FEDERAL COURT OF AUSTRALIA
The Ship “Socofl Stream” v CMC (Australia) Pty Ltd (ACN 002 007 427)
 FCA 961
ADMIRALTY - Shipping and Navigation - Bills of lading - Sea carriage of goods - Charterparties - Vessel demised by disponent owner to charterer - Disponent owner giving notice of default in payment of charter hire and calling on charterer to forthwith re-deliver the vessel at a safe port to be nominated by disponent owner - Vessel subsequently taking on cargoes in Singapore and Malaysia from plaintiff for which bills of lading issued and signed “as agents for and on behalf of master” who was employee of charterer - Vessel later arrested in Brisbane at instigation of disponent owner - Whether plaintiff entitled to succeed in action in rem for breach of bills of lading against disponent owner - Whether master had ostensible authority to bind disponent owner to bills of lading - Whether bills of lading contractual documents or mere receipts - Carrier’s duty to deliver with reasonable dispatch - Whether breached by arrest of vessel in Brisbane en route to Sydney.
Admiralty Act 1988, ss 3(1), 4(3), 18
Carver’s Carriage by Sea, 13th ed.
Baumwoll Manufactur von Carl Scheibler v Furness  A.C. 8
Manchester Trust v Furness  2 QB 539
Homburg Houtimport B.V. v Agrosin Private Ltd (The Starsin)  1 Lloyd’s Rep 85
Grant v Norway (1851) 10 C.B. (N.S.) 665
Sunrise Maritime Inc v Uvisco Ltd (The Hector)  2 Lloyd’s Rep 287
Alimport v Soubert Shipping Co Ltd  2 Lloyd’s Rep 447
Rama Corporation Ltd v Proved King and General Investments Ltd  2 QB 147
Perre v Apand Pty Ltd (1999) 198 CLR 180
Hill v van Erp (1997) 188 CLR 159
Bryan v Maloney (1995) 182 CLR 609
D C Thomson & Co Ltd v Deakin  Ch. 646
Robins v Power (1858) 4 C B (W S) 778; 140ER 1297
Mitcheson v Oliver, 5 Ellis & B 419; 119 ER 537
Myers v Willis 17 C B 77; 139 ER 996
Rodoconachi Sons & Co v Milburn Brothers (1886) 18 QBD 67
The President of India v Metcalfe Shipping Co Ltd (The Dunelmia)  1 QB 289
Sanko Steamship Co Ltd v Sumitomo (No 2) (1995-1996) 63 FCR 227
Hi-Fert Pty Limited v Kiukiang Maritime Carriers Inc (2000) 173 ALR 263
Fyffes Group Ltd v Reefer Express Lines Pty Ltd (The Kriti Rex)  2 Lloyd’s Rep 171
THE SHIP “SOCOFL STREAM” -v- CMC (AUSTRALIA) PTY LTD (ACN 002 007 427)
N1335 of 2000
RYAN, TAMBERLIN and CONTI JJ
27 JULY 2001
IN THE FEDERAL COURT OF AUSTRALIA
N1335 of 2000
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
THE SHIP “SOCOFL STREAM”
CMC (AUSTRALIA) PTY LTD (ACN 002 007 427)
DATE OF ORDER:
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The appellant pay the respondent’s costs of the appeal, such costs to be taxed in default of agreement.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
N1335 of 2000
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
REASONS FOR JUDGMENT
1 This is an appeal from a judgment of a single Judge of the Court in favour of the respondent plaintiff CMC (Australia) Pty Ltd (“CMC”), in the sum of $131,633.94, plus interest. In early 1999, CMC arranged to ship a quantity of steel products, part of it from Singapore and the rest from Port Klang in Malaysia, to Australia. The part of the shipment originating in Singapore was described in several bills of lading, each dated 6 January 1999. Those bills variously described the cargo, as eg., a certain number of “steel plates”, having a gross weight specified in metric tonnes. Those bills of lading each identified CMC as both shipper and consignee of the goods. Each designated the Ocean Vessel as “SOCOFL STREAM” and nominated Singapore as the port of loading and “NEWCASTLE/SYDNEY” as the port of discharge. Each bill stipulated the mode of payment as “FREIGHT COLLECT” and bore a rubber stamp impression by way of signature “on behalf of” or “for” “Master” of the name PACIFIC ORIENT SEA TRANSPORT PTE LTD (“POST”), accompanied by the legend “By ……” in which an illegible signature had been inserted. The following recital appeared on the face of the bill under the full name of POST;
“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.
RECEIVED from the shipper herein named the goods or packages said to contain goods hereinafter mentioned, in apparent good order and condition unless otherwise indicated in this Bill of Lading, to be transported from the port of loading with liberty to proceed via any route ports within the scope of the voyage, to the port of discharge or so near thereto as the ship can safely get and leave, always afloat at all stages and conditions of water, and there to be delivered or transshipped on payment of the charges thereon. THE TERM APPARENT GOOD ORDER AND CONDITION WHEN USED IN THIS BILL OF LADING WITH REFERENCE TO IRON, STEEL, METAL PRODUCTS OR WOOD PRODUCTS DOES NOT MEAN THAT THE GOODS, WHEN RECEIVED, WERE FREE OF VISIBLE RUST, MOISTURE, STAINING, CHAFFING AND/OR BREAKAGE. IF THE SHIPPER SO REQUESTS, A SUBSTITUTE BILL OF LADING WILL BE ISSUED OMITTING THE ABOVE DEFINITION AND SETTING FORTH ANY NOTATIONS AS TO RUST OR MOISTURE, STAINING, CHAFFING AND/OR BREAKAGE WHICH MAY APPEAR ON THE MATES, OR TALLY CLERKS’ RECEIPTS.
IN WITNESS WHEREOF, the master or agent of the ship has signed to THREE (3) bills of lading, all of this tenor and date, ONE of which being accomplished, the others to stand void.”
2 The part of the shipment which originated in Port Klang was covered by two bills of lading in each of which the shipper was designated as “AMSTEEL MILLS SD BHD” with a Malaysian address and the consignee was designated “TO ORDER” with CMC as the party to notify. Each of those bills stipulated Port Klang as the port of loading and “SYDNEY AUSTRALIA” as the port of discharge. Each of the Port Klang bills nominated the ocean vessel as the “SOCOFL STREAM” and stipulated the same voyage number as the Singapore bills. Both bore the legend “FREIGHT COLLECT” and recited, in addition, that freight was payable at “destination”. In the space for signature below the printed name “PACIFIC ORIENT SEA TRANSPORT PTE LTD” the Port Klang bills bore a rubber stamp impression “TITIMAS Shipping & Trading SDN BHD” above a typewritten inscription “AS AGENTS FOR AND ON BEHALF OF MASTER (CAPTAIN LEONOV SERGEY).” In the same space appears an indecipherable signature adjacent to a small circular rubber stamp impression containing the legend “APPROVED COLLECTION”. We infer that Titimas Shipping & Trading Son SDN BHD was the Port Klang agent for POST. Each of the Port Klang bills also bore the rubber stamp impression “AMSTEEL MILLS SDN BHD” which had been initialled apparently by way of indorsement to facilitate payment for the cargo through CMC’s bankers.
3 The printed terms and conditions on all the bills of lading were identical and included these clauses;
“RECEIVED from the shipper named of the reverse side hereof the goods or packages said to contain goods hereinafter mentioned, in apparent good order and condition unless otherwise indicated in this Bill of Lading, to be transported from the port of loading with liberty to proceed via any route or ports within the scope of the voyage, to the port of discharge, or so near thereto as the ship can safely get and leave, always afloat at all stages and conditions of water and weather, and there to be delivered or transshiped on payment of the charges thereon.
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.
3. (Period of Responsibility): The Carrier or his Agent shall not be liable for loss or damage to the goods before the goods have passed the ship’s rail in loading and after the goods leave the ship’s deck in discharging port, howsoever such loss or damage arises. Goods in the custody of the carrier or his servants before loading and after discharge whether being forwarded to or from the ship or whether awaiting shipment landed or stored, or put into bulk or craft belonging to the Carrier or not, or pending transhipment at any stage of the whole transport, are in such custody at the sole risk of the Merchant and the Carrier shall not be liable for loss or damage arising or resulting from any cause whatsoever.
4. (The Scope of Voyage): The contract is for liner service and the voyage herein undertaken shall include usual or customary or advertised ports of call whether named in this contract or not, also ports in or out of the advertised, geographical, usual or ordinary route or order, even though in proceeding thereto the vessel may sail beyond the port of discharge or in a direction contrary thereto, or depart from the direct or customary route. The vessel may call at any port for the purpose of the current voyage or of a prior or subsequent voyage. The vessel may land cargo on docks or place it in lighters at intermediate ports for the purpose of restowing the cargo or loading other cargo. The vessel may omit calling at any port or ports whether scheduled or not, and may call at the same port more than once, either with or without the goods onboard and before or after proceeding towards the port of discharge, adjust compasses, dry-dock, go on ways or to repair yards, shift berths, undergo degaussing, wiping or similar measures, take fuel or stores, land stowaways, remain in port, sail without pilots, tow and be towed, and save or attempt to save life or property, and all of the foregoing are included in the contract voyage.
5. (Substitution of Vessel, Transhipment and Forwarding): Whether expressly arranged beforehand or otherwise, the Carrier shall be at liberty to carry the goods to their port of destination by the said or other vessel or vessels either belonging to the Carrier or others, or by other means of transport proceeding either directly or indirectly to such port and to carry the goods or parts of them beyond their port of destination, and to tranship, [illegible] and store the goods either on shore or afloat and reship and forward the same at Carrier’s expense but at theMerchant’s risk. When the ultimate destination at which the Carrier may have engaged to deliver the goods is other than the vessel’s port of discharge, the Carrier acts as Forwarding Agent only. The responsibility of the Carrier shall be limited to the part of transport performed by him on vessels under his management and no claim will be acknowledged by the Carrier for damage or loss arising during any other part of the transport even though the freight for the whole transport has been collected by him.
6. (Discharge and Deliver): The Carrier retain the option of delivery at all times from the ships or from craft, hulk, customhouse, warehouse, wharf or quay, in all cases at the risk of the Merchant and all expenses incurred by delivery otherwise than from ship’s shall be borne by the Merchant. If the Merchant is not ready to take delivery of the goods as soon as the ship is ready to discharge them, or within such time as is provided by the regulations of the port, the Carrier shall be at liberty to land and warehouse, or discharge the said goods into holds or craft, or at any other suitable place, at the risk and expense of the Merchant without notice, and if the goods so discharged or warehoused be unclaimed 30 days or more after arrival of the ship, then any and all liability of the Carrier shall cease. Demurrage for detention of ship, if caused by the Merchant not taking delivery as fast as the ship can discharge, to be paid by the Merchant at the current rate of charterage. When the goods are received or taken by customs or other authorities or by the operation of any lighter, dock, warehouse, elevator or other facility, whether selected by the Carrier or the Merchant, and whether public or private, such authority or operator shall be considered as having received possession and delivery of the goods solely as agent of and on behalf of the Merchant, at the risk and expense of the goods and subject to any lien of the Carrier thereon. Unless Merchant’s tally clerks check the goods in cooperation with the ship’s checkers the ship’s checker’s shall be accepted by the Merchant as conclusive evidence.
20. (Freight and Charges): (1) Freight may be calculated on the basis of the particulars of the goods, furnished by the Merchant who shall be deemed to have guaranteed the Carrier the accuracy of the contents, weight, measure or value as furnished by him, at the time of shipment but the Carrier may, for the purpose of ascertaining the actual particulars, at any time, open the package(s), container(s), pallet(s) and/or other similar article(s) of transport and examine contents, weight, measure and value of the goods at the risk and expense of the Merchant. In case of incorrect declaration of the contents, weight, measure or value of the goods, the Merchant shall be liable for and bound to pay to the Carrier, (a) the balance of freight between the freight charged and that which would have been due had the correct details been given, plus (b) as and by way of liquidated and ascertained damages, a sum equal to the correct freight. (2) Full freight to the port of discharge and/or destination named herein shall be considered as completely earned on shipment of the goods, whether the freight be stated or intended to be prepaid or to be collected at the port of discharge, destination or any other place. The Carrier shall be entitled to all freight and other charges due hereunder, whether actually paid or not, and to receive and retain them irrevocably under any circumstances whatsoever, whether the vessel and/or the goods be lost or not, or the voyage be broken up or frustrated or abandoned at any stage of the entire carriage. Full freight shall be paid on damaged or unsound goods. (3) The payment of freight and/or charges shall be made in full and in cash without any offset, counterclaim or deduction, where freight is payable at the port of discharge, destination or any other place, such freight and all other charges shall be paid in the currency named in this Bill of Lading, or at the Carrier’s option in other currency subject to the regulations of the freight conference concerned or custom at the place of payment. (4) The Merchant shall be liable for, and indemnify the Carrier against all dues, duties, taxes and charges including consular fees and fumigation expenses levied on the goods, or all fines and/or loss sustained or incurred by the Carrier in connection with the goods howsoever caused, including the Merchant’s failure to comply with laws and regulations of any government or public authorities. The Merchant shall be liable for return freight and charges on the goods refused exportation or importation by any government or public authorities. If the Carrier is of opinion that the goods stand in need of sorting, inspecting, mending or repairing or reconditioning or otherwise require protecting or caring for, the Carrier may carry out such work at 6the cost and expense of the Merchant. (5) The shipper, consignor, consignee, owner or receiver of the goods and holder of this bill of lading shall be jointly and severally liable to the Carrier for the payment of all freight and charges and for the performance of the obligation of each of them hereunder.
21. (Lien): The Carrier shall have a lien upon the goods for freight, dead freight, demurrage or loss caused by detention, average contribution, salvage, and for all payments made and liabilities incurred in respect of any charges or expenditures stipulated herein to be borne by the Merchant: the Carrier may enforce such lien by public or private sale with or without notice or by legal proceedings, the cost of such enforcement being for the account of the Merchant.
24. (Limitation of Liability): In case of any loss or damage to or in connection with goods exceeding the actual value of £100 per package, or in case of goods not shipped in packages, per customary freight unit, the value of the goods shall be deemed to be £100 per package or per unit, on which basis the freight is adjusted and the Carrier’s liability, if any, shall be determined on the basis of a value of £100 per package or per customary freight unit, or pro rata in case of partial loss or damage, unless the nature of the goods and a valuation higher than £100 have been declared in writing by the Merchant upon delivery to the Carrier and inserted in the Bill of Lading and extra freight paid if required and in such case if the actual value of the goods per package or per customary freight unit shall exceed such declared value, the value shall nevertheless be deemed to be the declared value and the Carrier’s liability, if any, shall not exceed the declared value and any partial loss or damage shall be adjusted pro rata on the basis of such declared value. Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the Carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the Carrier of the goods as described in this Bill of Lading. If the loss or damage is not apparent the notice must be given within three days of the delivery. In any event the Carrier and the vessel shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after the delivery of the goods or the date when the goods should have been delivered.
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 Agent shall not be under any liability arising out of the contract of carriage, nor as Carrier nor bailee of the goods.
31. (Jurisdiction): Any dispute arising under this Bill of Lading shall be decided in the country where the Carrier has his principal place of business, and the law of such country shall apply except as provided elsewhere herein.”
4 The vessel “Socofl Stream” had been built in Japan in or about 1993 for Aurora Navigation S.A. (“Aurora”), a company incorporated in the Republic of Panama. While she was under construction, Aurora demised the vessel on 24 April 1990 under a bareboat charter with purchase agreement to AKP Sovcomflot (“Sovcomflot”), a corporation incorporated under the laws of what was then the Union of Soviet Socialist Republic (“USSR”). By a further bareboat charter with purchase agreement dated 31 August 1993, Sovcomflot, in turn demised the “Socofl Stream” to Kamchatka Shipping Co (“Kamchatka”), a company incorporated under the laws of what by then had become the Russian Federation. That charterparty in which Sovcomflot was called “the Disponent Owner” and Kamchatka was called “the Charterer”, contained, amongst others, these articles;
“ARTICLE 11 (Events of Default and Remedies)
(1) The following events shall constitute events of default under this Agreement, namely, if:
(a) the Charterer shall fail to pay the Charter Hire or any other amount payable to the Owner or the Disponent Owner hereunder or under any other certificate or document or agreement furnished to or concluded with the Owner or Disponent Owner on the due date thereof; or
(b) the Charterer shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it hereunder and such failure shall continue unremedied for a period of thirty (30) days after written notice thereof by the Owner or Disponent Owner;
(2) (a) If any Event of Default occurs and is not remedied within seven (7) business days from the date of telex notice by the owner or Disponent Owner as the case may be to the Charterer, then the Owner or Disponent Owner may, by telex notice to the Charterer, forthwith terminate this Agreement and upon such termination the Charterer shall forthwith pay to the Owner or Disponent Owner as the case may be a sum equal to the then outstanding Charter Hire Principal together with all other sums then due and unpaid under this Agreement and any other indebtedness of the Charterer under other agreements with the Owner and Disponent Owner and interest on the Charter Hire Principal calculated at the Default Rate for such period of time as the Charter Hire Principal remains overdue, whereupon the Charterer’s obligation to pay the Charter Hire shall cease and the Owner or Disponent Owner as the case may be shall thereupon transfer title to the Vessel to the Charterer in the manner mutatis mutandis provided in Articles 17 and 18 below.
(b) (i) If the Charterer fails to pay the sum equal to the then outstanding Charter Hire Principal and such other sums as aforesaid the Owner or Disponent Owner as the case may be may, after such termination, sell the Vessel free of any charter lease or other engagement concerning her within the reasonable range of the market price prevailing at the time of sale of the Vessel on cash terms.
(c) Pending any sale of the Vessel by the Owner or Disponent as the case may be as aforesaid the Owner or Disponent Owner may hold, use, operate, charter, lease or keep the Vessel idle, as the Owner or Disponent Owner in its sole discretion may determine, all free and clear of any rights of the Charterer and without any duty to account to the Charterer with respect to such action or inaction, provided that such acts of the Owner or Disponent Owner shall be performed in order to minimize the indebtness (sic) of the Charterer. Any net income derived from the use of the Vessel as aforesaid shall be deemed to form part of the Gross Sale Proceeds, provided always that if such use of the Vessel results in the Owner or Disponent Owner suffering a loss, then such loss shall be account of the Owner or Disponent Owner.
(d) Upon the receiving of any notice of termination under the provisions of this Article the Charterer shall, if required by Owner or Disponent Owner as the case may be restore the Vessel to the condition in which she was at the time she was delivered to the Charterer hereunder except for ordinary wear and tear and subject to changes allowed under Article 7 hereof and re-deliver 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, failing which re-delivery the Owner or Disponent Owner (of their agent) may itself enter upon the repossess the Vessel.
(f) Notwithstanding the provisions to the contrary contained in the foregoing, the Owner or Disponent Owner as the case may be, may, at its option, retain the Vessel and have the Vessel valued in U.S. Dollars as soon as possible by an independent shipbroker nominated by the Owner or Disponent Owner from the internationally well known and reputable ship brokers in which event the Owner shall offset against such value
(i) all costs incident to such valuation of the Vessel,
(ii) the discharge of any claims in respect of the Vessel, which may have given or may give rise to any charge or lien on the Vessel or which may otherwise be enforceable against the Vessel,
(iii) an amount equal to the then outstanding Charter Hire Principal and
(iv) any other sums due and payable by the Charterer to the Owner or Disponent Owner hereunder or under any other indebtness (sic) of the Charterer to the Disponent Owner.
In the event the value of the Vessel is less than the total of the sums mentioned in the foregoing paragraph, the Charterer shall pay the difference directly to the Owner or Disponent Owner upon demand therefor by the Owner or Disponent Owner, provided that if the value of the Vessel exceeds the total of the aforementioned sums, the Owner or Disponent Owner shall promptly pay the excess to the Charterer.”
5 By telex message or facsimile transmission dated 24 November 1998 to Kamchatka, Sovcomflot contended that Kamchatka had defaulted in payment of charter hire for the “Socofl Stream”. The message concluded:
“WE, DISPONENT OWNER, HEREBY DECLARE THAT YOU, THE CHARTERER HAVE FAILED TO PAY THE 11TH CHARTER HIRE AMOUNTING TO USD 482,163.98 ON THE DUE DATE OF APRIL 14, 1998 AND 12TH CHARTER HIRE AMOUNTING TO 478,086.46 ON THE DUE DATE OF OCTOBER 13, 1998. WE DECLARE THAT TIME FOR PAYMENT BY YOU OF THE CHARTER HIRES IS ESSENTIAL TO PERFORMANCE OF THE BAREBOAT CHARTER. THEREFORE, WE HEREBY MAKE A DEMAND AND REQUEST YOU TO MAKE PAYMENT OF THE SUM OF USD 960,250.44 TOGETHER WITH THE DEFAULT INTEREST STIPULATED IN ITEM 3 OF THE SCHEDULE A TO THE BAREBOAT CHARTER BY 1ST DECEMBER 1998 OTHERWISE YOU WILL BE IN DEFAULT UNDER CLAUSE 11 OF THE BAREBOAT CHARTER.”
6 A further telex or facsimile message from Sovcomflot to Kamchatka of 2 December 1998 referred to the earlier message of 24 November 1998 and concluded:
“WE, DISPONENT OWNER, HEREBY DECLARE THAT YOU, THE CHARTERER, HAVE FAILED TO PAY THE 11TH CHARTER HIRE AMOUNTING TO USD 482,163.98 (US DOLLARS FOUR HUNDRED EIGHTY TWO THOUSAND ONE HUNDRED AND SIXTY THREE AND 98 CENTS) AND THE 12TH CHARTER HIRE AMOUNTING TO USD 478,086.46 (US DOLLARS FOUR HUNDRED SEVENTY EIGHT THOUSAND AND EIGHTY SIX AND 46 CENTS) TOTALLING USD 960,250.44 (US DOLLARS NINE HUNDRED SIXTY THOUSAND TWO HUNDRED AND FIFTY AND 44 CENTS) TOGETHER WITH THE DEFAULT INTEREST STIPULATED IN ITEM 3 OF THE SCHEDULE A TO THE BAREBOAT CHARTER AS REQUESTED IN OUR ABOVE MENTIONED TELEX NOTICE DATED 24TH NOVEMBER 1998. AN “EVENT OF DEFAULT” UNDER ARTICLE 11(1)(A) OF THE BAREBOAT CHARTER HAS OCCURRED BY REASON OF THE CHARTERERS’ NON-PAYMENT . THEREFORE, WE HEREBY DECLARE AND GIVE NOTICE THAT, IF THE “EVENT OF DEFAULT” IS NOT REMEDIED, I.E. BY PAYMENT OF THE OUTSTANDING CHARTER HIRES DUE OF USD 960,250.44 (US DOLLARS NINE HUNDRED SIXTY THOUSAND TWO HUNDRED AND FIFTY AND 44 CENTS) TOGETHER WITH THE DEFAULT INTEREST SET FORTH IN ITEM 3 OF THE SCHEDULE A TO THE BAREBOAT CHARTER IN ACCORDANCE WITH ARTICLE 3(3)(A) OF THE BAREBOAT CHARTER WITHIN 7 BUSINESS DAYS OF THE DATE OF THIS TELEX, THE DISPONENT OWNER MAY TERMINATE THE BAREBOAT CHARTER UNDER ARTICLE 11(2)(A) WITH THE CONSEQUENCES FOR THE CHARTERER SET OUT IN ARTICLE 11(2) AS A WHOLE.”
7 Then by a further message dated 15 December 1998 which referred to the earlier ones Sovcomflot notified Kamchatka that:
“WE, DISPONENT OWNER, HEREBY DECLARE THAT YOU, THE CHARTERER, HAVE FAILED TO MAKE PAYMENT OF THE 11TH CHARTER HIRE AMOUNTING TO USD 482,163.98 AND THE 12TH CHARTER HIRE AMOUNTING TO USD 378,086.46 TOTALLING USD 960,250.44 TOGETHER WITH THE DEFAULT INTEREST STIPULATED IN ITEM 3 OF THE SCHEDULE A TO THE BAREBOAT CHARTER IN ACCORDANCE WITH ARTICLE 3(3)(A) OF THE BAREBOAT CHARTER AS REQUESTED IN OUR ABOVE MENTIOEND TELEX NOTICES DATED 24TH NOVEMBER 1998 AND 2ND DECEMBER 1998. AND “EVENT OF DEFAULT” UNDER ARTICLE 11(1)(A) OF THE BAREBOAT CHARTER HAS OCCURRED BY REASON OF THE CHARTERERS’ NON-PAYMENT. YOU, THE CHARTERER, HAVE FAILED TO REMEDY THAT “EVENT OF DEFAULT” WITHIN 7 (SEVEN) BUSINESS DAYS FROM THE DATE OF OUR TELEX NOTICE OF DEFAULT DATED 2ND DECEMBER 1998. THEREFORE, WE HEREBY DECLARE AND GIVE NOTICE THAT THE BAREBOAT CHARTER IS FORTHWITH TERMINATED UNDER ARTICLE 11(2)(A) OF THE BAREBOAT CHARTER.
AS A RESULT, WE HEREBY CALL UPON YOU PURSUANT TO ARTICLE 11(2)(A) OF THE BAREBOAT CHARTER, TO FORTHWITH PAY TO US A SUM EQUAL TO THE OUTSTANDING CHARTER HIRE PRINCIPAL AMOUNTING TO USD 5,956,015.57 TOGETHER WITH INTEREST OVERDUE WITH REGARD TO 11TH CHARTER HIRE AMOUNTING TO USD 198,544.19 AND THE DEFAULT INTEREST CALCULATED AT THE DEFAULT RATE (LIBOR + 1.5% AS PER ITEM 3 OF THE SCHEDULE A TO THE BAREBOAT CHARTER) WHICH WE CALCULATE AS USD 24,713.00 UP TO THE DATE OF THIS NOTICE AND AN ADDITIONAL USD 100.87 PER DAY FOR EACH DAY HEREAFTER TOGETHER WITH INTEREST OVERDUE WITH REGARD TO 12TH CHARTER HIRE AMOUNTING TO USD 194,466.67 AND THE DEFAULT INTEREST CALCULATED AT THE DEFAULT RATE (LIBOR + 1.5% AS PER ITEM 3 OF THE SCHEDULE A TO THE BAREBOAT CHARTER) WHICH WE CALCULATE AS USD 6,118.01 UP TO THE DATE OF THIS NOTICE AND AN ADDITIONAL USD 97.11 PER DAY FOR EACH DAY HEREAFTER TOGETHER WITH INTEREST ACCRUED WITH REGARD TO 13TH CHARTER HIRE WHICH WE CALCULATE AS USD 61,886.72 UP TO THE DATE OF THIS NOTICE AND AN ADDITIONAL USD 982.33 PER DAY FOR EACH DAY HEREAFTER. WE ARE PREPARED TO ALLOW YOU 7 (SEVEN) BUSINESS DAYS FROM TODAY’S DATE FOR YOU TO PAY SUCH SUMS.”
8 Finally, on 25 December 1998, Sovcomflot notified Kamchatka that:
“WE, THE DISPONENT OWNER, HEREBY DECLARE THAT YOU, THE CHARTERER, FAILED TO MAKE THE PAYMENT OF THE 11TH CHARTER HIRE AMOUNTING TO USD 482,163.98 AND THE 12TH CHARTER HIRE AMOUNTING TO USD 478,086.46 TOTALLING USD 960,250.44 TOGETHER WITH THE DEFAULT INTEREST STIPULATED IN ITEM 3 OF THE SCHEDULE A TO THE BAREBOAT CHARTER AS REQUESTED IN OUR ABOVE MENTIONED TELEX NOTICES DATED 24TH NOVEMBER 1998 AND 2ND AND 8TH DECEMBER 1998. AN “EVENT OF DEFAULT” UNDER ARTICLE 11(1)(A) OF THE BAREBOAT CHARTER OCCURRED BY REASON OF THIS NON-PAYMENT. YOU, THE CHARTERER, FAILED TO REMEDY THAT “EVENT OF DEFAULT” WITHIN 7 (SEVEN) BUSINESS DAYS FROM THE DATE OF OUR TELEX NOTICE OF DEFAULT DATED 2ND DECMEBER 1998. THEREFORE, WE DECLARED AND GAVE NOTICE THAT THE BAREBOAT CHARTER WAS FORTHWITH TERMINATED UNDER ARTICLE 11(2)(A) OF THE BAREBOAT CHARTER BY THE ABOVE MENTIONED TELEXNOTICE DATED 15TH DECEMBER 1998.
AS A RESULT, WE, THE DISPONENT OWNER, HEREBY CALL UPON YOU PURSUANT TO ARTICLE 11(2)(D) OF THE BAREBOAT CHARTER, TO 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. IN ADDITION WE, THE DISPONENT OWNER, HEREBY RESERVE ALL OF OUR RIGHTS IN RELATION TO THE ABOVE VESSEL UNDER THE BAREBOAT CHARTER OR OTHERWISE.”
9 That last message elicited this response from Kamchatka dated 30 December 1998;
“WE HAVE ALREADY MADE CLEAR TO YOU THAT WE ARE NOT INDEBTED TO YOU AS CLAIMED BY YOU OR AT ALL AND DENY THAT ANY CONRACTUAL (sic) RIGHTS EXISTS ON YOUR PART TO TERMINATE OUR POSSESSION OF THE ABOVE VESSEL. WE HAVE FURTHERMORE RESERVED ALL OUR RIGHTS IN RELATION TO THE ABOVE VESSEL AND CONTINUE SO TO DO. OUR REVIEW OF YOUR RECENT CONDUCT HAS LED TO A REVIEW OF THE OVERALL POSITION AND WE HAVE BEEN ADVISED THAT YOUR CONDUCT IN PURPOTING (sic) TO TAKE THE ABOVE VESSEL ON HIRE-PURCHASE WITH A SIMILAR CONTRACT ON TO US IS UNLAWFUL. WE ANTICIPATE THAT SIMILAR ARGUMENTS AS HAVE BEEN PUT TO US MAY WELL APPLY AS REGARDS THE RESPECTIVE OBLIGATIONS OF YOURSELVES AND OF THE MINISTRY OF TRANSPORT TOWARDS MITSUBISHI CORPORATION AND ITS NOMINEE, AURORA NAVIGATION S.A.
WE THEREFORE PROPOSE TO APPLY TO A COMPETENT COURT OF JURISDICTION FOR DIRECTIONS IN THE MATTER AND DO NOT PROPOSE TO RETURN POSSESSION OF THE ABOVE VESSEL TO YOU OR TO WHOEVER MAY BE ENETITLED THERETO UNTILL (sic) A FINAL DETERMINATION HAS BEEN MADE. WE CONFIRM THAT PENDING THE SAME WE WILL USE OUR BEST ENDEAVOURS TO MAINTAIN THE ABOVE VESSEL IN A THOROUGHLY EFFICIENT STATE IN HULL MACHINERY AND EQUIPMENT AND WILL ACCOUNT FOR ANY PROITS MADE IN ACCORDANCE WITH THE COURT’S DIRECTION.
THE HIGH COURT OF JUSTICE IN LONDON IS A COMPETENT COURT TO DETERMINE THE DISPUTE REGARDING OUR RESPECTIVE RIGHTS AND OBLIGATIONS TO WHOSE JURISDICTION WE ARE WILLING TO SUBMIT. PLEASE CONFIRM THAT YOU IN TURN WILL HAVE THE MATTER DECIDED ACCORDINGLY AND LET US HAVE THE NAME OF THE PERSON ON WHOM PROCEEDINGS MAY SERVED.
WE ALSO NOTE THAT WE ARE AWAITING TO HEAR FROM YOU AS TO YOUR UNDERTAKING TO REFRAIN FROM ARRESTING SEIZING OR OTHERWISE DETAINING THE ABOVE VESSEL PENDING AN AMICABLE SOLUTION A FINAL COURT DECISION. PLEASE LET US HAVE YOUR RESPONSE ON THIS ISSUE WITHIN THE NEXT FIVE (5) BUSINESS DAYS.”
10 The fact that Kamchatka’s response of 30 December 1998 was in English led Sovcomflot’s Deputy Director-General, Mr Izmailov, who was responsible for its fleet operations, to conclude that there might be litigation. The relevant part of Mr Ismailov’s evidence was summarised by the learned primary Judge in these terms;
“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.”
11 Mr Jebsen, it should be interpolated, was a principal of Jebsens Orient Shipping Services A/S (“Jebsens”) which, on 23 January 1998, had taken a time charter of the “Socofl Stream” for three months with options for several further periods of the same length. The learned primary Judge accepted that Jebsens remained a time charterer of the vessel from Kamchatka in January and February 1999.
12 The “Socofl Stream” apparently completed loading in Singapore on 6 January 1999 and proceeded to Port Klang where the balance of CMC’s steel was loaded on 9 January 1999. She then returned to Singapore where a stow plan was prepared on 12 January 1999 before sailing for Brisbane where she arrived at some time shortly before 25 January 1999.
13 In the meantime, Sovcomflot had commenced proceedings against the vessel by issuing a writ in rem out of the Queensland Registry of this Court, as a result of which the vessel was arrested on 25 January 1999. The writ claimed possession and delivery up of the ship together with damages for breach of the charterparty between Sovcomflot and Kamchatka and interest. On 29 January 1999, Jebsens applied unsuccessfully for an order to permit the vessel to sail under arrest to Newcastle, discharge the cargo and return to Brisbane. Then, on 9 February 1999, on CMC’s application, an order was made permitting the cargo to be discharged in Brisbane subject to certain conditions. That was done and, on 11 February 1999, the cargo was discharged and transported by road from Brisbane to Newcastle where part of the consignment was distributed to CMC’s customers and the balance was taken into a warehouse maintained by CMC. In the meantime, on 9 February 1999, CMC had instituted in the New South Wales Registry of this Court its own action in rem against the “Socofl Stream” claiming delivery of the cargo in accordance with the bills of lading or, alternatively, damages for failing to deliver the cargo at the port of discharge in breach of the obligations under the bills of lading. By its amended statement of claim filed on 1 March 2000, CMC articulated, first, a claim against Sovcomflot as demise charterer of the vessel. An alternative claim was made in similar terms against Aurora and a second alternative claim was formulated, also in similar terms, against Kamchatka. The paragraphs charging Sovcomflot included, so far as is relevant, the following;
“7. The Bills of Lading were signed by POST as agents for the carrier. At all material times the carrier was the demise charterer.
8. Alternatively the Master on whose behalf the Bills of Lading were signed was agentfor the demise charterer of the vessel.
9. The demise charterer of the vessel was a person liable under the Bills of Lading to the Plaintiff.
10. At all materials times the demise charterer was Sovremenniy Kommercheskiy Flot (Sovcomflot).
11. In the premises the plaintiff was entitled to the safe and proper discharge of the cargo described in the Bills of Lading (the cargo) in accordance with the terms thereof.
12. In the premises the Sovcomflot was under a duty as carrier by sea for reward or alternatively expressly or impliedly contracted by the Bills of Lading to convey the goods by seas as required by the Bills of Lading safely and properly discharge the cargo and deliver it to the plaintiff as required by the Bills of Lading.
13. In breach of duty and/or contract the cargo was not safely and properly discharged or delivered to the plaintiff as required by the Bills of Lading.
14. By reason of the said breach the plaintiff has suffered loss and damage.
15. Alternatively, in the premises the plaintiff was entitled to have the cargo delivered with reasonable dispatch.
16. In the premises Sovcomflot was under a duty as carrier by sea for reward or alternatively expressly or impliedly contracted by the Bills of Lading to deliver the cargo with reasonable expedition.
17. In breach of duty and/or contract the cargo was not delivered with reasonable dispatch.
18. By reason of the said breach the plaintiff has suffered loss and damage.
26.A. Further or alternatively by reason of its conduct in:
a) terminating the sub-demise charterparty with Kamchatka Shipping Company Ltd; and
b) failing to nominate a re-delivery port for the vessel; and
c) failing to establish the vessel's location by enquiry to Kamchatka or using vessel location services prior to the issue of bills of lading to the Plaintiff; and
d) failing to recover possession of the vessel prior to the issue of the Bills of Lading to Plaintiff; and
e) permitting the vessel to continue trading; and
f) causing or permitting plaintiff’s goods to be loaded at Singapore against the issue of bills of lading signed on behalf of the Master;
Sovcomflot caused or permitted:
26.A.1.the Master of the vessel to be vested with ostensible authority to continue to employ the vessel commercially on behalf of Sovcomflot alternatively Kamchatka as Carrier and in particular, for the Master to accept the plaintiff’s cargo for carriage and authorise the issue of bills of lading signed on behalf of the Master to plaintiff for cargo which bills of lading were provided to plaintiff and relied upon by plaintiff in the normal course of trade as a receipt for cargo, a document of title to the cargo and evidence of the contract of carriage; and/or
26.A.2. the Master of the vessel to be obligated to act as an agent of necessity on behalf of Sovcomflot alternatively Kamchatka as Carrier and in particular, for the Master to accept the Plaintiff’s cargo for carriage and authorise the issue of bills of lading on behalf of the Master for cargo to Plaintiff; and/or
26.A.3a representation to be made to the Plaintiff to the effect that the Master had authority to authorise the signing of bills of lading on behalf of the Master for the Carrier, which representation was relied upon by the plaintiff in the manner referred to in 26.A.1 above; and/or
26.A.4.itself to be the Carrier in fact and in law.
14 The correspondingly relevant paragraphs of Sovcomflot’s Amended Defence were;
“1. Sovremenniy Kommercheskiy Flot ("Sovcomflot") admits paragraphs 1, 5, 6, 33, 34, 37, 49, 50, 53 and 54 of the Statement of Claim.
2. Sovcomflot does not admit paragraphs 4 and 11 of the Statement of Claim.
3. Sovcomflot denies paragraphs 12-32 inclusive, 35, 36, 38, 39, 55, 56, 57 and 58 of the Statement of Claim.
4. As to paragraph 2 of the Statement of Claim, Sovcomflot does not admit that the plaintiff is the holder of the bills of lading as alleged but otherwise admits the said paragraph.
5. As to paragraph 3 of the Statement of Claim, Sovcomflot admits that the plaintiffis the notify party as alleged but otherwise does not admit the said paragraph.
6. As to paragraphs 7, 8, 9, 10, 40, 41, 42, 43, 45, 46, 47 and 48 of the Statement of Claim, Sovcomflot:-
(a) says that the said bills of lading were signed by POST as agents for the master;
(b) admits that the master was an agent for Kamchatka Shipping Company ("Kamchatka");
(c) admits that at all material times Sovcomflot was a demise charterer of the vessel and that Aurora Navigation S.A. ("Aurora") was the owner of the vessel;
(d) denies each and every other allegation made in the said paragraphs.
8. As to paragraph 51 of the Statement of Claim, if there is a contract contained in or evidenced by the bills of lading (which is denied) then 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.”
15 In the course of the hearing at first instance, Sovcomflot sought leave further to amend par 8 of its amended defence by inserting after the words “Statement of Claim” the words which have been underlined in reproducing that paragraph above. The learned primary Judge explained in the course of his reasons for his substantive judgment why he had decided to grant Sovcomflot the leave to amend which it sought. His Honour said;
“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).
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. 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)  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.
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 …
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 be evidenced by the bill.”
16 Having allowed Sovcomflot’s amendment, the learned primary Judge identified two principal questions to be resolved in the substantive determination of the action. They were whether the bills of lading were contracts or mere receipts and whether Sovcomflot was liable under the bills as demise charterer. Subsidiary questions identified by his Honour were whether the contract for carriage had been breached by Sovcomflot and particular issues concerning damages. It is convenient to consider the principal questions in the reverse order of that adopted by the primary Judge.
A. Was Sovcomflot liable under the bills of lading as demise charterer?
17 The learned primary Judge found that the Master of the “Socofl Stream” was not employed by Sovcomflot and had no actual authority to act as its agent. As to the latter issue, his Honour observed;
“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.”
18 His Honour went on to find that Sovcomflot had held the Master out as having authority to bind it by signing bills of lading. The relevant part of the reasons at first instance recited;
“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.”
19 The conduct relied on by the learned primary Judge as constituting Sovcomflot’s holding out of the Master as its agent was its failure to demand redelivery of the vessel to a safe port in accordance with Art. 11(2)(d) of the demise charterparty between Sovcomflot and Kamchatka, which is reproduced at  of these reasons. In that context, his Honour observed;
“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).
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.”
20 On the hearing of the appeal, Counsel for Sovcomflot attacked that reasoning because it rested on the implied finding that, had a demand been made under Art. 11(2)(d), Kamchatka would have complied with it by delivering the vessel to a safe port nominated by Sovcomflot. The surrounding circumstances, Counsel argued, indicated that Kamchatka would have ignored any demand for redelivery. On the view we take of the matter, it is unnecessary to resolve this question because we consider that, for the purpose of analysing whether the Master had the ostensible authority of Sovcomflot to issue the bills of lading, it is necessary to focus on what happened between 15 December 1998 when the notice under Art. 11(2)(a) of the charterparty was given and the time when CMC’s cargo was taken on board the “Socofl Stream” and the bills of lading were signed.
21 On appeal it was contended on behalf of Sovcomflot that merely allowing the vessel to continue to trade did not constitute a representation to the world by Sovcomflot that the Master had been authorised by it to issue bills of lading. There was no obligation, so the argument went, to have regard to cargo interests in determining how Sovcomflot would exercise its contractual rights to terminate the demise charterparty with Kamchatka. Nor was there any communication by Sovcomflot to the Master or any other person from which the making of the representation could be imputed to Sovcomflot. Likewise, it was argued that this was not a case where Sovcomflot’s inaction allowed others to assume that a particular state of affairs would continue. Rather, what CMC claimed to have assumed was a complete change whereby the Master, who was formerly the agent of Kamchatka, had become the agent of Sovcomflot.
22 We doubt whether the correct analysis of what CMC can be taken to have assumed involved any such “complete change”. The assumption to be imputed to CMC is that, when the ship, in the person of the Master, received cargo on board and issued bills of lading, that was done on behalf of the actual or disponent owner of the ship for the time being. On that analysis, although there may have been a “complete change” of ownership by reason of Sovcomflot’s termination of the demise charter to Kamchatka, that did not change any assumption which might reasonably have been made by third parties dealing with the ship. That the assumption actually made by CMC accorded with that which we have imputed to it is borne out by the evidence of Mr Hanneman, CMC’s Transport Manager, who deposed;
“At no time prior to the Arrest of the vessel did I or CMC have any knowledge that any person other than the Owner and POST have any interest in the ship. At the time of accepting Bills of Lading I believed that the Master was employed by the Owner and had authority to sign bills on behalf of the Owner in the normal way.”
23 That evidence was explored in cross-examination of Mr Hanneman by Mr Sexton for Sovcomflot when this exchange occurred;
Mr Sexton: “Now, Mr Hanneman, in relation to the belief that you had as deposed to paragraph 19, when you say that you believed that the Master had authority to sign bills on behalf of the owner and you used owner with a capitalised first letter, who are you referring to there?”
Mr Hanneman: “Whoever the owner was.”
Mr Sexton: “When you say “in the normal way”, do we take it that that means in accordance with whatever the legal position is?”
Mr Hanneman: “Yes.”
Mr Sexton: “At the time that you formed this belief, you didn’t know who the Master of the vessel was actually employed by, did you?”
Mr Hanneman: “No.”
Mr Sexton: “You didn’t know anything about the arrangements beyond Pacific Orient Sea Transport in relation to this vessel?
Mr Hanneman: “No.”
24 It was further argued on behalf of Sovcomflot that there is no authority which supports the proposition that an owner or demise charterer of a vessel on which goods are carried is ipso facto liable on a bill of lading in respect of those goods. It was submitted that “the cases speak of the liability of an owner / demise charterer as usually deriving from the bill of lading being signed by or on behalf of the Master who is the servant or agent of the owner or demise charterer” (original emphasis). We take Counsel to mean by the reference to “agent”, in the passage which he emphasised, actual agent. In support of the proposition just quoted, Counsel referred first to Baumwoll Manufactur von Carl Scheibler v Furness  A.C. 8, where it was held that the owner of a ship who has parted with possession and control to a charterer under a charterparty is not liable for the loss of goods shipped under bills of lading signed by the captain who is the servant of the charterer and not of the owner and who has no authority to pledge the owner’s credit, even though the shipper of the goods has no notice of those facts. In affirming a decision of the Court of Appeal, Lord Herschell L.C. observed, at 17;
“Not a single authority has been cited in which the owner of a vessel has ever been held liable on a bill of lading or as for a tort in any case in which the master of the vessel, or those who were guilty of the negligence, have not been properly described as the servants of the owner. No doubt a vessel may be chartered, and the charterer may have, during its continuance, full power to deal with the vessel, to determine her voyage, and to direct the course that she shall take, where, nevertheless, the master and crew remain truly the servants of the owner. In that case I apprehend it is perfectly clear that by reason of the relationship still subsisting, the owner becomes bound by such a contract as a bill of lading, and by all the contracts which a master can ordinarily make, and which persons therefore have a right to presume he is authorized to make, binding the owner.”
25 To similar effect, Lord Watson observed, at 21;
“At the time when the bills of lading were signed and also at the time when the goods of the appellants suffered damage, the ship was in the possession and under the control of the charterers, who employed their own master and crew in her navigation. That point once fixed, it appears to me that there is really no substantial question which can arise upon this appeal.”
26 However, the present case differs from Baumwoll Manufactur by reason of the fact that, by the time when the bills of lading had been signed, the ship was no longer in the possession and under the control of Kamchatka, although that company continued to employ the master and crew. The legal effect of Art. 11(2)(a) and (c) of the charterparty between Sovcomflot and Kamchatka and the telex message of 15 December 1998 was that possession and control of the vessel passed immediately to Sovcomflot.
27 Baumwoll Manufactur was distinguished by the Court of Appeal in Manchester Trust v Furness  2 QB 539. In that case, the captain had been appointed and paid by the owners of the vessel but it was a term of the time charterparty between the owners and charterers that “in signing bills of lading it is expressly agreed that the captain shall only do so as the agent for the charterers.” Nevertheless, it was held that the stipulation just quoted was valid as between the charterers and the owners and had no effect at all on the holder of the bill of lading, notwithstanding that the bill of lading referred to the charterparty by reciting that the goods were to be delivered to the holder of the bill “he or they paying freight for the same and other conditions as per charterparty.” Lord Lindley referred to Baumwoll Manufactur at 546, where he observed;
“But although there is a great difficulty in reconciling all the earlier cases about demises of ships and so on, the test is in each case that which was applied by the House of Lords in the case of the Baumwoll Manufactur v. Furness ( A.C. 8) - Whose servant is the master? Who is his undisclosed principal when he signs the bill of lading? My answer to that question is, that upon the true construction of these documents he was the servant of the shipowner.”
28 The third case cited in this context by Counsel for Sovcomflot was Homburg Houtimport B.V. v Agrosin Private Ltd (The Starsin)  1 Lloyd’s Rep 85, where Colman J observed, at 92;
“In identifying what considerations are relevant to the issue whether shipowners are bound by any particular bill of lading there is, in my judgment, no reason to depart in any respect from the approach which would be taken to the same question in relation to any other commercial contract. Where, as in the case of most bills of lading the document has been signed by a person or entity as agent the first stage of the investigation is to look at the document to see whether, on the face of it, the shipowners are represented to be the party contracting to carry the goods. For that purpose, it is necessary to construe the document as a whole in its business context. Although the words are to be understood in their commercial setting, the exercise in construction necessarily involves starting with the express words used and, if the meaning thereby arrived at decisively indicates what can be inferred to be the meaning mutually intended, that will be an end of the matter. In determining the meaning which the parties must be taken mutually to have intended, it is necessary not to lose sight of the fact that, at least in the case of a liner bill, only the shippers and the person or organization issuing the bill are involved. One is concerned to ascertain who the issuer of the bill has represented to be the person undertaking to carry the goods. Whereas it is clearly material when construing the words of representation in the bill that shippers can ordinarily be expected to have knowledge of the fact that liner bills are often issued by liner operators who have the authority to bind owners of chartered vessels to bill of lading contracts, whether in any particular case a liner operator does have that actual authority, must as a matter of principle be completely irrelevant to the process of construction. At the primary stage of construction, the issue is what was represented, not what was authorized to be represented. In answering this question facts, such as the existence of actual authority of the signatory to bind the owners, which would not normally be within the shippers' knowledge, cannot be part of the context or commercial setting.”
29 His Lordship then observed that if, on its proper construction, the bill of lading represents that the shipowner is undertaking the obligation to carry the goods, it may be necessary to consider whether the signatory of the bill had actual or ostensible authority to bind the shipowner. He then pointed out, 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.”
30 His Lordship went on to observe that the normal assumption, liable to be displaced by the language of the bill of lading, is that the shipowner is undertaking the obligation of carriage. That proposition was expressed as follows, at 93;
“If the shipper were to ask the question what is the identity of the carrier in this case, that is to say the person undertaking the obligation of carriage, the answer would surely be: the shipowner, unless the bill of lading stated that some other person was to be treated as the carrier. The shipper would then look at the face of the bill to see whether any other person was described as the carrier.”
31 However, it was concluded, as a matter of construction, that the bills of lading were charterers’ bills and not contracts binding on the shipowners. Nevertheless, in case the matter were to go further, his Lordship considered, amongst other things, the question of whether the signatories of the bills had ostensible authority to sign bills which were antedated or did not conform with the mate’s receipts. As to that matter, his Lordship 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 S.A. (The Ocean Frost),  2 Lloyd's Rep. 109;  A.C. 717 (see Lord Keith at p.112, col.2; p.777 A.C).
In testing the presence of ostensible authority it is, however, necessary not to lose sight of the need to identify the scope of the representation. This is particularly so in the case of an agent who has been placed in a ministerial position in which one would normally be expected to have actual authority to enter into a particular kind of transaction. Thus, if a director of a company were authorized by the board or other internal approval committee to enter into a contract with a supplier of goods on certain specific terms and due to a negligent oversight the director signed the contract on terms which omitted certain of the details included in the draft approved by the board, or other approval body, it would normally not be open to the company to assert that it was not bound by the contract signed by a director who could normally be expected by a third party to have actual authority to bind the company to contracts of that kind. That consequence would follow from the scope of the representation arising from the company having placed the director in that position vis-à-vis the third party. The representation in such a case is not that the director is acting with the approval of the company in respect of each detail of the contract but that the transaction is one of a kind to which the director has authority to bind the company and that his conduct in relation to the entering into of transactions of that kind may be relied upon as conduct authorized by the company and as giving rise to obligations by which the company will treat itself as bound. Notwithstanding that the director may not have had actual authority to agree to the details of the transaction and that the third party may have appreciated that the director would ordinarily need such authority, the company will still be bound under the ostensible authority principle unless the third party knew that the director did not have the requisite authority.”
32 Applying that general principle of ostensible authority to the issuing of bills of lading by a time charterer or local agent, it was observed, at 96;
“Once such a time charter has been entered into or letter issued, the shipowners have placed the time charterer or local agent in the position of their representative in respect of the issue of bill of lading contracts relating to the cargo to be loaded and have thereby indirectly represented to the shippers and to indorsees of the bills that they, the shipowners, have authorized the time charterers or agents to bind them to contracts of that kind. Consequently, the shippers and indorsees are entitled to assume that the owners are content to be bound by the terms of the bill even if, unknown to them, there was no actual authority to issue the bill in precisely the terms in which the bill was issued.”
33 Colman J referred to several authorities in this area including Grant v Norway (1851) 10 C.B. (N.S.) 665, which he explained as deciding that a master had no authority, actual or ostensible, to bind the shipowner in respect of goods that were never shipped, and some obiter remarks of Rix J in Sunrise Maritime Inc v Uvisco Ltd (The Hector)  2 Lloyd’s Rep 287. The first part of Rix J’s dictum is illuminating for present purposes. It is in these terms;
“For these purposes, I would regard an owner as giving his time charterer ostensible authority to bind him (in signing bills of lading on the master’s behalf) by reason of putting his vessel under his time charterer’s orders and directions regarding employment. That is not simply a matter of private contract; it is reflected in the reality of what happens when a time chartered vessel enters port in order to load cargo. An owner in such circumstances holds out his time charterer as a disponent owner with powers over the employment of his vessel, and thus as having power to bind him by signing a bill of lading.”
34 Later in his reasons in The Starsin, Colman J made a further reference to Grant v Norway, saying, at 97;
“Accordingly, as the law has now developed, Grant v Norway should be treated as conceptually aberrant and should not be used as a basis for the extension of the protection of shipowners against being bound by bills of lading issued by time charterers, or other agents on behalf of the owners, which by reason of some inaccuracy on their face, have been, issued without actual authority. Not only does this conclusion give effect to the conceptual basis of ostensible authority but it also reflects a further important policy consideration. That is that if an innocent shipper, indorsee or consignee could not rely on statements on the face of a bill of lading as to such matters as the date of shipment and the absence of clausing and was obliged to verify the accuracy of the date and the apparent good order and condition of the goods each time he took a bill of lading, that would represent a most serious impediment to international trade which depends so heavily on the accuracy of bills of lading as negotiable instruments.”
35 The reasoning of Colman J in The Starsin was approved by Timothy Walker J in Alimport v Soubert Shipping Co Ltd  2 Lloyd’s Rep 447 where a bill of lading issued by the master’s agent which antedated the loading of the goods was still held to bind the shipowners. His Lordship was content to adopt the reasoning of Colman J by quoting in full from the passage reproduced in the preceding paragraph of these reasons.
36 In the present case, Mr Sexton SC, for Sovcomflot, submitted that, in the absence of express authority from it to the master to sign bills of lading, a shipowner can normally only be said to have conferred ostensible authority on the master where it is the employer of the master. If that “normal” situation does not obtain, so it was submitted, ostensible authority can only be founded on a representation by the shipowner accompanied by reliance on that representation by the shipper or holder of the bill and an alteration of position as a result of that reliance; see Rama Corporation Ltd v Proved King and General Investments Ltd  2 QB 147 at 149-150.
37 In the present case, it was said that there was no evidence of reliance by CMC on any conduct. We disagree. In our view, the relevant conduct by Sovcomflot was its allowing the “Socofl Stream” to take on cargo after 15 December 1998 for which the master or his agent issued bills of lading. The evidence does not exclude the natural inference that Sovcomflot, at any time after 15 December 1998, could have made clear by arresting the ship (as it ultimately did) or otherwise, that the ship no longer had the disponent owner’s authority to take on cargo and issue bills of lading. CMC relied on the conduct of Sovcomflot which we have just identified by having its agents at Singapore and Port Klang put consignments of steel on board the vessel and obtain bills of lading in respect of those consignments in the usual way.
38 Nor can it be said, as Counsel for Sovcomflot put it, that CMC suffered no detriment in the circumstances just described. Counsel contended that CMC had a contractual arrangement with POST for the carriage for the goods to which the bills of lading were incidental and CMC is entitled to claim from POST any loss due to delay in delivery. That argument ignores, in our view, the fact that CMC can be taken to have believed that it was contracting with the owner of the vessel and, in the event of default, would have a cause of action in rem. It is not to the point, we think, that CMC may have had a parallel right to an indemnity or other contractual remedy enforceable in personam against parties other than the shipowner.
39 It was next submitted on behalf of Sovcomflot that “commercial unconscionability” of the kind referred to in The Starsin depended on a chance temporal coincidence. Had the charterparty been terminated, so this argument went, after the bills of lading had been issued, then everything would have appeared the same from CMC’s standpoint but there would have been no claim in personam against Sovcomflot because the master would clearly have been the agent of Kamchatka when the bills of lading were issued. It is true that, on that hypothesis, Kamchatka would have been the owner as demised charterer when the bills of lading were issued. However, that is not the critical time. By s 4(3) of the Admiralty Act 1988;
“A reference in this Act to a general maritime claim is a reference to;
(f) a claim arising out of an agreement that relates to the carriage of goods or persons by a ship or to the use or hire of a ship whether by charterparty or otherwise.”
40 Section 18 of the Admiralty Act provides;
“Where, in relation to a maritime claim concerning a ship, a relevant person:
(a) was, when the cause of action arose, the owner or charterer, or in possession or control, of the ship; and
(b) is, when the proceeding is commenced, a demise charterer of the ship;
a proceeding on the claim may be commenced as an action in rem against the ship.”
41 “Relevant person” is defined as follows in s 3(1) of the Admiralty Act;
“relevant person”, in relation to a maritime claim, means a person who would be liable on the claim in a proceeding commenced as an action in personam;”
42 The time when the cause of action in the present case arose was when the breach of the contract to which CMC was a party occurred and CMC suffered damage. That was clearly after the bills of lading had been issued. The question for present purposes thus becomes refined to whether, between the end of January and 9 February 1999 when the instant proceeding was commenced, Sovcomflot, which, by then, had indisputably become a demised charterer of the vessel, would have been liable in personam on a claim arising out of an agreement related to the carriage of CMC’s steel by the “Socofl Stream”.
43 Sovcomflot’s next submission was that, once the notice of termination of the demise charterparty had been served, Kamchatka was not entitled to trade with the “Socofl Stream”. It was said that Kamchatka was in no better position than a thief who employs a master who purports to issue bills of lading on behalf of the true owner. The judgment at first instance was criticised as being founded upon a finding that, by exercising its contractual rights as it did, Sovcomflot had afforded Kamchatka the opportunity to continue to trade. That reasoning was impugned as inconsistent with High Court and other authorities to the effect that a party may exercise contractual rights as and when that party thinks fit without regard to the effect of that exercise upon third parties. Reference was made to, amongst others, Perre v Apand Pty Ltd (1999) 198 CLR 180, where it was held that there is no general duty of care to avoid loss to a third party although in certain circumstances the law will permit the third party to recover damages for pure economic loss. As McHugh J noted in that case, at par 115;
“As long as a person is legitimately protecting or pursuing his or her social or business interests, the common law will not require that person to be concerned with the effect of his or her conduct on the economic interests of other persons.”
44 See also, Hill v van Erp (1997) 188 CLR 159, Bryan v Maloney (1995) 182 CLR 609 and D C Thomson & Co Ltd v Deakin  Ch. 646 at 676. Those authorities establish that a person, acting legally in accordance with some contractual or other legal right, is not obliged to have regard to the possibly deleterious effects of his or her actions on third parties. That proposition acknowledges that a person may exercise, or defer the exercise of, his or her legal rights without having regard to the effect of that action on a third party who may be affected thereby. For example, Sovcomflot could, at its election, have terminated the charterparty on 15 December 1998 or 5 January 1999 without regard to the effect of the exercise of that election on a shipper who was expecting to load goods onto the vessel on 6 January 1999. However, that is different from saying that a person whose actions foreseeably create a certain state of mind in another which induces that other to act in a particular way can thereafter assert that the third party is not entitled to act on the faith of the impression just created.
45 In the present case it was said on behalf of the appellant that the action of Sovcomflot claimed to give rise to the ostensible authority of the master to issue bills of lading on its behalf was Sovcomflot’s failure to nominate a port for redelivery pursuant to Art. 11(2)(d) of the charterparty. However, that, it was further argued, was a matter of discretion, not obligation, under the charterparty. We agree and we respectfully decline to adopt the finding by the learned primary Judge quoted at  of these reasons 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 rights to demand redelivery at a nominated port. Sovcomflot exercised one right (to terminate) but not another (redelivery at a nominated port).”
46 On the analysis which we favour, the right to require redelivery at a nominated port conferred by Art. A11(2)(d) was not conjunctive with, or alternative to, the right of termination conferred by Art. 11(2)(a). Rather, it was incidental or ancillary to that primary right and its exercise entitled the disponent owner to have the vessel, at the charterer’s expense, restored to her pre-charter condition and delivered to a safe port of the disponent owner’s nomination, presumably as a step towards the exercise of the power of sale conferred by Art. 11(2)(b)(i) and the possible use of the vessel by the disponent owner pending sale as contemplated by Art. 11(2)(c) or towards a valuation in lieu of sale pursuant to the option conferred on the disponent owner by Art. 11(2)(f). However, this analysis is not fatal to CMC’s contention that by 6 January 1999 Sovcomflot had conferred ostensible authority on the master of the “Socofl Stream” to receive goods on board and issue bills of lading to shippers.
47 According to CMC, Sovcomflot, on terminating the demise charterparty with Kamchatka, impliedly took control of the Master and crew of the “Socofl Stream”. Although Sovcomflot had actual or constructive knowledge that she was on liner service, it did nothing to prevent the vessel from trading after 15 December 1998. Reference was made by Mr King, who appeared with Mr Levingston for CMC, to Robins v Power (1858) 4 C B (W S) 778; 140ER 1297. In that case, the plaintiff had been a seaman on board the “Constance Emma” which, on 18 December 1855, while she was at sea near Suez, had been sold in Liverpool to the defendant. On 10 January 1856, the defendant’s agent, one Parr, arrived in Suez where the vessel was then in port and shortly afterwards the master gave up command of the vessel which was assumed by the first mate. The crew then, for the first time, learned that the vessel had been sold. The plaintiff remained on board until 10 March when a new master, who had been sent out by the defendant, arrived at Suez. The new master endeavoured to persuade the plaintiff to remain with the ship and sign fresh articles. The plaintiff refused and ultimately left the ship on 19 April 1856, having continued to do duty on board until that day. A few days later the ship sailed for Bombay. The plaintiff claimed wages from 23 August 1855 to 19 April 1856, but at trial confined his claim to the period from 18 December 1855, when the vessel was purchased by the defendant to 19 April 1856. On the return of the rule nisi to enter a nonsuit for verdict for the defendant in place of the jury’s verdict for the plaintiff, Cockburn CJ concluded that the rule should be discharged “provided that the plaintiff will consent to the damages being reduced by so much of the wages as were covered by the period intervening between the date of the transfer of the ship to the defendant and the time when the notice of the change of ownership reached Suez, that is, when Parr arrived there and the fact of the transfer of the ship to the defendant became notorious to all parties concerned.” It will be seen that this case turned on the fact that it had been open to the jury to find that there was an implied contract between the new owner, made by his actual agent, Parr, and the crew, which came into existence on or after 10 January 1856. No question of ostensible authority of the master therefore arose in that case, although Cockburn CJ did observe, obiter, at 786;
“I am very much disposed to think that a person who becomes the purchaser of a ship while at sea must be taken by intendment to adopt the master as his agent until his authority can be determined by the arrival of some one impowered by the new owner to supersede him; and therefore I think that Abernethy, the former master, or the mate, were authorized to engage the crew on behalf of the defendant. It is not necessary, however, to go to that extent on the present occasion, because I think there was evidence that this plaintiff was employed and performed service under a person having authority and acting as the agent of the defendant in that behalf.”
48 To similar effect, Willes J observed, at 788 - 789;
“It is quite clear that the defendant bought the vessel with the view of getting possession of her and using her for his own purposes. It is just, therefore, to presume that it was his intention to bear the burthen of the expenses incurred by the ship from that time, and that the people who were doing duty on board the vessel should continue to do duty as his servants. Immediately the notice of the change of ownership arrived out at Suez that intention was communicated to the sailors, and it was understood that the crew should continue to work the vessel as the servants of the new owner.”
49 In reply, Mr Sexton SC referred to Mitcheson v Oliver, 5 Ellis & B 419; 119 ER 537 and Myers v Willis 17 C B 77; 139 ER 996. Mitcheson v Oliver turned on whether a person, Thomson, who had acted as master of a ship in commissioning repairs and supplies to her in London had contractually bound the owner, then residing in Liverpool, to pay for those repairs. In holding that the question should have been answered in favour of the defendant, Parke B observed, at 444;
“None of us I believe have doubted that the jury came to the wrong conclusion and that the verdict ought to have been for the defendant, on this single ground that no contract can bind a defendant unless made by some one who had real authority to bind him, or unless the defendant is precluded from denying that there was authority in the person who made the contract. It is perfectly settled now that the liability to pay for supplies to a ship depends on the contract to pay for them, and not on the ownership of the ship.”
50 In Myers v Willis a shipowner, on 2 August 1851, executed a registered absolute bill of sale over a ship, The Celt, in favour of the defendant as collateral security for a loan of ₤1,000. On 23 March 1852, while the vessel was in port at Paquica, the master issued a bill of lading in respect of 360 tons of guano for delivery at the port of Cork. The bill recited that the master pledged himself and “the aforesaid vessel, her freight, tacke and appurtenances” to the performance of the bill. The Celt was later surveyed in Valparaiso, found unseaworthy and sold without ever sailing for Cork. The consignee, who was also a voyage charterer of the vessel, sued the grantee of the bill of sale for damages arising from non-delivery of the guano in accordance with the charterparty and the bill of lading. There was evidence that at the time of execution of the charterparty and the bill of lading, the fact that the bill of sale had been granted was unknown to either the master or the consignee. The action against the defendant failed, Jervis CJ holding that the register was not conclusive and the question was with whom was the contract made. His Lordship continued, at 103 and 106;
“It is admitted that, where the party is mortgagee of the ship only, taking merely the security of the ship, without intending to incur any of the liabilities incident to ownership, the bare circumstance of his being entitled to the vessel, and by subsequently entering upon the possession entitling himself to the earnings of the ship, will not make the master his agent so as to bind him in respect of contracts entered into by him as master after the date of the mortgage: not because he is not entitled to the profits, as is said to be the reason in some of the older cases; but because, applying the modern doctrine of principal and agent, it never was the intention of the mortgagee when he took the security of the vessel, to adopt the master as his agent so as to be liable for contracts made by him.
... ... ... ... ...
and on these grounds I think we are entitled to look to the real state of the facts, to see what was the intention of the parties; and, so doing, the only inference I can draw from them, is, that it never was the intention of Mr Willis to become the absolute owner of the ship, or to adopt the captain as his agent for the purpose of binding him in respect of contracts made by him in relation to the ship.”
51 In a concurring judgment, Crowder J observed, at 107 that “[the master] had authority to the extent which the master ordinarily has, to bind the person who was in point of fact really and substantially the owner of the vessel and not merely the person who appeared on the register as the nominal owner.” By contrast, in our view, in the present case, Sovcomflot intended to, and did, become the “absolute owner” or “really and substantially the owner” of the “Socofl Stream” on and from 15 December 1998 and impliedly took control of the master and crew so that acts which it thereafter permitted the master to do in the ordinary course of trade were done as its ostensible agent.
52 In support of this part of his reply, Mr Sexton suggested that the present case can be assimilated to that of a ship which is a victim of piracy, where it could scarcely be contended that the shipowner would be liable for bills of lading issued, or other contracts entered into, while the vessel was under the control of pirates. However, on that hypothesis, the act of piracy would normally be made known by the owner, if not already notorious, to shippers and others in the mercantile community at all relevant ports so as to negative any implied authority of the pirate captain.
53 It was next contended on behalf of Sovcomflot that it was not unreasonable for it to have acted as it did by giving the notice of termination on 15 December 1998 and requiring Kamchatka on 25 December to redeliver the vessel “at a safe port to be nominated by us.” Until the facsimile message of 30 December from Kamchatka disputing the effectiveness of the termination of the charterparty and threatening legal proceedings, so the contention proceeded, it was not reasonable to expect Sovcomflot to take any steps to locate or arrest the vessel. That much may be conceded but ostensible authority does not depend on the presumptive principal’s having acted unreasonably.
54 Moreover, we take issue with the appellant’s suggestion that “even if Sovcomflot had taken steps immediately after ….. 30 December 1998 to locate and arrest the vessel, it is most unlikely that the vessel would have been located and arrested before 6 January 1999 or even 9 January.” In this context, Counsel referred to the evidence of Mr Neill, the solicitor for CMC, who said, under cross-examination, that a tracking or monitoring service may not be able to provide, in response to an enquiry, information which provides the “exact location on the ocean” of a relatively small ship. However, in the same passage from the evidence this exchange occurred;
Mr Sexton: “What I am putting to you is that simply engaging a monitoring or tracking service does not guarantee that you’ll be able to locate a vessel within days, does it?
Mr Neill: “It depends on what sort of service the vessel is on.”
Mr Sexton: “That’s right; it depends on the circumstances, doesn’t it?
Mr Neill: “That’s right. If the vessel is on a tramper service it may go anywhere. If the vessel is on the liner service it’s going to a particular series of ports in a particular order, so they publish that service, and if you want to know where, say, the P & O Melbourne is, they’ll publish a list of ports where it’s going to, you ask the tracking service and they’ll obtain that list somehow and tell you where the ship’s going to be on each one of those days.”
55 The evidence, including the bills of lading themselves, indicated that the “Socofl Stream”, at the relevant time, was engaged on liner service. Doubtless it was the material to which we have just referred or similar evidence which led the learned primary Judge to find, at  of the reasons below;
“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.”
56 As indicated above, we do not regard the failure of Sovcomflot to take a step “towards nominating a port for redelivery” as critical to the question of ostensible authority. However, his Honour’s finding equally supports the conclusion that it was open to Sovcomflot to locate the vessel and circumscribe, in an appropriately public way, the master’s authority to bind it. Such a conclusion is not tantamount to saying, as Counsel for Sovcomflot argued, that “it may have been possible, if Sovcomflot had ordered its affairs entirely in order to protect the interests of persons such as [CMC], there were things which Sovcomflot could have done which may have prevented any loss to [CMC]” (emphasis added).
B. Were the bills of lading contractual documents or mere receipts?
57 Sovomflot contends that the bills of lading in this case operated only as receipts. An early case which considered the relationship between a charterparty and a bill of lading was Rodoconachi Sons & Co v Milburn Brothers (1886) 18 QBD 67. In that case, the plaintiff charterer was also the shipper, and the bill of lading contained an exception from liability on the part of the defendant owner which was not in the charterparty. The charterparty authorised the Master to sign bills of lading “without prejudice to the stipulations of the charterparty”. The Court held that the bill of lading operated only as a receipt. This result is not surprising given the identity of the parties and the limitation on the Master’s authority to sign bills of lading. Lord Esher MR in the Court of Appeal said, at 75;
“… as between the charterers and the shipowners the bill of lading does not alter the contract between them contained in the charterparty … unless there be an express provision in the documents to the contrary, the proper construction of the two documents 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 an acknowledgment of the receipt of the goods.” (Emphasis added)
See also the observations of Lindley LJ, at 78, and Lopes LJ, at 79-80.
58 The respondent relies on an extension of the above principle as applied in The President of India v Metcalfe Shipping Co Ltd (The Dunelmia)  1 QB 289. In that case, there was a charterparty made between the owners and the charterers to carry a cargo of urea from Italy to India. The Italian sellers, who placed the cargo on the vessel, took a bill of lading to order, which they then indorsed in blank. The bill of lading was then forwarded to the charterers, who had purchased the urea and payment was duly made. The Court held that the charterparty was the contract of carriage and the bill of lading was only a receipt. The bill of lading contained the terms “Freight payable by the charterers as per charterparty” and “All conditions and exceptions as per charterparty”, but did not incorporate an arbitration clause which was in the charterparty. In that case, however, as distinct from the present, there was an indorsement of the bill and the duly indorsed bill was forwarded to the charterers.
59 The bills of lading, for reasons given in this judgment, are between CMC and Sovcomflot, and not between CMC and POST, who are parties to the Memorandum of Understanding, which is said to embody the contract of carriage. There is no privity between the parties to the two arrangements and it is not appropriate to attempt to apply the provisions in The Dunelmia to the present case. In The Dunelmia,the Court disapproved the following statement in Carver, Carriage by Sea, British Shipping Laws, Vol 2, 11th ed (1963), Article 405 at p 340:
“Where … bills of lading are given to a shipper, not being the charterer or his agent, and he indorses them to the charterer, the bills of lading become the governing documents in a claim by the charterer against the shipowners for damage to the goods.” (Emphasis added)
60 See The Dunelmia at 304-305, 307-308 per Denning MR, with whom Edmund, Davies and Fenton Atkinson LJJ agreed. The disapproved paragraph covered a situation where there had been an indorsement of the bill of lading to the charterers. That did not take place in the present case. The Dunelmia does not cover the present circumstances where there is no privity.
61 The observations of Sheppard J in Sanko Steamship Co Ltd v Sumitomo (No 2) (1995) 63 FCR 227, at 267, as to the effect of the decision in The Dunelmia are not in point because his Honour said that he did not find it necessary to discuss that decision in any detail. His generalised summary of what was held in that case only refers to the relationship between the shipowners and the charterers in relation to the carriage of goods and is not concerned with the situation where there are two sets of provisions for carriage and where the parties are not identical.
62 In Hi-Fert Pty Limited v Kiukiang Maritime Carriers Inc (2000) 173 ALR 263, at 268-269, Tamberlin J referred to the remarks in The Dunelmia and said:
“As Counsel for Hi-Fert pointed out, however, this decision is distinguishable because in The “Dunelmia” the parties to the charterparty and the bills were effectively identical. In the present case they are not. The COA in the present case was between WBC and KMC and parties to the bill of lading are KMC and Hi-Fert. This in my view is an important difference because the court is presently concerned with two separate contracts of carriage between different entities. In my view the extract from The “Dunelmia” provides no support for a conclusion in the present case that the bill of lading is a mere receipt.
Some support for the conclusion that the bills of lading are not mere receipts is to be found in the terms of the present bill of lading. On the front page of the bills there are references to terms, conditions and exceptions including arbitration clauses being incorporated. There is also a reference to “this contract”. Also the conditions of carriage contain mutual promises and agreements as to what is to happen in certain events and as to the operation of the charterparty. The Hague Rules are expressed to apply … to “this contract”. There is also a contractual obligation provided for in relation to contribution to general average.
The language of the bill of lading and the above reference are in my view inconsistent with the bill being only a receipt for goods which acknowledges delivery of the goods in good order and having no other relevant operative effect as a contract of carriage. Having regard to these considerations each bill of lading in my view evidences a contract of carriage between Hi-Fert and KMC on which Hi-Fert is entitled to sue as endorsee.”
63 The Court, of course, will not find, wherever there are different parties to a bill of lading and a charterparty, that the bill of lading must be considered as a contract of carriage. Much will depend on the surrounding circumstances. Nevertheless, the distinction between the two sets of parties is an important consideration.
64 Mr Sexton, on behalf of Sovcomflot, submits that the Memorandum of Understanding dated 26 August 1998 between CMC and POST contained the only contract of carriage in the present case and that the bills of lading which have been issued were mere receipts having no contractual operation. The function of the bills of lading, so it is said, was simply as instruments to carry out the carriage contract comprised in the Memorandum of Understanding. It is submitted that the fact that the parties to the charterparty and the bills of lading were not identical does not “necessarily” mean that the issue of the bills of lading resulted in a contractual document of carriage between the owner or demise charterer and the consignee.
65 It is submitted for Sovcomflot that the task for the Court in the present case is to identify the contract of carriage. This can be readily accepted. In support of this submission it is said that the bills of lading do not make any provision for freight or charges. In relation to the subject shipment, there was a “special arrangement” made for the freight rates because of the size of the cargo. However, that arrangement was evidenced by freight invoices which were faxed to the respondent in mid January 1999, about two weeks before the bills of lading were received by the respondent on or about 27 January 1999.
66 Sovcomflot submits that the Memorandum of Understanding, by its terms, “takes precedence to the GENCON form of charterparty which in turn takes precedence to the bills of lading”. In particular, the first paragraph of the Memorandum of Understanding states:
“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.” (Emphasis added).
Because the only contractual relationship said to be created in respect of the carriage is between the respondent CMC and POST, Sovcomflot has no liability under the bills of lading.
67 These submissions for Sovcomflot face several difficulties. The first is that the Memorandum of Understanding and the bills of lading are made between different parties. On its face, there is something anomalous in having different contracts of carriage in force for the same carriage between the same parties. However, in the present case, since the Memorandum of Understanding was made between parties different from the parties to the bills of lading, there is nothing anomalous in treating the bills of lading as evidence of an agreement for carriage different from the arrangement constituted by the Memorandum of Understanding.
68 A second difficulty with the submissions on behalf of Sovcomflot is that the Memorandum of Understanding, in terms, operates to provide a “framework” for an overall arrangement for the carriage of cargoes but does not itself specifically state that it is to be a contract of affreightment or carriage. It is necessary to look elsewhere to see what terms apply to any particular contract of carriage made within that framework. The provisions in the Memorandum of Understanding are general. On their face, they are intended only to set out parameters within which specific and detailed contractual arrangements for carriage are to be made.
69 A third difficulty is that the submissions call for the detailed terms of the bills of lading to be ignored apart from the clause concerning receipt of the goods. The terms of the bills are framed as contractual obligations. By way of illustration, there is provision in the receipt box on the first page of the bills which goes beyond a mere acknowledgment of receiving the goods. The first paragraph in this box requires the shipper, owner, consignee and holder of the bill to;
“… expressly accept and agree to all its stipulations, exceptions and conditions, whether written, stamped or printed … No agent is authorized to waive any of the provisions of the within clauses.”
70 The second paragraph of the receipt box provides that the goods received are to be transported from the port of loading to the point of discharge. This imposes an obligation to carry and it is not purely descriptive. An identical provision appears in the body of the bills of lading themselves. Other operative provisions relating to the carriage which are contained in the bills of lading are as follows:
· The words “FREIGHT COLLECT”. This governs the payment of freight. This endorsement differs from the Memorandum of Understanding which requires provision for payment of freight to be “Freight payable as per Charterparty.”
· Clause 2 incorporates the Hague Rules.
· Clauses 3, 9, 21, 22, 23, 24, 25 and 26 contain provisions relating to exemptions or limitations in respect of potential liability.
· Clause 4 of the bills of lading refers to “The contract”.
· The remaining clauses contain detailed provisions which in terms govern the respective relationships, obligations and rights of the parties.
71 It can be seen that the whole tenor of the bills of lading is regulatory of contractual rights and obligations. To treat these provisions, other than those which operate as a receipt, as mere surplusage because of the existence of the Memorandum of Understanding between different parties and to ignore all other provisions apart from the receipt clause is not warranted. No persuasive submission has been made that there is any proper basis for adopting this course in the present case. The bills of lading do not purport to incorporate the terms of any charterparty. The position might be otherwise where there are two sets of differing provisions each purporting to comprise the contract of carriage made between the same parties and there is a provision for precedence of one over the other, but that is not this case. The bills of lading in the present case were intended, in our view, to have contractual effect between the parties and to make relevant operative provisions with respect to the carriage as between CMC and Sovcomflot. If the intention were otherwise it would have been a relatively simple matter to make this clear by express wording in the bills themselves.
C. Was there a failure to deliver with reasonable dispatch?
72 It was submitted on behalf of Sovcomflot both at first instance and on appeal that, there being no time for delivery specified in the bills of lading and the goods being steel and not perishable, the evidence did not permit a finding of a breach of the carrier’s implied obligation to deliver with reasonable dispatch. The learned primary Judge rejected that submission saying, at  of his reasons;
“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.”
73 On the appeal, Counsel for Sovcomflot pointed out that the vessel had been arrested on 25 January and released on 18 February 1999. Accordingly, it was further submitted, if CMC had not, in the meantime, successfully applied to this Court for discharge of the cargo, the delay in delivery would have been less than three weeks.
74 It is not disputed that it is an implied term of a contract of carriage of goods by sea that the vessel will proceed between ports of loading and discharge with reasonable dispatch; see eg Fyffes Group Ltd v Reefer Express Lines Pty Ltd (The Kriti Rex)  2 Lloyd’s Rep 171 at 191. The application of that implied term has been described in these words in Carver’s Carriage by Sea, 13th ed. p.1304;
“The expressions “reasonable dispatch” and “reasonable time” commonly used are ambiguous unless we know the state of circumstances to which they refer. If the reasonable dispatch is to be estimated by reference to the circumstances which ordinarily exist, the time to be occupied is a definite one, and may be calculated beforehand. But in the case we are considering, the true view is that the dispatch required from the parties is that which can reasonably be expected from them under the actual circumstances which exist at the time of performance. [Hick v Rodocanachi  2 Q.B. 626; affirmed as Hick v Raymond  A.C. 22; Carlton SS. Co. v Castle Co.  A.C. 486; Hick v Tweedy (1890) 63 L.T. 765.] Not, however, allowing as excuses impediments which the party has himself created, or which are under his control. [Zillah v Midland Ry. (1902) 19 T.L.R. 63; Tillett v Cwm Avon Works (1886) 2 T.L.R. 675; Hill v Idle (1815) 4 Camp. 327; Wright v New Zealand Shipping Co. (1878) 4 Ex.D. 165n, per Cotton L.J.; Hick v Rodocanachi, per Fry L.J.  2 Q.B. 645.]
“The delay having happened without fault on either side, and neither having undertaken by contract, express or implied, that there should be no delay, the loss must remain where it falls ……. If the contract be, as we construe it, only to use reasonable diligence in performing his part of the delivery, he was guilty of no breach, whilst the landing of the cargo was rendered impossible by a cause over which he had no control.” [Ford v Cotesworth (1868) L.R. 4 Q.B. 137. Cf. Taylor v G.N. Ry. (1866) L.R. 1 C.P. 385; and per Brett L.J. in Nelson v Dahl (1879) 12 Ch.D. 568, 583, 584. But see Hill v Idle (1815) 4 Camp. 327.]”
75 In this case, the delay occasioned to the vessel by its arrest in Brisbane was clearly an impediment which Sovcomflot itself had created, no doubt considering it in its own commercial interests to enforce immediately its right to possession against Kamchatka notwithstanding the adverse impact on the cargo interests of CMC and other shippers, if it thought about them at all.
76 In the light of these principles, we can detect no error in the conclusions at which the learned primary Judge arrived on this question.
77 It will be apparent from the foregoing reasons that each of the contentions pressed on behalf of Sovcomflot on the hearing of the appeal has failed. Accordingly, the appeal must be dismissed with costs.
I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Court.
Dated: 27 July 2001
Counsel for the Appellant:
Mr J E Sexton SC
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Solicitor for the Appellant:
Thynne & Macartney
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Counsel for the Respondent:
Mr P King with Mr J Levingstone
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Solicitor for the Respondent:
James Neill, Solicitors
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Date of Hearing:
7 and 8 May 2001
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Date of Judgment:
27 July 2001