FEDERAL COURT OF AUSTRALIA

Seafood Imports Pty Ltd v ANL Singapore Pte Ltd [2010] FCA 702

THE COURT ORDERS THAT:

1.                  There be judgment for the plaintiff in the sum of $130,192.40.

2.                  The application stand over to a date to be fixed for consideration of the costs of the application and interest (if any) on the said sum of $130,192.40. 

3.                  The defendant have leave to file and serve by 19 July 2010 written submissions as to costs and interest. 

4.                  The plaintiff file and serve by 2 August 2010 any written submissions in answer to the written submissions referred to in paragraph 3 of this Order.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

Background and evidence

1                     The plaintiff claims damages arising from the deterioration of a consignment of frozen seafood which was carried from Yokohama in Japan to Melbourne on board the vessel “CSCL Yantal” (“the ship”).  The consignment was carried under a bill of lading numbered ANLU814503264 issued at Tokyo on 7 November 2005 whereby the defendant acknowledged that the consignment of 8,300 kilograms of frozen seafood (“the goods”) had been received aboard the ship in apparent good order and condition before carriage and delivery to Melbourne.  The goods were received on board the ship in a refrigerated container numbered CGMU2821902 with seal ANL07738 (“the container”).  The bill of lading was endorsed; 

(i)         “Shipper’s Load & Count” and “Said to Contain” and;

(ii)        “(Shipment in a Reefer Container at a Temperature of Minus 18 Celsius or Lower)”.

The container was carried on board the ship pursuant to a slot charter arrangement between the defendant and China Shipping Container Lines (Hong Kong) Co Ltd (“China Shipping”) which was the operator of the ship for the voyage in question.

2                     It is common ground that the contract for the carriage of the goods is governed by the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading at Brussels, August 25, 1924 as amended by a Protocol to Amend the International Convention for the Unification of Certain Rules Relating to Bills of Lading signed at Brussels December 21, 1979 (“the Hague-Visby Rules”). 

3                     On behalf of the plaintiff, evidence was adduced on affidavit from Mr Yoshihisa Munemasa, the manager of the cold store in Tokyo, Japan where the goods had been kept immediately before being stowed in the container for shipment to Melbourne.  On 1 May 2009, after receiving submissions from Counsel, I ruled Mr Munemasa’s affidavit inadmissible on the ground that the plaintiff had not discharged the onus imposed by ss 63 and 64 of the Evidence Act 1995 (Cth) of showing that Mr Munemasa was not available to give evidence or that it would not be reasonably practicable to call him to give evidence.  My reasons for that ruling have been reproduced sub nom. Seafood Imports Pty Ltd v ANL Singapore Pte Ltd (No 1) [2009] FCA 435.  Exhibited to Mr Munemasa’s affidavit were records showing the receipt of the goods into the cold store on 1 November 2005 and a second record showing the despatch of the goods from the cold store on 4 November 2005 for loading onto the ship.  The ruling noted above did not preclude the plaintiff from adducing those records into evidence as business records.

4                     The incoming report was apparently issued on 2 November 2005 and recorded the receipt into the cold store on the previous day, 1 November 2005 of the goods comprising the following types and in the following quantities;

(a)        150 cartons (1,500 kgs) Snow Crab Claws;

(b)        250 cartons (2,500 kgs) Scallops Roe Off;

(c)        400 cartons (3,200 kgs) Sea Salad;

(d)        20 cartons (200 kgs) Clam Meat B;

(e)        15 cartons (150 kgs) Clam Meat S.

The outgoing report issued on 4 November 2005 apparently recorded the despatch of the goods on 4 November 2005 in the same types and quantities for shipment on board the ship.

5                     There is in evidence a sensor log and event log downloaded from the microprocessor for the controller attached to the container, as well as a “container yard monitoring report” which recorded temperatures which had been noted while the container was in the yard at the port of Yokohama.  According to Mr Robert Brown, a refrigeration technician and consultant who gave evidence on behalf of the plaintiff, the sensor log recorded temperatures of the supply air (“SA”) passing into the container and the return air (“RA”) passing out of the container during the period from 1 October to 7 December 2005.  Mr Brown indicated at paragraph 6 of his written statement dated 25 March 2009;

The Sensor Log for 4 November 2005 initially shows constant measures for both SA and RA.  The SA is recorded at -21º and the RA at -20º.  This is consistent with the principles of refrigeration in that the further the air circulates from the supply point, the greater the likelihood of it gaining heat from within the container.  The temperature of SA is a measure of the temperature of the air as it leaves the evaporator coil of the refrigeration unit.  Under normal cooling mode, RA is always warmer than SA.

6                     Mr Brown then observed that, at 0500 hours Greenwich Mean Time (“GMT”) which would have been 1400 hours in Japan on 4 November 2005, the SA temperature of the container had risen to -11º and at the same time the RA temperature had increased to-0.50º.  That increase in temperature, according to Mr Brown, was consistent with records discernible from the event log which show that power had been taken off the container at 0421 hours GMT and remained off for just over an hour.  The power supply was restored at 0531 hours and the container remained on power until 0634 hours after which it was off power until 0729 hours when it resumed normal cooling mode.

7                     In Mr Brown’s opinion, the rise in temperature of SA from -11.00º at 0500 hours to -1.6º at 0600 hours on 4 November 2005 was consistent with the container having been off power whilst it was being stuffed at the cold store with the doors of the container open.  At 0700 hours, Mr Brown noted, the sensor log recorded a drop in SA temperature to -8.00º which he attributed to the loading of hard frozen cargo which was reflected in the lower SA reading.

8                     At 0600 hours on 4 November 2005, Mr Brown testified;

10        … the RA was 10.5º, while by 07.00hrs it had reduced to 0.80º consistently with the unit now running and pulling the air down towards the set point.  By 08.00hrs the SA was -22.00º and the RA was -15.00º.  An hour later the SA was -23.00º and the RA was -20.00º, signifying normal operation.

11        The temperature difference between SA and RA reduced very quickly.  This indicates to me that product was loaded in a hard frozen state, and the machinery was working efficiently.  Had the product been loaded in anything less than a hard frozen state, the temperature difference between SA and RA would have remained wider for a considerably longer period.

12        From my experience, if product which is intended to be frozen is loaded in a less then frozen state, I would expect the pull down time to be days rather than hours.  I further observe that with power off from 06.30hrs, the RA temperature has reduced from 10.5º at 06.00hrs to 0.80º at 07.00hrs.  This demonstrates that despite the fact that the refrigeration was not operating at that point, the temperature was actually dropping due to the influence of the hard frozen cargo.

9                     There was also tendered in evidence a running log (“the Reefer Log”) apparently kept while the container was on board the ship during November 2005.  The Reefer Log referred to the container by its number, CGMU 2821902, and also contained similar entries for another container numbered CGMU 5500233.  The entries in respect of the container noted its stowage position, its port of loading as Yokohama and its port of discharge as Melbourne.  The Reefer Log also noted that the container had a set temperature of -20º Celsius.  As well, it contained the following hand written temperatures attributed to each day of November 2005 except 3 to 9 November inclusive:

The Reefer Log was recorded on a single page headed “Reefer Log voy 065 S loaded at Port of Yokohama 09.11.2005 Destination Melbourne”.

10                  A copy of the Reefer Log was supplied to the defendant under cover of an email dated 28 March 2007 from Captain Bellotti who, at that time, but, apparently not in November 2005, was the master of the ship.  Captain Bellotti’s email was in response to the following emailed enquiry on behalf of the defendant:

Subject:            CGMU2821902 ON CSCL YANTAI 065S

G’day Master:

We need your assistant to provide below information for CGMU2821902/Bay:360582/CSCL Yantai V065S:

1)    How often and exactly how China Shipping monitored the Container;

2)    When CS discovered there was a problem with the captioned container;

3)    What steps CS took in an effort to identify the cause of the problem and correct it;  and

4)    When those steps were taken by CS.

The text of Captain Bellotti’s email was in these terms:

Good day,

Please find attached Reefer Log of said voyage.  There are no indications of any reefer problems on that voyage (at least, not on board the ship).

As you can see from the log, all reefers are controlled twice daily while on board.  However, Owner’s form (attached) has only 1 entry (PM reading).

11                  A “Yard Monitoring Report” prepared by Reefer Service Co Ltd while the container was at the port terminal at Yokohama supplies the following handwritten temperature readings for the container on some of the dates omitted from the Reefer Log extracted at [9] above:

12                  The yard monitoring report to which I have referred at [11] above shows that the container was noted as having a temperature of -5º on 4 November 2005 and it thereafter returned to a consistent -20º on each of 5, 6 and 7 November.  According to Mr Brown, those recorded temperatures were of RA and were consistent with the container having been off power whilst in transit from the cold store to the container yard.  By reference to the event log, Mr Brown established that power had been reconnected to the container at 0729 hours GMT on 4 November2005which would have been 1629 hours in Japan.  It is likely, Mr Brown believes, that the reading of -5º RA was taken at or about the time when power was reconnected to the container. 

13                  The event log records apparently normal movements between operating (“cool”) and defrost mode between 4 November and 26 November 2005.  At 1810 hours on the latter date, the event log shows the container as having changed into defrost mode.  Thereafter from 2044 hours the event log shows that a series of alarms had been activated with no record of a return to normal operating or defrost mode.  At 2353 hours on 29 November the event log records “Auto 1 Pre-Trip Initiated by Keypad Operating Mode Changed to Pretrip”.  Although the initiation of the Pre-Trip inspection revealed that certain tests were “Passed”, the event log continued to record from 2355 hours on 29 November the activation of various alarms until 0439 hours on 2 December 2005 when it recorded “Power Down (Battery Present) Operating Mode changed to Power Off”.  No further event was recorded until 0838 hours on 2 December 2005 when “Controller Alarms:  56” were activated indicating “Primary Return Failure.”  Within two minutes, it is recorded, “Operating Mode Changed to Cool Reduced” and then to “Cool Max”.  However, from 0900 hours and at hourly intervals until 1300 hours the event log recorded “Controller Alarms:  56 – Primary Return Failure”.  Thereafter the remaining entries in the event log for 2 December 2005 are as follows:

14                  An expert report on the operation of the container was furnished to the defendant by Mr Kjell-Arne Andersson who has had extensive experience as a marine engineer including ten years at sea.  Subsequently he established his own firm as a pioneer in the provision and servicing of ship refrigeration systems, ship automation and control systems and refrigerated containers.  The firm’s business included the development and manufacture of refrigerated and dry cargo containers and it was the Victorian agent servicing containers, selling spare parts and carrying out repairs under warranty for many leading makers of refrigerated containers, including Carrier, Thermo King and Daikin.  After selling the business in 1986 Mr Andersson acted as a designer and consultant in relation to containerised generating plants, refrigerated containers and the repair and servicing of propeller and rudder systems. 

15                  In his principal report dated 17 December 2008, Mr Andersson examined the sensor log and event log for the container during the period from 1 October to 25 October 2005, ie, before the goods were stuffed into the container and before the ship commenced the voyage from Yokohama to Melbourne.  He noted that, at 1426 hours on 8 October 2005 and again at 2219 hours on 13 October, the event log showed that the unit was momentarily powered down and powered on again.  After observing that there was nothing in the sensor log or the event log to indicate whether that momentary switching off and switching on was done by an operator or was due to a malfunction in the controller, he preferred the latter inference as neither the sensor log nor the event log indicated any reason for it having been done by an operator.

16                  Mr Andersson also detected in the sensor log for 8 October 2005 a temperature of -21º Celsius for both SA and RA whereas the unit had been set to operate at -18º Celsius.  He characterised this as an abnormality which persisted for almost one hour while the unit was “stuck” on operating mode “Cool Max” causing it to overshoot the set temperature by -3º until the mode changed to operating mode “Cool Reduced”.  Mr Andersson ascribed this to a failure due to a defect in the software version fitted to the controller which caused it to become blocked or “stuck” in a particular mode. 

17                  In the sensor report for 13 October, Mr Andersson detected a reading at 0300 hours for the Relative Humidity sensor of 0.03% whereas it should have been between 50% and 60%.  He suggested this abnormality was due to incompatibility between the container’s controller and the software version with which it had been fitted.

18                  Mr Andersson also discerned from the event log a breakage of the “control fused 24V” at 11.51 hours on 7 November 2005 for which no reason was indicated in the event log.  He also noted that the temperature recordings for 1100 hours on 13 November 2005 are completely missing.  As well, a momentary switching on and off of power occurred at 11.39 hours on the same day at 2206 hours on 21 November and again at 2313 hours on 25 November, similar to that which Mr Andersson had noted for 8 and 13 October as described at [15] above.  He attributed both events on 13 November and that of 21 November and 25 November to a malfunctioning of the controller of a kind which later prompted its manufacturer, Carrier Corporation, to recall it and other controllers in the same production run. 

19                  Between 22 and 25 November 2005, according to Mr Andersson, the unit operated normally except that no defrost cycles at all were recorded on any of 23, 24 or 25 November.  That, he said, was a further indication that the controller was not operating normally as no reason for the absence of defrost cycles was disclosed by the sensor log or the event log. 

20                  In respect of the matters revealed by the event log for 26 November described at [13] above, Mr Andersson commented in his report “the defrost is ‘stuck’ and has not terminated.  At 2400 [hours] the defrost has been on for 5h 50 min.”  He regarded that as precisely attributable to the defect which Carrier Corporation had advised container owners, including the defendant “can cause the controller to become blocked in the function/running mode during processes like full cooling or defrosting etc, clearly with serious effects on cargo”;  see [49] below.

21                  As to the period between 27 and 29 November, the observations in section 4 of Mr Andersson’s report and his comments on what he observed are as follows;

(m)       27 Nov. 2005.

00:00 Defrost Initiated – Active from previous day

00:00 to 24:00.  Controller Alarms 56 and DataCorder Alarm 71 recorded every hour.

Comment: The defrost is still ‘stuck’ and has not terminated.  At 24:00 the defrost has been on for 29 h 50 min.

(n)        28 Nov. 2005.

00:00.  Defrost Initiated – Active from previous day.

00:00 to 24:00.  Controller Alarms 56 and DataCorder Alarm 71 recorded every hour.

Comment:  The defrost is still ‘stuck’ and has not terminated.  At 24:00 the defrost has been on for 53h 50 min.

(o)        29 Nov. 2005

00:00 Defrost Initiated – Active from previous day.

00:00 to 23:00.  Controller Alarms 56 and DataCorder Alarm 71 recorded every hour.

23:53.  Auto1 Pre-Trip Initiated By Keypad.

23:53.  Operating Mode Changed to Pretrip.

23:54.  Unit power down.

23:55.  Unit power on.

23:55.  Controller Alarms 56 and DataCorder Alarm 71 – Recorded.

23:56  Operating mode changed to cool reduced.

Comment:

There is no indication from the Event report if the Auto1 Pre-Trip was manually initiated by an operator or a malfunction in the controller.

There is no indication from the Event report if the unit was switched off and then on by an operator or by a malfunction in the controller.

At 23:53 the defrosting is terminated after 77 h 43 min.

Mr Andersson also concluded that the period of prolonged defrost there noted was attributable to the defect identified by Carrier Corporation as set out at [49] and [50] below. 

22                  Another period of continuous defrost for 46 hours 11 minutes between 30 November and 2 December 2005 was noted by Mr Andersson at section 4.4(p), (q) and (r) of his report where his observations and comments are recorded as follows;

(p)        30 No. 2005.

Unit operating in refrigeration mode until 06:28.

Controller Alarms 56 and DataCorder Alarm 71 recorded every hour.

06:28.  Defrost Initiated By Timer.

07:00 to 24:00.  Controller Alarms 56 and DataCorder Alarm 71 recorded every hour.

Comment: The defrost is ‘stuck’ and has not terminated.  At 24:00 the defrost has been on for 17 h 32 min.

(q)        1 Dec. 2005.

00:00. Defrost Initiated – Active from previous day.

00:00 to 24:00.  Controller Alarms 56 and DataCorder Alarm 71 recorded every hour.

Comment:  The defrost is still ‘stuck’ and has not terminated. At 24:00 the defrost has been on for 41 h 32 min.

(r)        2 Dec. 2005.

00:00. Defrost Initiated – Active from previous day.

00:00 to 04:00.  Controller Alarms 56 and DataCorder Alarm 71 recorded every our.

04:39.  Power down (for discharge at P&O Terminal in Melbourne).

04:39.  Operating Mode Change to Power off.

Comment:  The defrost is terminated after 46h 11 min.

08:38.  Power on

Local time 19:38.  Unit on power at P&O.  P&O logged temp. recorded -1ºC.

(Sensor report RetAir 08:00 reads 30ºC, 09:00 reads 6.5ºC)

08:38.  Controller Alarms 56 – recorded.

08:39.  Operating mode changed to cool reduced.

Comment:  This means that the unit is now in refrigeration mode.

08:40.  Operating mode changed to cool max.

09:00 to 13:00.  Controller Alarms 56 recorded every hour.

13:59.  Defrost Initiated Delta Temp.

Comment:  This means that the differential temperature across the evaporator coil is too great (coil iced up) which triggers a defrost.

14:31.  Defrost terminated due to normal operation.

14:39.  No active controller alarms.

Comment:  This is abnormal as it requires PTI order P5 to deactivate alarms 56 and 71.  There is no recordings in the Event report that this was done.

14:40.  Operating mode changed to cool reduced.

14:41.  Operating mode changed to cool max.

Comment:  This means that the unit is now in refrigeration mode.

14:41 to 24:00, Normal operating with defrost cycles operating correctly.

21:39.  Local time 08:39 on the 3 Dec. 2005.  P&O logged temp. recording -12ºC.

(Sensor report RetAir 21:00 reads - 13ºC, 22:00 reads -9ºC).

Those events were again attributed by Mr Andersson to the defect identified by Carrier Corporation in its recall notice set out at[50] below.

23                  In respect of events noted as having occurred between 3 and 5 December 2005, after the unit had been powered down at 0439 hours for discharge to P&O Ports’ terminal at Melbourne, the observations and comments in Mr Andersson’s report continued;

(s)        3 Dec. 2005.

Normal operation with defrost cycles operating correctly.

07:15.  Local time 18:15.  P&O logged temp. recorded -19ºC.

(Sensor report RetAir 07:00 reads -19ºC, 08:00 reads -20ºC)

21:26.  Local time 08:26 on the 4 Dec. 2005.  P&O logged temp. recording -20ºC.

(Sensor report RetAir 21:00 reads -20ºC, 22:00 reads -20ºC)

(t)        4 Dec. 2005.

Normal operation with defrost cycles operating correctly.

07:43.  Local time 18:43.  P&O logged temp. recording -20ºC.

(Sensor report RetAir 07:00 reads -20ºC, 08:00 reads -20ºC)

21:37.  Local time 08:37 on the 5 Dec. 2005.  P&O logged temp. recording -20ºC.

(Sensor report RetAir 21:00 reads -20ºC, 22:00 reads -15ºC)

(u)        5 Dec. 2005.

Normal operation until 05:22.

05:22.  Defrost Initiated By Timer.

05:22.  Operation Mode Changed to Defrost.

07:22.  Controller alarm 67- Humidity sensor failure.

08:00.  Controller alarms 56-Primary return failure, 67-Humidity sensor failure.

Comment:  The defrost has not terminated and has become ‘stuck’ in defrost mode.

08.03.  DataCorder Alarm 71-Recorded Return Temp out of range (OOR)

08:38.  Local time 19:38.  P&O logged temp. recording -20ºC.

(Sensor report RetAir 08:00 reads 30ºC, 09:00 reads OUTRNG)

09:00 to 17:00.  Controller Alarms 56 and DataCorder Alarm 71 recorded every hour.

17:47.  Power down.  Local time 04:47 (04:50 in the P&O Log) on the 6 Dec. 2005).

P&O logged temp. recording -20ºC.

(Sensor report RetAir 17:00 reads OUTRNG, 18:00 reads OUTRNG)

Comment:  This is the last Power Down as per the Event report prior to delivery of the container for unpacking.

24                  The last quoted sub-paragraph was said by Mr Andersson to describe a period of 12 hours and 25 minutes of continuous defrost from 0522 hours until 1747 hours on 5 December which he attributed to the same defect identified by Carrier Corporation in the terms set out at [49] of these reasons.

25                  Mr Andersson next noted that the container’s event log has no record of the unit having been switched on power at 1857 hours on 5 December 2005 (0057 hours on 6 December Melbourne time) and switched off at 2052 hours on 5 December (0752 hours on 6 December Melbourne time).  He attributed this omission to the same defect constituted by the incompatibility between the container’s controller and the software version with which it was then fitted.  Mr Andersson then observed that;

there is nothing to independently confirm that the unit’s LCD Display Module displayed the various alarms that the unit’s Event Report recorded during the periods when the Event Report recorded that the unit was “stuck” in defrost mode.

He went on to infer that the various abnormalities which he had identified had all been caused by what he called “the latent defect” which was later diagnosed by Carrier Corporation as a “failure of the ML2i program which is due to the RAM(hardware) of the controller.  The failure is a kind of program abort and is not visible during monitoring (no alarm is displayed).”

26                  Mr Andersson’s reasoning in respect of what would have appeared in the container’s display module while the unit was ‘stuck’ in defrost is set out in these paragraphs from his report;

(a)        There is nothing to independently confirm that the unit’s LCD Display Module displayed temperatures other than the temperatures recorded by the ship’s staff and also by P&O staff during the periods when the Event report recorded that the unit was “stuck” in defrost mode.

(b)        In reference to the illustration and statements 4.6:

(i)         The Temperature Control software uses the supply and return temperature sensors.

(ii)        The Temperature Control Software provides default independent readouts of set point and supply or return temperatures.

It is my opinion that because of the relationship as described in (i) and (ii) between the Temperature Control software and the return temperature sensors / readouts (Display) the displayed temperature during “stuck” defrost displayed the temperature as it was prior to the defrost i.e. the displayed temperature was also “stuck” (frozen).

27                  In relation to whether the container’s condenser fan continued to run while the unit was “stuck” in defrost mode, Mr Andersson erected a hypothesis in which;

it is possible, although the defrost part of the Controller software does not register the signal from the Defrost Termination Sensor (“DTS”) to terminate the defrost, that the Condenser fan part of the software has registered the signal and starts the Condenser fan motor.

28                  On the basis of that hypothesis, he expressed the opinion at section 8(b) of his report that;

If the Condenser fan was running during the “stuck” defrost (and the Display unit was reading the correct temperature) it would be very hard to determine that the unit was “stuck” in defrost.

29                  Mr Andersson’s principal report concluded with these paragraphs at section 8.7;

(a)        There is no evidence or reason to suggest that the crew’s reading was not correct throughout the voyage as recorded in the ship’s reefer log.  There is no reason to dispute this as the P&O reefer staff also recorded correct temperatures after the unit, on the 5 Dec. 2005 at 05:22, become ‘stuck’ on defrost identical to the condition that existed onboard the vessel.

(b)        It is clear from the records contained in and missing from the Sensor Report and the Event Logger Report relating to the Controller that there are numerous abnormalities in the records contained therein from the Controller.  If one assumes that the records that appear in the China Shipping log are an accurate record of the temperatures recorded from the unit’s LCD Display Module (which is supported by the records kept by P&O after the Container was discharged), then there is no evidence to support an argument that the Vessel’s crew was aware that there was any problem within the Container, let alone a problem that may have prompted any further action on their part.

30                  Under cross-examination, Mr Andersson accepted that the same malfunction, the unit becoming stuck in defrost mode, had occurred on the ship and while the container was in the P&O Ports terminal.  He also accepted that the controller may have behaved differently in the two situations and sought to explain the record of temperatures in the Reefer Log described at [9] above by suggesting that an operator on the ship had pushed a button to read the SA and RA temperatures and had averaged the two.  However, he acknowledged that it would be good practice to record each of the data points used in arriving at an average.

31                  Mr Andersson also accepted that a container stuffed with hard frozen seafood would normally remain in defrost mode for between 20 and 35 minutes.  He acknowledged that it is good practice, if a container is in defrost mode at one inspection, to check within the next 12 hours to see whether it has normally reverted to “cool mode” or is still in defrost.  However, he cautioned, if a controller were malfunctioning and improperly in defrost mode, a crew member might not recognise that it was in that mode. 

32                  In response to a suggestion by Mr Brown that temperatures in whole numbers were shown in the container’s display panel when the controller had failed and to one decimal point when it was functioning correctly, Mr Andersson said that he did not know.  Nor could he say whether, when the unit was stuck in defrost, the temperature displays for RA and SA were also stuck or frozen.  In his opinion, it could not be known what lights on the display panel were on or off while the unit was malfunctioning. 

33                  Mr Andersson also accepted, when further cross-examined, that, when the unit was in cool mode, the compressor would have been audible to a crew member and, if the compressor had not run for 77 hours a crew member should have done something about it, at least by turning the unit off and on again in the hope that it would return to full cool mode.  If that were unsuccessful, further investigation would be required.  The crew member should have returned after an hour to check that the temperature was down to -20ºCelsius and the unit was running correctly.  On the assumption that the defrost light had remained on while the unit was stuck in defrost mode for 77 hours, Mr Andersson accepted that it was intolerable for nothing to have been done about it.  He also accepted that it is worse for frozen cargo if a container is stuck in defrost mode than if it is merely off power.

34                  Mr Andersson acknowledged to Ms Hartley of Counsel for the plaintiff that his opinion depended on the container’s having been afflicted by abnormalities other than merely being stuck in defrost.

35                  Mr Darren Southcombe, a refrigeration technician with wide experience in maintaining and servicing refrigerated containers, who was called on behalf of the plaintiff, gave evidence which largely corroborated that of Mr Brown.  In respect of the matters recorded in the events log for 29 November 2005, Mr Southcombe deposed;

3          As appears from the Event Logger produced on behalf of the defendant, a pre-trip inspection, coded AUTO1 was initiated by key pad at 2353 on 29 November 2005.

4          The only way in which a pre-trip inspection can be initiated is via a modem or by the key pad which is located next to the control box door and slightly adjacent to the display module.  It is apparent that in this case, no modem activation was used, and that a member of the crew used the key pad to initiate the pre-trip.

5          The Event Logger records that as part of the pre-trip inspection on 29 November 2005, the heaters were tested as was the condenser fan.  Both the heaters and condenser passed their tests, the unit was powered down and powered up again.  Once this occurred, the active alarms which are referred to in the Event Logger must have been instantly displayed, as checking of the display is an integral part of the pre-trip inspection.  As the condenser fan is not able to run when the unit is in a defrost mode, it must be assumed that at the time of the pre-trip inspection, the unit was not then in defrost mode.  As there is absolutely no logical basis for the initiation of a pre-trip inspection mid-voyage, it is clear to me that there was evidence of malfunction which led to the commencement of the pre-trip inspection.

6          After the AUTO1 test was terminated, operation was in ‘cool mode’ for approximately 7 hours, and the temperature moved towards the set point quite rapidly, with the return air (RA) reading dropping from +25 degrees C to -13 degrees C at 0600 on 30 November 2005.  At 0628, the operating mode was changed (automatically) to defrost mode, where it remained until the unit was powered down and discharged on 2 December 2005.  There is no evidence in the Event Logger to show that any intervention took place during that period.

36                  Those observations led Mr Southcombe to express the opinion that whatever caused the initiation of the pre-trip inspection on 29 November 2005 must have been apparent from 26 November and that the container should have been closely monitored after the pre-trip inspection had been initiated.  Mr Southcombe further opined that;

7          …

·          Had the evidence which led to the pre-trip inspection on 29 November 2005 been acted upon promptly on 26/27 November 2005, remedial action could have been taken by the crew with a view to saving the consignment of frozen seafood in the container.

37                  Under cross-examination, Mr Southcombe acknowledged that, at the time when he made his first witness statement, he had not seen the Reefer Log described at [9] above or the P & O monitoring history noted at [42] below.  Nor had he seen the pre-trip report which had been prepared by Reefer Services in Japan before the goods were stuffed into the container.  He was unable to say what version of software had been installed in the container’s controller before the November 2005 voyage.  In Mr Southcombe’s experience, the normal duration of a defrost phase for a refrigerated container is from 10 to 30 minutes depending on the nature of the cargo.  On 5 December 2005, he concluded, the container had been in defrost mode for 3 hours and 16 minutes.

38                  The records in the event log suggest that the container behaved normally in both operating mode and defrost mode throughout 3 and 4 December 2005.  On 5 December 2005 the event log recorded at 0522 hours “Defrost Initiated by Timer.  Operating Mode Changed to Defrost.”  Thereafter the remainder of the entries for 5 December 2005 were recorded as follows:

No event data were recorded for 6 December 2005.

39                  Mr Brown’s belief is that the display on the container showed an RA temperature of -20º when it first went into prolonged defrost but would not have shown that temperature when released from defrost mode after three days of continuous defrosting.

40                  Mr Brown next discerned from the event log that the container failed again at 0700 hours on 30 November when the sensor log showed an RA temperature of -5º.

41                  The ship berthed at the P & O Ports terminal in Melbourne on 2 December 2005.  After a delivery order for the container was collected, also on 2 December 2005, from ANL Container Line Pty Ltd, the representative of the defendant in Melbourne, the container was collected from the P & O Ports terminal by Coynes Transport Industries, a wharf carrier contracted to Jackson Global Logistics, a freight forwarder retained by the plaintiff.  That collection occurred at some time between 7.43 am and 8.14 am on Tuesday, 6 December 2005.

42                  From the time when the container was discharged into the container terminal operated by P & O Ports at Melbourne, a computer generated Reefer Monitoring History was maintained in respect of the container until it went off-power at 0752 hours Melbourne time, presumably upon being delivered to Coynes Transport Industries at 0814 hours as described at [41] above.  The Reefer Monitoring History contains the following entries:

43                  After the container was delivered to the plaintiff’s premises, the goods were discovered on out-turn to have been in a deteriorated condition.  Apparently as a result of a complaint made on behalf of the plaintiff, the goods were inspected on the same day by two marine surveyors in conjunction, Mr Robert Robertson on behalf of the plaintiff and Captain Christopher Will on behalf of the defendant.  Mr Robertson took photographs of the goods and expressed the opinion, based on his observations and experience, that they had been thawed and re-frozen.  He detected a considerable amount of ice among the cartons and on the floor of the container which indicated to him that;

there had been more than a brief thaw, that fluids had leaked from the plastic bags internally out of the cartons and into the stow, and that at some stage, a rapid reduction in temperature had resulted in re-freezing.

44                  Most of the ice observed by Mr Robertson was “of a greenish colour” indicating that it had escaped from the contents of the cartons.  Most of the green seepage was from plastic bags containing sea salad “which didn’t cope with thawing at all”.  He expressed the opinion that the thawing of the cargo had almost certainly taken place more than a day or two before his inspection and very likely while the container was on board the ship.  He acknowledged the possibility that the re-freezing had occurred after the discharge of the container from the ship on 2 December 2005 but regarded it as highly unlikely that both the thawing and re-freezing had occurred during the period from 2 December to 6 December 2005.  The latter opinion was based on his experience that, in the thawing process, a considerable time usually elapses before fluid escapes from the thawed product because:

the block stowage within the container … preserves the low temperature for longer than would occur if the cartons were thawing individually.  Similarly, to then reverse the process by restarting refrigeration and to actually achieve re-freezing would take days rather than hours.

45                  Mr Robertson further opined that, if there had been a period of more than three days of normal operation of the container’s refrigeration equipment before a prolonged defrost cycle commenced at 1622 hours on 5 December 2005 that would have been sufficient to:

freeze prior leakages into the sheet ice between the cartons as sighted at survey and apparent in the photographs.  However, there would not have been sufficient time for the consignment to thaw and re-freeze while the container was at the Melbourne terminal.  The deterioration of the consignment was clearly not caused during the period from the commencement of the defrost to the time of delivery.

46                  In his oral evidence-in-chief, Mr Robertson expressed the opinion that, if the goods had not been frozen or had been subjected to thawing before being taken on board the ship in Japan, some breakdown in the stowage would have been apparent on turn out in Melbourne because of lack of strength in the corrugated paper fibre cartons in which the goods had been packed.  He also recounted previous experience of “hot spots” which had been left in containers stowed with unfrozen or partly frozen goods before freezing to the desired temperature had been achieved.  In those circumstances, he said;

… the refrigeration reduces the temperature within the container, but not necessarily right through the blocks though, and you can have a hot spot remain towards the centre of the stow where the other cargo is insulating it.

47                  Also in his oral evidence-in-chief, Mr Robertson said that he had detected on turn out, droplets of moisture within the actual packaging of the goods which he considered to be “indicative of thaw and re-freeze and then starting to thaw again because by this time, several hours had passed of unpacking, so there’s a warming process going on.”

48                  In his written survey report, Captain Will reported:

The entire cargo exhibited clear signs of having been thawed to varying degrees.  As seen in the photographs, the thawing extended right to the centre of the stow, particularly affecting the Sea Salad with resultant liquid runoff.

The text and pattern of the thawing suggested that the unit must have been off power for a considerable period – probably in excess of 5 days.

Product has generally outturned in doubtful/poor condition.  Each of the 5 lines of seafood was randomly examined.  They exhibited signs of thawing and deterioration to varying degrees.

Some product with liquid that had formed in bags, as well as liquid runoff from the Sea Salad line was found to be frozen on outturn, suggesting it had re-frozen after thawing.  This suggests the unit was put on power at some time prior to delivery – possible at West Swanson Dock after discharge?

The unknown temperature history and the possibility of re-freezing renders the product potentially unsafe.  Samples have been sent for analysis to check for bacterial content and fitness for human consumption.

We recommended that the container’s temperature records be downloaded from the unit, as well as temperature records obtained from the vessel and the terminal in Melbourne to ascertain a temperature history during transport.

49                  On 22 December 2006 Mr Thorne, the Manager Technical Services for the defendant, issued a notice in respect of several series of Carrier containers with MLi controllers including a range which included the container, a notice which, so far as is relevant, was in the following terms;

Leased Units Made after Sept 2004 and fitted with 69NT40-511 unit with ML2i controllers.

There have been operational / control problems with the subject equipment and until this matter is permanently resolved Carrier have advised us that we must verify and ensure that the software on all of these containers is to be version 5130.

IE.  If version 5130 is installed it is OK

If it is an earlier version or a later version (5127 or 5131 or 5132) it is to be removed and the 5130 is to be installed…

All service providers are to make sure they have version 5130 and if not, be aware that on request Carrier will make it available free of charge for installation in this CMA-CGM equipment..

To our reefer service providers in Aust and New Zealand we request that every one of these containers presented for pre trip has version 5130 installed.  Would also suggest that appropriate ID be made on or near controller so that the next time around it can be seen if 5130 has been checked/installed on a specific date…

… … …

Note.  Carrier advise ML2I software versions 5131 and 5132 can produce failures when fitted to machines with 69NT40-511 equipment made after September 2004.  This defect can cause the controller to become blocked in the function/running mode during processes like full cooling or defrosting etc clearly with serious effects on cargo.

50                  On 5 February 2007 Carrier Corporation issued a formal recall notice in respect of a series of controllers which included that fitted to the container.  The notice recited, in part;

Carrier Transicold is recalling the following series of ML2i manufactured controllers:  04324830 – 04335900.  ……

These controllers were primarily installed in the following series of units:

Serial Number Ranges

JSW60007465 – KSC60042365

KSE60050933 – KSE60051302

KSV60104729 – KSV60104888

All ML2i controller serial numbers should be inspected at the unit’s next pretrip interval regardless of the unit serial range.

This request is made due to compatibility concerns with software versions greater than 5130 installed in conjunction with the hardware in the above controller serial range.  These controllers will be exchanged to allow them to be upgraded beyond 5130, receiving produce enhancements.

51                  By a subsequent email dated 27 March 2007 Mr Berniere of CMA-CGM notified various recipients, including Mr Thorn, that;

Subject:  VERY URGENT AND IMPORTANT:  software version for Carrier ML2i controller

Be advised that this instruction is and will remain valid till further notice from M+R H.O.

It must also be applied for the leased cntrs which have Carrier 69NT40-511 machines manufactured after Sep. 2004 (see attached list).

Some other software versions (5134 or 5135) are displayed on the Carrier web site but they MUST NOT be used on CMA CGM cntrs.

They don’t correct the failure of the ML2i program which is due to the RAM (hardware) of the controller.  The failure is a kind of program abort and is not visible during monitoring (no alarm is displayed).

Pls make sure all repair cies do comply with this instruction and advise them they will be hold liable for any total failure of ML2i controller which may occur as from the date of our instruction.

The applicable law and burdens of proof

52                  It is common ground that cl 3 of the bill of lading identified at [1] of these reasons made applicable to the carriage of the goods from Yokohama to Melbourne the provisions of the Hague Visby Rules.

53                  There has been considerable discussion in the authorities about the effect of the Hague Visby Rules on the conduct of a claim for a breach by a carrier of its obligation properly and carefully to care for the goods.  That obligation is imposed by Art III r 2 of the Hague Visby Rules which provides:

Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for and discharge the goods delivered.

Article IV r 2 of the Hague Visby Rules provides so far as is relevant:

2.         Neither the carrier nor the ship shall be responsible for loss or damage arising from –

(a)        Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship.

… …

(m)       Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods.

(n)        Insufficiency of packing.

(o)        Insufficiency or inadequacy of marks.

(p)        latent defects not discoverable by due diligence.

In earlier authorities the view was expressed that a cargo owner had only to prove the contract of carriage and the non-delivery of the goods, or their delivery in a damaged condition.  Upon evidence probative of those matters being adduced, the burden shifted to the carrier of proving that the loss or damage had arisen from one of the matters specified in Article IV r 2, in this case that stipulated in paragraph (p);  see Gamlen Chemical Company (A’sia) Pty Ltd v Shipping Corporation of India Ltd [1978] 2 NSWLR 12, per Samuels JA at 24, as approved on appeal by the High Court sub nom. Shipping Corporation of India Ltd v Gamlen Chemical Company (A’sia) Pty Ltd (1980) 147 CLR 142, at 168.  However, in Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation Berhad (“The Bunga Seroja”) (1998) 196 CLR 161, a different approach was endorsed in the joint judgment of Gaudron, Gummow and Hayne JJ where it was observed, at 171-172 [22]:

while any action brought in a national court on a contract of carriage governed by that nation's law will be framed in a way that reflects that law, it cannot be assumed that the rules take the form which they do in order to reflect some particular cause of action or body of learning that is derived from, say, the common law.

54                  To similar effect, McHugh J suggested, at 196 [95];

The words “arising or resulting from” which appear at the very beginning of Art IV, r 2 indicate that the loss or damage must be caused by one or more of the matters enumerated in pars (a)-(q) before the carrier can escape liability. If it results or arises from any other cause such as the negligence of the carrier, the carrier is liable. The presence of r 2(a) which creates a limited but separate exemption for the carrier for damage resulting from the negligence of its master or servants in relation to the navigation or management of the ship is a further textual indication of this interpretation. The presence of this express immunity suggests that the parties to the Convention had turned their minds to negligence as a cause of loss and deliberately limited the carrier's immunity for loss caused by negligence to situations involving the negligence of the master or servants of the carrier in relation to the management and navigation of the ship. If negligence is established and has caused the loss or damage to the goods, the carrier is liable unless the negligence comes within the specific exception of par (a).

55                  His Honour then went on to observe, at 197-198 [98]-[99];

98        No doubt the failure to deliver the coils of aluminium in the condition in which they were received is evidence of a breach of the obligations imposed by Art III. But I do not think that a contract of carriage under the Hague Rules contains any implied obligation for the carrier to deliver the goods in the state in which it received them. Article II should be taken as declaring the rights and immunities and responsibilities and liabilities of the parties, subject to the right of the carrier under Art V to surrender the whole or part of its rights and immunities or to increase its responsibilities and liabilities by the terms of the bill of lading. As Professor Sturley points out “the new rules were designed to create a self-contained code (at least in the areas it covered) that would not require reference to domestic law”. The delivery of the goods in a damaged state is evidence of a breach of Art III, and imposes an evidentiary burden on the carrier to show that no breach of Art III has occurred. But unlike the common law, failure to deliver the goods in the state received does not cast a legal onus on the carrier to prove that the state of, or non-delivery of the goods, was not due to the carrier's fault.

99        Once Carruthers J found that there was no breach of the carrier's obligations in this case, the immunities conferred by Art IV, r 2 became irrelevant. However, the meaning of “perils of the sea” is important, and I should deal with it.  (Footnotes omitted)

56                  Those passages have been explained and applied in the joint judgment of Ryan and Dowsett JJ as members of a Full Court of this Court in CV Scheepvaartonderneming Ankergracht v Stemcor (A’sia) Pty Ltd (2007) 160 FCR 342, at 361 [56].  There it was observed;

… However, the decision of the High Court in Great China Metal 196 CLR 161 casts doubt upon the continuing authority of Gamlen 147 CLR 142 insofar as it concerns the burden of proof. Although forming no part of the ratio of the case, observations made in the joint judgment of Gaudron, Gummow and Hayne JJ and in the judgment of McHugh J suggest that the proper course is to identify negligence (usually a breach of Art 3, r 2) before considering the availability of exceptions pursuant to Art 4, r 2, and that the mere occurrence of loss or damage may not be sufficient to prove a breach of the former rule. In the present case Emmett J adopted that approach. It has not been suggested that we should do otherwise.

I regard myself as bound to take the same approach in the present case.

Condition of the goods when received on board the ship

57                  I am satisfied to a clear margin of probability that the goods were in good order and condition when stuffed into the container at the cold store and delivered to the ship at the terminal in Yokohama.  That question is not foreclosed by the acknowledgement in the bill of lading that the goods were shipped on board “in apparent good order and condition”.  That acknowledgement extended only to the external condition of the container and not to the condition of the cartons of seafood with which it was packed;  see Marbig Rexel Pty Ltd v ABC Containerline NV (“The TNT Express”) [1992] 2 Lloyd’s Rep 636, where Carruthers J concluded, at 641:

Before I leave this aspect of the case I should note that the plaintiff sought to rely upon a submission that by reason of the defendant having issued a clean bill of lading, the defendant is estopped from denying that the goods were in apparent good order and condition when loaded on board Pelopor.  This submission is inconsistent with the judgment of Mr Justice Yeldham in Ace Imports Pty Ltd v Companhia de Navegacao Lloyd Brasileiro, (1987) 10 NSWLR 32, with which I respectfully agree.  It is, in my view, apparent from the wording of the receipt clause and the notation inserted in the box beneath that clause that the defendant is merely acknowledging the receipt of the 20′ container in apparent good order and condition.  The acknowledgment could not possibly extend to the apparent good order and condition of the contents of the sealed container which had been consolidated by the shipper.  A Canadian case to the same effect is Lufty Ltd v Canadian Pacific Railway Co (The Alex), [1974] 1 Lloyd’s Rep 106.  There are numerous cases in the United States to the same effect.  See eg. Red Arrow Freight Lines, Inc v Roy G Howe 480 SW 2d 281.

However, I am satisfied from the surveyor’s reports of Mr Robertson and Captain Will that the damage to the goods which they observed at out-turn had occurred during the voyage and possibly also after the goods had been discharged at the P&O Ports terminal in Melbourne.  I have attained that degree of satisfaction from the description by those witnesses of how the damage to the cartons had permeated the stow and the absence of “hot spots” in the centre of the stow.  Moreover, neither surveyor suggested that there was any evidence at out-turn of pre-shipment thawing or other damage.  The inference which I favour derives further support from the fact that a significant part of the cargo was still fit for human consumption after receipt by the consignee in Melbourne.  Had there been pre-shipment thawing, it is unlikely that any part of the cargo would have remained fit for human consumption after being exposed again to elevated temperatures for several days of continuous defrosting on board the ship and again for a significant but shorter time at the terminal in Melbourne.

58                  As well, I consider that the inference which I have drawn is supported by the short time (about two hours) needed to “pull down” the container to the pre-set temperature of ˉ20ºC at the Yokohama terminal compared with the significantly longer “pull-down” time required after the container had been connected to power at the Melbourne terminal.

Was the defendant in breach of Article III?

(a)        Article III r 1

59                  I have not been referred to, nor discovered, any authority in which it has been held that the duty imposed on a carrier by Article III r1 extends to the establishment and maintenance of proper systems for monitoring the temperatures and refrigeration performance of refrigerated containers.  Article III r1 provides:

1.         The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to –

(a)        Make the ship seaworthy.

(b)        Properly man, equip and supply the ship.

(c)        Make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.

If the duty imposed by Article III r 1 obliges the carrier to ensure that any refrigerated container supplied by the carrier and used for the carriage and preservation of frozen goods is not affected by incompatibility between the container’s controller and the software with which it is fitted, then the facts of this case are sufficiently suggestive of a breach of the duty of seaworthiness to cast on the defendant the burden of proving due diligence cast on the carrier by Article IV r 1.  That rule provides:

Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is properly manner, equipped and supplied, and to make the holds, refrigerating and cool chambers and all other parts of the ship in which goods are carried fit and safe for their reception, carriage and preservation in accordance with the provisions of paragraph 1 of Article III.  Whenever loss or damage has resulted from unseaworthiness the burden of proving the exercise of due diligence shall be on the carrier or other person claiming exemption under this article.

However, for reasons which are explained below it is unnecessary in the present case to express a concluded view on whether the liability for loss or damage arising from unseaworthiness attaches to the provision of a container which has a controller fitted with incompatible software or whether the defendant has discharged the reverse onus of proving the exercise of due diligence in procuring the container and commissioning it for the voyage.  That is because I consider that the facts of this case amply raise the inference that there has been a breach by the defendant of the duty imposed by Article III r2 properly and carefully to carry, keep and care for the goods.  Article III r2 stipulates:

Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.

Unlike the obligation imposed by Article III r1 to use due diligence to ensure seaworthiness, Article III r2 is not subject to the temporal limit introduced by the prefatory words “before and at the beginning of the voyage”.  Because the loss and damage to the goods in the present case arose or resulted from the container having become stuck in defrost mode well into the voyage, Article III r2 is the more appropriate provision against which to test the defendant’s liability.  Moreover, the prefatory words to Article III r 2 “Subject to the provisions of Article IV” allow the defendant to invoke the “latent defect” exception afforded by par (p) of Article IV r 2 which has been regarded on both sides as the exception most readily available in the circumstances of this case.

(b)        Article III r2

60                  Regrettably, the Court has been left to draw inferences from a body of circumstantial evidence in order to make findings about what steps the defendant took to properly and carefully carry, keep and care for the container during the voyage.  There is no direct evidence from any person who was on board the ship during the voyage as to how frequently temperature readings were taken from the container or what those readings revealed.  It is not possible to find with confidence even that temperature readings were taken twice daily as the evidence suggests was required to conform with accepted good practice.  Nor does it appear that whatever readings were taken were recorded in accordance with what Mr Andersson and Mr Grier acknowledged was accepted good practice.

61                  The only record of temperatures registered by the container during the voyage is the Reefer Log described at [9] above.  That was apparently produced from the ship’s records by Captain Bellotti who, it seems, was the master of the ship when the Reefer Log was produced or discovered but was not the master or on board during the voyage in November 2005.  On behalf of the defendant two suggestions have been ventured as to why the Reefer Log contained only the entries which it did.  In his email of 28 March 2007, Captain Bellotti suggested that the copy supplied was an “Owner’s form” to which only afternoon readings were transcribed.  That derives some support from a printed note at the foot of the Reefer Log form “Remarks:  only to be used in case no charterer’s form available.”  However, the form of Reefer Log produced by Captain Bellotti appears to have space for entering only one temperature for each day.  In a later email of 5 April 2007, Captain Bellotti made this alternative suggestion;

Daily readings twice a day are entered on printed computer reefer form by crew members reading it.  As there are no CS form only owner’s form is filled with average daily reading.  If in times of reading unit was defrosting, then electrician takes a reading after defrosting period, and this one is entered in daily form.  Rough forms are generally kept for five years in archive, unless they were torn, and at the end, unreadable (am missing these for voyage).

62                  I am not persuaded that the temperatures recorded in the Reefer Log represent an average of temperatures actually seen on the dates to which the readings purportedly relate.  For one thing, an average to a decimal point expressed as an odd number could only have been derived from rounding up or down from a calculation taken to at least two decimal points.  There is no evidence on the fact of the Reefer Log that the majority of entries recorded as ending in “.4”, “.7” and “.9” had been calculated in that way.

63                  In many other respects, the matters which have led me to conclude that the crew of the ship failed properly and carefully to carry, keep and care for the container overlap with those identified at [65] to [75] below as negativing a conclusion that the loss arose from a latent defect not discoverable by due diligence.  My findings in those respects should be taken, as far as applicable, to have been relied on in reaching my conclusion that the plaintiff has established a breach by the defendant of Article III r 2.

Latent defect

64                  Historically, latent defect was an exception to the implied warranty of seaworthiness and related to defects in the hull of the vessel or its tackle or machinery whereas, according to Carver on Carriage By Sea, 13^th edn at 382 [541], paragraphs (m), (n) and (o) of Article IV r 2 “apparently refer to inherent defect or vice and insufficiency of packing or marks of the goods.”  A footnote to the same passage in that work suggests;  “But para (p) may include latent defects in other cargo or in shore tackle.”  As I understand it, the container into which the goods were packed was made available by the defendant and was at all times from reception at the terminal in Yokohama until its discharge from the P&O Ports terminal in Melbourne under the control of the defendant or its agents.  I have therefore proceeded on the basis that the exception in par (p) is available to the defendant if the loss to the goods arose or resulted from a latent defect in the container, being one that could not have been discovered using reasonable methods by a person of competent skill using ordinary care;  see Minister of Materials v Wold SS Co [1952] 1 Lloyds Rep. 485. 

65                  I am satisfied on the balance of probabilities that the damage to the goods in the present case arose or resulted principally from the container’s having been stuck in defrost mode for an extended period between 27 and 29 November 2005.  It is likely that the propensity of the container to become stuck in that way was due to the incompatibility between the container’s controller and the software with which it was fitted.  However, as already indicated, it was not that propensity which was the immediate cause of the plaintiff’s loss but the continuous running of the container in defrost mode for more than 77 hours.  That was an event which could have been detected and rectified had the defendant’s employees and agents carried out an appropriate monitoring and inspection of the container and made proper records, including notations of any apparent anomalies which might require further investigation or rectification.  It was the departure of the master and crew of the ship from accepted good practice in those respects which, I consider, amounted to a failure to exercise due diligence properly and carefully to carry, keep and care for the goods in the defendant’s container.  I shall indicate briefly my reasons for reaching that conclusion. 

66                  I find it more likely than not that either or both “defrost” and “heater” lights were illuminated on the container’s display panel for at least part of the extended time during which the container was in continuous defrost mode.  I have not overlooked Mr Andersson’s opinion noted at [32] above that it could not be known what lights on the display panel were on and off while the unit was malfunctioning.  However, I prefer the inference from relevant available evidence that, for at least part of the time while the unit was stuck in defrost, lights or other alarms were visible which should have alerted a reasonably diligent crew member to that fact or put him or her on enquiry whether the unit was excessively defrosting.

67                  There is no direct evidence of what the temperature display module on the container showed after the unit became stuck in display mode.  The expert witnesses, Mr Brown, Mr Southcombe and Mr Andersson differed in the inferences on this issue which they preferred to draw from the known facts which appeared to point in different directions. After some hesitation, Mr Andersson was inclined to the view that the temperature display simultaneously became stuck or frozen when the unit became stuck in defrost mode.  However, he was unable to commit himself to whether the presumptively frozen temperature display showed a temperature in degrees expressed as a whole number or to one or more decimal points.  Mr Brown believed that, from the time the unit became stuck in defrost mode, the temperature display was also stuck on a single temperature but did not express a view as to whether that would have been displayed as a whole number or to one or more decimal points.  His opinion was that whatever temperature on which the display module was stuck would have been within the range from -20ºC to +1.4ºC.  Mr Southcombe’s views on this issue were similar to those of Mr Brown.

68                  I am disposed to accept on the preponderance of expert opinion, that the temperature shown on the display module remained constant from the time when the container became stuck in defrost mode at 1810 hours on 26 November 2005 until it ceased malfunctioning at 2356 hours on 29 November 2005.  That means that the temperatures recorded in the Reefer Log for that period, whether they represented a calculated average, or purported to be a transcription of an actual entry made by a crew member, could not have been derived from actual ocular observation of the display.  At best for the responsible crew member or members involved, they were entered recklessly without caring whether they had any basis in fact.  Moreover, if the temperature shown by the display had been constant throughout the period during which the unit was stuck in defrost, that would have been so markedly in contrast to the variable temperatures observed during normal operation that it should have alerted the relevant crew member or members to the likelihood of a malfunction.

69                  I make a similar finding in respect of the defrost light which, I believe, on the basis of the evidence of Mr Brown and Mr Southcombe, was probably showing on the unit’s display panel for the whole of the time during which the unit was stuck in defrost mode.  That abnormality should have alerted the crew member who saw it, or the electrician mentioned in Captain Bellotti’s email of 5 April 2007 quoted at [61] above to the fact that heat was continuously being applied to the container.  That should have prompted a properly trained and responsible crew member to rectify the problem.

70                  It is more probable than not that while the unit was stuck in defrost mode, the condenser fan was not running and so would not have been audible to a crew member monitoring the container.  I accept the existence of the “possibility” to which Mr Andersson adverted in the portion of his evidence summarised at [27] above:  ie, that the condenser fan motor could have been activated and continued to run audibly while the unit was stuck in defrost.  However, I regard that hypothesis as less likely than that the condenser fan behaved normally and did not run during defrost, even one prolonged for over 77 hours as a result of an incompatibility between the controller and the software version then used on it.  The corollary to the proposition accepted by Mr Andersson as described at [33] above, is that a crew member failing, on several successive visits to the container, to hear the condenser fan running, should have done something about it.

71                  I do not accept that the various “abnormalities” which Mr Andersson discerned from the sensor log or the event log of the container during the pre-voyage period in October 2005 and later while the container was concededly functioning normally, support his primary thesis that while the unit was stuck in defrost mode, no alarm, light or temperature reading was visible to alert a crew member to that fact.  There is a marked difference of opinion between Mr Andersson on the one hand and Mr Brown and Mr Southcombe as to whether all or any of the matters identified by Mr Andersson were “abnormalities” at all.  It is unnecessary for me to resolve this controversy because, even if all the matters in Mr Andersson’s catalogue had been attributable to the incompatibility between the container’s controller and its software, it is improbable that the fact of the unit’s being stuck in defrost mode would have been undetectable by the electrician or some other crew member.

72                  Another matter which negatives proper and careful keeping and monitoring of the container during the voyage and the exercise of “due diligence in the sense used in Article IV r 2(p), is the fact that a pre-trip inspection was apparently initiated at 2353 hours on 29 November as disclosed by the event log and noted at [13] of these reasons.  I accept it as more probable than not that the initiation of that pre-test inspection was by the human intervention of a crew member using a keypad as Mr Brown suggested.  That conclusion is consistent with Captain Bellotti’s speculation.

73                  It also receives support from an internal email of 3 April 2007 by Mr Alfred Zhang, the claims manger for China Shipping who was then seeking information about the steps which had been taken during the voyage in November 2005 to rectify the defect to which the container was then subject.  Mr Zhang wrote;

CSCL [China Shipping] must prove that it exercised due diligence in caring for the goods.  As attached the Automatically generated Event Log for the container evidences that on 29 November 2005 (whilst the container was on board the vessel) someone manually accessed the reefer’s keypad and “Initiated by Keypad” an “Auto PreTrip” of the container which was then “Power[ed] down” and then “Power[ed] up.”

The independent experts that have reviewed the Event Report and the Sensor Report for the container have indicated that these steps were most likely taken by persons on board the vessel in an effort to correct a fault noted in the container’s records:

Further your email dated 29/3 regard to CGMU2821902/Bay:360582/CSCL Yantai V065s, CSCL must prove that it exercised due diligence in caring for the goods.  As attached the Automatically generated Event Log for the container evidences that on 29 November 2005 (whilst the container was on board the vessel) someone manually accessed the reefer’s keypad and “Initiated by Keypad” an “Auto Pre-Trip” of the container which was then “Power[ed] down” and then “Power[ed] up”.  The independent experts that have reviewed the Event Report and the Sensor Report for the container have indicated that these steps were most likely taken by persons on board the vessel in an effort to correct a fault noted in the container’s records.

With this in mind, CSCL will not be able to successfully defend any indemnity claim unless an adequate explanation can be given for the Event Log containing this evidence.

We are seeking details of exactly how Yantal monitored the container.  That is, further details of what the system is?  When do you check the containers?  Who checks them?  How are you checked?  What is recorded etc.  For example, we note that the containers are checked twice per day.  Why is it that only one record of such checks is then kept on the Reefer Log?  Is there another log kept on board the vessel?

If it was the case that persons on board the vessel did note a problem with the container and did manually access the reefer’s keypad in an effort to clear the problem, then there would be significantly better chances of defending the claim and limiting any indemnity claim against China Shipping than if we are forced to merely deny that the Event Report is accurate.

74                  This response to that email was sent by “Jasmin” on behalf of China Shipping apparently based on information derived from Captain Bellotti who, as noted at [12] above was in 2007, but not in 2005, the master of the ship;

1.         Obviously someone on board (electrician?) have rebooted said reefer, in order to clear alarms(s).  This, by itself, if no other work was done, wouldn’t be entered in “reefer repair sheet” (unless there were problems with maintaining set temperatures).  To the best of my knowledge (as per Reefer Log that was sent to Owners and I forwarded to Mr.Sean) temperatures were inside the range while reefer was on board.

On board, we do not have any China Shipping instruction manual regarding monitoring of reefers, so, we are following set Owner’s rules:

1.         Loading

Reefers are checked by OOW, plugged in, and if any problems observed (hot loading, alarm etc) Ch Officer is informed, who takes further measures (calling ship’s electrician, shore technician, Agent, Captain etc).

2.         At sea

Temperatures are taken twice a day (6-10 am and 16-20pm).  Remark is made on units in alarm or defrosting.  These are inspected by electrician, and repair is undertaken if necessarry.  If alarm is only reset, and temperatures are OK, no further action is taken (but, reefer shall be checked by electrician daily, to ensure set temperature is maintained).

In case of “live” units (ie fruits, chilled meat etc) reefer shall be additionally checked by Ch.Off and Electrician at least once a day.

3.         On arrival Port (Australia) CS reefer technician boards the ship in order to check spares and arrange supply in Brisbane.  If he asks for repair/break-down report on any particular reefer, he gets it.  If all temperatures were OK, nobody asks anything.

Reporting/monitoring:

Daily readings twice a day are entered on printed computer reefer form by crewmembers reading it.  As there are no CS forms, only Owners form is filled with average daily reading.  If in times of reading unit was defrosting, than electrician takes a reading after defrosting period, and this one is entered in daily form.  Rough forms are generally kept for 5 years in archive, unless they were torn and, at the end, unreadable (am missing these for voyage in question).  Owner’s forms are also kept for 5 years.

If reefer cannot be repaired on board, if temperature exceedes set values, if there is any danger to cargo, Shanghai and Sydney are notified.  However, main care is for cargo, and not for reefer units themselves.  This meaning, if unit keeps breaking down, and/or alarming, but cargo is safe (withing temperature range), we shall not make special report assuming the CS technicians shall carry out repairs with data stored in memory.  However, CS technician shall be informed, and offered all data available.

Best regards

Although that information suggests that the ship maintained an effective system for monitoring refrigerated containers during Captain Bellotti’s tenure as master, the evidence does not support a finding that the same system was followed consistently during November 2005.

75                  Mr Andersson’s alternative hypothesis that the initiation of the pre-trip inspection was another abnormality occurring spontaneously as a result of the incompatibility between the controller and the software is also speculative.  It receives no support in the evidence related to the container or any experience with other controllers and software in the serial numbers affected by Carrier Corporation’s recall notice.  For these reasons, Mr Andersson’s contention is rejected.  Once it is accepted that a crew member initiated the pre-trip inspection, questions are raised as to why it was not done earlier in the long cycle of continuous defrost and why no further investigation of the problem was not undertaken in response to the alarms which were visible when the pre-trip inspection was carried out.  There is no answer to these questions which is consistent with an exercise of due diligence.

The defendant’s “tackle to tackle” argument

76                  It was contended on behalf of the defendant that the Hague-Visby Rules apply only in the “tackle to tackle” period from loading to discharge from the ship.  Counsel referred in support of that proposition to Nikolay Malakov Shipping Co Ltd v Sea Sapfor Ltd (1998) 44 NSWLR 371.  However, that was not a case which concerned a container which had been supplied by the carrier.  In Nikolay Malakov Shipping a cargo of timber was damaged after it had been discharged from the ship and placed in open storage at the port of Sydney.  In the present case, by contrast, I consider that the liability imposed on the carrier properly and carefully to discharge the goods extended to ensuring that the refrigerated container in which they had been carried did not have a propensity to become stuck in defrost while at the port terminal and before the goods could reasonably be expected to be removed from the container.  In my view, the following observations of Devlin J in Pyrene Co Ld v Scindia Navigation Co [1954] 2 QB 402, at 417 directed to the duty properly and carefully to load can be paraphrased to apply with equal force to the corresponding duty to discharge;

… The phrase “shall properly and carefully load” may mean that the carrier shall load and that he shall do it properly and carefully:  or that he shall do whatever loading he does properly and carefully. The former interpretation perhaps fits the language more closely, but the latter may be more consistent with the object of the rules. Their object as it is put, I think, correctly in Carver's Carriage of Goods by Sea, 9th ed. (1952), p. 186, is to define not the scope of the contract service but the terms on which that service is to be performed. The extent to which the carrier has to undertake the loading of the vessel may depend not only upon different systems of law but upon the custom and practice of the port and the nature of the cargo.  It is difficult to believe that the rules were intended to impose a universal rigidity in this respect, or to deny freedom of contract to the carrier. The carrier is practically bound to play some part in the loading and discharging, so that both operations are naturally included in those covered by the contract of carriage.  But I see no reason why the rules should not leave the parties free to determine by their own contract the part which each has to play. On this view the whole contract of carriage is subject to the rules, but the extent to which loading and discharging are brought within the carrier’s obligations is left to the parties themselves to decide. 

I reject the interpretation of loading in article 2 as covering only the second stage of the operation. Such authority as there is is against it. If loading under the rules does not begin before the ship's rail, by parity of reasoning discharging should end at the ship’s rail;  but so to hold would be contrary to the decision of Roche J. in Goodwin, Ferreira & Co. Ld. v. Lamport & Holt Ld. (1929) 141 L.T. 494.  (emphasis added)

I would add by way of gloss on the phrase to which I have added emphasis the words “and the equipment in which it is carried and discharged.”

Conclusion

77                  For the reasons which I have endeavoured to explain, I am satisfied that the damage to the goods arose or resulted from the breach by the defendant of its obligation under Article III r 2 properly and carefully to carry, keep, care for and discharge the goods.  The defendant has not discharged the onus imposed on it by Article IV r 2(p) of proving that the damage to the goods arose or resulted from a latent defect in the container not discoverable by due diligence.  The extent of the loss or damage to the goods after salvage has been agreed to be $130, 192.40.  As indicated by the evidence of Mr Southcombe summarised at [37] above and the conclusion reached at [76] above, no basis has been established for reducing that amount by reason of part of the loss having arisen or resulted from events which occurred on and after 2 December 2005 when the container had been discharged to the P&O Ports terminal at Melbourne.  There will therefore be judgment for the plaintiff in the sum of $130,192.40.

78                  I am provisionally inclined to the view that further orders should be made that the defendant pay the plaintiff’s costs of the application, including any reserved costs, together with interest on the said sum of $130,192.40 from 6 December 2005 in accordance with s 51A of the Federal Court of Australia Act 1976 (Cth).  However, in case the defendant wishes to contend for some other or different order in these respects, it shall have leave to file and serve by 19 July 2010 written submissions embodying those contentions.  Any answering written submissions on behalf of the plaintiff should be filed and served by 2 August 2010.

Associate:

Dated:         5 July 2010