SURVEY NELSON LIMITED V DIRECTOR OF MARITIME NEW ZEALAND HC WN CIV 2009-485-2395

SURVEY NELSON LIMITED V DIRECTOR OF MARITIME NEW ZEALAND HC WN CIV 2009-485-2395 31 March 2010IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2009-485-2395UNDER the Judicature Amendment Act 1972 IN THE MATTER OF the Maritime Transport Act 1994 BETWEEN SURVEY NELSON LIMITED Plaintiff AND DIRECTOR OF MARITIME NEW ZEALAND Defendant Hearing: 9-11 March 2010 Counsel: H A Cull QC, J N Burton and P C Dawson for Plaintiff M T Scholtens QC and H L Dempster for Defendant Judgment: 31 March 2010JUDGMENT OF SIMON FRANCE JTable of ContentsParagraph No.Introduction [1] What is a safe ship management company? [4] Factual background [7] Issues arising [17] Issue one – a maritime document?(a) The statutory system [23](b) Part 21 of the Rules [31](c) Is an approval to be a safe ship management company a maritime document? [37] An interim discussion of the significance of it being not a maritime document [54]Issue two – the process inquiry: was sufficiently clear notice of the problem given? [61](i) The September 7 Notice [62](ii) Ferrier/Roberts [68](iii) Cowper/Maddick [76](iv) Survey Nelson's response to the September 7 letter [81](v) How the Maritime New Zealand notice might have looked [90](vi) Conclusion on adequacy of notice [95] Another interim discussion of the significance of this finding [99] Issue three – Unreasonableness [108] Issue four – Relevant and irrelevant considerations [122] Issue five – Delegations [129] Relief [135] Other matters [145] Decision [147]Introduction[1] The primary responsibility for the safety of ships rests with the owner. However a second tier of oversight is provided by what are known as safe ship management companies. Commercial vessels registered in New Zealand must be aligned with one of these companies which will not only do the periodic physical inspections and surveys, but will also monitor adequacy of safety systems and compliance with those systems. [2] Survey Nelson is such a company. It has over 700 ships on its books. In November last year the Director of Maritime New Zealand cancelled Survey Nelson's authorisation to offer these services. In these proceedings Survey Nelson challenges that decision. It has in place interim orders which have the effect of maintaining the status quo pending the substantive hearing. [3] There are really three bases advanced for challenging the decision. First it is said the Director acted under the wrong power to revoke, and this led her to take into account irrelevant considerations. Second, the process was flawed because the actual concerns with Survey Nelson's performance were insufficiently articulated. This meant the otherwise adequate hearing process was ineffective. Third, the decision was unreasonable both in its assessment that there was a basis to cancel the authorisation, and because it unfairly singled out Survey Nelson when other safe ship management companies had as bad a record as Survey Nelson and were equally struggling to apply a flawed system.What is a safe ship management company?[4] Safe ship management companies perform a quality assurance role. The starting point is that there is a safety code with which all ships must be compliant and all owners must comply. Primary and immediate responsibility for the safety of the vessel, the crew and any passengers rests with the owner.[5] There has been established, however, a second level of protection. It is not solely a matter of checking up on the boat. The safe ship management company must itself have an approved safe ship management system. Obviously that system must incorporate and reflect the Code which binds ships, but it adds another layer of system which is designed to provide a consistency about how ships and their owners approach the tasks of ensuring safety. The move is away from ad hoc compliance and assessments focussed on a single "warrant of fitness" day to more of a systematic approach applying across the whole year and across all the vessels registered with the particular company. Whilst the process applies only between the individual vessel and the management company, the safety system the vessel is following is one that should be being applied by and to all the vessels registered with that company. [6] The system has been described in these terms, the second paragraph of which highlights Maritime New Zealand's concerns with Survey Nelson. 13.97 The approach of the MTA is to ensure that participants, once admitted into the system, carry out their responsibilities properly. It does this by ensuring that the participant has appropriate internal control systems. Those systems are subject to audit by the SSM Companies, which are, in turn, required to maintain proper internal control systems. These systems are equally subject to audit by the regulator. 3.98 The monitoring of those systems is a vital element in providing confidence that the vessels within an SSM company's SSM system are safe. The identification of problems either in an SSM company's system, or in its adherence to its systems erode that confidence.Factual background[7] Safe ship management companies are regularly audited by Maritime New Zealand. The audits identify areas of non-conformity, if any, and areas of suggested improvement. The non-conformities are graded for seriousness, required to be corrected, and are then signed off.1 Paragraphs 3.97 and 3.98 of Ferrier/Roberts Report. This was an independent report on Survey Nelson commissioned by the Director of Maritime New Zealand.[8] Survey Nelson's results across a series of audits led the Director to commission an independent audit. Whether this was justified is disputed by Survey Nelson which says that under the preceding Director it was well regarded. Survey Nelson considers it is picked on. [9] Those commissioned to do the report were Mr Duncan Ferrier, a Wellington barrister; and Ms Margaret Roberts, a director of PricewaterhouseCoopers, with a specialty in organisational reviews. The Report was provided on 7 August 2008, Survey Nelson having first had the opportunity to comment. [10] The Report was critical of Survey Nelson. It felt that Survey Nelson was driven more by a desire to preserve its client base than to perform its auditing functions. This was said to raise particular concerns in relation to ship owners who were not themselves self-motivated to maintain standards. It was considered that Survey Nelson was too lax in relation to them, with consequent risks to safety. [11] The conclusions of the Report are worth citing, both for their own content and as introducing what happened next:1.20 There are two primary issues the Director of Maritime New Zealand needs to address. The first is to be assured that she can have confidence that the vessels within Survey Nelson's SSM system are safe. 1.21 The review panel believes that the Director can only assure herself of the safety of vessels within the Survey Nelson SSM system through a process of inspection and audit of these vessels. This process should focus on vessels allocated with high risk assessments by Maritime New Zealand that, in the first instance, Maritime New Zealand has not inspected in the last 12 months. 1.22 The second issue is to the action that should be taken in respect of the various maritime documents and delegations held by Survey Nelson. 1.23 The review panel considers that the Director has three options available to her:• take no action and retain the status quo;• take action either to suspend or revoke the delegations held by Mr and Mrs Reynolds and/or the approval of Survey Nelson's SSM system; or• appoint a commissioner to oversee implementation of an improvement of standards within Survey Nelson's SSM system. 1.24 The review panel records that in its view:• Survey Nelson is unlikely to change its level of performance without some degree of control being exercised over the process by the Director and thus the retention of the status quo is not tenable;• suspending or revoking the delegations held by the directors of Survey Nelson will require alternative regulatory coverage for the 700 vessels within the Survey Nelson SSM system; and• with goodwill from both Maritime New Zealand and Survey Nelson, the appointment of a commissioner to oversee the necessary organisational change required of Survey Nelson, might provide a mechanism by which to ensure an adequate standard of performance.[12] Following that report the Director decided to arrange for two persons to perform a type of oversight role, as envisaged in the last bullet point. They were to review Survey Nelson's systems and provide advice as to how to improve. The cost of this was met by Maritime New Zealand. In a briefing paper sent to the Minister prior to these people being engaged, the Director said:It is evident to me that the report highlights two specific areas of deficiency: 1. The adequacy and robustness of the surveys being performed under the Survey Nelson SSM system 2. The appropriateness of and accountability for the exercise of the safety regulatory functions that have been delegated to Survey Nelson In my view, some of the deficiencies and failures reported in respect of Survey Nelson are symptomatic of the wider systemic issues that have repeatedly been identified in numerous independent reviews, accident reports issued by the Transport Accident Investigation Commission and internal assessment undertaken by Maritime New Zealand. I therefore do not believe the first two options2 recommended by the review panel are appropriate at this time.2 The first two options referred to at the end of this passage were the status quo, and suspension/revocation.[13] The reviewers were Messrs Cowper and Maddick. Their input came in three forms – an interim report in December 2008, a final report in May 2009 which commented on the progress Survey Nelson had made since the hands-on period of assistance at the end of 2008, and then some brief comments by each reviewer on Survey Nelson's response to their final report. These last comments were outside the formal process, and were extra comments obtained from the reviewers as part of the revocation process. These comments were passed on to Survey Nelson at the time notice of intending revocation was given. [14] In a report to the Director, Ms Sharon Forsyth – who is the General Manager of Maritime Services and the person who primarily advised the Director over this matter – took the following extracts from the Cowper/Maddick findings as respresentative of their conclusions:The report concludes (in summary extract): 4. Whilst there are fairly comprehensive systems in place within SNL's Head Office, which have had some improvements since our involvement, these are still not effective in assuring the way in which the business operates and particularly how surveyors in the field are required to deliver the systems in place in essence are not effectively implemented in their operation. 5. SNL having implemented some changes to their core systems are now focussing on training their surveyors in these system requirements of key concern is the fact that the surveyors we have interviewed are functioning in a fairly independent manner, rather than being clearly linked to the systems in place. System compliance is what drives action rather than understanding their functions should be taking a holistic approach to the vessel and its operation. 6. We have spoken at length with Terry and Jean Reynolds regarding how they should be managing the conversations with their surveyors and how they need to drive them. They have progressed this to some extent, not enough or quick enough from our perspective and now need to accelerate this process. The final conclusion of the report regarding SNL is worth repeating in full as it provides the context for the Director's choice of next steps:In summary, the SNL systems have the basis to support the SSM processes and requirements effectively. From a systems perspective, there are many ways to achieve this although at this stage the SNL approach is not working to deliver a consistent safety outcome. SNL's previous philosophy and culture was based on market share and not risk management. The lack of health and safety enforcementand no vessel operational and emergency training, together with a minimum of customised ships manual documentation meets expectations of their high risk clients but it does not fulfil their statutory delegation requirements to MNZ. This previous management culture still leaves the question of the risk status of all SNL's fleet. A failure to implement all MNZ regulations and rules together with a lack of training of their surveyors on how to function in the risk management environment presents a high risk to their clients. The lack of a complete management systems approach and reluctance to enforce all of the statutory requirements together with lack of risk assessment by their surveyor's encourage risk-taking rather than helping to reduce the overall risk.[15] Ms Forsyth considered suspension to be the appropriate response. However, the Director (Ms Catherine Taylor) concluded that she was not satisfied as to Survey Nelson's capacity to ensure safety of the vessels and decided upon revocation of the approval. [16] Notice of intended revocation was given on 7 September 2009. There was a period set for submissions which was extended upon request. Once submissions were filed there was a meeting of the parties and then the Director took further time to consider her decision. As of 20 November the revocation was confirmed.Issues arising[17] As noted there are three primary challenges. Other points are made which will be addressed as necessary, but in my view the three points I have identified represent the essence of the complaint. [18] The first issue is primarily one of statutory interpretation. Most core functions within the Maritime transport system are done pursuant to what is termed a "maritime document". There are specific statutory criteria applying to the issuing of any such document and to the suspension or revocation of such a document. The process includes appeal rights to the District Court.[19] Maritime New Zealand, in cancelling Survey Nelson's approval to be a safe ship management company, followed this statutory process. Survey Nelson contended from the outset that this was incorrect, and the approval was not a maritime document. [20] Determining whether the approval is a maritime document is a matter of statutory interpretation. However, it is not the end of matters. If Survey Nelson is correct, and it is not a maritime document, what was the correct process to be followed? Identifying the correct cancellation process will obviously influence consideration of the other issues. It will impact both on whether adequate notice was given and on whether the decision was reasonable given the bases for cancellation that were properly available. [21] The basic process claim is that Survey Nelson were never told clearly enough what the problem was. This meant that the opportunities for comment and submission were in large measure illusory because of the elusive nature of the complaints. [22] The third challenge is unreasonableness. Within this challenge it is said that the response of cancellation is sufficiently disproportionate to the problems that it is unreasonable to have done so. Further, the whole safe ship management system is submitted to be a mess, and for some reason Survey Nelson is being unreasonably singled out when it is no worse and arguably better than other providers. Finally, the Director's post cancellation actions are said to cast doubt on whether safety really was the concern. It is also said that those actions support the proposition cancellation was disproportionate.Issue one – a maritime document?(a) The statutory system[23] A maritime document is defined in s 2 of the Maritime Transport Act 1994:Maritime document— (a) Means any licence, permit, certificate or other document issued under Part 5 of this Act to or in respect of any person, ship, cargo, maritime procedure, or maritime product; and (b) Includes any foreign licence, permit, certificate, or other document recognised by the Director under section 41 of this Act or accepted by the Director under section 42 of this Act:[24] The best clue as to the role and significance of a maritime document is found in the provisions relating to the functions of the Director. Section 439 provides:439 Director of [Maritime New Zealand](1) The Authority shall from time to time appoint a chief executive of the Authority, who shall be known as the Director of Maritime [New Zealand]. (2) The Director shall have and may exercise such functions and powers as may be conferred or imposed on the Director by this Act or any other Act, or regulations or rules made under this Act or any other Act, and such functions and powers as may be delegated to the Director by the Authority under [section 73 of the Crown Entities Act 2004] or any other Act. (3) Without limiting subsection (2) of this section, the Director shall— (a) Exercise control over entry into the maritime transport system through the granting of maritime documents and marine protection documents under this Act or any other Act; and (b) Take such action as may be appropriate in the public interest to enforce the provisions of this Act or any other Act, and of regulations and rules made under this Act or any other Act, including the carrying out or requiring of inspections and audits[; and][(c) monitor adherence, within the maritime transport system, to any regulatory requirements relating to— (i) safety and security, including (but not limited to) personal security: (ii) access and mobility: (iii) public health: (iv) environmental sustainability: (v) any other matter; and][(d) ensure regular reviews of the maritime transport system to promote the improvement and development of its safety and security; and][(e) promote compliance with safety and maritime pollution standards in the maritime transport system.](4) In performing or exercising any functions or powers in relation to— (a) The granting of maritime or marine protection documents; or (b) The suspension of maritime or marine protection documents; or (c) The revocation of maritime or marine protection documents; or (d) The granting of exemptions; or (e) The enforcement of the provisions of this Act or any other Act, or of rules or regulations made under any such Act,— in respect of any particular case, the Director shall act independently and shall not be responsible to the Minister or the Authority for the performance or exercise of such functions or powers.[25] It can be seen from this extract that a maritime document is the primary method by which the Director is to exercise control over those persons who wish to operate within the maritime transport system. Broadly, you need to have one to be involved. [26] The centrality of a maritime document is reinforced by ss 17 and 18 of the Act which provide:17 General requirements for participants in maritime system(1) Every person who does anything for which a maritime document is required (in the succeeding provisions of this section called a participant) shall ensure that the appropriate maritime documents and all the necessary qualifications and other documents are held by that person. (2) Every participant shall comply with this Act, regulations made under this Act, maritime rules, and the conditions attached to the relevant maritime documents. (3) Every participant shall ensure that the activities or functions for which the maritime document has been granted are carried out by the participant, and by all persons for whom the participant is responsible, safely and in accordance with the relevant prescribed safety standards and practices.(4) Every participant— (a) Shall, if so required by maritime rules, establish and follow a management system that will ensure compliance with the relevant prescribed safety standards and the conditions attached to the document; and (b) Shall provide training and supervision to all employees of the participant who are engaged in doing anything to which the document relates, so as to maintain compliance with the relevant prescribed safety standards and the conditions attached to the document and to promote safety; and (c) Shall provide sufficient resources to ensure compliance with the relevant prescribed safety standards and the conditions attached to the document.18 General requirements for persons other than participantsEvery person, other than a participant (within the meaning of section 17 of this Act), who— (a) Operates any ship; or (b) Is responsible for any maritime product; or (c) Is otherwise engaged in any maritime activity— shall comply with the relevant provisions of this Act and any relevant rules.[27] It can be seen that martime document holders are "participants" in the system upon whom specific requirements are placed. In very broad terms the obligations in s 17(4)(a) are also placed on non-"participants" by s 18, but the extra requirements in s 17(4)(b) and (c) seem to have no equivalent for non-participants. [28] The definition of maritime document refers to documents issued under Part 5. Part 5 does not itself identify any particular document as a maritime document – rather it provides the machinery that attaches to a maritime document. This machinery includes: a) rules governing issuing of a maritime document including assessment of the applicant as a fit and proper person; b) rules allowing the suspension of maritime documents or the attaching of conditions;c) rules allowing revocation; and d) rules allowing inspections and audits. [29] The rule making powers are contained in ss 34 and 36. Section 34(1) provides that maritime rules may be made requiring a maritime document to be held by ships owned or operated in New Zealand, including:(d) persons or organisations having a direct involvement in ship operations or ship or maritime product safety services.[30] Section 36 is another rule making power. It does not relate to maritime documents, but provides that maritime rules may be made for any number of other identified purposes, of which 30 are identified. I agree with Ms Scholtens QC that these purposes can be classified as the standard setting functions – e.g. prescribing number of passengers, number of crew, requirements for navigation aids etc. However, it can be argued that s 36(j) has some applicability to the current case, providing as it does for rules to be made:(j) prescribing standards and requirements for the safe management of commercial shipping operations.(b) Part 21 of the Rules[31] Part 21 of the rules is entitled "Safe Ship Management Systems". It is itself divided into two sections – (i) big boats and those that go outside restricted waters, and (ii) not such big boats, commercial boats, boats that stay within restricted waters, and some fishing boats. This case concerns the second section, which is contained in rr 21.9 to 21.13. [32] Within the definition section of r 21.9 there are references to three documents which are identified as maritime documents – a certificate of survey, a safe ship management certificate and an approval to be a surveyor. The rules refer to safe ship management companies as an organisation, and that term is defined:"Organisation" means a partnership, a corporation sole, a body of persons whether corporate or unincorporate, or any other entity that is managing a safe ship management system, and that represents any party and the shipowners belonging to that safe ship management system, or solely the shipowners belonging to that system:[33] Rule 21.12 sets out how one gets to be a safe ship management company:21.12 Safe Ship Management System(1) If an organisation applies in writing to the Director for approval of that organisation's safe ship management system, and the Director is satisfied that– (a) the organisation possesses a valid certificate issued by a recognised accreditation body indicating that the organisation has implemented a quality assurance system which has been approved by that body and is subject to continuing audit; and (b) the scope and field of application of the quality assurance system is for the safe management of ships in accordance with the New Zealand Safe Ship Management Code; and (c) the organisation has been granted quality assured supplier status in terms of: (i) AS/NZS ISO 9001:1994 as amended from time to time, for organisations which are not the owners of the ships which are in their safe ship management system; or (ii) AS/NZS ISO 9002:1994 as amended from time to time, for organisations operating a safe ship management system for ships of which they are the owners; then the Director must grant approval in writing to that organisation's safe ship management system. (2) for the purposes of approving a safe ship management system, the Director may permit an organisation to operate a safe ship management system for an agreed period and maximum number of ships prior to the organisation's system obtaining the approval in writing referred to in r 21.12(1).[34] The balance of 21.12 sets out obligations on safe ship management organisations.[35] Next, r 21.13 is entitled:Entry to and conditions to be met for ship to remain in safe ship management system.[36] Its contents are true to label. It sets out rules for both the owner of the ship and for the safe ship organisation to which it is attached. The thrust of the rules is that you must be with an organisation, comply with survey and inspection requirements, do audits, and have what is known as a safe ship management certificate.(c) Is an approval to be a safe ship management company a maritime document?[37] The Director's position is that it would be inconsistent with the scheme of the Act if the approval were not a maritime document. The starting point is that it is the Director's duty to act in the public interest to enforce safety measures. The Act provides her with the means to discharge this obligation by giving the Director control of the issuing of maritime documents. The Director's capacity to carry out her duties would be considerably weakened if it is not a maritime document. [38] Ms Scholtens noted that maritime documents bring with them general requirements on the holders in addition to any specific rule attaching to an activity. The holder of such a document must be a fit and proper person at the time of applying, and must remain so. Whilst a process is set out for imposing conditions, suspending or revoking, the power to revoke is expressed in broad terms – the Director can revoke a maritime document if she believes she should do so. It is submitted that this reflects the need for wide powers in order to give effect to the paramount consideration of safety. [39] I agree with these submissions. Plainly the approval in issue should be a maritime document. The reality is that the holder of a management company approval will receive delegated powers to suspend maritime documents. It would be strange that this person's entry permit is not itself a document of that status. However, whilst it is important to give effect to this statutory scheme if one can, it is not permissible to ignore the actual provisions. They must be capable of being readconsistently with the scheme. There are within the rules some formidable barriers to doing so. [40] There are, on my count, 67 maritime rules in the sense that there are 67 Parts to the rules. Again on my count, across these 67 Parts, 24 documents are expressly described as maritime documents. This was a point stressed by Ms Cull QC for the plaintiff – where it is intended for a document to be a maritime document, the rules say so. [41] There is merit in the point, but it can only go so far. If that were the only impediment to reading the rules consistently with the scheme of the Act, it would not be a decisive point. But it is a starting point; if it were a maritime document, the general scheme of the rules suggests that the rule would describe it as such. [42] The preamble to Part 21, being the rule in issue, describes the rule as being sourced in ss 17(4)(a), 34 and 36(j) of the Act. Section 17(4)(a) and s 34 are about maritime documents only. This obviously suggests that Part 21 owes its genesis to the rule making powers relating to maritime documents (s 34). However, within Part 21 there are six documents, unlike the management company approval, that are expressly identified as maritime documents. Therefore, the references in the preamble to the sections of the Act dealing with maritime documents can be explained by the presence in Part 21 of these six maritime documents, and do not necessarily say anything about the status of the approval held by safe ship management companies. [43] An alternative question is whether the alternative rule making power which does not relate to a maritime document could authorise a rule establishing a safe ship management company regime. In other words, if it is not a maritime document, what is the source of the power to create it at all? The possible source is that referred to in the preamble, namely s 36(j) which provides for rules:(j) prescribing standards and requirements for the safe management of commercial shipping operations.[44] I agree with Ms Scholtens that the natural reading of the s 36 rule making powers is that it is a rule making power related more to detail and standards. Rule 36(j) is an example. Whilst I consider the language of s 36(j) could be read as authorising a safe ship management company approval regime, it is much less a natural fit than s 34 to be the source of such a rule. [45] I come next to the two points that I consider most tell against the idea that the approval is a maritime document. First, when one looks at r 21.12(1), namely the application process for an approval to be a safe ship management company, it is a very limited inquiry. The rule is written in quite a directive or mandatory tone, has relatively minimal requirements, and accords the Director very little discretion. There is no reference to the idea of a fit and proper person, and no suggestion that that information of that sort is required. This is a classic example of the dilemma this issue poses. It is very odd, to say the least, that such an important task is visited with such a meagre entry route. But if it were the entry route for a maritime document, one would expect there to be incorporation of, or reference to, the requirements that characterise a maritime document such as the fit and proper person inquiry. [46] Second, r 21 identifies its own grounds for cancelling an approval. On my perusal of the other parts or rules, I could not see any situation where this was done with a document expressed to be a maritime document. Nor would one expect there to be a separate regime because the Act already provides a whole process for maritime documents. [47] Rule 21.12 provides:(6) If at any time after an organisation's safe ship management system has been approved by the Director under rule 21.12(1)– (a) the organisation ceases to have a valid certificate issued by a recognised accreditation body indicating that the organisation has implemented a quality assurance system which has been approved by that body and is subject to continuing audit; or(b) the scope and field of application of the organisation's quality assurance system ceases to be for the safe management of ships in accordance with the New Zealand Safe Ship Management Code; or (c) The organisation ceases to have quality assured supplier status as referred to in rule 21.12(1)(c); or (d) the organisation fails to meet the requirements of rules 21.12(3), 21.12(4), 21.12(5), 21.13(6), 21.13(8) and 21.13(10); then the Director may, in writing, withdraw his or her approval of that organisation's safe ship management system, and that system will cease to be an approved safe ship management system under Part 21.[48] This specific cancellation route is consistent with the idea that safe ship management organisation approval is not a maritime document. If the approval were a maritime document, why would there be provided this separate cancellation route? [49] Although these are the main points, other factors support the plaintiff's submission that this is not a maritime document. First, the scheme is workable without the approval being a maritime document. In particular s 18 of the Act creates an obligation to comply with the relevant rules, and the Director's inspection and audit powers as set out in s 50 are not limited to maritime documents. They apply to all functions. And, as noted, there is a power to cancel the approval, albeit more limited than if it were a maritime document. [50] Second there does not appear to be anything that looks like a specific right of renewal. Indeed, to opposite effect, r 21.12(2) allows approvals to be for an agreed period and for a maximum number of ships. This therefore gives the Director a further measure of control. [51] Another point, not decisive but consistent with the theme, is the definition of "organisation" which has been set out earlier. 3 The consistent scheme and drafting of the rules would suggest that if the safe ship management organisation was the holder of a maritime document, that definition would say so. That is what happens3 Paragraph [32] above.elsewhere. For example, a surveyor, within the same definition section, is defined by reference to his or her status as the holder of a maritime document. [52] I am reluctant to hold that an approval to operate a safe ship management system is not a maritime document because it should be, and it is deficiency if it is not. However, other than that the result is significantly inconsistent with the scheme of the Act, every recognised interpretation aid points to the same conclusion, namely that it is not one. Further, and as important, the scheme is workable if it is not one. It is not as good a scheme, but it is a workable one. Part 21 has its own responsibilities, and its own grounds for revocation. Other necessary powers such as audit and inspection are available to the Director, and on my reading the approvals can be (and as advised are) time limited so control can be effected by not renewing. [53] Given these factors, I conclude that the approval of an organisation to be a safe ship management company is not a maritime document.An interim discussion of the significance of it being not a maritime document[54] The Director's formal steps were premised on the approval being a maritime document. However, the submission advanced on behalf of the Director at the hearing is that even if the correct cancellation route was r 21.12(6), the process that was followed was adequate to meet those needs. Without at this point agreeing or otherwise, I consider that it is a tenable argument, so undertake the rest of the analysis with that proposition in mind. In other words, having read all the material, it does not appear to me to be a situation where one can say straight away that the Director's error is determinative and it has to be done again. That may be the result, but it needs to be looked at.[55] It is sensible at this stage to focus a little more on what then the real cancellation route was. Rule 21.12(6) was earlier cited. 4 The first parts, paragraphs (a) – (c) really just restate the entry conditions identified in r 21.12(1) and say that the Director can cancel if the entry criteria are no longer met. These paragraphs need not be considered further. [56] The key provision is r 21.12(6)(d) which I set out again for convenience:(d) the organisation fails to meet the requirements of rules 21.12(3), 21.12(4), 21.12(5), 21.13(6), 21.13(8) and 21.13(10);[57] Of the various rules named in r 21.12(6)(d), the Director has specifically identified r 21.13(8) and r 21.13(10) as being the specific rules which she says that Survey Nelson was in breach of. They provide:(8) The organisation must carry out subsequent audits of the safety management of each ship in that organisation's approved safe ship management system to ensure compliance with the New Zealand Safe Ship Management Code. These subsequent audits are to be undertaken when the ship is operational, and in its normal service. (10) The organisation must carry out inspections of each ship from time to time to ensure that the ship and its equipment are being maintained in accordance with the approved maintenance plan and remain fit for their intended purpose. These inspections are to include the inspections required by rule 46.17, and such inspections are to be independent of any audit required by rule 21.13(8).[58] Before moving on to consider the plaintiff's case measured against these provisions, it is appropriate to address an argument advanced by Ms Cull concerning the correct interpretation of 21.12(6)(d). It was argued that the use of "and" between the identified rules meant that all of these separate rules had to be breached before the powers to cancel were engaged. In other words it needs to be shown that Survey Nelson was in breach of all of 21.12(3), 21.12(4), 21.12(5), 21.13(6), 21.13(8) and 21.13(10).4 Paragraph [47] above.[59] I do not accept this. The invalidity of this argument can quickly be shown. To take one of the paragraph (d) rules, r 21.13(6) is the obligation on a safe ship organisation to complete an initial audit when a ship enters its system. If the plaintiff's submission were correct, then as long as that initial audit was done, a failure by the organisation to do any of the subsequent audits and inspections as required by (8) or (10) would not engage the cancellation power. [60] In response to the proposition that such an outcome showed the argument was flawed, Ms Cull suggested such gross omissions to later inspect or audit would inevitably feed into the issue of whether with the initial entry requirements were being maintained. I do not think that is necessarily so given that the focus of those entry requirements is on having a system rather than on its implementation, but even if it were, it still provides no basis for reading (6)(d) in the manner suggested. A breach of any of the identified rules is potentially a serious enough threat to ship safety as to support cancellation. It would be wrong to limit the effectiveness of the cancellation power. This is especially so if it is correct that the approval is not a maritime document and so none of the more widely worded cancellation powers are applicable.Issue Two – the process inquiry: was sufficiently clear notice of the problem given?[61] In my view the key document must be the notice given on 7 September of an intended adverse decision. That document must be read in light of all the preceding history, but it is the formal step triggering the submission process. As a starting point the Director must establish its adequacy in terms of the now alleged breaches of rules 21.13(8) and 21.13(10).(i) The September 7 Notice[62] There are four documents that form the notice. There is first the formal letter to the directors of Survey Nelson advising of the intended adverse decision, and then there are three appended documents. In chronological order, the appendices were theCowper/Maddick report, then a memorandum of Ms Forsyth to Ms Taylor as Director detailing the history of the Survey Nelson issue, the concerns, and the options available to the Director. Finally, there was a memorandum from Ms Taylor back to Ms Forsyth advising of her decision, and what underlay it. [63] Looking first at the formal letter, it made reference to the attachments and advised that in the Director's opinion, despite direct assistance and oversight:SNL systems [are] not delivering against the core requirements of an SSM company – assuring the safety of the vessels within the system.[64] The Director confirmed that she considered resolutions other than revocation to be inadequate because conditions or suspension would not ensure the implementation of adequate safety systems by Survey Nelson. [65] The decision to revoke was described as being in accordance with s 44(1) of the Act (which relates to maritime documents) and r 21.12 (which is the cancellation power that should have been exercised). [66] Next, there is the Director's reply memorandum to Ms Forsyth. It contained her reasons as to why cancellation was necessary. That memorandum was the first of the documents appended to the formal notice letter. It: a) referred to concerns dating back at least 12 months as identified in various reports; b) noted that despite considerable oversight and expense on the part of Maritime New Zealand, the concerns had not been fully addressed by Survey Nelson; c) said she was not satisfied that Survey Nelson could put in place systems to provide oversight and peer review for its surveyors, nor for the vessels and operations within its systems;d) specifically referred to the concerns raised in relation to vessels surveyed by Survey Nelson that have been highlighted in various reports in the last 12 months; e) explained why, despite Ms Forsyth's recommendation of suspension, the Director considered revocation to be the right response; f) identified that she wished specific steps to be taken in relation to Mr Reynolds (the principal of Survey Nelson) and another named person as regards their continued status as surveyors. [67] The combination of the formal letter and this memorandum in my view define the inquiry. Although the history of concerns with Survey Nelson go back much further than 12 months, what the Director has done is say that it is the Ferrier/Roberts report, provided to her in August 2008, and the Cowper/Maddick report, provided in May 2009 that have informed and dictated her decision. I do not dismiss Ms Forsyth's memorandum but it is primarily just a distillation of these reports, and particularly of the Cowper/Maddick report. A fair assessment whether adequate notice of the relevant breaches has been given requires consideration of these two reports because they are the basis of the Director's decision. When she refers, more than once, to the preceding 12 months, it must be seen as referring to these sources.(ii) Ferrier/Roberts[68] This report was commissioned by Ms Taylor. It followed on from a series of audits by Maritime New Zealand that caused Maritime New Zealand concern. Survey Nelson disputes the validity of this concern, but the point is that Maritime New Zealand regarded the situation as sufficiently troubling to arrange for an independent audit. This involved obtaining permission from the Minister to delegate the necessary powers. The very fact that Maritime New Zealand thought it necessary to set up what it regarded as an independent audit must have made it plain to Survey Nelson that the Director had serious concerns.[69] The report is extensive, running to over 100 pages when appendices are factored in. There are findings of concern in many areas, including the operating environment, the response of Survey Nelson to previous audits, the mismatch between Survey Nelson's perceptions of its role and Maritime New Zealand's perceptions, and the communication difficulties between the two, the organisational culture of Survey Nelson which is described as one of commercial survival and expediency, the inability of Survey Nelson to understand the requirements of a systems approach, and specific identified flaws in its operational processes. At paragraph 6.25 the authors observe:6.25 The review panel has identified cases in which Survey Nelson has:• not provided sufficient guidance with the SSM manual;• allowed non-conformities to be attended to in an untimely fashion;• not ensured Maritime New Zealand is made aware of concerns with non-compliant vessels;• allowed a vessel to operate for a purpose that it was not certificated for;• granted maritime documents without having all the necessary information to ensure it is safe;• not thoroughly checked a vessel when doing an audit;• allowed temporary repairs to remain beyond a reasonable length of time;• not limited the use of skilled professionals to preliminary work only;• not followed up in a timely way to ensure that vessel owner/operators have said what they were going to do;• used the initial audit undertaken by MNZ as a means to check if the vessel is compliant; and• tolerated levels of non compliance that are unacceptable to MNZ. The risk associated with the delegation of the Director of Maritime New Zealand's power to Survey Nelson is increased when Survey Nelson demonstrates these behaviours.[70] The overall conclusions of the report are cited earlier. 5[71] In the course of its review the Report considered in detail seven named vessels. In relation to each vessel, serious concerns were identified that would in most cases amount to breaches of the responsibilities set out in Rules 21.13(8) and 21.13(10). The concerns were not, however, labelled in terms of these specific rules. [72] In my view the Ferrier/Roberts report was a document that should have given rise to considerable concern over whether Survey Nelson should have continued approval. The concerns were on two levels – it seems Survey Nelson did not really "get" the concept of a systems approach whereby individual assessments and surveys were just part of a broader safety plan for a vessel. It was this aspect that was to become the primary focus of the later Cowper/Maddick initiative. The second area of concern was the performance of the specific functions of inspection, audit and survey in relation to named vessels. [73] It would not have surprised me had cancellation been undertaken at this point. However, the Director, who is obviously best placed to know these things, was plainly conscious that the whole safe system management system had difficulties. In her affidavit Ms Taylor said she seriously considered cancellation at this point. However, she was concerned that the efforts of Maritime New Zealand to make the system work, and to work alongside Survey Nelson, may have given a misleading signal as to adequacy of Survey Nelson's performance. [74] The Director determined that given this background, it would be fairer to appoint Messrs Cowper and Maddick to provide assistance for Survey Nelson to better grasp and make this shift in focus. [75] In my view there was also a practical reality that informed developments. Every vessel needs to be attached to a company or it cannot operate. Survey Nelson had about 20–25% of the fleet on its books. The upheaval caused by a sudden cancellation would be large. It is not a resolution to be lightly adopted.5 At paragraph [11] above.(iii) Cowper/Maddick[76] This report has been touched on earlier in the judgment, and extracts from the conclusion already cited.6 The oversight process began with a more intense period of working with Survey Nelson, which culminated in a report which identified necessary areas of improvement. There then was the final report in May of 2009 which incorporated commentary on how successful the earlier initiatives had been. I consider it fair to say the conclusion was that improvements had been made, but they had not come about quickly enough, and that on-going supervision and assistance would be necessary to reach the appropriate standards and levels of understanding. [77] In the Report there are, amongst others, sections headed up: a) survey, auditor and inspector roles; b) vessel files and records. [78] These two headings would seem directly to touch on the obligations contained in r 21.13(8) and r 21.13(10), which are the rules Maritime New Zealand says were breached. In their interim report, under the Survey, Auditor and Inspector heading, the report writers looked at three specific vessels. One related to a vessel undergoing a full survey for re-entry into the system, and two involved vessels which were having what is called a mid-term survey. Under the other heading of "vessel files and records", five vessels were considered, being the same three as above plus two more. Under both headings problems were identified, just as they had been in the Ferrier/Roberts report. [79] The interim report identified the absence of a clear link between Survey Nelson's systems, and how people in the field were working. Reflecting this problem, the records were considered to be either minimal or inadequate. Mr Maddick is a surveyor. In relation to one of the vessels he identified several issues of importance that had not been addressed in the re-entry survey. More6 At paragraph [14] above.generally the authors were concerned about the lack of identification of the particular task and how it fitted within the overall safety plan. [80] At the time of the final report the authors' primary concern remained that those in the field continued to act in an independent manner. As had Ferrier/Roberts, the authors identified that Survey Nelson's previous approach was based on maintaining market share and not risk management. They identified a change happening, but as noted thought it was too slow.(iv) Survey Nelson's response to the September 7 letter[81] The next document of significance is Survey Nelson's response to the formal letter giving notice of intended cancellation. First their counsel wrote disputing whether the approval was a maritime document. In a separate letter sent a day later, Survey Nelson made a substantive response. [82] The response began by seeking to establish as a relevant background fact that Part 21 and the Appendix 6 New Zealand Safe Ship Management Code were poorly drafted and confusing. [83] Next, the response noted:5.3 The grounds relied upon by the Director are unclear but can be summarised as follows: 5.3.1 A concern that the safety of people and vessels within the SNL system may be compromised despite the interventions undertaken by MNZ to date; 5.3.2 SNL being unable to put in place appropriate systems to provide oversight and peer review of its surveyors; 5.3.3 Unspecified concerns relating to a number of SNL vessels that were 'brought to the Director's attention'; 5.3.4 Concerns relating to the survey standards applied by Terry Reynolds and Roger Kempthorne.[84] The Survey Nelson submission then continued on to make further process points, and observed that the Director's concerns were not expressed in terms ofr 21.12(6). Similarly the Cowper/Maddick conclusions were challenged, and again it was noted that they also were not expressed in terms of r 21.12(6). [85] Attention was then turned to the Ferrier/Roberts report. It was submitted it had to be treated with circumspection because the authors had strong commercial links to Maritime New Zealand. [86] Next came a point which was a constant theme in Survey Nelson's position. It is said the various reviews are negative, and focus on problem vessels without alluding to the 700 well run vessels. It is not a point I see as having much relevance. The task of a safe ship management company is to monitor compliance with standards, and ensure the seaworthiness of vessels. If it has failed in that task in relation to a number of vessels, it does not seem particularly relevant to me that it has done its job in relation to lots of others. If the Director wishes to take a zero tolerance or near zero tolerance policy, I venture to suggest that is what is expected of her. [87] Survey Nelson's response, having made these various criticisms, then identified what it understood to be the five main problems about which the Director was concerned. The five problems that Survey Nelson perceived itself to be addressing were: a) systems not effectively implemented; b) surveyor related problems; c) insufficient training and development of surveyors and staff; d) vessel records and administration; e) safety of vessels and people. [88] Each concern was then tackled, with Survey Nelson setting out the systems responses it had made in each area. [89] In terms of a complaint that the Director has not adequately identified what is wrong, it has to be said this list is a pretty good encapsulation of the problems.(v) How the Maritime New Zealand notice might have looked[90] As part of the documentation for the hearing, Ms Forsyth drafted a notice that was expressed in terms of r 21.12, and the specific breaches alleged of rr 21.13(8) and 21.13(10). Ms Cull objects to the document, but it is permissible as long as confined to its purpose. It is an encapsulation of how a complaint might have looked, based on the same information available at the time, if it were written in terms of the correct cancellation power. No one is suggesting that is how Maritime New Zealand did put it. And, of course, it is a two-edged sword because it highlights how it could/should have been put, but was not. [91] In relation to a breach of r 21.13(8) (the rule requiring audits to ensure compliance) the draft notice refers to two vessels – the Wellesley, and H A Subritzky. The events concerning the Wellesley began in August of 2007. It was detained, for safety reasons, by Maritime New Zealand on 12 February 2008. After corrective action was taken, it was again briefly detained on 12 December 2008. The issues concerning the other ship, the H A Subritzky, ran from June 2007 till December 2008. [92] In relation to breaches of r 21.13(10), (the rule requiring inspections) the same two ships plus three more are referred to. Those five ships were all discussed in the Ferrier/Roberts report and there is extensive reference in that report to the non-compliance issues arising in relation to each. [93] Mr Reynolds responds to this draft document of Ms Forsyth in his second affidavit. 7 He first says that each of the vessels was a problem vessel which was discussed with Maritime New Zealand. He notes that there is no 2009 incident relied upon, the latest being 2008. He also notes that safety is the primary responsibility of the ship owner. [94] Those preliminary points made, Mr Reynolds then provides a response about each ship. A central feature of Mr Reynolds' response are extracts from, or references to, correspondence previously entered into, either with MaritimeNew Zealand or the reviewers, about these ships. In other words, they are not new disputes.(vi) Conclusion on adequacy of notice[95] Maritime New Zealand face quite a formidable hurdle. It has framed its notice in terms of the incorrect statutory route, and has used the language of that route. Whilst the Director's formal letter made reference to Part 21, there was no real attempt to articulate the concerns in light of the cancellation processes set out in r 21.12(6)(d). [96] The difficulty is compounded because the failings seen with Survey Nelson are not just the specific vessel breaches. Rather, those breaches are viewed as symptomatic of a larger issue, namely that Survey Nelson is, in the view of the Director, inadequate in its quality assurance role. It fails to see the need to establish a broader system which engages the individual vessels in a process that goes beyond the formal checks, and it has failed in efforts to transmit its safe management system to its contractors who engage directly with the ships. These concerns are valid in themselves, but they are more easily accommodated within a "maritime document" analysis, than within the very constrained ambit of the r 21 requirements. [97] When one looks at how the notice could have been drafted, the contrast with the actual notice is stark. The draft imaginary notice is vessel and incident specific. It is also interesting to see Mr Reynolds' response to it, as set out in his affidavit. It is plainly territory with which Mr Reynolds is far more comfortable – debating the rights and wrongs of individual actions in relation to individual ships. The arguments that Mr Reynolds sets out in his affidavit response are not found in Survey Nelson's formal response to the Director's notice of 7 September 2009. Although the topics that Survey Nelson identified are the correct ones, Survey Nelson's formal response was in terms of the systems response it has made under those topics. It did not contain the ship specific commentary Mr Reynolds now provides.7 28 February 2010, paragraphs 42–102.[98] In the end, therefore, I consider that one has to conclude the notice of 7 September 2009 was inadequate in terms of identifying the specific breaches said to engage the Director's powers of cancellation. As a consequence material that Survey Nelson would have wished to place before the Director in relation to the breaches was not included in its response.Another interim discussion of the significance of this finding[99] The judgment to date has concluded that the Director erred in her view that Survey Nelson's approval was a maritime document. This meant that a different cancellation route applied. Concerning that different cancellation route the Director did not give an adequate explanation of what breaches of what rules she was relying on in order to have the power to cancel. This lack of identification of the specific breaches led to Survey Nelson failing to put before the Director comments on these breaches. [100] That said, it is important to note two points. First I have already observed the disputes about the specific vessels were not new. Second, the process that was followed in relation to the September 7 notice was not irrelevant. They were issues that went very much to the Director's discretion to cancel. [101] A proper notice in the circumstances of this case would do two things: a) it would identify the original breaches that triggered the power to cancel; b) it would identify what it is about Survey Nelson's response to the Cowper/Maddick oversight that has led the Director to conclude it is inadequate and means she has decided on cancellation. [102] What has happened here is that the second bullet point has been well attended to, but the first has been overlooked. The first step has, however, been done once earlier. The Duncan/Ferrier process had built into it opportunities for Survey Nelson to comment on the findings.[103] Having identified these flaws in the 7 September notice, and having put them in context it is appropriate to defer further discussion until addressing remedy. However, a couple of minor topics should be addressed before moving on. The first topic is the issue of unclear language or what the plaintiff terms "management speak". Undoubtedly there is some of that, but it is to be recalled that Survey Nelson is performing a quality assurance role. The language used by Maritime New Zealand picks up on the reports of Messrs Cowper and Maddick. Survey Nelson's response8to the 7 September notice left me in little doubt it understood what the concerns were, and was able to provide its response to them. [104] Second, another discrete ground of process challenge was that the Director should have given notice around 20 November to Survey Nelson that she was about to confirm her decision. There are two aspects to this. First it is said that Survey Nelson were led to believe that the interim decision would not be confirmed. Mrs Reynolds says that when they were leaving the meeting held in late October, Mrs Taylor said to her that it would be alright. There is no response to this claim by Mrs Taylor. [105] Ms Cull does not suggest that the Director's assurance to Mr Reynolds gives rise to any enforceable expectation, but submits it is relevant to the fairness of the final aspect of the process. Second, had final warning of the adverse decision been given, Survey Nelson could have acted so as to prevent Maritime New Zealand advising all its ship owners of the cancellation. Although interim orders have required that advice to be reversed, damage will have been done. [106] On this issue I consider one needs to separate good governance from a legally relevant breach of fairness. I can see the argument the plaintiff makes, but ultimately it cannot be a basis on which one would overturn an otherwise correct decision. Caught up in these processes, one often sees things done abruptly that could have been deferred or heralded better. Arguably if Mrs Reynolds was left with that understanding, this was such a case although it is not something to be definite about. At some point the decision has to be taken and become operative. A further period of warning would not greatly alter matters.8 Paragraphs 7/7.1–11/11.6 of Survey Nelson's reply.[107] Finally there was a submission that the 20 November decision did not match the 7 September notice. The proposition is that the cancellation decision, unlike the original notice, starts to incorporate the language and grounds of r 21.12(6). I consider that it is not an issue that raises separate problems from those already discussed. They key issue remains the adequacy of the 7 September notice, and at best the 20 November decision is further evidence of the alleged deficiency.Issue three – Unreasonableness[108] The topics raised by the plaintiff under this heading are proportionality, and irrationality in the sense that Survey Nelson is not worse than any other licence holder and it is unreasonable to select them out. [109] Addressing proportionality, one specific aspect which the plaintiff focuses on is the Director's response to the problems created by the removal of Survey Nelson from the safe ship management system. It has been noted earlier that every ship linked to Survey Nelson must be linked to some safe ship management company or they cannot put to sea. Cancellation of Survey Nelson's approval puts 20–25% of the fleet in difficulty with this requirement. [110] Exercising her statutory powers of exemption, the Director intends to exempt ships currently linked to Survey Nelson from the obligation to be attached to a company until the ship's next out of water inspection, provided that it continues to be compliant and is made available for inspection within 14 days on request. It is then the intention of Maritime New Zealand to visit within six months every Survey Nelson ship it has not otherwise seen within the last 12 months. What is observed at that time will influence whether the exemption continues to apply to that ship. [111] The plaintiff's submission is that this approach shows cancellation to be disproportionate. The problem cannot be so acute if this is a proper response to the situation created by cancellation. It is noted that since cancellation (which, however, lasted only a short time because of the interim orders being made) no Survey Nelson ship has been impounded or detained.[112] This proportionality submission leads to the other proposition being advanced under this head, which is that Survey Nelson is being unreasonably singled out. The evidence of Maritime New Zealand is that Survey Nelson stands out as a poor performer, and certainly I heard no evidence suggesting other companies have necessitated independent reviews or oversight. However, Survey Nelson disputes it is a poor performer. [113] As part of preparation for the hearing, Survey Nelson sought from Maritime New Zealand comparative data. Shortly before the hearing, it received some statistics on incidents and accidents. Survey Nelson then had two people reanalyse the data, 9 with the result that Survey Nelson comes at least midway and sometimes higher as a safety performer. The uncorrected data was not being relied on by Maritime New Zealand, so I do not have their assessment of it. [114] In addition to relying on the reanalysed data, Mr Reynolds deposed that he had enjoyed good standing under the previous Director. He had been regarded as a senior operator and had performed training functions on request. Evidence from Maritime New Zealand was seen as implying that the former Director had a dim view of Survey Nelson, so an affidavit from the former Director was filed saying that was not so. In my view this little flurry was unnecessary. I do not read the Maritime New Zealand evidence as doing any more than referring to an audit under the previous Director that had unfavourable aspects. [115] I also record that in support of Survey Nelson's good standing, and in support of the related theory that it was being singled out, three other items of evidence were relied on. First Mr Reynolds identified two occasions where he clashed first with Ms Taylor and then at the later date Ms Forsyth. He suggests these may have led to personal animosity. Second, letters of support from ship owners are supplied. These letters indicate that those persons consider Survey Nelson does a better job than its competitors. Finally it is noted that some of the impugned surveyors work on contract with other companies also, and do not receive there the type of training the Director wishes Survey Nelson to provide.9 There are challenges to this evidence by Maritime New Zealand on the bases of relevance, and form. It is not necessary to formally resolve them.[116] It is not easy to characterise all this evidence, and certainly not possible to resolve some of the allegations. To the extent that it amounts to an allegation of bias or bad faith, I consider the key point is that the Director has, on two occasions, sought outside assessment. This is conduct that is the very opposite of what one would expect from people with personal agendas. [117] The plaintiff's claim that cancellation was a disproportionate response draws on all the matters identified, and also places reliance on what is said to be widespread acceptance that the system is flawed. Certainly the material to which I was referred accepts that there are problems with the system, but it is difficult to gauge how fundamental they are. Ultimately, however, it seems a point that has limits. The system is what it is. Those who choose to work within it must adhere to it. The Director has identified that of all the companies, Survey Nelson is unable to do so to an extent that threatens the safety of vessels. If that is a reasonable assessment, she is obligated to act. [118] I have doubts, absent bad faith, that it is relevant whether other companies exhibit some or all of the same flaws. The reality, though, is that there is not the information before me that could support the proposition that the decision was irrational because it singled out Survey Nelson when it was not in fact any worse than other companies. The evidence of Maritime New Zealand witnesses is otherwise. The statistical information provided is quite vague as to its import, and addresses only one area. 10[119] Appended to an affidavit of Ms Forsyth 11 was a tabulated summary of the audits of all the other safe ship management companies. Neither party particularly focussed on this document in submissions. For three of the companies no non-conformities were identified in any audit. Overall it does not appear to me to be a document that aids the unreasonableness argument; a number of companies, based on these summaries, are doing considerably better.10 Ms Cull points to time constraints in terms of being able to present the material better. I accept the point, but it does not mean the evidence can have greater probative value that it merits as presented.11 4 th affidavit, Tab 9. The document was provided earlier to Survey Nelson in response to an official information request.[120] Looking at it on classic reasonableness grounds, I am far from the view that the reports do not provide a basis on which the Director could cancel the approval. Indeed quite the opposite. A reading of the file has left me with considerable concerns over Survey Nelson's approach to its role. There is a constant theme throughout the documentation that Survey Nelson takes the approach that attack is the best form of defence. It was observed by Ferrier/Roberts, and it is clear from the correspondence. Individuals are attacked for their competence, and findings always contested. Even organisations such as the Transport Accident Investigation Commission are similarly branded when it found errors with Survey Nelson. In a final observation Mr Maddick observed:Even with our considerable intervention and support Terry has not learnt from his past mistakes on how to function in his capacity as a Director of a Safe Ship Management Company or as a professionally licensed marine surveyor.[121] In assessing the proportionality and reasonableness of cancellation, I consider one cannot overlook that as a response to the Ferrior/Roberts report, Maritime New Zealand provided at its own expense expert assistance to help Survey Nelson overcome its deficiencies. When the Director thereafter received advice that the response was slow, and that she could not be satisfied about Survey Nelson unless on-going oversight and assistance was provided, it was in my view well open to her to act as she did.Issue four – Relevant and irrelevant considerations[122] I consider it is helpful to consider this issue separately. There is a degree of overlap with the issues of maritime document, and adequate notice, but in my view it is important not to overstate the consequences of the Director focussing on the incorrect cancellation power. [123] The statutory scheme contended for by the plaintiff, which I have accepted, is that the safe ship management approval is not a maritime document, but rather its issuance and cancellation are governed by r 21.12. The last part of r 21.12(6), already cited, can be again highlighted. If:(d) the organisation fails to meet the requirements of rules 21.12(3), 21.12(4), 21.12(5), 21.13(6), 21.13(8) and 21.13(10); then the Director may, in writing, withdraw his or her approval of that organisation's safe ship management system, and that system will cease to be an approved safe ship management system under Part 21.[124] A breach of r 21.12(6)(d) creates a discretion. Something must guide its exercise, since it is not to be assumed that all breaches will be of equal significance. Albeit because she thought she was dealing with a maritime document, the Director has in exercising her discretion taken into account Survey Nelson's overall performance as a safe ship management organisation. Its performance over the years has been assessed, as have the root causes of the particular breaches, and the possible safety consequences of breaches. On these topics Survey Nelson has been given various opportunities to comment and improve. [125] Looked at in this context, it is very difficult to suggest that much of what has gone on is irrelevant. I return to the earlier analysis: a) there has to be a breach of r 21.12(6)(d); b) there has to be a consideration of what to do about it. [126] I do not see that the latter consideration is limited to solely an assessment of the seriousness of the breach. Part 21 should be read within the context of the statutory scheme under which it is enacted, and this includes the Director's role and responsibilities. Part 21 creates safe ship management organisations and they do not operate in a vacuum. They are part of a scheme, and I have no doubt the Director can and should look at these bigger picture issues when assessing the significance of a breach of r 21.12(6)(d). [127] One could look at it equally from an organisation's view point. It would rightly feel aggrieved if, having committed a breach, it could not call in aid its general soundness, its good systems, and its past record.[128] Accordingly I am of the view that there is little if anything in what has happened that merits the label of "irrelevant consideration", notwithstanding the incorrect focus on a maritime document.Issue five – Delegations[129] A topic which hangs over this case, without ever really gaining prominence, is the issue of delegations. One cannot operate as a safe ship management company unless one is also the recipient of a number of accompanying delegations. For the people on the ground, the delegations are primarily to powers of audit, inspection and survey. For the directors such as Mr and Mrs Reynolds, the delegations also involve powers to suspend maritime documents, or impose conditions. [130] Sections 433–434 of the Act authorise these delegations. Concerning delegations to persons outside the maritime authority, s 444(8) provides:(8) Every delegation under this section shall be given for a specified period but in any event shall be revocable at will.[131] The question arises whether this capacity to revoke the delegations at will makes the rest of the case largely irrelevant. If the Director can simply withdraw the delegations, then whether or not Survey Nelson still has an approval does not matter. And if they are withdrawn, Survey Nelson cannot operate effectively as a safe ship company. [132] In this case, with one exception, the Director did not purport to act on the delegations other than as a consequence of cancelling the approval. The one exception was the status of Mr Reynolds and another as surveyors – the Director gave specific directions in that regard. [133] I was not directed to any authority on the issue of the extent to which this capacity to revoke at will can be fettered by attaching the delegations to an overall system which itself attracts both natural justice considerations, and a statutory scheme. Instinctively I would consider that the delegations would take on some of the procedural obligations arising from the scheme, but this cannot be overstated.For example, the delegations of surveyors attached to Survey Nelson were consequently revoked because Survey Nelson ceased to be approved. The surveyors delegations for other companies would be unaffected. It has not been suggested that the surveyors have independent process rights that would accord them natural justice rights as regards the issue of cancelling Survey Nelson's approval. [134] I conclude that the Director could not cancel the delegations only because she wanted to cancel the approval and wished to avoid due process obligations attaching to the approval. This seems contrary to the clear statutory scheme. Imagine, for example, that there was no breach of r 21.12(6)(d). It would seem surprising that despite there being no power to cancel the approval, the Director could achieve the same thing simply by revoking the essential accompanying delegations. Once the delegations are linked to the approval system, some fetter must arise. I stress, however, that if independently there are other reasons to cancel a person's delegation then that is a different matter unaffected by this.Relief[135] Bringing together my various conclusions, I am of the view that there was a basis to cancel the approval. This basis arose because:• the defects identified in the Ferrier/Roberts report, and summarised in Ms Forsyth's imaginary notice, were such as to give rise to the cancellation power contained in r 21.12(6); and• the Director, having tried a remedy other than cancellation and finding it wanting, concluded that the breaches necessitated cancellation. On the information available to me that was a decision well within her discretion, and frankly was not surprising. [136] However, there were deficits in the notice of intended cancellation which was provided on 7 September 2009. Those deficits related to the first bullet point above. The notice did not adequately identify for Survey Nelson what the specific breaches were, nor did it link those breaches into the various rules relied upon. Aconsequence of this lack of information is that Survey Nelson did not put before the Director information that it would have in relation to the breaches. I infer from the affidavits it would also have sought to argue those breaches were dated, although such a proposition really goes towards the second issue of whether cancellation was a correct response given what had happened since. [137] The significance of the deficit in the notice is lessened by the history of the matter. The specific breaches were detailed in an independent report provided to the plaintiff in 2008, and commented on at that time. The Director's formal notice, whilst not making reference to the relevant grounds and rules, did refer to incidents in relation to vessels. It is these instances that were detailed in the report and which were known to Survey Nelson. [138] Survey Nelson was "misled" in its response in that it focussed on systemic issues and how it was improving. In taking this focus Survey Nelson was trying to refute advice which the Director was receiving both internally and from Messrs Cowper and Maddick. These submissions were relevant. They went directly to what was the key issue, namely how the Director should respond to the breaches. She had tried oversight, and the main issue was whether there had been a sufficient response to that oversight for her to feel she could allow Survey Nelson's approval to continue. [139] Balancing all these factors I do not consider the Director's error as to the nature of the approval, with its consequent failures to expressly address the correct test, has led to process defects of such a nature that I would quash the decision of 20 November 2009. [140] If it were finely judged, the issue might have arisen of balancing the impact on the plaintiff with the fact that it is a decision aimed at protecting public safety. Whilst I have decided relief only on the basis of the significance of the breach, I touch on this issue for completeness. [141] There were competing factors. In favour of the plaintiff was that it plainly will affect their livelihood, and they have held the status of a safe ship companysince the system was established in the late 1990's. Process is important and it should have a proper opportunity to present its case and protect its business. [142] However, the deficit in the September notice came at the end of a long process where in my view Survey Nelson had been treated with considerable fairness. The decision of Maritime New Zealand, at its own expense, to provide for oversight and assistance at a time when revocation was possible illustrates well how fair an approach was taken. Survey Nelson, on my reading of the material presented, has not used those opportunities well or has not been able to. It has chosen combativeness when openness to the problems would have benefitted it more, and it is not difficult to see that it has at times suffered from under resourcing. When Mrs Reynolds became unwell, the steps it should have been taking to improve matters could not be done. [143] Whilst there are accordingly explanations for some of the errors, and for the slowness of the response, it has to be recalled that the approval to be a safe ship management organisation is a central document in a system of ensuring the safety of ships and those on them. It is true, as Survey Nelson is wont too often to say, that the key responsibility for safety lies with the owner, but the very repetition of this by Survey Nelson at the times it was said reflect, for me anyway, the reasons why Maritime New Zealand had concerns. It failed to grasp what its role was. [144] These balancing assessments are made on the basis of written material, and I do not make definitive conclusions about many of the issues. Rather, I observe that it was no surprise to me, having read the materials, that the Director had concerns. Given that the system involves important aspects of maritime safety, if engaged in a balancing exercise, I would have required myself to be satisfied that there had been a significant breach that could actually have made a difference to the outcome before I would have quashed the decision. I consider overall here the plaintiff has had ample opportunity to understand the problems and correct them.Other matters[145] Before giving my formal rulings I observe that I consider that it should be made plain in the Rules that the approval to be a safe ship management organisation is a maritime document. Further, the application process for such an approval should be brought in line with that applying to maritime documents. In my view this should not await any wider review of the system but should if possible be clarified as a matter of priority. [146] The other matter is the interim orders. The terms in which they were expressed had the effect of continuing the existing approvals and delegations until further order of the Court. It is clear that at the time of making these the Court was not aware that in fact the approval was due to expire, and on its face now has done so. There is no doubt the interim orders were not intended to have the effect of extending the life of the approval. They were intended only to prevent the Director from acting on her decision of 20 November 2009. Had I appreciated this at the outset I would have wished to hear argument on why the whole case was not moot given that the approval had anyway expired. I understand that the usual renewal process has been deferred because of the interim orders. Again I am sure that was not, and could not, have been the intent of the interim orders.Decision[147] The application challenging the Director's decision of 20 November 2009 fails with the effect that the interim orders are cancelled, and the Director's decisions confirmed both as regard the cancelling of the approval and the revocation of the delegations.[148] Counsel may file memoranda of costs if agreement cannot be reached. Although the review failed, the plaintiff succeeded on its argument that the approval was not a maritime document. It may be the parties might agree that costs could lie where they fall. ___________________________ Simon France JSolicitors: H A Cull QC, Wellington, email: office@helencullqc.co.nz M T Scholtens QC, Wellington, email: mary.scholtens@stoutstreet.co.nz