FEDERAL COURT OF AUSTRALIA
Sun Lucky Co Ltd v “Mu Gung Wha” [1999] FCA 220
ADMIRALTY – arrest of vessel – release - application to strike out proceeding and for release or reduction of security – voyage charterparty – issue of bills of lading for discharge at additional port – whether approved – waiver and estoppel – security - causation
PRACTICE AND PROCEDURE – strike out application - writ based on breach of charterparty and implied indemnity – principles relating to strike out of proceedings and release of security – implied terms in charterparty – effect of bills of lading issued at request of charterer.
WORDS AND PHRASES – “charterparty”, “bill of lading”
Admiralty Act 1989 (Cth) ss 4(3)(f), 19.
Laemthong International Lines Co Ltd as owners of the ship Laemthong Pride v BPS Shipping Ltd (1997) 190 CLR 181, cited
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, applied
KMP Coastal Oil Pty Ltd v The Owner of the “Iran Amanat” (1997) 75 FCR 78, applied
The “Nogar Marin” [1987] 1 Lloyd’s Rep 456, cited
The “Island Archon” [1994] 2 Lloyd’s Rep 227, cited
Newcastle Protection and Indemnity Association v Gard [1998] 2 Lloyd’s Rep 387, cited
The “Eurus” [1996] 2 Lloyd’s Rep 408, cited
Freshpac Machinery Pty Ltd v The Ship “Joana Bonita” (1994) 125 ALR 683, followed
Leyland Shipping v Norwich Union [1918] AC 350, cited
Voyage Charters (1993) Cooke et al
SUN LUCKY MARINE CO LTD v
THE SHIPS “JASMINE”, “CASPIA”, “DAHLIA”, “GLOBAL AMBITION” & “MU GUNG WHA”
WAG 88 OF 1998
TAMBERLIN J
HEARD IN PERTH
DELIVERED IN SYDNEY
12 MARCH 1999
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IN THE FEDERAL COURT OF AUSTRALIA |
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WESTERN AUSTRALIA DISTRICT REGISTRY IN ADMIRALTY |
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BETWEEN: |
SUN LUCKY MARINE CO LTD Plaintiff
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AND: |
THE SHIPS "JASMINE", "CASPIA", "DAHLIA", "GLOBAL AMBITION" & "MU GUNG WHA" Defendants
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DATE OF ORDER: |
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WHERE MADE: |
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HEARD: |
PERTH |
THE COURT ORDERS THAT:
1. The proceedings against the first to fourth defendants inclusive are dismissed.
2. The application of Korean Line Corporation is dismissed with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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WESTERN AUSTRALIA DISTRICT REGISTRY IN ADMIRALTY |
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BETWEEN: |
Plaintiff
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AND: |
"JASMINE", "CASPIA", "DAHLIA", "GLOBAL AMBITION" & "MU GUNG WHA" AS SURROGATES FOR THE SHIP “KOREAN PEACE” Defendants
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JUDGE: |
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DATE: |
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PLACE: |
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HEARD: |
PERTH |
REASONS FOR JUDGMENT
1 This is an application on behalf of those interested in the fifth defendant, the ship “Mu Gung Wha” seeking orders that (i) the writ and the subsequent arrest of the vessel be set aside; (ii) that the security fund provided in respect of the plaintiff’s claim against the vessel be released; and (iii) that damages be paid for the wrongful arrest of the vessel. In the alternative a further order is sought that the amount of security provided as a condition of release of the vessel be reduced from $US 2,240,142 to $US 225,700. An additional order is sought that the action against the vessels named as first to fourth defendants be dismissed. This latter order is not opposed. Finally, an order is sought that the plaintiff pay the defendants’ costs of the application. I also note that the parties have agreed that the question of damages for wrongful arrest will not be dealt with at this stage and this course is acceptable to the Court.
2 The vessel was arrested on 17 July 1998 as a surrogate vessel for another vessel owned by the Korean Line Corporation (“KLC”), namely the “Korean Peace”. Upon security having been provided in the amount of $US 2,240,142 on 21 July 1998, the vessel was released from arrest.
3 The arrest was made under s 19 of the Admiralty Act 1989 which is concerned with the arrest if surrogate vessels and which provides as follows:
“19. A proceeding on a general maritime claim concerning a ship may be commenced as an action in rem against some other ship if:
(a) a relevant person in relation to the claim was, when the cause of action arose, the owner or charterer of or in possession or control of the ship; and
(b) that person is, when the proceeding is commenced, the owner of the second-mentioned ship.”
The operation of this section was recently considered by the High Court in Laemthong International Lines Co Ltd as owners of the ship Laemthong Pride v BPS Shipping Ltd (1997) 190 CLR 181.
4 The vessel in respect of which a general maritime claim is made is the “Korean Peace”. At all relevant times that vessel was owned by Choy Yang Shipping Co Limited (“Choy Yang”) and was on time charter from that corporation to Sun Lucky. The time charter was dated 28 April 1998 and was in New York Produce Exchange Form (1946) with some additional clauses. Clause 8 of that time charter provides:
“… The Captain (although appointed by the Owners), shall be under the orders and directions of the Charterers as regards employment and agency; …”
5 Sun Lucky, as disponent owner, entered into a voyage charter of the “Korean Peace” to KLC, as charterer on 20 May 1998. This charterparty is in the Stemmor Form. Clause 2 of this charterparty required the vessel to proceed with all convenient speed to one safe berth port at Vladisvostok and to load cargo and to proceed to one safe berth Shantou in mainland China.
6 The particulars of claim as set out in the writ succinctly assert the claim in the following broad terms:
“The Plaintiffs’ against the Defendant is for:
(a) Damages for breach of a voyage charterparty on the Stemmor form dated 20 May 1998; and/or
(b) An indemnity in respect of loss and damage incurred by the Plaintiff as a result of complying with the Defendant’s order or instruction (such indemnity arising either by implication under the terms of the aforesaid charterparty, or alternatively as a matter of law); and/or
(c) Damages and/or an indemnity under written letters of indemnity provided by the Defendant to the Plaintiff on or about 28 May 1998.” (Emphasis added)
7 The relevant person named in the writ is KLC.
8 The plaintiff’s claim has been submitted to arbitration in London. Points of Claim and defence have been filed in those arbitration proceedings. To gain an appreciation of the way in which Sun Lucky advances its claims it is useful to consider the Points of Claim which I set out below.
“POINTS OF CLAIM
1. By a Voyage Charterparty dated 20 May 1998 on an amended Mediterranean Iron Ore (‘Stemmor (1983)’) form the Claimants, as time charterered/disponent owners, chartered to the Respondents the vessel ‘KOREAN PEACE’ to load steel products at one safe berth/port Vladivostock for carriage to and discharge at ‘one safe berth/port Shantou’.
2. The Charterparty, to which the Claimants will refer for its full terms, true meaning and effect, provided inter alia as follows:-
‘2. This ship shall proceed with all convenient speed to one safe berth port Vladivostok, C.I.S. Pacific … and there load … as directed by the Charterers… Upon completion of loading the ship shall proceed at her usual service speed to one safe berth port Shantou and there deliver the cargo …
11. The Captain to sign Bills of Lading at any Freight required by Charterers, not less than Chartered rate. Charterers have the right to sublet this Charterparty to others in whole or in part, at any rate of freight without prejudice to this Charter, they remaining fully responsible for due fulfilment of same.’
3. By a side letter dated 20th May 1998 it was further expressly agreed between the Claimants and the Respondents as follows:
‘Bills of Lading to be issued in Charterers’ office and to be signed by the Charterers on Owners’ behalf after Owners have given their approval of the fax copy …’
4. It was an implied term of the Charterparty, such implication arising as a matter of law, or alternatively being necessary as a matter of business efficacy, that the Respondents would not sign or cause to be signed bills of lading the terms of which were more onerous than those contained in the Charterparty and/or which involved liabilities which would not have arisen under the Charterparty.
5. Pursuant to the Charterparty, on or about 26th May 1998 the vessel completed loading approximately 24,000 metric tonnes of steel products at Vladivostock.
6. Wrongfully and in breach of the implied term pleaded in Paragraph 4 above on or about 27th May 1998 the Respondents caused and/or permitted bills of lading to be issued for 2 discharge ports, instead of the single discharge port provided for in the Charterparty.
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7. Further or alternatively by a fax dated 23rd May 1998 the Respondents requested the Claimants to authorise the issuance of bills of lading in respect of 2 discharge ports (namely Shantou and Shantou Donghai).
8. Discharge of cargo at both Shantou and Shantou Donghai was, as far as the Claimants are and were aware, not manifestly unlawful in itself, and accordingly on 26th[sic, 28th] May 1998 the Claimants, through their agents in Hong Kong, New Asean Marine Co. Ltd., issued 2 bills of lading, numbered 1 and 3, naming as the port of discharge ‘Shantou Donghai Port, China’.
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9. On or about 1st June 1998 the vessel arrived at the anchorage within the port of Shantou, PRC, whereupon the Port Authority directed that the vessel would not be permitted to discharge part of her cargo at Shantou and part of her cargo at Shantou Donghai, but that she should either discharge her entire cargo at Shantou, or alternatively discharge her entire cargo at Shantou Donghai.
10. By reason of the vessel’s laden draft, which exceeded the draft restriction applicable to Shantou Donghai, the vessel was unable to proceed to Shantou Donghai to discharge her entire cargo.
11. The Shantou Port Authority categorically refused to permit discharge at Shantou only of cargo destined for Shantou, and insisted on discharging the vessel’s entire cargo, irrespective of whether cargo was destined for Shantou or Shantou Donghai.
12. Whilst at Shantou the vessel was arrested on 5th June 1998 at the instance of San He Enterprise Development Company by an Order of the Guangzhou Maritime Court of the People’s Republic of China known as ‘(1998) Guangzhou Maritime Law Shan Zi No. 013-2’, and by an Order of that Court known as ‘(1998) Guangzhou Maritime Law Shan Zi No 013-7’ the Owners of the vessel, Choyang Shipping Co. Ltd., were required to provide security in the sum of US$ 450,000.
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14. The vessel remained under arrest until 14th July 1998 when security in the sum of US$ 450,000 was provided to the Guangzhou Maritime Court by Steamship Mutual Underwriting Association (Bermuda) Limited on behalf of Choyang Shipping Co Ltd.
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16. Following the release of the vessel from the first arrest, on 15th July 1998 the vessel was re-arrested at the instance of Shantou SEZ Jinli Develop Trade Co. by a further Order of the Guangzhou Maritime Court known as ‘(1998) Guangzhou Maritime Law Shan Zi No 017-2’.
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18 On 21st July 1998 the vessel was released from arrest when Steamship Mutual on behalf of Choyang Shipping Co. Ltd. posted security in the sum of US$ 700,000 with the Guangzhou Maritime Court. The Claimants again provided counter security to Steamship Mutual in the form of a bank guarantee dated 17th July 1998 issued by Warburg Dillon Read.
19. By reason of the Respondent’s breach of Charterparty pleaded in Paragraph 6 above the Claimants have suffered loss and damage, in that they remained liable for charterhire in the daily sum of US$ 5,700 to Choyang Shipping Co. Ltd. and incurred other expenses for time charterers’ account during the entire period that the vessel was under arrest at Shantou, and have become exposed to a potential liability to indemnify Warburg Dillon Read in the event that the holders of Bills of Lading Nos. 1 and 3 establish liability on the part of the shipowners, and have incurred and will incur further liability to Warburg Dillon Read in respect of the cost of maintaining the guarantees issued to Steamship Mutual.
20. Further or alternatively, by reason of their complying with the Respondent’s request to issue bills of lading for a second discharge port, the Claimants have incurred a number of liabilities including (but not limited to) charterhire to the shipowners and/or have incurred other liabilities for time charterers’ account and/or will incur a liability to Warburg Dillon Read, and, in the premises, the Respondents are obliged at common law to indemnify the Claimants in respect of such liabilities.
21. Further, the Claimants claim and are entitled to interest on all sums awarded at such rate and for such period as the Tribunal considers appropriate to Section 49 of the Arbitration Act 1996.
AND THE CLAIMANTS CLAIM:-
(1) Damages;
(2) An indemnity against all liabilities incurred by reason of the Claimants’ compliance with the Respondents’ request to issue bills of lading for a second discharge port;
(3) Interest as aforesaid;
(4) Costs.”
9 In late May 1998, a request was made by or on behalf of KLC to have cargo taken not only to Shantou but in addition to another adjacent port in a separate administrative area of the People’s Republic of China known as Shantou Donghai (“Donghai”). Whilst the two ports are only a few hundred metres apart they are administered by different bodies and there appears to be considerable rivalry, if not hostility, between these bodies. After the loading of cargo at Vladivostok for the voyage charter, bills of lading were issued in response to the request providing for discharge at the additional port of Donghai. However, when the “Korean Peace” arrived at Shantou to discharge cargo the Shantou Port Authority required it to discharge the entire cargo, including cargo in respect of which the bills of lading had been issued for discharge at Donghai. As a consequence of the discharge, claims were made by Chinese cargo interests under the bills of lading arising from the non-delivery at Donghai. As a consequence the “Korean Peace” has been arrested twice by cargo interests. On each occasion Sun Lucky provided counter-security and the arrested vessels were released.
10 The case for Sun Lucky is that KLC was and is a person who will be found to be liable personally to Sun Lucky for claims made by the Chinese cargo interests, either by way of damages for breach of the voyage charter or, under implied an indemnity. Sun Lucky contends that KLC is a person who would be liable to the plaintiff on general maritime claims concerning the “Korean Peace” arising from the above circumstances. Sun Lucky characterises its claims as arising out of an agreement which relates to the carriage of goods by ship within s 4(3)(f) of the Act. Sun Lucky claims that at the time of commencement of the proceedings, the registered owner of the “Mu Gung Wa” was KLC and that therefore the requirement of s 19(b) of the Act has been satisfied. The evidence shown to the Court in support of the writ is set out in two affidavits of David Carter, who is the Australian solicitor for Sun Lucky. Given the broad language used in s 4(3)(f) I am satisfied that the present claims are properly characterised as claims which arise out of an agreement which relates to the carriage of goods by ship.
11 It was a term of the release from arrest of the vessel on 21 July 1998, that such release was without prejudice to any rights it may have to contest the arrest of the vessel, by applying to have the writ and the arrest set aside and to have the security furnished returned or varied. It is pursuant to this reservation that the current application is made.
Submissions for KLC
12 The first series of submissions for KLC on its application concern the claim for damages for alleged breach of the voyage charterparty. KLC says that there is no arguable basis to support the claim in damages for breach of the voyage charterparty. Further, so it is said there is no material to show there has been any breach of the charterparty which could give rise to a claim for breach of contract. It is then said that the bills of lading under which the claims of the Chinese cargo interests were made and for which counter-security was provided by Sun Lucky, were issued with the consent of Sun Lucky, and that Sun Lucky thereby authorised the discharge at Donghai without any reservation of right to claim in respect of such variation to the nominated discharge port in the voyage charter. It is further said that even if there was a breach, then the consequences of such breach were waived by subsequent agreement with Sun Lucky, or alternatively, that there has been an election by it not to pursue any rights which it might otherwise have had in respect of the variation.
13 The second series of submissions for KLC concerns the claim for an implied indemnity, which is in respect of loss incurred by Sun Lucky as a consequence of complying with KLC’s request to vary the port of discharge. KLC submits that there was no indemnity implied by law or which can be implied from the circumstances. It is said that Sun Lucky’s only reservation of any right was limited to the additional costs of discharging the cargo at Donghai. KLC therefore submitted that there is no arguable case for implication of an indemnity of the nature sought by Sun Lucky on either of the bases identified in the writ.
14 The third group of submissions for KLC concerns the claim under the written letter of indemnity provided by KLC to Sun Lucky on 28 May 1998. The submission is that there is no arguable case in relation to this claim.
15 The final group of submissions concern the quantum of the monetary security provided on release in the light of further evidence submitted to me in the present hearing.
Appropriate tests – strike out and release
16 It is apparent that two related matters are raised. The first is whether the proceedings should be struck out. The second is whether the arrest should be set aside and whether the security provided in substitution for the vessel should be released.
17 In order to succeed in a strike out application the applicant must demonstrate, in substance, that the case advanced is so clearly untenable that it cannot possibly succeed: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. This is a difficult threshold for an applicant to cross and must be confined to clear-cut cases. The underlying reason is, as Barwick CJ pointed out in General Steele at 130, that:
“… great care must be exercised to ensure that … a plaintiff is not improperly deprived of his opportunity to have his case tried.”
18 In relation to an application for release of a vessel, the Full Federal Court in KMP Coastal Oil Pty Ltd v The Owner of the “Iran Amanat” (1997) 75 FCR 78 at 85, observed that when hearing an application for release of a vessel from arrest the relevant question is whether there is a serious question to be tried.
19 In making determinations on these questions, of course, it is not the role of the Court to “try” the matter in relation to each of the submissions of fact and law advanced as if it were a final hearing. Rather, the task of the Court on such applications is to consider whether the material presently available demonstrates the plaintiff’s case to be so unarguable and baseless that it could be struck out as frivolous or vexatious, and/or whether it raises a serious question to be tried.
20 In view of the limited role of the Court at this stage when considering questions as to arguability and whether there is a serious question to be tried, the application should be considered in a more general way than if the task of the Court was to decide the substance and the merits of the questions raised by KLC in opposition to the claim. Accordingly, it is neither necessary nor appropriate to make findings on the numerous authorities and arguments referred by KLC.
21 KLC was critical of the form and detail of the somewhat sparse particulars furnished in the writ as the basis of the plaintiff’s claim. Of course, the writ is not intended to serve as a formal pleading. The form of the writ as set out in the Admiralty Rules prescribes a minimal amount of information. The rule only requires that the plaintiff should give “short particulars of the claim enough to identify the cause of action”: Admiralty Rules r 19 Form 6. More detail as to the nature of the plaintiff’s claim in the present matter appears in the material annexed to the supporting affidavits and in the Points of Claim prepared in the London arbitration proceedings set out above. I do not think that the arguments of KLC gain any substantial support from the limited nature of the particulars in the writ and the absence of any more elaboration of the claims.
Relevant case law
22 Reference to the authorities cited indicate that the relevant case law in the area of the present dispute is not settled and that complex questions of fact and law are likely to arise. Among other matters there is an issue as to whether the effect of the conduct or contractual provisions under consideration gave rise to a breach of contract or a right to indemnity. A similar issue was considered in The “Nogar Marin” [1987] 1 Lloyd’s Rep 456 at 460 where Staughton J said:
“…it seems to me a little artificial to say that a charterer commits a breach of contract when he presents a bill of lading containing terms more onerous than the charter-party, and that the owner is entitled to damages. It makes better sense to say that there is an implied term which obliges the charterer to indemnify the owner.
If that be the correct analysis when the complaint is that the bill of lading contains terms more onerous than the charter-party, it seems to me that an implied undertaking to indemnify can equally be relied on when the bill of lading tendered incorrectly states the condition of the cargo.”
23 That case concerned a claim to an indemnity in relation to a voyage charterparty. The claim failed on the ground of lack of causation because of the intervening negligence of the ship’s master. Nevertheless, the observations both at first instance and in the Court of Appeal are of assistance in the present case. The decision was upheld on appeal: see The “Nogar Marin” [1988] 1 Lloyd’s Rep 412. The judgment of the Court of Appeal was delivered by Mustill LJ who observed that questions before him as to the rights of an owner for damages or to an implied indemnity were both novel and difficult. He admitted that the opinions of the members of the Court of Appeal had fluctuated during argument. His Lordship proceeded to consider the appeal in the light of the following statement or principle which is set out at 417:
“1. The general principle is that –
…when an act is done by one person at the request of another which act is not manifestly tortious to the knowledge of the person doing it, and such an act turns out to be injurious to the rights of the third party, the person doing it is entitled to an indemnity from him who requested that it should be done.
2. This is, however, a general principle, not a conclusion of law which is always to be drawn. … whether there is an obligation to indemnify must greatly depend on the circumstances of each individual case. Notes of caution to a similar effect may be found elsewhere in the authorities.
3. A special situation exists where the person receiving the request or demand has a duty to act upon it. Here, as we understand it, the right of the indemnity does arise by operation of law, except in the case where there is ‘default’ on the part of that person.”
The Court of Appeal accepted the proposition that the authorities on indemnity rights assume that a requirement to act in particular way involves a tacit offer to indemnify, and that by responding as requested the owner is regarded as having accepted that offer. However, as they point out, the implication of a right of indemnity is not automatic and will always depend on the facts of the individual case and the terms of the underlying contractual relationship. This latter observation was subsequently endorsed by Evans LJ in The “Island Archon” [1994] 2 Lloyd’s Rep 227 at 231 and 234, who gave the main judgment of the Court of Appeal. That case concerned a time charter. His Lordship held that the owners were entitled to be indemnified against the consequences of complying with the time charterer’s request to proceed to Basrah and deliver cargo there. He also observed that there was no rigid distinction between a time and voyage charter in relation to these questions. He saw the principal question as being, in the circumstances, whether the owner had agreed to accept the risks to which the vessel might be exposed as a consequence of the variation. The Court observed that the risks which a shipowner agrees to bear must be determined on the true construction of the charterparty in the relevant surrounding circumstances.
24 More recently, these observations of Evans LJ in The “Island Archon” were applied by Coleman J in Newcastle Protection and Indemnity Association v Gard [1998] 2 Lloyd’s Rep 387 at 404-5. That was a case which concerned a time charter. Coleman J approached the question as turning on whether or not risk had been accepted and concluded that it had not and that the owners were entitled to an implied indemnity in respect of the cargo damage in issue. In a decision which referred to both The “Nogar Marin” and The “Island Archon”, namely The “Eurus” [1996] 2 Lloyd’s Rep 408 at 420-1, Rix J at 420 pointed out that in a voyage charter the freedom of action of a charterer is much more circumscribed than in the case of a time charter. He noted that there is some uncertainty in the authorities as to whether, in addition to breach of an implied term of contract, the liability of a charterer in cases where a bill of lading imposes greater liabilities on the owner than he bears under his charter can be explained by the common law doctrine of implied indemnity arising out of a request. In the circumstances of that case it was not necessary to determine the point, however, Rix J found that the law on the question was not settled.
25 Consideration of the above authorities indicates that there are complex questions which require examination in this proceeding.
Breach of contract
26 Sun Lucky’s case on the claim of breach is made on two grounds. The first is the loading of cargo destined for two ports in breach of the charterparty; the other is the issuing of bills of lading which provided for the discharge of the “Korean Peace” cargo at Donghai as well as Shantou. The vessel was loaded with a view to partial discharge at the extra discharge port and was then permitted to sail. No prior consent had been obtained from Sun Lucky to this course.
27 The substance of the case advanced by KLC is that on 28 May 1998 it requested and obtained the agreement of Sun Lucky to the issue of the bills of lading which provided for discharge at the second port of Donghai.
28 The questions concerning whether there had been contractual variation and if so as to its terms, raise matters of some complexity of both law and fact, in a context where both the facts and the law are at this stage unresolved. The extensive material placed before me in the form of communications between the parties and their agents, in the second half of May and early June 1998, relating to the proposed unloading at Donghai, is open to reasonably differing analyses. It is apparent from the material that it will be essential to consider the whole of the context in which the documents and correspondence were issued in order to determine whether there was any agreement reached by the parties. Some of the central documents, particularly the fax of 28 May 1998 from the agents for Sun Lucky to the agents for KLC, raise questions of construction. For example, reference is made in the fax to the owners “basically” confirming the issue of bills of lading for Shanghai and Donghai but there are then reservations as to who should bear the expense. There is reference to KLC meeting the additional expenses and there is also a requirement for payment of a specific amount. KLC did not agree to pay the amount sought by Sun Lucky. There appears therefore to have been a counter offer. In order to determine the effect of this fax it may be necessary to consider additional evidence as to local usage at the ports which may depend on subtle shades of meaning.
29 It cannot therefore, in my view, be accepted on the present state of the evidence that there is no arguable basis for the claims advanced by Sun Lucky. I am not satisfied that either Sun Lucky or its agents gave unreserved agreement to the issue of the second set of bills and consented to the second discharge port in the sense that it consented without reservation. None of the authorities cited in support of KLC’s case are sufficiently clear or directly applicable so as to justify dismissal of the claim. In my view the strike out application on the breach claim in this case should not be granted in light of the necessity for a closer examination of the questions of evidence yet to be adduced in relation to the matter.
Implied indemnity
30 I have not been referred to any binding authority which is directly in point.
31 In support of its argument for the existence of an implied indemnity, Sun Lucky, referred to the Voyage Charters (1993) Cooke et al at 402 where the authors say:
“… a contract to indemnify will normally be implied where the captain, at the request of the charterers, signs a bill of lading in differing terms from the charter, and as a result of the difference the owners suffer loss. However, the implication is not automatic and must always depend on the facts and circumstances of the particular case … Where the captain … is under a duty to sign the bill of lading, the right to the indemnity arises, in the appropriate circumstances, by implication of law …Where the captain … is under no duty to sign, the request that he do so carries with it an implied promise to indemnify…”
32 This statement, in my view, lends some support for the claims of Sun Lucky because in the present case there was an express request to effect a variation.
33 KLC seeks to draw a conclusive distinction between the position which applies in the case of a time charter and that which applies in the case of a voyage charter on the basis of the employment clause under which there is an obligation on the Captain to comply with the orders of the charterer. It is said that because the relevant charter is a voyage charter, Sun Lucky therefore had a free choice whether to permit the vessel to proceed to Donghai, and that it duly considered the matter and gave its consent. Therefore, it is said that it was not appropriate to imply a duty to indemnify on the part of the charterer because the risk associated with the additional port was voluntarily assumed by Sun Lucky. The response of Sun Lucky is that, at the time when the later bills were issued, the vessel had been loaded and on the seas bound for two discharge ports instead of the one port provided for in the voyage charter. Sun Lucky was therefore confronted with a fait accompli and any freedom of choice was in a practical sense substantially undermined. So even if the ability to choose was a relevant consideration under the charterparty, in the present case, the requisite degree of freedom of choice arguably did not exist. I consider that there is sufficient force in these considerations to warrant that the claims of Sun Lucky should be permitted to proceed to trial.
34 The submissions for KLC do not, in my view, give sufficient weight to the important shades of difference which may turn, in any particular context, on the construction of the underlying contractual arrangements and the written and oral communications between the parties. The case presented by KLC calls for the drawing of a rigid general classification as to differences between time and voyage charterparties with a view to contending that Sun Lucky’s case is simply unarguable or does not raise a serious question. When regard is had to the evidence of concern expressed on behalf of Sun Lucky not to be out of pocket in respect of the discharge at Donghai, it is unlikely as a matter of commercial probability that it was prepared to accept the risk of any loss or damage arising from the nomination of the additional discharge port.
35 Questions of implied terms or reservations as to the existence of an indemnity in respect of the variation of the charterparty also require close consideration of all the evidence and a determination of the facts. On its face, the claim for an implied term in the present circumstances is not unrealistic. I cannot make any ruling as to the merit claim in relation to this matter on the present state of the proceedings. It is worth noting that Sun Lucky was anxious to ensure that it was protected against any extra expenditure occasioned by the addition of Donghai as a discharge port. It is not readily apparent what commercial or other benefit, if any, Sun Lucky would derive from any such variation. Indeed, as it turned out, the variation was one which in fact operated to impose extra risks as a consequence of the consent.
36 The case advanced for KLC is largely dependent on distinguishing facts and authorities from those said by Sun Lucky to be applicable in the present case. Ultimately, the distinctions may prove to be sound and relevant but at the strike out/release stage, they do not convince me that Sun Lucky has no serious case for trial.
37 An illustration of the difficulties which KLC faces at this point in the proceedings can be seen in its contention that it is not liable because the variation was made pursuant to its request. It contrasts this request with a command or order. The characterisation of the request made on 28 May 1998 raises questions of construction in the light of the circumstances discussed above that the vessel had already been loaded for discharge at Donghai and was embarked on the voyage. These facts are yet to be determined and reasonable persons may well differ in the light of these facts as to their proper characterisation. Where this is so it cannot, in my view, be said there is no serious question to be tried.
38 Having regard to the above I reject the submission that there is no arguable case on the implied indemnity claim. I also reject the argument that the proceeding should be struck out on the General Steele principle. This case falls far short of satisfying either of those requirements.
Letters of Indemnity
39 The claims based on the letters of indemnity were not strongly pressed before me. I am not satisfied that these claims have any real substance. Taken on their own they would not justify the setting aside of the writ and the orders, nor the release of the funds. This claim is not raised in the Points of Claim under the London arbitration and I note that the advisers to the plaintiff do not evince much confidence in the correspondence and orders in respect of this claim. However, it is not necessary for me to make a final determination on this question and I do not do so.
Whether security shown to be excessive
40 While it is true that the appropriate amount of security involves a prediction of future events, it does not follow that it is excessive. As Sheppard J pointed out in Freshpac Machinery Pty Ltd v The Ship “Joana Bonita”(1994) 125 ALR 683 at 687:
“The plaintiffs, in either willingly accepting, or being required to accept, security for their claim in lieu of the vessel which has been arrested, are running a risk. The security may be insufficient. The court determining the amount of security should be comfortably satisfied that the amount which is to be provided is likely to be sufficient to meet the claim … If it errs on the side of caution and is found to have provided for a greater sum than was … necessary … that, I am afraid is one of the incidents of the exercise which is involved.”
41 A large part of the security obtained is said to arise in the form of interest calculated over a period of a four year period estimated for the final resolution of this matter. The estimates submitted by the parties range from two to four years. Although the case may resolve in two years, at this stage, it is not possible to predict the period with any accuracy and I think the Court should act with caution given that the security is really in effect a proxy for the released vessel. Likewise, the assessment of legal costs must, in my view, take full account of all potential for appeals and post-arbitration costs. With respect to the Chinese arrests, security in amounts totalling $US 1.150 million was provided. In relation to one of the claims for security, the claim was forcefully negotiated downwards from $US 1,800,000 to $US 450,000. In other words, the figures were not simply plucked out of thin air. Moreover, there is evidence of possible exposure by KLC to liability in respect of guarantees provided in China to secure the release of the “Korean Peace”.
42 I accept the plaintiff’s submission that, on the basis of the outcome of its best arguable case, the amount in question has not been shown to be excessive.
Other matters
43 I now turn to two other matters. KLC submits that the loss claimed as a result of the breach of the charterparty was not caused by the change of discharge ports. It says that the loss was caused by the voluntary choice of Sun Lucky itself to berth at Shantou with the knowledge that the Port Authority there would be likely to require discharge of all cargo. KLC seeks to distinguish the decision in Leyland Shipping v Norwich Union [1918] AC 350, relied on by Sun Lucky, on the grounds that the loss in the present case is not the natural consequence of any breach of the charterparty because it consented to the discharge. This again raises the questions as to whether there was in fact any agreement or implied indemnity. Alternatively, it is submitted that the requirements of the Shantou Port Authority for unloading all cargo at Shantou broke the chain of causation between KLC’s request and the alleged loss. In my opinion in order to resolve these questions the facts need to be ventilated, but at present there is a serious question to be tried on the issue of causation. The determination of these questions will require examination in the light of particular circumstances which may include evidence as to the practice and awareness of Sun Lucky as to the unloading requirements at Shantou and as to possible alternative courses of action which might have been available.
44 A question as to the identity of the plaintiff and whether it was the contracting party was initially raised in submissions and correspondence but it was not strongly pursued on the hearing. On the present state of the evidence I am not satisfied that there is any substance in the arguments raised as to the failure of the plaintiff to properly identify itself as the contracting party.
Conclusion
45 The orders of the Court are:
1. The proceedings against the first to fourth defendants inclusive are dismissed.
2. The application of Korean Line Corporation is dismissed with costs.
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I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin. |
Associate:
Dated: 12 March 1999
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Counsel for the Plaintiff: |
Mr Ken Martin QC |
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Solicitor for the Plaintiff: |
Jackson McDonald Solicitors |
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Counsel for the Defendants: |
Mr Gregory John Nell |
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Solicitor for the Defendants: |
Cocks MacNish |
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Date of Hearing: |
25 to 26 November 1998 |
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Date Last Written Submissions Received: |
2 December 1998 |
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Date of Judgment: |
12 March 1999 |
