FEDERAL COURT OF AUSTRALIA

STX Pan Ocean Co Ltd v Bowen Basin Coal Group Pty Ltd [2012] FCA 1508

THE COURT ORDERS THAT:

1.    The hearing dates of 3 and 4 December 2012 be vacated.

2.    The second defendant pay the plaintiff damages in the sum, including interest up to and including today of USD 534 087.84

3.    Interest is to run on the judgment at a rate of 3.01% per annum

4.    The second defendant pay the plaintiff’s costs of the remitter and the interlocutory application filed on 8 November 2012.

5.    The plaintiff have leave to apply to seek an order for an assessment of the costs payable on a lump sum basis.

THE COURT NOTES THAT:

6.    The second defendant was called outside the Court at 10:45 am and 3 pm and there was no appearance.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

1    This is an interlocutory application for the assessment of damages to which the plaintiff, STX Pan Ocean Co Ltd, is entitled, based on default of the second defendant, David Thomson, in complying with orders made on 11 October 2012 that he serve and provide to my associate a copy of his written submissions on or before 25 October 2012. The Full Court ordered on 29 February 2012 (Thomson v STX Pan Ocean Shipping Co Ltd [2012] FCAFC 15) that the matter be remitted to me to assess the damages caused by Mr Thomson’s fraudulent misrepresentations and misleading representations made in contravention of s 52 of the Trade Practices Act 1974 (Cth), the subject of my earlier judgments: STX Pan Ocean Co Ltd v Bowen Basin Coal Group Pty Ltd (No 2) [2010] FCA 1240 and STX Pan Ocean Co Ltd v Bowen Basin Coal Group Pty Ltd (No 3) [2010] FCA 1374.

The assessment issue

2    In my earlier reasons I had approached the assessment of the damages to which STX was entitled as against Mr Thomson on the basis that STX could recover its loss of profits for the use of the two ships, Yong An 2 and Izola, in the period of 11.1736 days between 6 and 17 May 2010. I had allowed STX to recover both the costs of the bunkers the two ships consumed in port at idle during that period, being motor diesel oil, and also the loss for net hire that it would have received for those ships in that period.

3    In allowing the appeal, the Full Court upheld Mr Thomson’s argument that the allowance for bunkers consumed in the 11 day period should fall away because the net income that would have been lost, if STX proved such a loss on the remitter, would have to take into account the costs incurred in deriving that income: Thomson [2012] FCAFC 15 at [59], see too [35]-[41]. The Full Court also considered that STX should be allowed a further opportunity to prove the value of any lost profit for the hire of each vessel over the 11 day period on the remitter.

Consideration

4    It seems to me that the reasoning of their Honours precludes me from acceding to STX’s submission that it suffered the two categories of loss that I had earlier found: namely, first, the loss of hire and, secondly, the value of the bunkers that were consumed while the vessels remained at idle in port by reason of the misrepresentations, on the basis that this was an expense that STX would not have incurred in any event. The Full Court’s attention was not drawn to the fact that, frequently, time charters require the charterer to pay the value of bunkers on delivery and provide that it receive a credit for their value on redelivery, in effect, making the charterer bear the whole expense of the bunkering of the vessel while she is under hire. The consequence of Full Court’s observation is that STX is only to be compensated for the loss of the profits that would have been derived from the 11 day period in which the ships might have been hired but not for the additional expenses of bunkering that, ordinarily, it would not have incurred had the ships been time chartered.

5    In my opinion, because no allowance is made for the actual expenditures STX incurred during that period for keeping the vessels at idle, it may be under-compensated. One example is the 1946 New York Produce Exchange (NYPE) form of time charter: Daebo Shipping Co Ltd v The Ship Go Star [2012] FCAFC 156 at [77] per Keane CJ, Rares and Besanko JJ. On the other hand, if STX had voyage chartered the ships, it may have had to incur the expense of bunkering.

6    The charters that STX entered with the first defendant, Bowen Basin Coal Group Pty Ltd, and maintained on foot for the 11 day period by reason of Mr Thomson’s misrepresentations were voyage charters on the Americanized Welsh Coal Charter form (1993 revision). That charterparty provided for demurrage to be payable at the rate of USD27,000 per day, or pro rata for part of a day. Thus, ordinarily it would be a question of fact whether the disponent owner in STX’s position would have been able to arrange an alternative fixture as a time or voyage charger and to whose account the bunkers would be under such a charter.

7    STX lost both the value of the potential hire of the vessels for the 11 days, and had to pay in the order of USD50,000 for her consumption of bunkers at idle. The Full Court appears to have overlooked the possibility that STX would readily have been able to negotiate a charterparty under which it would not have borne any cost for bunkers when they suggested the claim for bunkers would fall away as the net income derived from a proved loss of profits in that period would have to take account the cost incurred in deriving that income. Here, the cost of the bunkers actually consumed while the two ships were at idle was not a cost that was derived in earning the income; it was a cost thrust on STX as a result of Mr Thomson’s misrepresentations, which it might not have incurred had it been able to deploy the vessels profitably in charter parties over those 11 days.

8    I think, however, I am bound by the Full Court’s reasons for rejection of my assessment, although, with respect, I do not consider that their Honours were laying down any matter of principle in assessing such damages.

Is Mr Thomson in default?

9    STX proceeded today on the basis that Mr Thomson had defaulted in complying with the orders of 11 October 2012. He was already in default under my orders of 4 July 2012 under which he had to exchange written submissions by 17 August 2012 and replies by 31 August 2012. On 11 October 2012, I ordered that, if Mr Thomson failed to comply with his obligation to serve written submissions by 25 October 2012, STX was at liberty to apply by 9 November 2012 in an interlocutory application for the assessment of damages to proceed by default, which would be returnable before me today. That is what has STX proceeded to do. During the course of the hearing on 11 October 2012, counsel for Mr Thomson said that his instructing solicitors would cease to act shortly afterwards and would file a notice of ceasing to act. That is what happened and Mr Worcester, the solicitor for Mr Thomson, filed a notice of ceasing to act on 19 October 2012.

10    I am satisfied by the evidence of Mr Nicolaas van der Reyden that Mr Worcester informed Mr Thomson, before he ceased to act, of the Court’s orders of 4 and 11 July 2012, and provided him with a copy of STX’s written submissions dated 17 August 2012. Mr Worcester gave an address for service for Mr Thomson at his last known address in the notice of ceasing to act, and provided STX’s solicitors with an email address and two mobile phone numbers at which Mr Thomson could be contacted. Mr Thomson was hard to locate for the purposes of him being served in person, although it appears from the evidence that he opened the emails that STX’s solicitors sent to him after 18 October 2012 at the email address Mr Worcester had given.

11    When STX filed the interlocutory application with which I am dealing today it attempted to serve Mr Thomson personally. He did not file any address for service as he was required to do under r 4.05(2) of the Federal Court Rules 2011 (Cth) in the event, which is unclear, that Mr Worcester had terminated his retainer. And, if Mr Thomson terminated the retainer, he otherwise failed to file a notice of termination of Mr Worcester’s retainer in accordance with Form 6, together with a notice of his address for service in accordance with r 4.04(2).

12    Process servers were unable to find Mr Thomson at the address for service provided by Mr Worcester or at another address which the process server was informed was the address at which his ex-wife now lived. However, on 9 November 2012 Mr van der Reyden sent to Mr Thomson’s email address sealed copies of the interlocutory application and supporting affidavit that were made for the hearing. On 10 November 2012, Mr van de Reyden received an email indicating that his previous email had been read, being an automatic email reading response. Subsequently, when I made directions on 13 November 2012 that a court book of evidence to be relied on at the hearing today be provided to me and Mr Thomson, Mr van der Reyden again sent four emails each containing a portion of the court book to Mr Thomson’s email address and yesterday Mr van den Reyden received two emails confirming that two of those four emails had been read or at least opened by Mr Thomson.

13    In all the circumstances I am satisfied that Mr Thomson is fully aware of today’s hearing. In any event, by failing to comply with his obligation to give an address at which he is capable of being served, he is also in default under r 5.22(a). I am satisfied that it is appropriate for the Court to proceed to deal with the interlocutory application. Mr Thomson was called twice outside the Court today, first at 10.45 am and then this afternoon when the matter returned for the hearing following the completion of other matters in my list. He has not appeared. He is also in default of the order of 11 October 2012 to serve his written submissions by 25 October 2012 (r 5.22(b)) and to appear today (r 5.22(c)).

What loss did STX suffer?

14    I am satisfied by the evidence of Mr Ahn that had he been aware that each of the ships was available on 6 May 2010 he would immediately have sought to fix them under sub-charters so that they would be profitably employed. I am satisfied by the evidence of his superior, Mr Sang Jae Lee, that he would have approved Mr Ahn acting in that way.

15    The plaintiff called evidence from two experts, Simon Everton, a ship broker who was a member of the Baltic Exchange in London, and Mr Anderson de Silva, the ship broker in Perth who had been involved in the original fixing of the two ships from 17 May 2010. Each of them deposed to the charter market being relatively strong in the month of May 2010. Each of them considered that he, and reasonable persons in the market in that period, would have been able to fix the ships on, or shortly after, 6 May 2010 because of the availability of good cargos, both in China, where Yong An 2 was anchored awaiting the resolution of Bowen Basin’s position, and Izola, which was at Kwinana awaiting instructions to load.

16    Mr Everton’s evidence is that a major ship broking company called Icap, formerly J.E. Hyde, publishes on its own indices for Handymax vessels such as Yong An 2 and Izola. Each vessel had a displacement of about 45,000 metric deadweight tonnes. Mr Everton considered that these indices, while not as independent as the Baltic Exchange indices, had a good reputation for reliability and were a helpful guide to the market rates for smaller Handymax vessels of around the tonnage of the two ships. Those indices indicated that on 6 May 2010 the daily market rate for Handymax vessels of about 45,000 metric deadweight tonnes was USD22,250. In my opinion, that is the appropriate figure to use as a figure for the assessment of damages.

17    It may have been that the ships would have been chartered a day later, when the rate had gone up by USD500 a day and possibly later still when the rates continued to increase. There may also have been some deductions for commission and the like that ought be taken into account. But doing the best I can, I think it is appropriate to adopt USD22,250 as the rate for which each of the two ships could, and would, have been chartered on 6 May 2010. Of course, Yong An 2 would not have been able to be delivered to the sub-charterer until she had discharged her cargo of coal in China.

18    It is likely that both of the hypothetical sub-charters would have provided for the sub-charterers to pay the value of bunkers on delivery and to get credit for them on redelivery on a back-to-back basis with STX’s head charters. In fact, the sub-charter of Yong An 2 that was ultimately entered into following her actual discharge of the cargo was on those terms under a time charter on the 1946 NYPE form. The voyage charter for Izola that was ultimately entered into on the Uniform Australian Grain Charter 2002 form, was amended to provide for the sub-charterer to bear the cost of bunkering.

19    Accordingly, I am satisfied that STX would have been able to fix both ships on sub-charterers under which the sub-charterers paid hire at the rate of USD22,250 per day and bore the cost of bunkering. On that basis the value of total amount of lost hire for the 11.1736 days for the two ships is USD497,225.20.

20    STX initially claimed interest based on a mistaken assumption, that Australian interest rates damages applied to damages in United States dollars. However, STX has now given evidence of the United States dollars overdraft facility interest rate it has with its bank. Under that facility it is charged a rate of interest with a margin over the LIBOR (3M) rate. I think it is sufficiently notorious that the Federal Reserve of the United States has kept interest rates on United States dollars in that country at a very low margin at or just above zero. The LIBOR (3M) rate as at today is 0.31% and the margin currently applicable for STX on its facility is 2.7%. Interest from 1 June 2010 to today on those rates totals USD36,862.64.

Associate:                        Dated:    5 February 2013