All questions

Shipping contracts

i Shipbuilding

There is no specific statutory regime for shipbuilding contracts. General contract law principles apply (and any applicable statutory provisions relevant to the supply of parts).

The passing of legal title

Legal title in the ship will pass from the shipbuilder to the shipowner in accordance with the terms of the contract, or pursuant to the CCLA.17

Typically, title will pass on delivery.

ii Contracts of carriage

New Zealand is not a signatory to the UN Convention on the Carriage of Goods by Sea 1978 (the Hamburg Rules) or the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea 2009 (the Rotterdam Rules). Instead, the carriage of goods under New Zealand law is subject to:

  1. the MTA (which incorporates the Hague-Visby Rules for international carriage of goods by sea);18 and
  2. the CCLA, Part 5, Subpart 1 (which governs domestic carriage of goods by land, water or air or by more than one of those modes).
Cabotage

New Zealand has (partially) deregulated cabotage under the MTA,19 under which no foreign ship may carry coastal cargo unless:20

  1. it is passing through New Zealand waters while on a continuous journey from a foreign port to another foreign port and is stopping in New Zealand to load or unload international cargo; and
  2. its carriage of coastal cargo is incidental to its carriage of international cargo.

In practice, this means that liner companies will call at several New Zealand ports as part of their rotation to and from foreign ports.

International carriage of goods by sea

The Hague-Visby Rules apply to every bill of lading (BOL) relating to the international carriage of goods if:21

  1. the BOL is issued in a contracting state;22
  2. the carriage is from a port in a contracting state; or
  3. the contract contained in or evidenced by the BOL provides that the Hague-Visby Rules or the MTA are to govern the contract.

Under the MTA, parties may not limit the New Zealand courts' jurisdiction in respect of:23

  1. a BOL (or similar) relating to the international carriage of goods; or
  2. a non-negotiable document (other than a BOL or similar document of title) that contains express provision to the effect that the Hague-Visby Rules are to govern the carriage as if the document were a BOL (as provided for in Section 209 of the MTA).

However, the provisions of the MTA do not affect the enforceability of arbitration agreements and foreign choice-of-law clauses.24

Domestic carriage of goods by sea

Domestic carriage of goods by sea is governed by Part 5, Subpart 1 of the CCLA.25 The Act applies to all domestic carriage pursuant to a contract of carriage (even if the ship is simultaneously engaged in international carriage).26

The CCLA outlines the liability for all those involved in domestic carriage, including those who arrange carriage or provide incidental services to carriage.27 The Act provides (subject to exceptions) for strict liability for carriers for loss or damage to goods. Loss caused by delay in delivery is not covered by the Act (common law principles apply).

The CCLA recognises four types of contracts of carriage:28

  1. 'at owner's risk': the carrier will be liable only if the loss or damage is intentionally caused by the carrier;
  2. 'at declared value risk': the carrier is liable for the loss or damage to the amount specified in the contract. If the contract is silent, Sections 256 to 260 will apply;
  3. 'on declared terms': the contracting parties may regulate the carrier's liability under the contract; and
  4. 'at limited carrier's risk': the carrier is liable for the loss or damage to any goods in accordance with Sections 256 to 260. Section 259 caps the liability for carriers at NZ$2,000 for each unit of goods lost or damaged.29

Subject to limited defences,30 the default rule is that the contracting carrier is liable to the contracting party for loss or damage to any goods, whereas the contracting carrier is responsible for them, whether caused by the contracting carrier or by an actual carrier.31

The right to sue for freight arises when a carrier ceases to be responsible for the goods.32

The right to sue is supported by a lien.33 If the owner does not pay within two months' notice of the lien, the carrier may sell the goods by public auction.34

iii Cargo claims

The High Court has jurisdiction to hear cargo claims in the civil jurisdiction and admiralty (actions in rem and in personam).35 However, the majority of cargo claims are settled on commercial terms.

The contracting carrier is liable to the contracting party for loss or damage to goods while under the carrier's responsibility.36

The CCLA confers a right to bring proceedings under a contract of carriage to the holder of the BOL or a person entitled to delivery of the goods.37 However, if the consignee is not a party to the contract, it may still bring a claim against the contracting carrier once the goods are in the possession of the consignee.38 In some circumstances, claims may also be brought in tort.

If a claim is commenced, it is likely to be against both the shipowner (or contracting carrier) and the vessel (in rem).

Jurisdiction

A defendant issued with proceedings from New Zealand may bring an action in forum non conveniens to protest jurisdiction and apply to the New Zealand court to dismiss (or to stay) the proceeding. A plaintiff opposing a stay or dismissal will carry the burden of convincing the New Zealand court that there is a strong case for maintaining the action under the New Zealand jurisdiction.

Commencing proceedings against overseas parties

Generally, the rules governing service of proceedings are set out in Part 6 of the High Court Rules 2016. There are various exceptions to the standard rules for overseas service, which parties must take into account when serving proceedings on an overseas party.39

Damages

The measure of damages to be awarded differs depending on whether the Hague-Visby Rules or the CCLA apply to the claim.

Under the Hague-Visby Rules, the measure of damages is calculated by the reduction in value of the cargo at delivery,40 whereas under the CCLA, the contractual measure of damages are recoverable (including consequential losses).41

In addition to the damages available under the Hague-Visby Rules or the CCLA, the courts have a discretionary power to award interest or legal costs (including increased or indemnity costs) and disbursements to successful claimants.42

iv Limitation of liability

Both the Hague-Visby Rules and the CCLA limit a carrier's liability.43 However, the benefit of the limitation of liability does not apply to loss or damage caused by the carrier, either intentionally or recklessly.44

Under the Hague-Visby Rules, liability is limited in accordance with Article 4. Under the CCLA, liability is capped at NZ$2,000 for each unit of goods lost or damaged.45

In addition, a shipowner has to limit civil liability, except in 'exceptional cases'.46

Limitation of liability for ships under the MTA was reformed following the grounding of the MV Rena.47 Part 7 of the MTA gives direct force of law to the Convention on Limitation of Liability for Maritime Claims 1976 (the LLMC Convention 1976) (incorporated in Schedule 8) as amended by the Protocol of 1996 to Amend the LLMC Convention 1976 (the LLMC Protocol 1996) (incorporated in Schedule 9).48 By Order in Council, in May 2015, New Zealand also adopted the increased LLMC Protocol 1996 limits (i.e., the LLMC Protocol 1996 as amended by the International Maritime Organization (IMO) in April 2012), effective since 8 June 2015 and replacing the previous limits.