme Court judges had difficulty understanding the basis on which the judge at first instance 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.

The Supreme Court also disagreed with the reasoning of the majority of the Court of Appeal.  In relation to 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."

As for the question of whether Art.IV Rule 2(a) 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 matter 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."

As for the Court of Appeal's reliance on the fact that the Hague-Visby Rules are an international convention, the Supreme Court turned this reasoning on its head as they concluded that the recent European decisions cited to them were consistent with their proposition that Art.IV Rule 2(a) exempts a shipowner from liability for the actions of master and crew unless the damage is intentional or consequence of subjective recklessness.

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. 

Comment

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.

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 latter of these texts state: "It seems that the exception extends to a willful 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"."