FEDERAL COURT OF AUSTRALIA
CMC (Australia) Pty Ltd v "Socofl Stream" [2000] FCA 1681
ADMIRALTY – action in rem against demise charterer of vessel brought by owner of cargo – bills of lading – whether bills gave rise to contract of carriage or were mere receipts – apparent or ostensible authority – agency by estoppel – whether defendant bound under bills of lading as carrier – whether master of vessel had apparent or ostensible authority to bind defendant – where master not employed by defendant – where defendant purported to terminate charterparty with sub-demise charterer but failed to nominate a port for redelivery of vessel – where sub-demise charterer indicated to defendant that it proposed to continue to trade – whether defendant breached implied term of contract that goods would be delivered with reasonable dispatch
Cheers v El Davo Pty Ltd (in liq) [2000] FCA 310 referred to
Agios Stylianos Compania Naviera SA v Maritime Associates International Ltd Lagos (The “Agios Stylianos”) [1975] 1 Lloyd's Rep 426 referred to
The San Roman (1872) LR 3 A&E 583 considered
The Patria (1871) LR 3 A&E 436 considered
Sandeman v Scurr (1866) LR 2 QB 86 referred to
Rodocanachi, Sons & Co v Milburn Brothers (1887) 18 QBD 67 considered
President of India v Metcalfe Shipping Co Ltd [1970] 1 QB 289 considered
Gardner Smith Pty Ltd v The Ship Tomoe 8 (1990) 19 NSWLR 588 considered
Sanko Steamship Co Ltd v Sumitomo Australia Ltd (No 2) (1996) 63 FCR 227 considered
Hunter Grain Pty Ltd v Hyundai Merchant Marine Co Ltd (1993) 117 ALR 507 considered
Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (2000) 173 ALR 263 applied
The Rewia [1991] 2 Lloyd’s Rep 325 referred to
Cactus Pipe and Supply Co v M/V Montmartre 1985 AMC 2150 referred to
Yeramex International v SS Tendo 595 F.2D 943 (4th Cir 1979) referred to
Homburg Houtimport BV v Agrosin Private Ltd (The "Starsin") [2000] 1 Lloyd's Rep 82 applied
Kaleej International Pty Ltd v Gulf Shipping Lines Ltd (1986) 6 NSWLR 569 referred to
Alimport v Soubert Shipping Co Ltd [2000] 2 Lloyd's Rep 447 referred to
Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 referred to
Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Company Pty Ltd (1975) 133 CLR 72 referred to
Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 referred to
Armagas Ltd v Mundogas SA (“The Ocean Frost”) [1986] AC 717 referred to
Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147 referred to
Boulas v Angelopoulous (1991) NSW ConvR 55-606 referred to
First Sport Ltd v Barclays Bank plc [1993] 1 WLR 1229 applied
Fyffes Group Ltd v Reefer Express Lines Pty (The “Kriti Rex") [1996] 2 Lloyd's Rep 171 referred to
Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 applied
Scrutton on Charterparties and Bills of Lading 20th ed. 1996
Ganado and Kindred Marine Cargo Delays: The Law of Delay in the Carriage of General Cargoes by Sea (1st ed. 1990) at 35 to 39
CMC (AUSTRALIA) PTY LTD (ACN 002 007 427) v THE SHIP “SOCOFL STREAM”
N 80 OF 1999
MOORE J
24 NOVEMBER 2000
SYDNEY
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IN THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
CMC (AUSTRALIA) PTY LTD (ACN 002 007 427) PLAINTIFF
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AND: |
THE SHIP "SOCOFL STREAM" DEFENDANT
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DATE OF ORDER: |
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WHERE MADE: |
THE COURT ORDERS THAT:
1. Judgment for the plaintiff in the sum of $131,633.94 plus interest.
2. The defendant pay the plaintiff's costs of the proceedings save as to costs already the subject of an order of the Court.
3. Liberty to apply within 7 days.
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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BETWEEN: |
CMC (AUSTRALIA) PTY LTD (ACN 002 007 427) PLAINTIFF
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AND: |
DEFENDANT
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JUDGE: |
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DATE: |
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PLACE: |
REASONS FOR JUDGMENT
Introduction
1 These proceedings arose out of the failure of a shipper to deliver, on time, cargo shipped from Singapore and Malaysia for delivery to Newcastle. A challenge to the jurisdiction of this Court to hear and determine the proceedings was unsuccessful: see (1999) 95 FCR 403 ("the jurisdictional judgment"). Much of the background is set out in the jurisdictional judgment and it is unnecessary to repeat it. It is, however, desirable to refer in a summary way to the more significant events before moving to consider the evidence.
The Background
2 The following is a brief overview of events leading to these proceedings. The cargo was steel products originating in South America which was shipped in January 1999 to Australia from, as its immediate ports of origin, Singapore and Port Kelang in Malaysia. The owner of the cargo was the plaintiff, CMC (Australia) Pty Ltd ("CMC"). The cargo was shipped on the Socofl Stream ("the Vessel") which had, until December 1998, been chartered by Kamchatka Shipping Company ("Kamchatka") under a sub-demise charterparty with Sovremenniy Kommercheskiy Flot ("Sovcomflot"). In the jurisdictional judgment I concluded that the charterparty between Kamchatka and Sovcomflot had been terminated by a notice given by Sovcomflot on 15 December 1998. The notice took effect immediately, or at the latest, a week later. At all material times Sovcomflot was a demise-charterer under a charterparty with the owner, Aurora Navigation SA ("Aurora"). While Sovcomflot demanded (in writing and a week after the notice of termination was sent) redelivery of the Vessel by Kamchatka, no port ofredelivery was nominated.
3 Notwithstanding the termination of the sub-demise charter and the demand for redelivery, the Vessel continued to trade, manned by the master (Capt Leonov) ("the Master") and crew who had been engaged by Kamchatka. The steel products were loaded in Singapore on 6 January 1999 and in Port Kelang on 9 January 1999. The bills of lading issued in relation to the goods were, as to those issued in Singapore, signed by a representative of Pacific Orient Sea Transport Pte Ltd ("POST") and, as to those issued in Port Kelang, by a representative of Titimus Shipping and Trading Sdn Bhd ("Titimus") on behalf of POST. The Singapore bills were, in terms, signed "On Behalf of Master", and the Port Kelang bills were, in terms, signed "AS AGENTS-FOR AND ON BEHALF OF THE MASTER". The bills of lading made no provision for freight or charges.
4 Two earlier events should be mentioned. On 23 January 1998, Kamchatka chartered the Vessel to Jebsens Orient Shipping Services A/S ("Jebsens") under a time-charter for three months with options for the further hire of the Vessel for several further periods of the same length. It was not in issue that, subject to the legal effect of events in December 1998 concerning Sovcomflot and Kamchatka, Jebsens remained a time charterer of the Vessel in January and February 1999. On 26 August 1998 CMC executed an agreement entitled "Memorandum of Understanding" ("the August 1998 agreement") with POST concerning the shipment of "steels and other cargoes" from Asia to Australia. The true character of this agreement is an issue in these proceedings.
6 On 9 February 1999, an order was made by this Court, on CMC's application, permitting cargo to be discharged from the Vessel on certain conditions. The order was entered on 11 February 1999. Pursuant to the order, the cargo of CMC was discharged and transported by road transport from Brisbane to Newcastle or the surrounding area and delivered either to customers of CMC or to a warehouse maintained by CMC.
The evidence in detail
7 I now consider the evidence in the proceedings in more detail as it relates to contentious factual or legal issues.
(i) the relationship between POST and CMC
Each shipment shall be governed by a separate charter party but that charter party shall incorporate and be bound by the terms of this agreement.
9 There then followed ten numbered clauses. Clauses 1 and 2 classified various ports (of loading and unloading) into zones. Clause 3 required POST to nominate a vessel after receiving advice from CMC about forthcoming shipments and identified a procedure to be followed to effectuate carriage and deal with changes to the vessel to be used or the cargo to be carried. Clause 4 specified minimum tonnages of cargo to be provided by CMC (identified as "minimum inducement(s)" required by POST) and clause 5 identified freight rates for a range of steel products shipped from the various zones to various ports in Australia. Payment was dealt with in clause 7 which required payment to POST within a specified number of days "upon completion of loading and signing/releasing Bills of lading". That clause also declared that "All Bills of Lading … be marked "Freight payable as per Charterparty".". Annexed to the August 1998 agreement was a substantially incomplete (as to the vessel and cargo) copy of the standard form Gencon charter identifying POST as the owner and CMC as the charterer with certain clauses deleted and non-standard clauses appended to the standard form.
10 Counsel for Sovcomflot relied, in particular, on clause 9 of the Gencon charter which read:
Bills of Lading (refer rider clause 27)
The Captain to sign Bills of
Lading at such rate of freight as presented without prejudice to this
Charterparty, but should the freight by Bills of Lading amount to less than the
total chartered freight the difference to be paid to the Owners Captain
in cash on signing Bills of Lading.
11 For completeness reference should be made to clause 27 which provided:
Bimco Congenbill (Edition 1978) Bill of Lading form to be used and the Owner's agent at Load ports to sign and release Bills of Lading. In the Bills of Lading to be inserted the following reference clause:-
"All terms, conditions and exceptions of the Charter Party dated …… (inclusive of the arbitration clause 30) are incorporated into and form part of this Bill of Lading."
Bills of lading issued under this Charter Party shall contain the General Paramount Clause.
12 Evidence was given in the proceedings by Mr Ken Hanneman who was employed by CMC as its transport manager. He agreed with a proposition put in cross-examination that the cargo in issue was carried pursuant to an arrangement found in the August 1998 agreement as amended by a specific agreement in relation to the rate of freight. He later agreed that the August 1998 agreement regulated the freight that would be charged by POST to CMC in the absence of a special arrangement. As noted earlier the bills of lading made no provision for freight or charges. Mr Hanneman gave evidence to the effect that a special rate had been arranged in the present case because of the size of the cargo and that rate was not in the August 1998 agreement. In evidence are two facsimile copies of freight invoices dated 11 January 1999 from POST to CMC. One was in the sum of US$100,950.99 and related to the goods loaded at Port Kelang, the other for US$120,077.62 for the goods loaded at Singapore. Both sought payment to a bank account of POST identified in the invoices as the "Owners' Nominated Bank Account". Mr Hanneman accepted that the invoices would have been received on or about 12 January 1999 and that the bills of lading were not received by CMC until 27 January 1999.
(ii) The status of Kamchatka/the Master
13 As I noted in par 4 of the jurisdictional judgment, certain facts were admitted by Sovcomflot and became common ground. They included that as at 6-9 January 1999 the Master and crew of the Vessel were employed by Kamchatka and that as at 5 February 1999 these people, employed by Kamchatka, remained on board the Vessel.
(iii) The failure to nominate a port for re-delivery after termination of the demise charter
14 One factual issue arose in relation to the failure of Sovcomflot to nominate a port for the re-delivery of the Vessel. Evidence was given by Mr Tagir Izmailov who was the Deputy Director General of Sovcomflot. As such he was responsible for the operations of the Sovcomflot fleet. He had earlier worked for seven years as the head of Sovcomflot's legal department and, before that, had worked at sea as a navigator. In January 1999 there were 77 vessels in the fleet of which ten were the subject of a bare boat charter. His evidence in chief was that both during Kamchatka's demise charter of the Vessel and after its termination, Sovcomflot did not know the location of the vessel, its movements or its commercial operations until Sovcomflot attempted to locate the vessel in order to arrest it. He said that, in particular, in December 1998 and up to and including 9 January 1999 Sovcomflot did not know the Vessel was arriving to load cargo at any particular port at any particular time, had loaded steel or timber or any other particular cargo at any ports for shipment to Australia or that it was on charter to Jebsens or POST.
15 Mr Izmailov said during cross-examination that when the charterparty was terminated no port for re-delivery was nominated because Sovcomflot did not know where the Vessel was. He appeared to accept that, in theory, he could have contacted Kamchatka to ascertain the location of the Vessel but said that to do so would have been useless. He also accepted that a way of finding out the whereabouts of the Vessel would have been to use the Lloyd’s Register and other services which provided updates on the location of vessels. He asserted that after the notice of termination had been given, any trading by Kamchatka would be "illegal". He appeared to accept, however, that the Vessel might continue to trade after the notice had been given. He said that his expectation was, at the time the notice was given, that Kamchatka would agree to the notice and provide, I infer, a trading schedule of the Vessel identifying where it was located. He later gave evidence to the effect that because Kamchatka's response of 30 December 1998 was in English, he concluded there was going to be a legal contest and it would not provide any information to Sovcomflot. He also said that Sovcomflot requested their lawyers to search for the seven vessels (I infer a reference to the vessels which were demise chartered). He also gave evidence suggesting that in a conversation with Mr Jebsen he indicated Sovcomflot would not refuse to carry goods at Brisbane to Newcastle or Sydney.
16 Mr Neill, CMC's solicitor, gave evidence about steps Sovcomflot could have taken to locate the Vessel. It was admitted over objection though the general thrust of the evidence was not challenged. Some of it was self-evident. The first means of locating the Vessel was by asking Kamchatka. The second was using one of two commercial tracking services, namely MRC or one maintained by Lloyd’s. The third was through Sovcomflot's London solicitors though on the basis they would also use these commercial tracking services. The last was for Sovcomflot to inquire of their shipbroker. The Vessel could be located by means of a schedule likely to have been created by POST and made available to shipbrokers to promote the sailing schedule of the Vessel. It appears from questions asked in cross-examination that the MRC service may have been discontinued in November 1999 though that would not bear upon its availability in late 1998.
17 I am satisfied that it would have been open to Sovcomflot to have ascertained the location of the Vessel before issuing the notice terminating the demise charterparty. It could have done so with a view to nominating a port for redelivery. I accept that the Vessel would not have been located immediately. However, by not taking steps to locate the Vessel as a step towards nominating a port for redelivery, Sovcomflot created a circumstance in which Kamchatka could continue to trade using the Vessel though no longer as a demise charterer. The failure of Sovcomflot to nominate a port for redelivery has consequences which are discussed later.
(iv) The solicitors discussions during and after arrest
18 Mr Neill gave evidence about steps taken on behalf of CMC (and other parties for whom he was acting) at the time the Vessel was arrested. This evidence has to be considered in the context of what occurred prior to and after the arrest of the Vessel which has already been referred to in par 5 above. On 4 February 1999 Mr Neill sent a letter to the Master. Mr Neill indicated he acted for CMC, noted the Vessel had been arrested, noted that Kamchatka was a bare boat charterer but was alleged to be in breach of the charterparty and noted that Kamchatka might not honour its obligation to deliver CMC's cargo to Newcastle or Sydney. Mr Neill indicated:
Should our clients or ourselves not hear from you within 48 hours we will assume that you do not intend to honour your obligation to deliver the cargo to Sydney or Newcastle and our clients will be free to treat the contract as an end (sic). This may mean that our clients commence arrangements to carry the cargo to Sydney/Newcastle by other means. Our clients will hold you and/or the vessel responsible for all costs and expenses in relation to same.
19 On 8 February 1999 a further letter was sent to the Master by Mr Neill on behalf of not only CMC but three other companies said to be owners of cargo on the Vessel. The letter was to substantially the same effect as the letter of 4 February 1999. Mr Neill gave evidence of a conversation with Mr Michael Fisher of Thynne & Macartney, solicitors, who were acting for Sovcomflot. Mr Neill's account of the conversation was to the following general effect. In response to a question from him about how long it would take to resolve the arrest, Mr Fisher indicated he did not know and said it depended on what Kamchatka did. Mr Fisher indicated if Kamchatka defended the matter it could take a long time to resolve. Mr Neill asked what would happen if the cargo was left on board. Mr Fisher responded by indicating that Sovcomflot had no obligation to deliver the cargo to Sydney and, in any event, it wanted a clean break and an empty ship. He indicated that if there was cargo on board when Sovcomflot obtained control of the Vessel it would probably discharge the Vessel and take a lien over the cargo for costs. Mr Neill proposed paying Sovcomflot to carry the cargo to Sydney but Mr Fisher responded by indicating a preference of Sovcomflot to "make a clean break". Mr Neill indicated that if that was Sovcomflot's position he would make arrangements to get the cargo to Sydney by some other means.
20 Between 5 and 12 February 1999 four applications were made to this Court for orders authorising the discharge of cargo. In this period Mr Neill had several telephone conversations with Mr Fisher and also saw him at Court. At no stage did Mr Fisher indicate Sovcomflot was prepared to carry cargo to Sydney in the Vessel. On 10 February 1999 Mr Neill again discussed with Mr Fisher how long the Vessel would remain under arrest and Mr Fisher indicated it may be for a long time if Kamchatka defended the proceedings.
21 In cross-examination Mr Neill indicated the conversation with Mr Fisher on 5 February 1999 (which he later accepted may have been on 4 February 1999) was to explore commercial options for the delivery of the cargo. He also said Mr Fisher indicated that Sovcomflot would not carry the cargo from Brisbane to Newcastle without any additional payment of freight and that if Mr Neill's clients wanted the cargo delivered by the Vessel they would have to pay additional freight. Mr Neill accepted that he did not say to Mr Fisher Sovcomflot had a contractual obligation to CMC to deliver the cargo from Brisbane to Newcastle at no additional freight cost. Mr Neill’s evidence was that he did say to Mr Fisher, however, that whoever was the carrier, that carrier had an obligation to carry the cargo from Brisbane to Newcastle. Mr Neill said that when he wrote the letter of 4 February 1999 he understood that Kamchatka might be the bare boat charterer. He agreed no copy of that letter or the letter of 8 February 1999 was sent to Sovcomflot or its solicitors in Brisbane. Mr Neill accepted he may have had a conversation with Mr Fisher on 3 February 1999 in which Mr Fisher said that Kamchatka's charter had been ended, at the latest, by the arrest of the Vessel.
22 Mr Neill was asked in cross-examination about a conversation on 28 January 1999 with Mr Fisher. He accepted this was the first occasion he spoke to Mr Fisher and that he was then acting for POST (later in his cross-examination Mr Neill said that while he initially acted for POST he later got instructions to act for CMC and other cargo interests). There was a discussion in this conversation with Mr Fisher about whether POST should order tugs. In the course of this discussion Mr Fisher indicated that he was acting for Sovcomflot and that it was claiming to be entitled to arrest the Vessel because of the default of another party under a demise charter. Mr Neill then understood that the dispute concerned possession of the Vessel and did not concern matters such as a cargo claim or a claim for unpaid bunkers. Mr Neill said the understanding that Kamchatka was a bare boat charterer, reflected in his letter of 4 February 1999, came from what Mr Fisher had told him. Mr Neill did not accept that by, at the latest, 28 January 1999 Mr Fisher had told him that Kamchatka was the former demise charterer and that the charterparty had been terminated. Mr Neill's account of the discussion or discussions with Mr Fisher was that they were on the basis that there was a dispute about whether Kamchatka remained the bare boat charterer.
23 In further cross-examination about the conversation with Mr Fisher on either 4 or 5 February 1999, Mr Neill did not accept that Mr Fisher suggested Sovcomflot would be prepared to listen to a proposal to the effect that it could carry the cargo to Newcastle. He did accept, however, that Mr Fisher may have said that if he, Mr Neill, wanted to investigate CMC paying Sovcomflot to carry the cargo to Sydney, he could investigate that course. Mr Neill's evidence was that they looked at the costs of carrying the cargo by ship to Sydney and that "it just didn't seem to stack up". He explained that this related to transporting the cargo by sea under a new contract of carriage compared to transporting it by road. Mr Neill then said in cross-examination that the first proposition he had put to Mr Fisher was that Sovcomflot should carry the cargo from Brisbane to Newcastle pursuant to the existing bills of lading for no additional freight.
24 Given that I prefer, for reasons which I explain shortly, the evidence of Mr Fisher it is unnecessary to deal with a legal issue concerning the status of documents (correspondence between Mr Neill and other clients) sought to be tendered by Sovcomflot's counsel.
25 Mr Fisher gave the following evidence about his dealings with Mr Neill. His evidence about various conversations he had with Mr Neill were based on file notes he kept which summarised the gist of each conversation. He said there were two conversations with Mr Neill on 28 January 1999. The first concerned the provision of tugs by POST. Mr Neill's concern was to ensure that his client, POST, would not be required to provide tugs because the Vessel would be freed from the arrest. Mr Fisher said to Mr Neill that his client was a disponent owner of the Vessel who was far removed from the contractual relations in which POST was involved. Mr Fisher described his client as being "much higher in the chain". Mr Fisher indicated the Vessel would not be sailing. The second conversation concerned an inquiry from Mr Neill about when the Vessel might sail from Brisbane and whether it would be sold or Sovcomflot would be accepting security for the Vessel to allow it to sail. Mr Fisher's response was that his client was a disponent owner seeking to recover the Vessel from a former demise charterer and wanted to regain possession of it. He indicated sale or the provision of security were not in contemplation.
26 Mr Fisher said the application (which was unsuccessful) to allow the Vessel to sail from Brisbane under arrest was made by Jebsens and supported by Sovcomflot. He had a further conversation with Mr Neill on 3 February 1999. Mr Neill indicated that his client would be arresting the Vessel or issuing caveats against its release from arrest in relation to claims arising out of contracts for the carriage of cargo on the Vessel. Mr Fisher indicated that Mr Neill's clients’ claims in relation to cargo would be against Kamchatka but that it was no longer a demise charterer. He also indicated that Kamchatka's charter had been ended, at the latest, by Sovcomflot's arrest of the Vessel. He added Mr Neill's clients could not arrest the vessel. Mr Neill indicated his clients would argue to the contrary. Mr Neill did not suggest Sovcomflot had any obligations under the bills of lading.
27 A further conversation took place between Mr Fisher and Mr Neill on 4 February 1999. After Mr Fisher indicated he would provide Mr Neill with copies of the draft orders from a directions hearing on 3 February 1999, they discussed whether Mr Neill's client could arrest the Vessel in the next few days to obtain security for the various costs incurred in discharging the cargo in Brisbane. Mr Fisher told Mr Neill again of the arguments why Kamchatka was no longer the demise charterer of the Vessel and that this was decisive of whether Mr Neill's client could arrest the Vessel or make claims against it. They did discuss whether an agreement could be reached whereby Sovcomflot, if it obtained possession of the Vessel, would transport the cargo to Newcastle for discharge. However Mr Neill made it clear that he did not have any instructions to arrange or offer to pay for such a "deal" and was floating the idea without instructions. This part of the conversation is referred to in a letter Mr Fisher sent to Sovcomflot's London solicitors on 4 February 1999. Mr Fisher indicated in his conversation with Mr Neill he thought Sovcomflot would be interested in such a "deal" and suggested to Mr Neill he should pursue the idea. He also suggested this would best be done through the previously existing charterering chain involving Jebsens and POST. He did not say Sovcomflot would prefer to make a clean break in response to any suggestion of an arrangement involving payment to Sovcomflot to carry the cargo to Sydney or Newcastle. Mr Fisher rejected the suggestion that they ever had any discussions in which Mr Neill indicated that Sovcomflot was obliged to carry the cargo to Sydney or Newcastle. Mr Fisher was not told by Mr Neill that because of Sovcomflot's position (as outlined by Mr Fisher) Mr Neill's clients would have to get their cargo to Sydney by other means. Mr Fisher's expectation between 5 and 12 February 1999 was that Mr Neill or his clients would approach him with a proposal to carry the cargo on the Vessel. The next he heard from Mr Neill was in the context of the application to discharge the cargo from the Vessel.
28 In cross-examination Mr Fisher accepted that at the time he sent the letters on 3 February 1999 to Kamchatka, Mr Neill had indicated to him that CMC and other cargo interests claimed rights in rem in relation to the Vessel and might arrest it themselves. The letters of 3 February 1999 purported to be an acceptance of Kamchatka’s repudiation of the charterparty for non-payment of instalments. Mr Fisher appeared to accept that the reason the letters were sent (or one of the reasons the letters were sent) was to avoid possible cargo claims of the type foreshadowed by Mr Neill. Later in his cross-examination it became quite clear that the step of expressly accepting the repudiation was taken because of what Mr Neill had said his client would do and to put beyond doubt, for the purposes of Australian law, that the demise charter was at an end. Mr Fisher gave evidence that he visited the Vessel (with a representative of Sovcomflot) between its arrest and the time the order giving Sovcomflot possession was made on 18 February 1999. Mr Fisher spoke to the Master. He explained in evidence that the purpose of the visit was to assess the Vessel's condition as he then assumed Sovcomflot would gain possession. Mr Fisher did not accept, in substance, suggestions put to him that the Master acted as if he was then looking to Sovcomflot for the crew's wages, the Vessel was in good working condition and the crew were engaged in maintaining the Vessel while under arrest.
29 In relation to the conversation on 4 February 1999, Mr Fisher did not accept that he said Sovcomflot had no obligation to deliver the cargo to Sydney but did say his client was not liable under the bills to carry anything anywhere. He denied saying his client wanted a clean break and an empty ship. He appeared to accept he did speak of discharging the cargo and taking a lien (though he was less certain about having mentioned a lien).
30 To the extent that there are differences between the accounts of Mr Neill and Mr Fisher about the contents of their conversations and when they occurred, I would accept the evidence of Mr Fisher. While I do not doubt that Mr Neill endeavoured to give an honest account of these conversations, his account was based on his recollection (unaided by contemporaneous notes) more than a year after the conversations took place. On the other hand Mr Fisher's account was based, in part, on contemporaneous notes, the veracity of which I do not doubt. Mr Fisher's account is inherently plausible and not at odds with any other contemporaneous documents in evidence or the evidence of Mr Hanneman. I otherwise accept the evidence of both Mr Neill and Mr Fisher concerning events in early 1999 other than what passed between them in their discussions.
(v) The decision to transport by road
31 Some of the evidence relating to the decision to transport the cargo from Brisbane by road is referred to in the preceding section concerning the solicitors’ discussions. Mr Hanneman gave evidence about the decision as well. Mr Hanneman was made aware of the arrest of the Vessel by Mr Keith Faulkner from POST. Mr Faulkner rang, I infer, on 27 January 1999 and told Mr Hanneman the Vessel had been arrested and he did not know when it would get to Newcastle. He indicated that when he knew more he would again contact Mr Hanneman. Mr Hanneman initially decided to wait and see whether the arrest would be resolved without the need to make alternative arrangements for the carriage of the cargo. Eventually it appeared to him the matter would not be resolved easily and alternative arrangements to move the cargo would need to be made. He instructed Mr Neill to obtain an order permitting the discharge of the cargo in Brisbane. Mr Hanneman commenced to make inquiries about transporting the cargo by other means. On about 7 February 1999 he was told by Mr Faulkner that POST had no suitable ships to carry the cargo within the following three weeks. In any event, he then estimated the cost of this method would be $55 per tonne. He contacted a railway freight forwarder on 5 February 1999 and obtained a quote which was withdrawn on 10 February 1999. In the result, Mr Hanneman ascertained the cost of rail transport was going to be no less than $41.50 per tonne and probably more. On 10 February 1999 Mr Hanneman negotiated a price of $35.50 per tonne for one class of the cargo and $40.00 per tonne for another class for transport by road. The cargo was ultimately transported by this means and the total cost was $102,392.64. This amount also included delivery of some of the cargo to customers which CMC would have undertaken in any event. The nett additional cost of transporting the cargo by road from Brisbane was $78,362.04.
(vi) Particular matters concerning damages
32 It is necessary to refer briefly to the evidence concerning a number of particular matters in issue. Each concerned the way in which CMC calculated its damages.
(a) Stevedoring charges for delays occasioned by rain
33 CMC accepted that it would have been obliged to pay for the stevedoring costs of discharging the cargo from the Vessel had the cargo been transported to Newcastle. Mr Hanneman gave evidence about the stevedoring costs associated with discharging the cargo in Brisbane ($77,105.10) and what the costs would have been had the cargo been discharged in Newcastle ($39,134.70). The additional stevedoring costs to CMC were $38,150.40. However the stevedoring charges actually paid for discharge in Brisbane included $3,896.40 for rain delays which CMC claimed as part of its damages in these proceedings. Sovcomflot put in issue this aspect of the claim.
34 Mr Hanneman gave evidence that the stevedoring arrangements in Newcastle were to the effect that rain delays would be charged if the stevedoring labour was ordered. However the order could be cancelled anytime prior to the labour being taken on board. He indicated that this arrangement gave rise to flexibility in Newcastle that did not exist in Brisbane. The import of his evidence was that had it been raining in Newcastle at the time the cargo was to be discharged, no labour would have been ordered or, if ordered, the order would have been cancelled. On either basis no cost would have been incurred for delays caused by rain. CMC contended that had the Vessel not been arrested and had it proceeded with "reasonable despatch" to Newcastle, the discharge of the cargo would have been completed by 30 January 1999. It appeared not to be in issue that there was no rain on 29 January 1999 (only 0.8 mm) or 30 January 1999 (only 0.2 mm) in Newcastle that might have delayed the discharge though 50 mm of rain fell on 31 January 1999.
35 Mr Hanneman gave evidence that by no later than 30 January 1999 discharge of cargo would have been completed in Newcastle had the Vessel not been arrested in Brisbane and it had proceeded with reasonable dispatch on its voyage. He said, in cross-examination, that this was based on his assessment that it would have taken the Vessel 44 hours from berth (Brisbane) to berth (Newcastle) and 28 to 30 hours to discharge the cargo in Newcastle. There would, in all, be 72 to 74 hours between the Vessel leaving its birth in Brisbane and completing discharge in Newcastle.
36 No evidence was called by Sovcomflot challenging this evidence of Mr Hanneman. I accept it. Accordingly, I am satisfied that the Vessel would have discharged its cargo before the rain in Newcastle on 31 January 1999 and no additional stevedoring charges, for rain, would have been incurred.
(b) Additional costs of Precision Profiling Pty Ltd
37 Some of the cargo on the Vessel was due for delivery to a customer of CMC, Precision Profiling Pty Ltd ("Precision Profiling"). Evidence led from Mr Hanneman was to the effect that Precision Profiling was required to purchase steel from other suppliers (in substitution for the steel on board the Vessel in Brisbane) resulting in an additional cost to Precision Profiling of $7881.61. Mr Hanneman gave evidence that this sum had not been paid but that CMC had undertaken to Precision Profiling to pay the amount. However it is not clear whether this undertaking was conditional on CMC itself recovering this sum in these proceedings. Tendered without objection was a letter dated 22 April 1999 from Precision Profiling enclosing what is fairly plainly, as I read the document as a whole, a schedule of steel supplied to it by other suppliers between 2 February 1999 and 23 February 1999 (the bulk of the steel purchased was invoiced in the first half of February 1999) in substitution for steel that would have been supplied by CMC but for the delay occasioned by the arrest of the Vessel in Brisbane. The schedule identifies the difference between the CMC price and the price actually paid.
(c) Warehousing costs
38 Because Precision Profiling agreed to take the steel on board the Vessel (which was not delivered on time), it was necessary, as CMC contended, for CMC to store it at its warehouse in Newcastle. CMC sought to recover what it calculated to be the additional costs (said to be $8,421.08) of storing this steel for a lengthy period. However Mr Hanneman’s evidence concerning what actually occurred was somewhat obscure. It appears it would have been necessary, even if the Vessel had arrived in Newcastle as originally scheduled, for the steel to be stored in a warehouse for some time to enable it to be sorted. It also appears that it would have been delivered to Precision Profiling within days of being unloaded in Newcastle. However because of the late delivery to Newcastle it was stored for a longer period. How long is not clear. It is also not clear whether, during that longer period, CMC would otherwise have been able to utilise the warehouse space and, as a result, lost the commercial benefit of that space from which it would have derived income.
(d) Interest
39 CMC claimed interest on the costs associated with not delivering the steel referred to in the preceding paragraph. CMC extended Precision Profiling's terms of payment and its claim represents what is said to be an additional interest cost resulting from this extension. The amount claimed was $1563.56. Again, however, the evidence on this aspect of the claim of CMC is obscure. I am not able to say whether, in fact, CMC suffered a loss (referable to an extension of terms of credit) as a result of the arrangements it made with Precision Profiling.
The application to amend the defence
51. In the premises Kamchatka was a person liable under the Bills of Lading to the Plaintiff.
42 In a defence of 23 December 1999, Sovcomflot pleaded:
8. As to paragraph 51 of the Statement of Claim, Sovcomflot admits that Kamchatka was a party to the contract contained in or evidenced by the bills of lading but does not otherwise admit the said paragraph.
It can be seen that Sovcomflot appears to have admitted the bills of lading constituted a contract for the carriage of the goods and that Kamchatka was a party to the contract. The proposed amendment initially involved inserting into par 8 after the word "Claim" the words "if there is a contract contained in or evidenced by the bills of lading (which is denied) then". Shortly before the final day of hearing (30 June 2000) counsel for CMC filed written submissions which contended that the amendment to par 8 would result in an inconsistency with other paragraphs in the defence. In the result an application was made to further amend the defence by inserting a similar formulation (to that proposed for par 8) into pars 10(c), 11(b) and (c), 12 and 13(b).
43 Paragraph 10 of the defence concerned par 52 of the statement of claim. Paragraph 52 provided:
Paragraphs 10 to 18 and 24 to 39 are repeated with the substitution of Kamchatka for Sovcomflot.
Paragraph 10 of the statement of claim alleged Sovcomflot was the demise charterer (liable under the bills of lading (par 9) which had been signed by the Master on its behalf (par 8) as carrier (par 7)) and following paragraphs alleged a duty (including a contractual obligation) to convey the goods in accordance with the bills (pars 11 and 12) which was breached, inter alia, by non-delivery to Sydney (par 13) or no delivery with reasonable dispatch (pars 15 and 16). Paragraphs 24 to 28 alleged Sovcomflot breached a duty as a carrier by sea (and also bound to do so under the bills) to undertake the contractual voyage without unreasonable deviation. Paragraphs 29 to 32 alleged breach of a duty of care by Sovcomflot as bailee of the cargo. Paragraphs 33 to 39 alleged breaches of the Hague Rules and the Hague-Visby Rules. Thus par 52 of the statement of claim maintained the same allegations against Kamchatka. The proposed amendment to the defence would qualify the acceptance by Sovcomflot of the allegation in par 12 (that Sovcomflot was under a duty as carrier by sea or under the bills of lading to convey the goods in accordance with them) as if the allegation were made against Kamchatka. The acceptance would be qualified by a contention that the bills of lading were not a contract for carriage (that is, they were merely receipts).
44 Paragraph 11 of the defence was said to be an answer to the whole of the statement of claim and the proposed amendment to sub-par (b), which in its original form alleged repudiation by CMC of any contract contained in or evidenced by the bills of lading, denied that there was such a contract. Sub-paragraph (c) in its original form alleged that the removal of the cargo by CMC prevented performance of any obligation under the contract evidenced by the bills and the proposed amendment denied that there was such a contract.
45 Paragraph 12 of the defence was also said to be an answer to the whole of the statement of claim and alleged that by operation of the Hague-Visby Rules the losses or damage were not recoverable from the carrier on the assumption that Sovcomflot and/or Aurora were parties to the bills of lading. The proposed amendment denied that the bills constituted a contract.
46 The application to amend arose in circumstances where Sovcomflot had (the Friday before the first day of the substantive hearing) been provided by CMC (by a process of informal discovery) with a bundle of documents which included what was described by Sovcomflot as the charterparty between CMC and POST (discussed in pars 8 to 11 above). The application to amend was opposed from the outset. It was submitted by counsel for CMC that the amendment (as originally proposed) had the effect of withdrawing the admission in par 8 of the original defence (that Kamchatka was a party to the contract evidenced by the bills of lading), was inconsistent with the way the case had been conducted on behalf of Sovcomflot when the jurisdictional issue had been litigated and that the application was made too late. The first point is partially correct and the second is correct. It is also true that the application to amend was made at a very late stage though it must be accepted that the document upon which the proposed amendment is based was received by Sovcomflot only days before. However no prejudice is pointed to by CMC (such as being unable to call (in time) evidence answering the issue raised by the amendment) and I propose to allow the amendment: for a recent consideration of the applicable principles see Cheers v El Davo Pty Ltd (in liq) [2000] FCA 310.
Nonetheless it is important to indicate what is the effect of the amendment. It is intended, as I apprehend it, to raise one legal issue, namely whether a bill issued to a person who is a charterer is a mere receipt, and another issue being a mixed question of fact and law, namely whether the August 1998 agreement constituted a contract for carriage between CMC and POST. If the amendment had been intended to be broader in scope and raise a question about the person on whose behalf (other than Kamchatka or Sovcomflot as the demise charterer (who, for present purposes, are to be treated as the owner) or other than Aurora as owner) the bills were issued, then CMC may well have been prejudiced by the amendment.
47 The prejudice would arise because limited attention has been given to the contractual arrangements between Kamchatka and Jebsens and between Jebsens and POST and how they might have impacted on the authority of the Master to sign bills of lading. The charterparty between Jebsens and POST is not in evidence and while a version of the charterparty between Kamchatka and Jebsens is in evidence, it is barely legible. When the issue of amendment first arose on 10 April 2000, one of the reasons advanced by counsel for CMC why the amendment should not be allowed, was that CMC did not know (and, I infer, had not explored) what the position was between POST and Jebsens and had acted on the basis that POST had signed the bills of lading as agent for the owners. On that basis, the issue in the proceedings would be who was to be treated as the owner for the purposes of liability under the bills. In final written submissions prepared by counsel for Sovcomflot the following was said:
2.2 The principle is that the bill of lading is not a contractual document when there is some other supervening contract which regulates the rights and obligations of the shipper or consignee. In other words, it is a question of determining what document or documents comprise the contract of affreightment in a particular case.
2.3 The principle is not limited to cases in which the carrier under the bill of lading is also the disponent owner who is a party to the charterparty with the consignee or indorsee …
48 The submission went on to contend, on the facts of this case, that there was a contract between CMC and POST which constituted the contract of affreightment and, accordingly, the bills of lading were mere receipts. It appears that this submission of Sovcomflot did not depend on a coincidence between the parties to what was said to be the contract of affreightment also being parties to any contract which might otherwise the evidenced by the bill.
Were the bills of lading contracts or mere receipts?
49 The amendment to the defence raises an issue concerning the status of the bills of lading. Sovcomflot submitted that CMC was a charterer and the bills did not constitute a contract of affreightment but mere receipts for the cargo. This submission was thought to give rise to two subsidiary issues. The first is whether the August 1998 agreement was a charterparty and the second is, even if it was, does CMC fall within the principles discussed in Article 35 in Scrutton on Charterparties and Bills of Lading 20th ed. 1996. That article commences (at p 71):
Where the charterer is himself the shipper, and receives as such shipper a bill of lading in terms differing from the charter, the proper construction of the two documents taken together is that, prima facie and in the absence of any intention to the contrary, as between the shipowner and the charterer, the bill of lading, although inconsistent with certain parts of the charter, is to be taken only as an acknowledgement of the receipt of the goods.
50 In my opinion, this issue can be resolved by making several assumptions. The first concerns the status of POST in relation to the Vessel and its dealings with CMC. As I noted earlier the evidence does not reveal with any clarity (as far as I can discern) what the position of POST was. However in an affidavit prepared for the proceedings January 1999 (when the Vessel was first arrested) by solicitors acting for Jebsens, it was asserted that Jebsens (who was a time-charterer) had, itself, time-chartered the Vessel to POST. While this affidavit was tendered in these proceedings for a limited purpose (to establish the attitude adopted by Sovcomflot in the proceedings in this Court in January 1999) it would be prudent not to ignore what was asserted by Jebsens’ solicitors. It can be viewed, at least, as providing a foundation for an assumption that POST was a time charterer of the Vessel for the voyage from Singapore and Port Kelang to Brisbane.
51 The second assumption is that the effect of the August 1998 agreement, properly construed, was that CMC was a charterer on each occasion its cargo was carried on a vessel chartered by POST. It is apparent from the evidence that the Vessel carried, on the voyage in question, goods other than the goods of CMC. It may be that CMC was a concurrent voyage charterer as to its cargo and not the entire Vessel: see e.g. Agios Stylianos Compania Naviera SA v Maritime Associates International Ltd Lagos (The “Agios Stylianos”) [1975] 1 Lloyd's Rep 426, though I assume, for present purposes, that it was the charterer of the entire Vessel.
52 I approach the matter this way because I accept the submission of CMC that the principle in article 35 applies in circumstances where the asserted contractual right of a party, said to arise under a bill of lading, actually derives from a charterparty. That is, in appropriate circumstances, the contractual rights of parties to a charterparty are to be found in the charterparty and not a bill of lading issued by one to the other (as shipper) or endorsed by a third party to the other. In those circumstances the bill of lading is to be treated as a mere receipt for the cargo.
… an action in rem against the ship; though the charterer and shipper were nominally different firms, they were in fact almost identical, and the decision cannot, it is submitted, be supported, except on this ground.
54 In The San Roman an English firm entered a charterparty with a German firm who owned the San Roman. The charterparty provided that the vessel would proceed to a foreign port, load cargo and then proceed to another port within limits identified in the charterparty. It was provided that the master could sign bills of lading (without prejudice to the charterparty) but at not less than the chartered rate. The plaintiffs were shippers of cargo loaded at the foreign port. Bills of lading were signed by the master containing certain exceptions which differed from exceptions in the charterparty. The plaintiffs had been members of the firm which was the charterer. On the journey from the foreign port the vessel was delayed. In issue was whether the owner was liable to the shippers in damages for the delay. The Court approached the matter on the basis that the contract between the shippers and the owner was to be found in both the bills of lading and the charterparty.
55 In The Patria the vessel, owned by a German firm, was chartered by another German firm. The plaintiffs were consignees of a cargo of coffee loaded onto the vessel in Central America for delivery, according to the bill of lading signed by the master, at Hamburg. In its voyage to Hamburg, the vessel was delayed. The plaintiffs sued the vessel in rem alleging a breach of the contract contained in the bill of lading. The owner argued that the proceedings should have been against the charterer and not the owner. The Court rejected this submission for two reasons (at 458-459):
First, The owner of the ship cannot release himself from his liability by chartering his vessel without the consent of the owner of the goods. In this case there is no demise of the ship. The master receives freight as agent for the owner as well as the charterer: Sandeman v Scurr. Secondly, The proceeding here is in rem: the maritime lien attached under this statute as soon as the ship was arrested.
56 The owner raised another objection that the master had no power under the charterparty "to contract ... his owner out of that charterparty". The Court rejected this objection and did so by quoting (at 459) the following passage from the judgment of Lord Chief Justice Cockburn in Sandeman v Scurr (1866) LR 2 QB 86 at 96:
We think that, so long as the relation of owner and master continues, the latter, as regards parties who ship goods in ignorance of any arrangement whereby the authority ordinarily incidental to that relation is affected, must be taken to have authority to bind his owner by giving bills of lading. We proceed on the well-known principle that, where a party allows another to appear before the world as his agent in any given capacity, he must be liable to any party who contracts with such apparent agent in a matter within the scope of such agency. The master of a vessel has, by law, authority to sign bills of lading on behalf of his owners. A person shipping goods on board a vessel, unaware that the vessel has been chartered to another, is warranted in assuming that the master is acting by virtue of his ordinary authority, and therefore acting for his owners in signing bills of lading. It may be that, as between the owner, the master, and the charterer, the authority of the master is to sign bills of lading on behalf of the charterer only, and not of the owner. But, in our judgment, this altered state of the master's authority will not affect the liability of the owners, whose servant the master still remains, clothed with a character to which the authority to bind his owner by signing bills of lading attaches by virtue of his office. We think that, until the fact that the master's authority has been put to an end is brought to the knowledge of a shipper of goods, the latter has a right to look to the owner as the principal with whom his contract has been made.
57 I apprehend that footnote 18 indicated the learned authors’ view that it was only in unusual circumstances that when a bill was signed by the master on behalf of the owner, the contract of affreightment with the shipper was to be found in the charterparty as well as the bill of lading and not simply the bill of lading. The San Roman illustrated the unusual circumstance and The Patria illustrated the usual (subject, of course, to the terms of the various instruments).
58 It is of some significance that it has not been suggested in these proceedings that the bills of lading were not, in terms, signed on behalf of the master (even though signed by or on behalf of POST) and did not purport to bind the owner and identify the owner as the carrier. Thus it is not suggested by Sovcomflot that, apart from the contention that the bills of lading are only a receipt in the hands of CMC, the bills of lading would not have constituted a contract of affreightment with the owner as the carrier. Of course, there is an issue about whether Sovcomflot can be treated as the owner which is a matter discussed shortly.
59 It appeared to be common ground that in circumstances where a vessel is chartered from an owner and the charterer is also the shipper then generally bills of lading issued by the master in relation to the charterer's cargo constitute only receipts for the cargo and not the contract of affreightment. The terms of that contract are to be found in the charterparty (again with the qualification that the terms of the instruments are relevant). Authorities cited by counsel for Sovcomflot illustrative of that proposition were Rodocanachi, Sons & Co v Milburn Brothers (1887) 18 QBD 67, President of India v Metcalfe Shipping Co Ltd [1970] 1 QB 289 and Gardner Smith Pty Ltd v The Ship Tomoe 8 (1990) 19 NSWLR 588. In Rodocanachi, Sons & Co v Milburn Brothers the bill of lading (issued by the master in relation to cargo on account of the charterers who had chartered the vessel) appeared to afford the shipowners greater protection than the charterparty. Lord Escher MR explained why the bill of lading should be treated only as a receipt (at 75):
In my opinion even so (that only a bill of lading in the form in question could be signed in accordance with the charterparty), unless there be an express provision in the documents to the contrary, the proper construction of the two documents (the bill of lading and the charterparty) taken together is, that as between the shipowner and the charterer the bill of lading, although inconsistent with certain parts of the charter, is to be taken only as any acknowledgement of the receipt of the goods. With regard to the effect of these documents as between charterers and shipowners, I adopt fully what was said by Lord Bramwell in Sewell v Burdick. This doctrine gives effect to both instruments, because, although as between the shipowners and the charterers the bill of lading is only a receipt for the goods, it will be the contract upon which the holder of the bill of lading to whom it is indorsed must rely as between himself and the shipowner.
60 The passage from Lord Bramwell’s judgment that the Master of the Rolls appears to have had in mind was ((1884) 10 App Cas 74 at 105):
There is, I think, another inaccuracy in the statute (the Bills of Lading Act (18 & 19 Vict. c. III)), which indeed is universal. It speaks of the contract contained in the bill of lading. To my mind there is no contract in it. It is a receipt for the goods, stating the terms on which they were delivered to and received by the ship, and therefore excellent evidence of those terms, but it is not a contract. That has been made before the bill of lading was given. Take for instance goods shipped under a charterparty, and a bill of lading differing from the charterparty; as between shipowner and shipper at least the charterparty is binding: Gledstanes v Allen.
61 It is relatively clear from these passages that the notion of a bill of lading being a receipt only, arises in circumstances where the inquiry is where the terms of any contract of affreightment between the charterer of a vessel (and its goods) and the owner are to be found.
62 In President of India v Metcalfe Shipping Co Ltd the charterer (the Government of India) had purchased goods from an Italian firm and had chartered a vessel to transport them. The bill of lading issued initially to the Italian firm as shipper. However the bill was endorsed by the Italian firm to the Government of India. An issue arose between the charterer and the shipowners about short delivery on discharge. The charterer sought to refer the dispute to arbitration in London which was provided for in the charterparty but excluded in the bill of lading (which authorised the master (or his agent) to sign bills of lading "without prejudice to" the charterparty). Megaw J at first instance, and later the Court of Appeal, concluded that the arbitration clause in the charterparty was the effective machinery for determining disputes between the parties. In his judgment, Lord Denning set out passages from two leading textbooks (Scrutton and Carver) to the effect that if a bill of lading was issued to a shipper (not the charterer) but then endorsed to the charterer, the bill became the governing document in any claim by the charterer against the shipowner for damage to the goods. Lord Denning referred to a number of authorities and then said (at 307):
My conclusion is that the statements in the textbooks are wrong. They must be revised in the light of the decision of the House of Lords and of our present case. The writers of textbooks suffer under the impediment that they do not have the full argument and discussion which we have. After full consideration, I am prepared to hold that in a case such as this the relations between shipowner and charterer are governed by the charterparty. Even though the charterer is not the shipper and takes as indorsee of a bill of lading, nevertheless the relations are governed by the charter, at any rate when the master is only authorised to sign bills of lading without prejudice to the charter.
63 Edmund Davies LJ expressed agreement with this conclusion. His Lordship pointed out that the charterparty was a contract (between the Government of India and the shipowner) and as a fundamental principle, its terms could not be altered without the express or implied assent of the parties. In that context, his Lordship noted that where a charterer ships goods, the bill of lading is a mere receipt and does not operate as a new contract between the charterer and the shipowner nor modifies the charterparty contract. The approach of Fenton Atkinson LJ was as follows:
First in time comes the charterparty between the charterers and shipowners which makes full contractual provision for the carriage of these particular goods and their delivery at Madras, and for myself I cannot see why the fact that the sellers of the goods in question took a bill of lading which they held for a short space of time before indorsing it over to the charterers, as they were contractually obliged to do, should affect the charterers' rights under the charterparty, all the more so when there was the without prejudice clause in the charterparty.
64 In Gardner Smith Pty Ltd v The Ship Tomoe 8 proceedings in rem were brought by the plaintiff, Gardner Smith Pty Ltd ("the Trader"), seeking damages flowing from the contamination of a cargo of vegetable oil shipped from Malaysia to Australia. The Trader chartered the vessel, it appears, from the demise charterer. Quantities of oil were loaded in Malaysia and bills of lading issued to the Malaysian supplier. The bills were endorsed to the Trader as purchaser of the cargo. A preliminary question arose in the proceedings whether the bills of lading formed part of the contractual arrangements between the Trader and the demise charterer. The shipowner contended they did, apparently to gain the benefit of a limitation provision. The Trader contended the charterparty wholly governed the legal relationship between it and the demise charterer. Carruthers J accepted the Trader's contention and did so by applying President of India v Metcalfe Shipping Co Ltd.
65 The critical question in these proceedings is whether the principle emerging from the above authorities is also applicable when there is no direct contractual relationship between the charterer (and perhaps additionally when the charterer has not chartered the whole vessel) and the shipowner (whether the owner or a demise charterer). There is no obvious reason why it should be, given that in each of these authorities the task of the Court has been a limited one of ascertaining which of two instruments, apparently contractual in nature, embodied the terms of the contract between the same parties. However counsel for Sovcomflot, in support of the wider application of the principle, relied on passages in the judgment of Sheppard J in Sanko Steamship Co Ltd v Sumitomo Australia Ltd (No 2) (1996) 63 FCR 227.
66 Before considering the reasons of Sheppard J in that matter, I should mention an earlier judgment of his Honour in Hunter Grain Pty Ltd v Hyundai Merchant Marine Co Ltd (1993) 117 ALR 507. This was an action in personam brought by a purchaser of a cargo of soyabean meal against the owner of a vessel and the time charterer of the vessel (who was the charterer at the time the cargo was contaminated – as it was being loaded). The shipper (who was the vendor) was issued with the bill of lading and endorsed it to the purchaser. On the voyage in question, the vessel was the subject of a voyage charter between the vendor/shipper and the time charterer. As to the contractual arrangements between the various parties, his Honour said (at 510):
If it were not for the endorsement of the bill of lading, the voyage charter would be the contractual document which applied. As between (the time charterer) and (the vendor/shipper) the bill of lading would be regarded merely as a receipt for the goods, but where it is endorsed as here, the bill of lading is considered to contain the contract: see Scrutton on Charterparties (19th ed, 1984), p 62, and the cases there cited. That matter is not in issue.
67 In Sanko Steamship Co Ltd v Sumitomo Australia Ltd (No 2) a vessel carrying a cargo of phosphate foundered on a reef and the cargo was lost. This occurred because of the gross negligence of its crew. One of the claims Sheppard J dealt with was bySumitomo Australia Ltd ("the Voyage Charterer") who had chartered the vessel under a voyage charterparty with a time charterer ("the Time Charterer") who, in turn, had chartered the vessel from a substitute bare boat charterer ("the Demise Charterer"). The Voyage Charterer was also the consignor of the goods and, as Sheppard J found, effectively the consignee. Two bills of lading issued in relation to the cargo which were signed by a person on behalf of a firm or company acting "as agents for the master". One issue in the proceedings which was unnecessary for Sheppard J to decide (see 267) was whether the bills were signed by that firm or company as agents for the Time Charterer or as agents for the Demise Charterer. I apprehend the resolution of that issue could have determined who was the carrier of the cargo by reference to the bills (if they evidenced the terms of the contract of affreightment). In relation to where the terms of the contract between relevant parties might be found, his Honour said (at 267):
The relationship between a charterparty and a bill of lading issued pursuant to it was considered by the Court of Appeal in England in President of India v Metcalfe Shipping Co Ltd [1970] 1 QB 289. I do not find it necessary to discuss the decision in detail. It is enough to say that the Court held that the charterparty was prima facie the contract which governed the relations between the shipowners and the charterers for the carriage of goods unless altered by the parties, expressly or by implication. Where the charterparty authorised the master to sign the bill of lading without prejudice to the charterparty, it operated as a mere receipt for the goods or as a document of title and had no impact on the charterparty. The bills of lading here were not signed by the master but by Strachan Shipping Company "as agents for the Master".
There is disagreement in the submissions as to whether the bills of lading were signed by Strachan Shipping Company as agents for (the Time Charterer) or agents for (the Demise Charterer). In the view that I take of the matter I do not need to decide that question which, in other circumstances, it may have been necessary to resolve, not in relation to the liability of (the Time Charterer) but the liability of (the Demise Charterer). In cases concerning a bill of lading which is endorsed to a consignee – it will be recalled that (the Voyage Charterer) was, in effect, both the consignor and the consignee of the cargo – it will probably be the terms of the bill of lading which has been endorsed which govern the contractual relationship between the consignee and the shipowner. A number of authorities for this proposition exist. It is not appropriate to discuss them nor to determine whether the law is completely settled in regard to this matter. Reference may, however, be made to Scrutton, p 62 and the decision of the Supreme Court of New South Wales in Gardner Smith Pty Ltd v The Ship “Tomoe 8” (No 2) (1990) 19 NSWLR 588 and the decision of this Court in Hunter Grain Pty Ltd v Hyundai Merchant Marine Co Ltd (1993) 117 ALR 507 at 510. It follows that, as between (the Voyage Charterer) and (the Time Charterer), the bills of lading operate as mere receipts for the cargo and have no effect in relation to the operation of the charterparty which governs the relationship between (the Time Charterer) and (the Voyage Charterer) and, as I shall indicate in a moment, (the Demise Charterer) and (the Voyage Charterer).
68 In my respectful opinion, the principle emerging from President of India v Metcalfe Shipping Co Ltd may have been stated more broadly in this passage than the authority itself might suggest. As I have endeavoured to show the issue before the Court of Appeal was whether, as between the same parties, the terms of their contract were to be found in the bills of lading or the charterparty. For my part I would not view the judgment of the Court of Appeal as standing for a broader proposition that, as between a shipper (and voyage charterer) and a shipowner (who were not parties to the same charterparty), a bill of lading issued by the shipowner (through the master) was not to be treated as containing the terms of the contract of affreightment if under the bill (properly construed) the shipowner was the carrier.
69 This conclusion is consistent with the recent judgment of Tamberlin J in Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (2000) 173 ALR 263. In that matter Hi-Fert Pty Ltd ("the Purchaser") purchased a quantity of fertiliser from an American company, Cargill Fertiliser Inc ("the Seller"). It was transported from an American port to Australia on a vessel, the Kiukiang Career ("the Ship") which was owned byKiukiang Maritime Carriers Inc ("the Owner"). The Ship was time chartered by the Owner to a third corporation ("the Time-charterer") under a time charterparty dated 19 August 1995. On 11 November 1993 the Purchaser had entered into a contract of affreightment with the Time-charterer for cargo shipped from the American port to Australia. Bills of lading were issued to the Seller by the master of the Ship in relation to the cargo of fertiliser in question. The master was employed by the Owner. The Purchaser sued, inter alia, the Owner for losses arising from the contamination of the cargo. The causes of action included negligence, bailment, breach of contract, and breach of duty as a carrier. In what Tamberlin J described as its first line of defence, the Owner alleged that "the bills of lading were not evidence of any contract of carriage and did not attract the obligations in (the US Carriage of Goods by Sea Act 1936 (US)) but were merely receipts for cargo received on board the (Ship)".
70 His Honour commenced considering this issue by noting that a bill of lading can serve three purposes, namely a receipt, evidencing the terms of the contract of carriage between a shipper and carrier and a negotiable document of title. He noted that the Owner had submitted the bills of lading were not evidence of a contract of carriage between the Purchaser and the Owner but were merely a receipt. The contract of carriage, the Owner had submitted, was embodied in the 11 November 1993 agreement between the Purchaser and the Time-charterer and that was the only contract controlling the carriage of cargo on the Ship. His Honour distinguished The "Dunelmia" [1969] 2 Lloyd's Rep 476 on the basis that the parties to the charterparty and the bills were effectively identical. I add, parenthetically, that this approach accords with the commentary in Scrutton concerning The San Roman referred to in par 53 above. His Honour then said:
In the present case they are not (identical). The (11 November 1993 agreement) in the present case was between the (Time-charterer) and (the Owner) and parties to the bill of lading are (the Owner) and (the Purchaser). This in my view is an important difference because the Court is presently concerned with two separate contract of carriage between different entities.
His Honour then addressed the terms of the specific bills of lading which were supportive of his ultimate conclusion that:
Having regard to these considerations each bill of lading in my view evidences a contract of carriage between (the Purchaser) and (the Owner) on which (the Owner) is entitled to sue as endorsee.
71 As I indicated earlier, I view this authority as more accurately reflecting the principle emerging from President of India v Metcalfe Shipping Co Ltd. I do not accept the wider proposition advanced by Sovcomflot. The bills in this matter are not mere receipts. Accordingly, it is necessary to consider the position of Sovcomflot.
Is Sovcomflot liable under the bills as demise charterer?
72 Having regard to the jurisdictional judgment, there can now be no issue that Sovcomflot was, when the bills issued in January 1999, a demise charterer of the Vessel from the owner, Aurora. A demise charterer can be treated as the owner for the purposes of liability under a bill. However this liability of a demise charterer ordinarily arises when and because it employs the master and the master acts as the agent of the employer. In signing a bill (or authorising another to sign it on his behalf) the master can, depending on the terms of the bill, bind the owner. Whether the owner is liable under a bill in cases broadly analogous to the present case can be a vexed question under English law: see e.g. the discussion by Legatt Jin The Rewia [1991] 2 Lloyd's Rep 325, and in the United States: see e.g. Cactus Pipe and Supply Co v M/V Montmartre 1985 AMC 2150 and Yeramex International v SS Tendo 595 F.2d 943 (4th Cir 1979).
73 In these proceedings the Master was not the employee of Sovcomflot but rather the employee of Kamchatka. The question that then arises is whether a bill issued in name of the Master (and, in terms, binding the owner as carrier) binds Sovcomflot and renders it the carrier of the cargo to which the bill relates.
74 In my opinion it does. In Homburg Houtimport BV v Agrosin Private Ltd (The "Starsin") [2000] 1 Lloyd's Rep 82 at 92 Colman J identified the proper approach (with which I agree). The first stage is to look at the bill in question to see whether, on its face, the shipowners are represented to be the party contracting to carry the goods. If, on the proper construction of the bill, it appears that the shipowner is undertaking the obligation to carry the goods, the second stage is to consider whether the signatory to the bill had authority to bind the shipowner: see also the observations of Samuels JA in Kaleej International Pty Ltd v Gulf Shipping Lines Ltd (1986) 6 NSWLR 569 at 572.
75 In the present case there is little in the bills of lading in question to suggest that, as a matter of construction, they were not intended to result in the owner being the carrier. In the top right-hand corner of each bill is a commentary which includes the following:
IN ACCEPTING THIS BILL OF LADING, the shipper, owner and consignee of the goods, and holder of the bill of lading expressly accept and agree to all its stipulations, exceptions and conditions, whether written, stamped or printed as fully as if signed by such shipper, owner, consignee and/or holder. No agent is authorized to waive any of the provisions of the within clauses.
76 The detailed terms of the bill commence with definitions. Clause one provides:
1. (Definition): In this Bill of Lading the "ship" and the "vessel" means the herein designated ocean vessels: the owner of the goods includes the shipper, the consignee, the owner of the goods, the receiver, and the endorsee and/or holder of the Bill of Lading whether by way of security and/or as agent or otherwise: and the "Carrier" means the owner or demise charterer of the vessel. Wherever the term "Merchant" is used in this Bill of Lading, it shall be deemed to include the shipper, the receiver, the consignee, the holder of the Bill of Lading and the owner of the goods.
77 Of some significance in these proceedings is clause 30 which reads:
30. (Identity of Carrier): The contract evidenced by this Bill of Lading is between the Merchant and the owner of the vessel named herein (or substitute) and it is therefore agreed that said shipowner only shall be liable for any damage or loss due to any breach or nonperformance of any obligation arising out of the contract of carriage whether or not relating to the vessel's seaworthiness. If, despite the foregoing, it is adjudged that any other is the Carrier and/or bailee of the goods shipped hereunder, all limitations of and exonerations from, liability provided for by law or by this Bill of Lading shall be available to such other. It is further understood and agreed that as the Line, Company or Agent who has executed this Bill of Lading for and on behalf of the master is not a principal in the transaction, said Line, Company or Agents shall not be under any liability arising out of the contract of carriage, nor as Carrier nor bailee of the goods.
78 The vessel named in each of the bills was, of course, the Socofl Stream. It must be accepted that the second sentence in clause 30 contemplates the possibility that a person other than the owner might be the carrier. However the bill, having regard to all its terms, is fairly clearly intended to result in a contract of carriage between the owner and the shipper (or anyone holding title through the shipper). Thus, the answer to the inquiry in the first stage is that the owner (which may be a demise charterer) is the carrier and the bill is intended to be a contract for the carriage of the goods.
79 This leads to the second stage of inquiry. Colman J described it this way in The "Starsin" (at 93):
However, once it has been determined, as a matter of construction and without regard to the existence of actual or ostensible authority, that the shipowner is the contracting party and that therefore, as they are commonly called, the bills of lading are "owners' bills", the shipowner can escape liability for the carriage only if he can show that the signatory had neither actual nor ostensible authority to bind him.
As to the question of authority, he said (at 95):
There can be no doubt that ostensible or apparent authority is founded upon the principal's representation to the party relying on the contract that the agent has authority to enter into it on the agreed terms. That representation may be made either specifically in relation to a particular contract or generally by reason of the principal's placing the agent in a ministerial position in which an agent would ordinarily have actual authority to enter into transactions of the kind in question: see generally Armagas Ltd v Mundogas SA (The Ocean Frost), [1986] 2 Lloyd's Rep 109; [1986] A.C. 717 (see Lord Keith at p. 112, col. 2; p. 777 A-C).
Reference was then made to the principles in the general law concerning ostensible authority and the following comment made:
… I would hold that there is a substantially similar public policy foundation for this kind of apparent authority as for estoppel by representation, namely that it would be unconscionable for a principal to deny that he was bound by a transaction which had been entered into apparently on his behalf by someone whom he had permitted to represent to third parties that he had the principal's authority to bind the principal to transactions of the kind in question. To permit the principal to rely on lack of actual authority in such circumstances to the prejudice of the third party would be to permit a similarly prejudicial inconsistency of conduct to that against which the law of estoppel is directed.
Colman J then noted that ostensible authority could not be based on a representation of actual authority given by the agent alone. However ostensible authority could arise when an agent represents that he has actual authority to enter into a contract of a kind which a person holding his representative position or appointment on behalf of the principal would have authority to enter. Colman J said:
This is because the representation in such a case is that attributable to the principal's conduct in placing his representative in a position to deal with the third party in respect of that kind of transaction.
80 The approach of Colman J has recently been endorsed in Alimport v Soubert Shipping Co Ltd [2000] 2 Lloyd's Rep 447 especially at pars 9 and 10.
81 This view of apparent (or ostensible) authority is consistent with earlier English and Australian cases. The classic formulation of the doctrine is that of Diplock LJ in Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503 (approved by the High Court in Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Company Pty Ltd (1975) 133 CLR 72 at 78 and Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 159, 172-4, 199, 207, 211-2), one of a plethora of cases arising in the context of corporate transactions. In particular, his Lordship said:
“The representation which creates “apparent” authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principal’s business with other persons. By doing so, the principal represents to anyone who becomes aware that the agent is so acting that the agent has authority to enter on behalf of the principal into contracts with other persons of the kind which an agent so acting in the conduct of his principal’s business has usually “actual” authority to enter into.”
82 Similarly, in Armagas Ltd v Mundogas SA (“The Ocean Frost”) [1986] AC 717, Lord Keith said (at 777):
“In the commonly encountered case, the ostensible authority is general in character, arising when the principal has placed the agent in a position which in the outside world is generally regarded as carrying authority to enter into transactions of the kind in question. …”
83 A concise overview of the doctrine of apparent (or ostensible) authority was given by Slade J in Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147 at 149-150 (approved by Kirby P (with whom Gleeson CJ and Samuels JA agreed) in Boulas v Angelopoulous (1991) NSW ConvR 55-606 at 59,431-59,432):
“Ostensible or apparent authority … is merely a form of estoppel, indeed, it has been termed agency by estoppel, and you cannot call in aid an estoppel unless you have three ingredients: (i) a representation, (ii) a reliance on the representation, and (iii) an alteration of your position resulting from such reliance.”
84 Thus if Sovcomflot, by words or conduct, represented to CMC that the Master, when issuing the bills of lading, was acting as Sovcomflot’s agent, and CMC accepted the bills on the faith of that representation, then Sovcomflot may be estopped from denying, as against CMC, that the Master was its agent.
85 In the present case it is admitted that the bills were signed on behalf of the Master. As just discussed, the bills are, in terms, issued by the master on behalf of the "owner" and identify the "owner" as the carrier. Sovcomflot terminated the demise charterparty with Kamchatka and did not, at that time, make a demand for the redelivery of the Vessel at a nominated port. Following the termination of the charterparty, Sovcomflot became the demise charterer and, prima facie, the "owner" for the purposes of any owner's bill.
86 Sovcomflot had a range of contractual rights under the demise charterparty with Kamchatka. Once the charterparty had been terminated, Sovcomflot was entitled to sell the Vessel (Article 11(2)(b)(i)) and pending the sale Sovcomflot could "hold, use, operate, charter, lease or keep the Vessel idle". The right to demand redelivery conferred by Article 11(2)(d) was redelivery of the Vessel "to the Owner or Disponent Owner as soon as possible thereafter at such safe port as the Owner or Disponent Owner may nominate". If a demand for redelivery at a nominated port had not been complied with, Aurora or Sovcomflot could "enter upon and repossess the Vessel". However Kamchatka was under no contractual obligation to redeliver unless a port was nominated. Its status after the termination of the charterparty and the nature of its possession of the Vessel was debated at some length during the jurisdictional argument. It is an issue that need not be resolved. It is sufficient to observe that Sovcomflot allowed Kamchatka to continue to use the Vessel in the sense that it did not require redelivery of the Vessel by exercising the contractual right to demand redelivery at a nominated port. Sovcomflot exercised one right (to terminate) but not another (redelivery at a nominated port).
87 Sovcomflot's demand for redelivery in its telex of 25 December 1998, in which it demanded that Kamchatka "forthwith re-deliver the above vessel to the disponent owner as soon as possible at a safe port to be nominated by us, failing which re-delivery the disponent owner (or their agent) may itself enter upon and repossess the vessel," was a barren one in the absence of the nomination of a port for redelivery. Moreover, the failure of Sovcomflot to nominate a port might reasonably have been taken by Kamchatka to be an indication that Sovcomflot was not prepared to assert or enforce its legal rights, at least fully. Sovcomflot neglected to nominate a port for redelivery even when Kamchatka made it plain (again) in its telex of 30 December 1998 that it proposed to continue to trade. Sovcomflot thus afforded Kamchatka the opportunity to continue to trade using the Vessel under the command of the Master. Sovcomflot effectively clothed the Master with authority to issue bills of lading on behalf of the "owner", that is, the person who was, at that time, in fact and in law the demise charterer. Sovcomflot would have had no reasonable basis, in my opinion, for assuming that what had occurred in late December 1998 between it and Kamchatka would be known to shippers who might use the Vessel before Sovcomflot regained physical possession of it. It should have known that by allowing Kamchatka to trade in the way just discussed, shipowners would enter contracts of carriage on the assumption that the Master could bind the owner.
88 It is conceivable that Kamchatka would have ignored a demand for redelivery even if a port had been nominated. Kamchatka had earlier indicated, as illustrated by a telex from it to Sovcomflot dated 10 December 1998, that it rejected the suggestion that it was in breach of the demise charter arrangements. It was not until early February 1999 that the more general dispute between Sovcomflot and Kamchatka was resolved at a meeting in Moscow. However I am not satisfied that Kamchatka would have ignored a demand for redelivery if a port had been nominated. An assumption cannot be made that Kamchatka would not act lawfully and minimise its liability, that is, comply with a demand to redeliver made in accordance with Article 11(2)(d) after the lawful termination of the charterparty.
89 It must be accepted that at no point after the demise charter was terminated was the Master employed by Sovcomflot and was, by virtue of his employment, an agent of Sovcomflot. It was an admitted fact, and common ground (at least as a matter of fact), that Kamchatka continued to employ the Master in January 1999 (though counsel for CMC appeared, at times, to resile from this agreed fact). However agreement on that fact does not conclude, in Sovcomflot's favour, the inquiry about the status of the Master and his authority. There may be an agency by estoppel in circumstances where the putative agent is not the agent of the principal at all. This was the situation in First Sport Ltd v Barclays Bank plc [1993] 1 WLR 1229; 3 All ER 789 where a thief presented a cheque card at the time he acquired goods from a retailer using a stolen cheque which he signed. In issue was whether the defendant bank was bound by conduct of the thief where plainly the thief was not the bank’s agent. A majority of the Court of Appeal concluded that the bank was bound by the conduct of the thief though the conclusion was substantially influenced by the language deployed in the cheque card. The contents of the card constituted the relevant representation about the authority of the person using it.
90 Relevant principles of more general application were discussed by Sir Thomas Bingham MR at WLR 1240, All ER 799:
It is of course elementary that a finding of ostensible authority cannot be based on the false assertion of the purported agent that he has authority which in truth he lacks. Such a finding must be based on a holding out by the alleged principal of the alleged agent as having his authority to act on his behalf in the relevant respect, which authority (after reliance upon it by the third party) the alleged principal is not permitted to deny. The simple justice underlying the rule is obvious: if A induces B to treat C as A’s agent with authority to bind him, it would be quite unfair if A was afterwards free to disavow the transaction on the basis that C was never his agent at all, even though in truth he never was.
For reasons given in the preceding paragraphs concerning the consequences of the failure of Sovcomflot to nominate a port for redelivery, the conduct of Sovcomflot constituted a representation that the Master had authority to bind it even though the Master was not its employee. For these reasons I am satisfied that Sovcomflot is bound by the bills of lading and is, for the purposes of the bills, the carrier.
Was the contract for carriage breached by Sovcomflot?
91 CMC submitted that Sovcomflot breached its contractual obligations under the bills of lading by breaching an implied term that the cargo would be delivered with reasonable dispatch: see e.g. Fyffes Group Ltd v Reefer Express Lines Pty (The “Kriti Rex") [1996] 2 Lloyd's Rep 171 at 191. Sovcomflot submitted that there was no specification of a time for delivery in the bills of lading and no evidence, expert or otherwise, as to what an implied term to deliver with reasonable dispatch would mean in the circumstances of this case. However it is relatively clear, in my opinion, that the delay occasioned by the arrest of the Vessel in Brisbane was material. On any view of the evidence, the residue of the voyage from Brisbane to Newcastle (even allowing for discharge and loading (if any) of cargo in Brisbane) would have taken a limited number of days only and certainly less than seven. There was some evidence that the sea voyage from Brisbane to Newcastle would take 38 hours port to port. That was in relation to a voyage that had, to that point, taken approximately three weeks from the time CMC’s cargo had been loaded. It was over a fortnight after the arrest of the Vessel that the cargo was discharged in Brisbane. That occurred in circumstances where, as Mr Fisher indicated to Mr Neill at the time, there was no certainty about when the Vessel might sail and the cargo might be delivered to Newcastle. While there was some discussion about the possibility of CMC's cargo being carried by the Vessel, when that would happen was uncertain and it was not being suggested that it would occur at the rate CMC had already secured. CMC was, in these circumstances, entitled to treat the delay as unreasonable and make its own arrangements to transport the cargo by other means.
92 I accept that the question of what is reasonable must be viewed objectively having regard to the particular circumstances of the voyage and that there is an element of subjective evaluation as well: see generally Ganado and Kindred Marine Cargo Delays: The Law of Delay in the Carriage of General Cargoes by Sea (1st ed. 1990) at 35 to 39. I also accept that Sovcomflot did not act capriciously when it decided to arrest the Vessel in Brisbane. There were commercial reasons for it doing so. In addition, I have accepted the evidence of Mr Fisher that Sovcomflot supported the unsuccessful application by Jebsens that the Vessel be permitted to sail to Newcastle under arrest. However, the need, as Sovcomflot perceived it, to arrest the Vessel in Brisbane (being what it believed was the first opportunity it had to do so after the termination of the charterparty) arose from Sovcomflot's failure to implement a strategy where it required redelivery of the Vessel at a nominated port and/or termination of the charterparty at a time when, if necessary, the Vessel could have been arrested. In any event, it adopted a course where the commercial interests of shippers who were likely to have cargo on the Vessel were to yield to its interests and adopted a course which was likely to result in significant delay. I am satisfied that there was a breach of the implied term to deliver the cargo with reasonable dispatch and that CMC was entitled to discharge the cargo and transport it itself.
Particular issues concerning damages
93 There was generally no issue about the damages CMC was entitled to if Sovcomflot was bound by the bills of lading and breach was established. However there were four elements of the damages claimed that Sovcomflot put in issue. The evidence concerning these matters was discussed earlier in this judgment.
94 The first concerned the stevedoring charges incurred in Brisbane because of rain. The evidence establishes that this was an element of the stevedoring charges incurred by CMC in Brisbane. I have already indicated that I am satisfied, on the evidence of Mr Hanneman, that there would have been no rain delays in Newcastle had the Vessel not been arrested in Brisbane and had it proceeded to Newcastle with reasonable dispatch. Accordingly, no adjustment should be made to the calculation of loss made by CMC concerning stevedoring costs associated with the discharge of the cargo in Brisbane which included a charge for rain delays, namely a total loss of $38,150.40.
95 It may be accepted that if the amount in question ($7881.61) was recoverable by Precision Profiling from CMC it can be included as part of the damages: see Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 352 per Fullagar J. The point made by counsel for Sovcomflot was that there was no evidence of the additional cost to Precision Profiling of purchasing steel in the open market to satisfy the orders it would have satisfied using the steel which was part of the cargo on the Vessel. It was also submitted that there was no evidence that Precision Profiling was required to provide fabricated steel products to its customers at a price based on the cheaper CMC steel. In addition Precision Profiling did ultimately receive the CMC steel. That steel could have been used by Precision Profiling in substitution for steel that it would have had to purchase on the open market.
96 I am satisfied the letter of 22 April 1999 and the enclosed schedule establishes that Precision Profiling incurred additional expenses by CMC's failure to deliver on time, as agreed, the steel which was on the Vessel. Mr Hanneman was asked questions about the position of Precision Profiling in cross-examination. However it was not suggested that the claim was not bona fide in the sense that Precision Profiling suffered no loss because it was able to pass on the additional cost of the steel bought in the open market. I infer from the making of the claim it was not able to do so. Precision Profiling lost the benefit of the contractual bargain it had with CMC and suffered loss as a consequence. That alone, in my opinion, would sustain a claim by Precision Profiling against CMC notwithstanding that the steel on the Vessel was later delivered to Precision Profiling. That further delivery does not alter the fact that additional expense was incurred by Precision Profiling in buying steel in substitution for the steel that could not be delivered on time by CMC. Accordingly, CMC is entitled to include this amount of $7881.61 in its damages.
97 Consistent with what I said earlier in this judgment about the claims concerning additional warehousing and the extension of Precision Profiling's terms of credit, I am not satisfied that, on the evidence, these claims are made out.
Conclusion
98 I have, to this point in the judgment, dealt only with the contention that Sovcomflot was liable as carrier for breach of contractual obligations to deliver the cargo with reasonable dispatch. This was, as I understood the approach adopted by counsel for CMC, the primary basis upon which its case was mounted and on which it has succeeded. Accordingly it is unnecessary to deal with a range of subsidiary submissions made by CMC designed to establish the liability of both Sovcomflot and the Vessel.
99 The parties did not address the form of any orders that might be made in the event that CMC was successful. The orders I make may need to be modified and accordingly I give the parties liberty to apply within 7 days of the date of judgment if any variation to them is sought.
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I certify that the preceding ninety-nine (99) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore. |
Associate:
Dated: 24 November 2000
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Counsel for the plaintiff: |
Mr P E King with Mr T J Davie |
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Solicitor for the plaintiff: |
James Neill |
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Counsel for the defendant: |
Mr J E Sexton SC |
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Solicitor for the defendant: |
Thynne & Macartney |
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Date of Hearing: |
10-11 April, 29-30 June 2000 |
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Date of Judgment: |
24 November 2000 |
