On April 9 2009 the Court of Appeal decided, by a majority, that a master's "outrageous conduct" did not come within the carrier's exception of liability under Article IV Rule 2(a) of the Hague Visby Rules.

Rule 2(a) provides that:

"[n]either 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."

Facts

The appellant carrier, Tasman Orient Line CV, chartered the Tasman Pioneer and issued bills of lading to the respondent shippers for carriage of their cargo from Auckland, New Zealand, to Busan, Korea, subject to the rules. The respondent shippers claimed for the loss of their respective cargoes, which were stowed on deck, in the course of the voyage.

En route from Yokohama to Busan, in order to save time, the master elected to take a narrow passage between Biro Shima Island and the coast, instead of the usual route leading to the Inland Sea and Busan. The master had 36 years' experience at sea and had previously navigated the passage. It was about 3:00am, dark, with a two-metre swell, a 36-knot gale force wind and squalls which are known to blank out radar images. Radar images were lost and, as the second mate worked on reconfiguring the radar, the master ordered hard port. When the radar image was regained, it showed Biro Shima only 800 yards away. A starboard order was given, but within seconds the Tasman Pioneer grounded.

As a result of the grounding, the vessel's speed slowed from 15 knots to seven knots; within 10 minutes the vessel developed a list of about eight to 10 degrees. In order to correct the list, the ballast tanks were flooded. Pumping commenced, with two cargo holds taking in water. The master did not contact the coastguard. He continued to steam at full speed through the passage and into the Inland Sea, where he anchored near where the normal route would have taken the vessel. He then contacted the owner's agent. He instructed the crew to lie to investigators about the true course of the vessel and to say that the vessel had hit an unidentified floating object. He instructed the second mate to erase the course sailed from the ship's chart. The coastguard was alerted by a passing vessel. When the coastguard arrived at about 9:00am, the foredeck of the Tasman Pioneer had only about two metres freeboard.

At first instance the High Court found on the evidence that the deck cargo would have been saved had the master complied with his duties and duly reported the grounding immediately. Actions relating to salvage would have started about five hours earlier and the vessel could have made for the nearest sheltered anchorage where the vessel could have been beached if required. However, by the time salvage operations started, the deck had sunk below sea level; the deck cargo was inundated and unable to be saved.

High Court Decision

It was common ground that the master's decision to take the shortcut through the narrow passage leading up to the grounding was covered by the exception in Article IV Rule 2(a). The question before the court was whether the events after the grounding could properly be said to be acts of the master in the navigation or in the management of the ship, for which the carrier is not liable.

The court held that the master's post-grounding conduct was conduct either in the navigation or in the management of the ship. However, the judge considered that the rules imply that regardless of the category into which the master's actions fall (ie, management, navigation or other), any actions must have been undertaken in furtherance of the master's paramount duty of safely caring for the ship, cargo and crew. On that basis, the court read into the exception an implicit requirement that the act, neglect or default of the master be in the good-faith navigation or in the management of the ship. The court found that the master's actions had not been in good faith, as none of his actions had been motivated by his paramount duty to the safety of the ship, crew and cargo.

The carrier appealed.

Court of Appeal Decision

Majority judgment

The Court of Appeal dismissed the appeal, with the majority judgment delivered by Justice Baragwanath. In order to assist with the construction of Article IV Rule 2(a), the court first considered an Australian case, Great Metal China Metal Industries Co Ltd v Malaysian International Shipping Corporation Berhad (Bunga Seroja) (1989) 196 CLR 161, in which the High Court of Australia considered that the rules must be read as a whole, in light of their history and as a set of rules devised by international agreement to regulate contracts governed by several different legal systems. The Court of Appeal considered that the second point (ie, looking at the rules in light of their history) raised difficulties in application and rejected the practice of "harking back to old English cases". One of the reasons for rejecting the view that the rules must be read in light of their history was that the majority took the view that modern statutory construction is purposive, referring to Section 5 of the Interpretation Act 1999.

The court proceeded to identify the principles underlying the rules. It referred to Articles 31 and 32 of the Vienna Convention on the Law of Treaties (1155 UNTS 331). Article 31 provides that the interpretation of the terms of the rules shall be in accordance with their ordinary meaning, in their context and in light of their object and purpose. Article 32 provides that recourse may be had to supplementary means of interpretation if the interpretation according to Article 31 leads to ambiguity or to a result which is manifestly absurd or unreasonable. These principles are consistent with the Interpretation Act 1999.

The majority concluded that a construction of Rule 4(2)(a) which allowed one party wilfully to defeat the objects of the other party would not comply with the convention. They considered that the rules display a plain intent to strike a fair balance between the competing interests of shipper and carrier.

The majority described the master's conduct after the grounding as outrageous and fundamentally at odds with the purpose of both the contract of carriage and the legislative regime designed to achieve a sensible compromise between competing interests. The court proceeded to read Article IV Rule 2(a) in light of the purpose of the rules which it had identified, and held that it was appropriate to read down the broad language of Article IV Rule 2(a) so as not to include the master's selfish acts in 'acts for the navigation and management of the ship'.

In support of that construction, the court compared Article IV Rule 2(a) with the exemption under Article IV Rule 4, which provides that the carrier shall not be liable for loss or damage resulting from "any deviation in saving or attempting to save life or property at sea or any other reasonable deviation". The court considered that it was reasonable to infer that an unreasonable deviation would fall outside the scope of that exemption, in which case it made little sense to construe an unreasonable deviation as coming within the exception in Article IV Rule 2(a).

This conclusion meant that the court did not need to address the question whether 'act, neglect and default' in Article IV Rule 2(a) includes reckless or even deliberate conduct on the part of the master.

Dissenting judgment

Justice Fogarty disagreed with the majority and would have allowed the appeal.

The judge first traversed the principles of interpretation, including the approach to interpretation stated in Article 31 of the convention and Section 5(1) of the act. The judge concluded that the interpretation of the exception should be wholly faithful to the text, in the context of the whole set of rules and the object and purpose of those rules.

Considering what the purpose and context of the rules might be, the judge cited certain passages from the Bunga Seroja decision which underlined that the rules are intended to confer a wide range of immunities upon carriers. The judge then went on to consider the natural meaning of the words of Rule 2(a). The judge had no doubt that the phrase 'act, neglect or default of the master' includes intentional conduct. The judge held that the word 'act' is neutral as to quality and so applies independently of culpability.

The judge found support for this interpretation in the English decision Marriott v Yeoward [1909] 2 KB 987, which interpreted the words "any act, neglect or default whatsoever of... servants" to include felonious acts by servants, as well as in the passing comments in the English case Bulgaris v Bunge (1933) 45 LLRep 74 (KB), in which the court stated that the deliberate abandonment of a ship by its crew, even if it had been the grossest deliberate and wilful desertion of the ship in calm weather, would have constituted "act, neglect or default of the master in the navigation or in the management of the ship".

Comment

The majority and minority judgments reach fundamentally opposed conclusions by applying ostensibly the same principles. When construing statutory provisions, primacy must be given to the natural meaning of the words in their context and in light of the purpose of the enactment.

The majority adopted the view that the purpose of the rules was to strike a reasonable balance between the interests of shippers and carriers. They then construed the exception in light of that purpose. Forming a subjective view first about purpose and then interpreting words to fit that view allows personal views about what would be a reasonable outcome to direct the interpretation of words that do not appear to be ambiguous. The dissenting judge focused primarily on the natural meaning of the words, in which he saw no ambiguity. However, in doing so, he also referred to certain passages in the Bunga Seroja decision which indicated that the rules were intended to confer a wide range of immunities upon carriers.

The carrier has applied for leave to appeal to the Supreme Court.