Birkenfeld (the plaintiff) sustained serious injuries in a collision at sea off the coast of Greece on 8 August 2002. In the collision, the plaintiff's windsurfer collided with a rigid inflatable boat (RIB) owned by Yachting New Zealand (the second defendant) and driven by Kendall (the first defendant).

The plaintiff claimed NZD 15,000,000 in general damages for her injuries along with special damages of over NZD 55,000. However, under pt 7 of the Maritime Transport Act 1994 (MTA), shipowners and other defined parties may be entitled to a limitation of liability fixed by reference to the tonnage of the offending ship. This statutory regime is based on the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 1976).

In a separate proceeding (Birkenfeld v Yachting New Zealand Inc [2007] 1 NZLR 596: see CMI531 (NZCA) and CMI536 (NZSC)), Yachting New Zealand had sought a decree limiting its liability to the plaintiff to 250,010 'units of account' (SDRs) under the MTA, which decree had been granted by the Court.

The plaintiff did not accept an offer to settle her claim from the second defendant, submitting to the Court that she was entitled to have liability for the collision determined.

Both defendants applied for an order permanently staying the proceeding. The second defendant also applied for an order that the limitation fund be distributed by payment to the plaintiff of the amount of the settlement less the costs of this application.

The second defendant submitted that upon distribution of the fund, the plaintiff would have achieved all that she could lawfully achieve on the pleadings against the defendants. Moreover, it would be inequitable to require the defendants to continue to incur the cost of defending these proceedings. In addition, in terms of r 477 of the High Court Rules, to maintain the proceeding in the circumstances would be frivolous or vexatious and an abuse of the process of the Court. As to jurisdiction to make the orders sought, the defendants relied by analogy on s 89 of the MTA, the provisions of the LLMC 1976, and the inherent jurisdiction of the Court.

The plaintiff disagreed with the application on the ground that liability for the collision was contested and no determination of liability had been made. The plaintiff also applied to strike out the first defendant's stay application.

Held: The plaintiff's proceedings against both defendants were permanently stayed.

The starting point is that the limitation decree made by the separate proceeding had conclusively established that the second defendant was entitled to a limitation of liability under s 86 of the MTA in respect of the plaintiff's claim. The liability of the second defendant was also conclusively established to be limited to 250,010 units of account calculated in terms of s 87 of the MTA.

The Court did have jurisdiction to make an order for a stay under r 477 of the High Court Rules. The defendants were right to submit that no good purpose would be served by permitting this proceeding to continue when one of the defendants to it had offered to pay to the plaintiff the maximum amount she could lawfully recover if her claim were successful. That would be wasteful of the Court's resources. In the circumstances of this case, it would be an abuse of process to permit the plaintiff to proceed further with her claim against the second defendant. Therefore an order for permanent stay of the proceedings in relation to the second defendant was made.

The first defendant was a person entitled to limit his liability under the MTA. First, he was responsible for the navigation and management of the RIB at the time of the collision. Thus, he fell within the extended definition of 'owner' in s 84 of the MTA and was entitled to limit his liability. In addition, if the second defendant was responsible for the first defendant's acts, omissions, neglects or defaults in relation to the collision, then the first defendant was also entitled to limitation of liability on that basis under s 85(1)(a) of the MTA as 'a person for whose act, omission, neglect, or default the owner of the ship is responsible'. That was consistent with the position under the LLMC 1976, upon which the MTA is based, which enables any crew member (whether a master or otherwise), for whom the owner is responsible, to avail themselves of limitation of liability. In addition, according to both ss 84 and 86(3) of the MTA, the plaintiff could not claim up to the limit of liability from both the defendants. If the plaintiff had recovered in full from one of them, then that is the maximum sum to which she was entitled. Therefore, there was no basis to allow the plaintiff's application to strike out the first defendant's stay application.

The position was also clear from the LLMC 1976. Article 11.3 of the LLMC 1976 provides that a fund constituted under the Convention is deemed to be constituted by all persons mentioned in arts 9.1.a, 9.1.b, 9.1.c or 9.2. These articles incorporate a reference to art 1.2 which defines 'ship owner' as meaning 'the owner, charterer, manager and operator of a seagoing ship'. However, the fact that several different parties are entitled to limit their liability under the LLMC 1976 does not mean that the limited amount is available several times over.

The Court also found that the plaintiff did not allege, in terms of s 86(2) of the MTA, that either of the defendants intended to cause loss, injury or damage or acted recklessly with knowledge that such loss, injury or damage would probably result. If it could be established that either of the defendants had acted on that basis, limitation of liability would not be available.