FEDERAL COURT OF AUSTRALIA

Toll Holdings Ltd v Stewart [2016] FCA 256

ORDERS

THE COURT ORDERS THAT:

1.    Leave be granted to:

(a)    the applicants pursuant to s 440D of the Corporations Act 2001 (Cth) to proceed in respect of the relief sought in the Amended Originating Application filed 29 February 2016; and

(b)    the second respondent/cross claimant pursuant to ss 440B and 440D of the Corporations Act 2001 (Cth) to proceed in respect of the relief sought in the Amended Cross-Claim filed on 10 March 2016,

on the condition that no step is taken to enforce any judgment against the third respondent/fourth cross respondent, without a further grant of leave.

2.    It be declared that the first and third respondents have as against the applicants and the second respondent the right of possession of the goods shipped under bills of lading numbered TSZX2271812, TSZX2271874, TSZX2293155, TSZX2294689, TSZX2294711, TSZX2294643 (the Goods).

3.    The applicants do all that is necessary to be done by them for the release of the goods to the first and third respondents.

4.    Judgment be entered for the second respondent/cross claimant (Shenzhen MTC Co Ltd) against the applicants/cross respondents (Toll Holdings Ltd and Toll Global Forwarding (Hong Kong) Ltd) on the Cross-Claim in conversion in a sum to be assessed.

5.    The application for relief sought in the Amended Originating Application filed 29 February 2016 be dismissed.

6.    The applicants pay the respondents’ costs of the proceedings.

7.    The matter be listed for directions as to the assessment of the second respondent’s damages and determination of liability for storage and container demurrage charges on 1 April 2016.

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

REASONS FOR JUDGMENT

RARES J:

1    On 4 January 2016 Dick Smith Electronics Pty Limited (the third respondent), a large domestic retailer of electronic goods, appointed administrators to itself pursuant to s 436A(1) in Pt 5.3A of the Corporations Act 2001 (Cth). Later on the same day a syndicate of secured lenders of Dick Smith appointed James Stewart, Jim Sarantinos and Ryan Eagle (the first respondents) as receivers and managers of Dick Smith. On 5 January 2016, the receivers announced in a circular to creditors that they intended to trade Dick Smith’s business in the ordinary course while they assessed its financial position.

2    On 30 March 2015, Toll Holdings Ltd (THL), the first applicant and Dick Smith entered into a master services agreement (master Toll agreement) for THL and its subsidiaries, including Toll Global Forwarding (Hong Kong) Ltd (TGF), the second applicant, to provide freight forwarding services to Dick Smith both in Australia and internationally. Unless it is necessary to make a distinction between THL and TGF, I will refer to them in these reasons collectively as Toll.

3    In March 2015, Dick Smith had entered into an overseas vendor trading agreement with a Chinese company Shenzhen MTC Co Ltd, for supply of electronic goods. Prior to this, Dick Smith and MTC had operated under a commercial arrangement since September 2014. From 1 June 2015, Dick Smith and MTC agreed that Dick Smith had an “open account 90 days” for purchases from MTC, allowing Dick Smith 90 days from the date of shipment to pay MTC. This change of credit arrangements coincided with MTC also agreeing to procure “telex release” bills of lading to be sent to Dick Smith by email in lieu of MTC requiring original bills of lading to be presented in order to obtain delivery of the goods at their destination. (I will refer to those amended contractual arrangements as the MTC agreement.) These contractual arrangements operated in respect of seven cargoes shipped to Dick Smith from ports in China. The seven cargoes consisted of 17 containers loaded with television sets that MTC shipped to various Australian ports on seven shipped on board bills of lading issued between 21 and 30 December 2015. MTC caused Dick Smith to receive seven “telex release” bills for those seven cargoes between 28 December 2015 and 4 January 2016.

4    On 5 January 2016, at 16:40 (or 13:40 in China) MTC emailed TGF instructing it to “hold” delivery of cargoes carried under 12 bills of lading, including the seven bills now in issue, and to help “recall” those cargoes. TGF responded at 17:04 (or 14:04 in China) that the cargo being containers, under bill (TSZX2271791) had been released, but the cargoes covered by the other seven bills were “on hold”. MTC has a separate claim against Toll in conversion in respect of one of those bills (TSZX2271795) (the 1795 bill). I will refer to the other six telex release bills under which 14 containers were shipped as the six bills. Subsequently, on 7 January 2016, MTC emailed instructions to TGF to change the telex release bills into original bills of lading and to change the consignee from Dick Smith to “to order”. MTC also sent an email to Dick Smith on 7 January 2016 that stated “all MTC TVs that are on the water and not yet received into Dick Smith are the property of MTC”.

5    On 7 January 2016, Toll issued original “to order” bills in respect of the six unreleased cargoes. Between 7 and 18 January 2016 Toll issued electronic delivery orders to ACFS Port Logistics Pty Ltd, Dick Smith’s cartage and container unpacking contractor, to enable ACFS to pick up the containers carried under each of the six bills and the 1795 bill before the expiry of the 72 hours’ free storage offered by the Australian stevedores who discharged the cargoes on arrival at their ports of destination. ACFS carried the 17 containers into its Australian Customs’ bonded warehouses. There, at least, the 14 carried under the six bills remain in bond because Toll asserts that it has not paid a Customs fee of $194 each for its entry for home consumption of each such cargo. MTC’s invoiced price for the cargoes carried under the six bills was USD1,367,100.50.

6    On 25 February 2016, the receivers announced that the remaining Dick Smith stores in Australia would close in about eight weeks. They said that this was because the business sale process, that they had instituted earlier, had resulted in offers that were significantly below liquidation values, highly conditional or both.

7    On 26 February 2016, Toll began these proceedings seeking to interplead under r 18.01 of the Federal Court Rules 2011 (Cth) in what Toll characterised as a dispute between Dick Smith and MTC as to which was entitled to take delivery of the 14 containers carried under the six bills held by ACFS in Customs bond. The question of whether the receivers are entitled to sell the television sets, some of which bear Dick Smith’s branding, is urgent given the imminent closure of Dick Smith stores.

8    Dick Smith cross claimed for orders that it is entitled to delivery of the cargoes carried under the six bills. MTC cross claimed for orders that it had the right to stop those cargoes in transitu and the cargoes be delivered up to it and, if it did not have that right, for damages against Toll for conversion of those six cargoes. MTC also sought damages for conversion of the cargo carried under the 1795 bill, the invoice price of which was USD398,492.80.

Issues

9    The following issues were in dispute at the hearing:

(1)    Should each of Toll and MTC be granted leave to proceed against Dick Smith or in respect of its undisputed property (in the cargoes) under ss s440B and 440D of the Corporations Act (the leave to proceed issue)?

(2)    Did MTC give an effectual notice to Toll on 5 or 7 January 2016 of stoppage in transitu for the purposes of ss 42(1), 46, 47 and 48 of the Sale of Goods Act 1923 (NSW) (the notice issue)?

(3)    If MTC did give an effectual notice of stoppage in transitu, does Toll still have possession of the cargoes or did ACFS take possession of them as agent for Dick Smith when collecting them from the wharves (the delivery issue)?

(4)    Can Toll interplead or did it collude with MTC, for the purposes of r 18.05(1)(b), by issuing the to order bills of lading (the interpleader issue)?

(5)    Is Toll liable in conversion to MTC for releasing six cargoes and or the cargo carried under the 1795 bill (the conversion issue)?

The statutory regimes

10    The rights of an unpaid seller of goods where, as is agreed to be the position here, property in the goods has passed to the purchaser, conferred by Pt 5 of the Sale of Goods Act are, relevantly:

42    Unpaid seller’s rights

(1)    Subject to the provisions of this Act and of any statute in that behalf, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods as such has by implication of law:

(a)    a lien on the goods for the price while the seller is in possession of them,

(b)    in case of the insolvency of the buyer a right of stopping the goods in transitu after the seller has parted with the possession of them,

(c)    a right of resale as limited by this Act.

…

46    Right of stoppage in transitu

Subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transitu, that is to say, the seller may resume possession of the goods as long as they are in course of transit, and may retain them until payment or tender of the price.

…

47    Duration of transit

(1)    Goods are deemed to be in course of transit from the time when they are delivered to a carrier by land or water or other bailee for the purpose of transmission to the buyer until the buyer or the buyer’s agent in that behalf takes delivery of them from the carrier or other bailee.

…

(3)    If after the arrival of the goods at the appointed destination the carrier or other bailee acknowledges to the buyer or the buyer’s agent that the carrier or other bailee holds the goods on the buyer’s behalf and continues in possession of them as bailee for the buyer or the buyer’s agent, the transit is at an end, and it is immaterial that a further destination for the goods may have been indicated by the buyer.

…

48    How stoppage in transitu is effected

(1)    The unpaid seller may exercise the seller’s right of stoppage in transitu either by taking actual possession of the goods or by giving notice of the seller’s claim to the carrier or other bailee in whose possession the goods are. The notice may be given either to the person in actual possession of the goods or to the person’s principal. In the latter case the notice to be effectual must be given at such time and under such circumstances that the principal, by the exercise of reasonable diligence, may communicate it to the principal’s servant or agent in time to prevent a delivery to the buyer.

(2)    When notice of stoppage in transitu is given by the seller to the carrier or other bailee in possession of the goods, the carrier or other bailee must redeliver the goods to or according to the directions of the seller. The expenses of the redelivery must be borne by the seller. (emphasis added)

11    Relevantly, s 435A of the Corporations Act provides that the object of Pt 5.3A is to provide for the business, property and affairs of an insolvent company to be administered in a way that maximizes the chances of the company, or as much as possible of its business, continuing in existence or, if that is not possible, results in a better return for its creditors and members than would result from an immediate winding up. Under ss 440B and 440D, the Court may grant persons leave to proceed against a company, such as Dick Smith, during its administration as follows:

440B    Restrictions on exercise of third party property rights

General rule

(1)    During the administration of a company, the restrictions set out in the table at the end of this section apply in relation to the exercise of the rights of a person (the third party) in property of the company, or other property used or occupied by, or in the possession of, the company, as set out in the table.

Note:    The property of the company includes any PPSA retention of title property of the company (see section 435B).

…

440D    Stay of proceedings

(1)    During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:

(a)    with the administrator’s written consent; or

(b)    with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

Background

12    The facts are not substantially in dispute. Rather, the legal characterization and consequences of the facts are in dispute. I will set out the further essential facts necessary to determine the issues in addition to the introductory summary above. This involves examining the contractual positions between Dick Smith and, first, Toll, secondly, ACFS and, thirdly, MTC so as to ascertain when the parties contemplated that delivery to Dick Smith of goods sold by MTC would occur. This is because, as s 47(1) of the Sale of Goods Act provides, the duration of the transit during which a vendor can exercise its right to stoppage in transitu, ends when the goods are delivered to the buyer or “the buyer’s agent in that behalf” takes delivery of them. Next it is necessary to determine what actually occurred so as to ascertain, in accordance with the principles in the cases whether the transit did come to an end.

13    The master Toll agreement described Toll as “the LSP” (logistics service provider). It began operation on 1 April 2015. It contemplated that Dick Smith would enter into a statement of work (SOW) with subsidiaries of Toll each of which would be called a “SOW Contract” and would define the services that the LSP (as the contracting Toll party was generically described) would provide (cll 1, 4). Toll and Dick Smith agreed that, relevantly, the terms of the master Toll agreement would prevail over any inconsistency in a SOW Contract (cl 6).

14    Toll promised in cl 7.1 that, in the absence of an event of force majeure or certain other exceptions, it would provide the promised services in accordance with the terms of the master Toll agreement and the relevant SOW Contract. Those terms included that the LSP had to work co-operatively with Dick Smith, supply the services in a safe and efficient manner and act under any reasonable directions given by Dick Smith within the scope of the agreement (cl 7.2(a), (c), (d)). The LSP had power to subcontract, to any person on any terms, the performance of part or all of the services (cl 7.6(a)). Each party had the right to terminate the master Toll agreement if the other party was or became insolvent, or, went into receivership or administration (cl 21.1(b)). The governing law was that of New South Wales (cl 26.12).

15    On 30 March 2015, Toll and Dick Smith executed an SOW Contract for domestic freight services (the domestic SOW Contract). Relevantly, this described the outline of services that Toll would provide in cl 4.1 as below:

Outline of Services

1.    Dick Smith Chullora Distribution Centre (“DC”)/Hubs to Dick Smith Stores (“Stores”)/Commercial Customers

Toll will be responsible for the transportation of Goods within Australia from the DC and/or Hubs (eg ACFS at Port Botany) to both Stores and third party businesses/customers nominated by Dick Smith. (emphasis added)

16    The domestic SOW contract defined a “Hub” as meaning designated Dick Smith hubs specified in the operational procedures (cl 10).

17    Also on 30 March 2015, Toll and Dick Smith executed a “SOW Contract – China DC, International Carriage and Customs Clearance” (the China SOW Contract). This provided relevantly that:

    In section 4:

    With regards to Goods travelling via FCL sea carriage … Toll will take custody and control of the Goods when the Dick Smith Vendor has transferred the Goods on the vessel …

Toll must ship direct vendor shipments by FCL (Full Container Load) … ocean freight … as instructed by Dick Smith (cl 2.2). (emphasis added)

    Toll would provide Customs clearance services for inbound (to Australia) shipments from China and Dick Smith would pay all import duty due to Customs by direct debit (cl 3.1).

    Toll must provide the EDO (Electronic Delivery Order) to Dick Smith’s cartage service provider “ACFS” … with copies to relevant Dick Smith personnel as nominated by Dick Smith and notified to Toll from time to time, and ACFS will be responsible to Dick Smith from the ports of arrival for the container … deliveries to the Dick Smith Australian DC/hubs …

    …

    For the avoidance of doubt, unless otherwise agreed and varied in this SOW Contract, Dick Smith is responsible for all matters involving wharf cartage of freight within Australia including but not limited to coordination of instructions to and payment of its supplier. …

    Toll must provide to both Dick Smith and ACFS … an automated report for all shipping data, to be visible and updated at each point of a shipment, including date of loading at point of origin, date of ship departure, date of ship arrival and date of shipment clearance (cl 3.2). (emphasis added)

    In section 10:

    by force of special condition 1, the terms of Toll’s relevant carriage document were to apply to the goods as SOW special conditions “for the duration of the carriage of those goods by sea …”. Sample carriage documents were annexed and included both a non-negotiable sea waybill and an “original ocean or combined transport bill of lading” each of which had a pro forma signature block nominating TGF as signing on behalf of the carrier; and

    special condition 2 incorporated appendix B as further special conditions. These provided, relevantly, that if Dick Smith requested Toll to advance any duties or imposts at any port in respect of the goods landed and Toll accepted the request, then Dick Smith would indemnify Toll for its disbursement.

18    Under their standard operating procedure for China, Dick Smith and Toll agreed, among other matters that:

    a shipper or vendor would provide TGF at origin with shipping documents, including a telex release or original bill of lading;

    TGF would issue a house bill of lading, but if the vendor requested an original bill of lading, TGF at origin would release it to the shipper. However, TGF would charge a telex release fee, if the shipper, having requested an original bill of lading, subsequently requested a telex release one (section 4.2);

    TGF would send pre-alert information to Toll at the destination within five working days of the vessel’s departure, including copies of the bill of lading and or telex release (section 4.2);

    in section 9.1, as follows:

Delivery Requirements

    Toll will offer a Freight Forwarding Service from Supplier directly into DS/DC.

    The main Dick Smith DC is in SYD, but each hub, MEL, BNE, PER has “warehouse”/Cross dock facility.

    All sea freight is delivered to either IPEC depot or Dick Smith depot by ACFS. (emphasis added)

    in section 9.2, there was a special requirement that ACFS would be responsible for FCL deliveries; and

    in section 9.4, TGF was responsible for sending ACFS:

    a delivery order on or the day before the estimated date of arrival; and

    all shipping line electronic delivery orders [that had PIN numbers to allow ACFS’ drivers to collect the containers from the wharf].

Dick Smith’s arrangements with ACFS

19    Prior to 4 January 2016, Dick Smith had agreed particular cartage rates with ACFS for collection of standard 20’ and 40’ container loads form terminals at ports, such as Brisbane and Melbourne, where its cargoes were landed. Roshan Perera, Dick Smith’s international logistics co-ordinator, attached to his first affidavit examples of agreed rates between ACFS and Dick Smith effective for the period between 1 March 2015 and 31 August 2016. The rates were for collection of containers from the terminals during the period of about 72 hours free time that the terminal operators allowed after a container had been landed, for transfer via ACFS’s local depot and then for handling, unpacking, redelivery of the goods to Dick Smith, and return of the empty container to the carrier.

20    Toll’s client relationship manager, Ahmed Arfan-Sayed, explained the practice of dealings between Toll and ACFS. He said that after Toll received permission from Customs for an under bond movement of the relevant arrived cargo, it notified ACFS, by sending it an electronic delivery order. That order would enable ACFS to collect from the terminal and deliver the containers into ACFS’ warehouse.

21    Mr Perera explained that, prior to 4 January 2016, Dick Smith had a direct debit arrangement in place with Customs. That arrangement operated so that any Customs duty or fees owed by Dick Smith in respect of goods that it imported was paid automatically. He said that Toll “pre-cleared” all Dick Smith import shipments so that the arrived containers could be collected from the wharf as soon as the ocean carrier made them available. I infer that as and when Toll entered an importation for home consumption, Customs activated the direct debit and collected the duty applicable or fee due.

22    The direct debit arrangement ceased on 4 January 2016. That change is of some significance in the present circumstances, since the Customs fees for the entries for home consumption of the cargoes carried under the six bills have not been paid.

The MTC agreement and background

23    Dick Smith and MTC agreed in the MTC agreement relevantly that:

    “Delivery Address” meant “Dick Smith’s freight forwarders nominated from time to time …” (cl 2);

    FOB means free on board in accordance with the INCOTERMS 2012 and means the Supplier [MTC] shall be responsible and liable for all packing costs, the costs of commercial documents, Inland delivery to the first carrier, inland delivery to the vessel or aircraft, wharfage and export customs. The Supplier shall also be responsible for the costs of obtaining an airway bill or bill of lading which shall be included in the Free on Board value (cl 2). (emphasis added)

    Dick Smith could place purchase orders with MTC and, where not inconsistent, the terms of the MTC agreement would apply to the individual purchase agreement that then would be formed by MTC’s acceptance of the purchase order (cl 5);

    MTC’s quoted prices would be “FOB shipping point to the Delivery Address” (cl 6.3(a));

    MTC had to issue an invoice and any delivery documentation that Dick Smith notified for the goods “at the time the Goods are delivered to the Delivery Address, and not any time before” (cl 7.1);

    Title and property in the Goods passes to Dick Smith on delivery to the Delivery Address (cl 8.1).

…

    Dick Smith’s acceptance of the Goods at the Delivery Address is not an acceptance that the

(a)    Goods are undamaged;

(b)     total number of Goods required to be delivered has been received; nor

(d)    Goods comply with the relevant Purchase Agreement’s terms (cl 8.3). (emphasis added)

    The Supplier must meet all dates and times for delivery of the Goods to Delivery Address as set out in the relevant Purchase Order or any later time that Dick Smith otherwise notifies or allows to the Supplier (cl 9.1).

    The Supplier must deliver the Goods to the Delivery Address notified to the Supplier in the relevant Purchase Order or as Dick Smith otherwise notifies the Supplier (cl 9.4).

    the law of New South Wales and the Commonwealth of Australia was the governing law (cl 21.1); and

    the United Nations Convention on Contracts for the International Sale of Goods (known as the Vienna Convention) did not apply (cl 21.2).

24    Dick Smith’s printed purchase order forms, used in its relevant transactions with MTC, included trading terms that provided, consistently with the MTC agreement, that:

    MTC had to deliver the goods (purchased) to nominated sites within the lead times specified in the purchase order (cl 2);

    title to and risk of the goods passed to Dick Smith on acceptance by it in accordance with cl 6 (cl 5);

    Dick Smith would be deemed to have accepted goods that did not require installation and testing [such as those included in the seven telex release bills of lading] upon their “delivery … to the nominated site” (cl 6).

25    On 6 and 11 November 2015 and 4 December 2015, Dick Smith placed a total of 10 purchase orders with MTC for the seven cargoes of televisions the subject of these proceedings. The parties accepted that there was no material distinction between any of those transactions or what happened in respect of those cargoes after they arrived in Australia and that analysis of the factual and legal circumstances of one would determine the fate of all (subject only to any different considerations apposite to the cargo carried under the 1795 bill). Thus, for simplicity I will deal with only one of those cargoes below.

26    On 6 November 2015, Dick Smith sent MTC purchase order 2038356 (order 356) for numerous varieties of televisions for a total FOB price ex China of USD259,510.90. Order 356 commenced with an instruction to MTC to “Forward to Toll Group Sinotrans Shenzhen Logistics … For delivery to ACFS WA 3 PL hub” (emphasis added).

27    On 17 December 2015, MTC issued invoice 15MTCQ340 (invoice 340) for a total price of USD151,517.60 to Dick Smith in respect of some, but apparently not all, of those 928 televisions being required by order 356 and another order. Invoice 340 noted that the goods would be shipped from the port of Chiwan on board Maersk Virginia on 22 December 2015 for discharge at the port of Fremantle. On the same day, MTC also issued for that cargo:

    a shipping advice that described the total of 928 televisions it comprised as being the contents of two specified shipping containers;

    a packing list;

    a packing declaration; and

    an original certificate of origin of the goods.

28    On 22 December 2015, TGF issued a bill of lading TSZX2271874 stamped “TELEX RELEASE” on a Toll form headed “Copy Ocean or Combined Transport Bill of Lading” (the 1874 bill). The 1874 bill recorded that TGF had issued it at Shenzhen on 22 December 2015 and:

    named MTC as shipper;

    named Dick Smith as both consignee and notify party;

    directed that any application for delivery of the goods be made to Toll in Kewdale, Western Australia;

    specified both the place of receipt and the port of loading as Chiwan, China;

    specified Fremantle as the port of discharge;

    recorded that the goods had been shipped on board on 22 December 2015;

    stated “Freight Collect”; and

    stated “Original Bill – Surrendered at Origin”.

29    On 25 December 2015, MTC sent TGF in Shenzhen a “telex release requirement letter” in respect of, among others, the 1874 bill under which MTC accepted responsibility for any risk caused by the telex release. Mr Perera gave unchallenged evidence that he did not recall ever having received a copy of such a letter. I infer that only MTC and TGF knew of MTC’s practice of issuing TGF with such letters.

30    On 28 December 2015, MTC emailed Mr Perera with shipping documents in respect of four invoices, including invoice 340. The email heading referred to purchase orders, including order 356, and attached shipping documents that I have described above and the telex release 1874 bill. The email also contained the following pro forma instruction that appeared in many of MTC’s emails:

***CARGO CAN NOT BE RELEASED WITHOUT THE ORIGINAL BILL OF LADING OR OUR TELEX RELEASE INSTRUCTION, AND PLEASE INFORM YOUR DESTINATION OFFICE/AGENT ABOUT THIS WARNING ACCORDINGLY.*** (emphasis added, block letters in original)

Immediately below there was an instruction in Chinese script that, translated, stated:

Please issue bill of lading or FCR according to SI; your attention will improve our working efficiency.

31    As noted above, Dick Smith appointed administrators and some secured lenders appointed the receivers to it at some time during 4 January 2016. As a consequence of the events of 4 January 2016, Dick Smith’s direct debit facility enabling immediate payment to Customs was cancelled.

32    On 4 January 2016, in accordance with the usual course of business, Mr Perera emailed to Toll the shipping documents for the 1874 bill (excluding the bill itself) for the purpose of obtaining Customs clearance and delivery of the relevant cargo.

33    On 5 January 2016, Toll emailed ACFS with advices or electronic delivery orders relating to the arrival in Fremantle of the two FCL containers carried on Maersk Virginia together with corresponding electronic delivery orders for the same containers issued by the ocean carrier, or its agent Hamburg Sud Australia Ltd. Toll’s arrival advices specified the estimated arrival date for the ship as 6 January 2016, the house bill (i.e. the 1874 bill) and ocean bill numbers under which the containers had been carried, and directed delivery of the containers by 10 January 2016 to:

Dick Smith Electronics

ACFS Fremantle

34    The attached Hamburg Sud electronic delivery orders had individual PIN numbers that the ACFS truck driver had to use in order to collect each container from the terminal at the wharf where the ship discharged the cargo.

35    Also on 5 January 2016, as noted above, MTC emailed TGF at 16:40 (Australian Eastern Daylight Time) in a mixture of the Cantonese and English that, when combined, relevantly read, first, in the email heading “DSE: please urgently hold cargo, and recall. Urgent Case!”, and secondly, in the text above a schedule of 12 bills of lading:

Please hold the cargo shown under the following B of L and help recall.

Letters in black are notified telex release, letters in red are not telex release. (emphasis added)

36    The schedule stated estimated dates of arrival for eight of the bills of lading, including the 1874 bill and the other seven in issue, all of which, were identified in black except for a bill of lading that had an estimated date of arrival of 2 January 2016 (and which is not in dispute). The email also contained the same pro forma instruction I set out at [30] above. As I explained at [4] above, Toll promptly responded on 5 January 2016 that seven of the cargoes were “on hold” but that, in respect of the eighth “containers are already released”.

37    On 7 January 2016, MTC sent a further email to TGF headed:

DSE: please change telex release B/L to OBL, change consignee To Order.

The text of the email read, relevantly:

Please treat this email as prevailing over the previous email.

I summarise today what Barbara and Grace emailed to you as follows. Please action and respond.

Thank you

38    OBL is an acronym for “original bill of lading”. The email then set out a table of two columns headed respectively “B/L” and “MTC requirements”. The table listed 11 bills of lading. These included the seven in issue and stated the following two (translated) MTC instructions for each of them:

1. Change telex release B/L to OBL

2. Change consignee on bill to To Order

39    Following those instructions, TGF promptly issued original to order bills of lading (and not copy ones, as had been the case with the corresponding telex release bills) for the same cargoes and, of course, omitted any name for the consignee. In addition, each original bill contained the endorsement “Original Bill Required at Destination” in lieu of “Original Bill – Surrendered at Origin”.

40    Mr Perera gave evidence that Toll has refused to release the goods the subject of the six unaccomplished bills. However, that is not strictly accurate. Toll has refused to pay the outstanding fee due to Customs on the entries for home consumption for each cargo. Those cargoes remain in bond. Among other matters, the parties are at issue as to which is liable to ACFS for storage charged for the containers it is holding (currently accruing at AUD308 per day) and to the ocean carriers (for container detention charges) for the periods after the carriers’ allowed free time (accruing at about AUD2,300 per day). Those charges now exceed AUD100,000.

41    Also on 7 January 2016, the receivers and Dick Smith entered into a deed (the Toll deed) so that Dick Smith could, but would not, continue its arrangements with Toll. The parties acknowledged that but for the Toll deed, Toll could exercise a lien over goods held by it (recital C, cl 1(c)). Toll promised to continue to provide all services under the master Toll agreement as and when the receivers directed, including to complete any outstanding and unfulfilled orders placed by Dick Smith prior to 4 January 2016 (cl 2(e)). And, the parties agreed that they continued to be bound by the master Toll agreement (cl 3(a)). The Toll deed made no reference to the matters the subject of these proceedings.

42    On 18 January 2016, ACFS collected from Toll the last of the containers shipped under the seven bills of lading in issue and took it to a bonded warehouse.

43    On 21 January 2016, Toll emailed ACFS with a list that included some of the containers that ACFS held in bond in Melbourne, Brisbane and Fremantle and stated: “Please hold these as underbond shipments for us”. The email made no reference to other containers in issue that ACFS held in bond in Sydney.

44    On 25 January 2016, MTC emailed Dick Smith and informed it that MTC held original bills of lading for all the cargoes in an attached list. MTC said that it had cancelled the telex release bills because of Dick Smith’s insolvency and “then forwarder [scil TGF] issued original BLs accordingly”. On 26 January 2016, MTC emailed Toll and requested return of the goods carried under, among others, the six bills.

45    On 28 January 2016, pursuant to s 439A(6) of the Corporations Act, Yates J granted the administrators an extension of six months, to 2 August 2016, in which to convene second meetings of Dick Smith’s creditors.

46    On 16 February 2016, the receivers and Dick Smith entered into a Customs payment deed with Toll. The recitals referred to the provisions in the China SOW Contract for payment of duties and imports, including the special condition in appendix B that enabled Dick Smith to request Toll to make such payments on its behalf. Toll agreed to pay directly to Customs, and then seek reimbursement from Dick Smith, all amounts that would have been payable by Dick Smith under cl 3.1 of the China SOW Contract except for, among others, the goods the subject of the six bills (cl 1(e)). The parties agreed that the receivers and Dick Smith would not require Toll to pay charges and imports to clear and release those goods, or other goods imported pursuant to a bill of lading to which either Toll or Dick Smith was not entitled to possession, or goods for which the shippers had not provided written consent allowing their release to Dick Smith (cl 1(e)). They also agreed that Dick Smith could apply to a court for release of any goods held by Toll pursuant to cl 1(e) (cl 1(f)).

47    On 10 and 11 March 2016, the solicitors for the administrators wrote to MTC and Toll informing them that the administrators neither consented to, nor opposed, the applications for leave to proceed against Dick Smith under ss 440B and 440D. However, the administrators said that if leave were granted, they expected that MTC and Toll would apply for a further grant of leave before seeking to enforce any verdict or judgment against Dick Smith.

1.    The leave to proceed issue – consideration

48    I reject Dick Smith’s argument that granting leave to each of Toll and, that particularly, MTC, to proceed would give some undue preference to either of them or subvert the object of Pt 5.3A.

49    Toll asserted against Dick Smith that it was a stakeholder of the cargoes in bond the subject of the six bills and so was entitled to interplead between the persons asserting a right to delivery of those cargoes, namely Dick Smith and MTC. Toll also argued that if it were not entitled to interplead, although it claimed no proprietary interest in those cargoes, its stance in respect of them had exposed it to contested issues of liability to give possession of them, as Dick Smith sought, or in conversion, as MTC asserted.

50    MTC asserted an interest as a vendor entitled to exercise, and to the benefits of its asserted exercise, on 5 and 7 January 2016, of the right of an unpaid vendor to stoppage of the cargoes in transitu. If MTC were not entitled to the benefit of its right to have stopped the cargoes in transitu before delivery to Dick Smith, it claims in conversion against Toll.

51    I am of opinion Dick Smith and the receivers are proper and necessary parties to each of Toll’s and MTC’s claims in these proceedings. The issue of who is entitled to the cargoes self-evidently requires an urgent, judicial decision.

52    The conduct of the receivers in opposing leave to proceed sought by Toll and MTC is difficult to understand. They act as agents of Dick Smith through the authority conferred by securities it granted their secured appointors. Those lenders took those securities to protect them against the consequences of Dick Smith defaulting on its obligations under the loan agreements or becoming insolvent. No doubt, by entering into administration on 4 January 2016, Dick Smith committed an act of default under the securities entitling the syndicate of lenders to enforce their securities.

53    In the present commercial circumstances, the receivers are conducting closing down sales of Dick Smith’s business over about the next six weeks. They hope to sell the disputed cargoes to engorge the receipts of that process while leaving MTC in the position of being an unsecured creditor, without the benefit, if it can establish it, of its asserted stoppage in transitu. If MTC succeeded in its claim, that would intercept the disputed cargoes, for which it has not been, and is unlikely ever to be, paid. Thus, the dispute with Dick Smith that MTC seeks to litigate is effectively one between the syndicate of secured lenders and an unpaid vendor asserting a secured or quasi-secured interest over goods allegedly not yet delivered to the debtor.

54    The only aspect of the object of Pt 5.3A expressed in s 435A that is presently relevant is whether a better return for Dick Smith’s creditors and members can be achieved by an administration than by an immediate winding up. That competition does not suggest that its outcome will affect any result for the unsecured creditors or members of Dick Smith. The receivers are effectively realising Dick Smith’s assets and undertaking in the same way as would occur in an immediate winding up. That is because they are closing down its business, selling its stock in trade, terminating the contracts of employment of its staff and, no doubt, progressing to the sale or disposition of its other property. The financial outcome of the receivership is unlikely to be known in the near future. The administrators are unlikely to be in any position to put a substantive proposal to creditors and members in that time and the administrators, for good reason, have taken an appropriate, neutral stance on the issue of the grant of leave to proceed.

55    A number of factors have been considered by courts as appropriate to take into account for the purposes of exercising the various powers to grant leave to proceed that are peppered throughout Pt 5.3A. In Attard v James Legal Pty Ltd (2010) 80 ACSR 585, at 614 [146]-[148], Tobias JA, with whom Beazley and Giles JJA agreed on this aspect (see at 587 [1], 588 [4]), considered the issue of whether to grant leave to proceed against a company under a deed of company arrangement under s 444E(3). His Honour referred to factors that courts have considered in relation to granting leave to proceed under provisions in Pt 5.3A such as ss 440B, 440D and 443E(3). He set out, with reference to authorities that I will not repeat here, that the following where relevant, may be taken into account:

(1)    whether the claim has a solid foundation and gives rise to a serious dispute;

(2)    whether the administrator would be unreasonably distracted from performance of his or her statutory duties or obliged unnecessarily to incur substantial legal costs;

(3)    whether the company is insured against the alleged liability the subject of the proceedings;

(4)    who appointed the administrator;

(5)    whether the applicant will suffer any disadvantage if leave were refused;

(6)    whether there is good reason for allowing a creditor to depart from the general intention of Pt 5.3A that such proceedings should not be taken;

(7)    who is applying for leave;

(8)    what funds the company has to defend the litigation; and

(9)    whether the statutory procedure for dealing with the creditor’s claim should be displaced, for example where it is likely that the administrator will reject the creditor’s proof of debt.

56    One or more of those factors will not necessarily be relevant in every case, as Tobias JA recognized (80 ACSR at 614 [148]). Moreover, the discretionary power to grant leave under ss 440B and 440D cannot be fettered by inflexible rules. The interests of justice in all of the circumstances of each case will be different and affected by those particular considerations.

57    The Court’s statutory power to grant leave to proceed under each of ss 440B and 440D is unqualified. In The Queen v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd (1979) 144 CLR 45 at 50, Stephen, Mason, Murphy, Aickin and Wilson JJ said:

The general rule is that a discretion expressed without any qualification is unconfined except in so far as it is affected by limitations to be derived from the context and scope and purpose of the statute.

58    Moreover, it “is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words”: Owners of “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 at 421 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.

59    Each of Toll and MTC is a proper and necessary party to the controversy with Dick Smith over rights in and to the disputed cargoes. That controversy requires resolution urgently so that all of the parties know their rights in respect of those cargoes. The matter has been fully argued and its outcome is unlikely, on the evidence and having regard to the commercial decision of the receivers to close down Dick Smith’s business, to affect any return that unsecured creditors may be able to ponder when evaluating, in the distant future (after the likely lengthy duration of the receivership) whether an administration should occur. In this regard, the neutral stance of the administrators suggests that they do not see any prejudice to the unsecured creditors flowing from the grants of leave sought.

60    For these reasons, I am of opinion that it is in the interests of justice that each of Toll and MTC should have leave to proceed under each of ss 440B and 440D.

2.    The notice issue – consideration

61    I reject Dick Smith’s argument that MTC’s communication to Toll of 5 January 2016 did not effectually prevent delivery to Dick Smith or was deficient because it did not instruct Toll to redeliver the cargoes to MTC.

62    MTC’s email of 5 January 2016 to Toll was a clear instruction by the vendor to the bailee of the goods, being Toll as the issuer of the bills of lading, to hold the goods at MTC’s direction. Both MTC and Toll were by then aware of Dick Smith’s changed financial circumstances, evidenced the previous day by the appointments of the administrators and receivers. In that context, MTC’s 5 January 2016 instruction to hold the cargoes countermanded the previous authority that Toll had to deliver the goods carried under the seven bills to Dick Smith. And, in that context the instruction to hold those goods would have conveyed to a reasonable business person in Toll’s position, that MTC was asserting a right to intercept the cargoes and to retake possession of them – so much was conveyed, neatly, in the word “hold”. Indeed, Toll’s email response of 5 January 2016 that all seven cargoes were “on hold” contrasted with the position of the cargo in the 1791 bill about which Toll reported “containers are already released”.

63    First, s 48(1) requires only a communication “in time to prevent a delivery to the buyer”. MTC’s instruction to “hold” the cargoes, if acted on by Toll, would have prevented delivery of the goods to Dick Smith. In Kemp v Falk (1882) 7 App Cas 573 at 586, Lord Blackburn held that a telegram to a ship’s master that said “don’t deliver” was a notice to stop the goods in transitu. Self-evidently, if Toll held the goods, they would go nowhere until MTC gave further instructions, and in particular they would not be delivered to, the by then insolvent, Dick Smith. Of course, by giving the instruction to Toll, MTC assumed liability to pay the costs and expenses of Toll in performing the holding operation: Booth Steamship Company Ltd v Cargo Fleet Iron Company Ltd [1916] 2 KB 570 at 581-582, 584 per Lord Reading CJ, 588 per Warrington LJ, 599, 601 per Scrutton J.

64    Secondly, a vendor’s right to effect a stoppage in transitu is a right to retake possession of the goods from whomever, including the bailee for delivery to the purchaser, then has possession of them. Essentially, as Cairns LJ put it in Schotsmans v Lancashire and Yorkshire Railway Company (1867) LR 2 Ch App 332 at 338, the goods must be in the hands of a middleman: see too Benjamin’s Sale of Goods (9th ed: 2014) at [15-066] and Ex parte Rosevear China Clay Company; In re Cock (1879) 11 Ch D 560 at 568-569 per James LJ, 570-571 per Brett LJ, 571 per Cotton LJ. Ordinarily, the carrier will be a person, as bailee, to whom an effectual notice of stoppage can be given. However, once the purchaser has possession of the goods after a full, effectual and final delivery of them, the right to stop the goods in transitu is gone: Lyons v Hoffnung (1890) 15 App Cas 391 at 396-397 (11 NSWLR (L) 288) per Lord Herschell, giving the opinion of the Privy Council (of himself, Lord Watson, Sir Barnes Peacock and Sir Richard Crouch), citing Dixon v Baldwin (1804) 5 East 175 at 184 per Lord Ellenborough CJ; see too Benjamin: op cit at [15-070], [15-075].

65    The Privy Council approved (15 App Cas at 397) what Lord Esher MR had said in Bethell v Clark (1888) 20 QBD 615 at 617, namely that when goods have not been delivered to the purchaser or his agent to hold for him otherwise than as carrier, they are in the hands of the carrier as such and for the purposes of the transit. Accordingly, the goods may be stopped in transitu, even though the carrier was the purchaser’s agent to accept delivery and pass the property in the goods. Lord Esher MR there explained that if the goods were in the possession of the carrier by reason of the terms of the sale contract or the purchaser’s directions to the vendor, they were in transit. However, he continued, “if the goods are not in the hands of the carrier by reason either of the terms of the contract or of the directions of the purchaser to the vendor, but are in transitu afterwards in consequence of fresh directions given by the purchaser for a new transit, then such transit is no part of the original transit, and the right to stop is gone” (emphasis added); see too Whitehead v Anderson (1842) 9 M&W 518 at 534-535 per Parke B giving the judgment of the Court of Exchequer.

66    Dick Smith relied on Phelps v Stokes & Co v Comber (1885) 29 Ch D 813 in support of its argument that MTC’s emails of 5 and 7 January 2016 did not amount to an effectual notice of stoppage because in them MTC did not direct that it wished to retake possession of the goods, as opposed to requiring Toll to hold them.

67    I reject that argument. First, the email exchange on 5 January 2016 conveyed that MTC did request, and Toll understood, that it would take possession of the cargoes for MTC: Kemp 7 App Cas at 586. Secondly, MTC’s direction in the email of 7 January 2016 to issue to order bills of lading in substitution for the telex release ones could have no other signification. Toll created the to order bills and held them at MTC’s direction. Since the form of the to order bills enabled them to be endorsed in blank, they were capable of being made into a negotiable instrument at MTC’s election and subject to its paying any shipowner’s and other bailee’s (including Toll’s) liens for freight, storage or other charges: cf Hilditch Pty Ltd v Dorval Kaiun KK (No 2) (2007) 245 ALR 125 at 132-134 [22]-[31] where I discussed the authorities concerning negotiability of a bill of lading. MTC’s direction to create the to order bills evinced sufficiently its intention to retake possession of the cargoes, if that were necessary.

68    However, MTC’s act of creating the to order bills and Toll’s participation in it, was somewhat problematic. It is not clear how MTC could change the contractual arrangements in that way. I discuss this in considering the interpleader issue below. But, it is not necessary to decide this question because of the conclusion I have reached below about the transit coming to an end.

3.    The delivery issue – consideration

69    The exercise of the right of stoppage in transitu does not rescind the contract of sale or restore property in the goods in the seller: Kemp 7 App Cas at 581 per Lord Blackburn; United States Steel Products Co Ltd v Great Western Railway [1916] 1 AC 189 at 203 per Lord Atkinson; Booth Steamship [1916] 2 KB at 581, 598-600. Indeed, s 46 of the Sale of Goods Act gives the seller the right to retain possession until payment or tender of the price. The seller, having obtained possession of the goods by stopping them in transit to the purchaser, is then in the position of being able to exercise an unpaid vendor’s lien for the unpaid price. The possessory right is a common law security for the vendor’s entitlement to the price: cf Hewett v Court (1983) 149 CLR 639 at 645-646 per Gibbs CJ, 653 per Wilson and Dawson JJ. While the origin of the right of stoppage in transitu may have been in equity, as Lord Blackburn suggested (Kemp 7 App Cas at 582), now the right is statutory. It arises on the insolvency of the purchaser. Insolvency was defined in s 5(3) of the Sale of Goods Act as being when a person has ceased to pay his or her debts in the ordinary course of business or cannot pay the person’s debts as and when they become due.

70    MTC and Toll argued that when ACFS collected the six cargoes that did not transfer possession of them from Toll to Dick Smith. Dick Smith did not contest that, for the purposes of it being able to interplead, Toll had a sufficient basis to assert that it was in possession of the six cargoes. This concession appeared to have been based on the understanding that, as Toll had made the Customs’ entry for home consumption and the cargoes remained underbond while the Customs’ fees remained unpaid, as they still are, then the effect of the goods being in bond was sufficient to support Toll’s assertion that it remained in possession. But, Dick Smith’s argument that Toll delivered the cargoes to it when Toll allowed ACFS to collect the containers from the wharves and so the transit came to an end, is logically irreconcilable with its concession.

71    The concession appeared to have been based on an understanding of whom the Customs Act 1901 (Cth) permitted to make a payment to release goods from bond. However, as Dick Smith argued, under s 71F(1) of that Act an import entry can be withdrawn at any time by document or electronically. That withdrawal must also be communicated by the person by whom (such as Toll), or the person on whose behalf (such as Dick Smith), the original import entry was communicated to Customs (s 71F(3)). Thus, on the material before me, it appears that Dick Smith could withdraw and re-enter the entry for home consumption of each cargo at any time.

72    Moreover, prior to the events of 4 January 2016, Dick Smith had its direct debit arrangement with Customs to pay any duties or fees. There is no intelligible basis before me as to why Dick Smith could not either re-establish such an arrangement if it chose or just pay the six outstanding $194 fees to secure release of the cargoes. The Customs payment deed did not prevent Dick Smith from making such a payment. More importantly, in the period between 5 January 2016 and 16 February 2016 (when that deed was made), Dick Smith was under no contractual or other constraint from making a payment to Customs to release the cargoes from being in bond.

73    I reject MTC’s argument that the transit continued after ACFS took the cargoes from the wharves between 8 and 18 January 2016.

74    As I have held, MTC exercised effectually its right to stop each of the six cargoes in transitu. But, as Mr Arfan-Sayed said in his oral evidence in chief, Toll lodged requests with Customs for underbond movement of the cargoes from the wharves to enable AFCS to collect the containers and take them to ACFS’ bonded warehouse. In chief, in answer to why he had lodged those requests, he said:

With the container terminals in Australia you’re only permitted 72 hours free time at the wharf. At the time we were notified of claims by both parties – MTC and Dick Smith – to ownership of the goods … with no clear knowledge on our behalf of who was the actual owner, we lodged an underbond to move them, to avoid any additional storage costs, which can range to $200 to $300 per container per day.

75    However, he was under the mistaken impression that only Toll could pay the Customs fee. Before 4 January 2016, Dick Smith had paid those fees automatically by direct debt.

76    Toll gave ACFS electronic delivery orders on and after 5 January 2016 that enabled ACFS to enter PIN numbers at the wharves so as to collect the containers. Those orders directed ACFS to deliver the containers to Dick Smith at ACFS’ warehouses (see e.g. [33]-[34] above). Toll’s issue of the electronic delivery orders was in accordance with the requirements of the China SOW Contract. In the passages from cl 3.2 of the China SOW Contract that I have emphasized above, ACFS was, and Toll was not, responsible to Dick Smith for all matters involving wharf cartage of freight in Australia from the ports of arrival. The role of ACFS, as independent from Toll, was reinforced by section 9.1 of the standard operating procedure (see [18] above).

77    Significantly, first, at no time before it collected the last of the cargoes in issue, did Toll communicate to ACFS that ACFS had to hold those cargoes for MTC or anyone other than Dick Smith. Secondly, releasing the cargoes to ACFS was a violation of MTC’s instruction that Toll “hold” them. As Toll knew, and reported to MTC on 5 January 2016, one of the cargoes that MTC required be stopped was that carried under the 1795 bill. Despite this, Toll sent an electronic delivery order for the cargo carried under the 1795 bill to ACFS on 7 January 2016 and soon after ACFS delivered that cargo to Dick Smith.

78    Indeed, by dispensing in early June 2015 with the necessity for Dick Smith to present an original bill of lading to collect the goods it purchased from MTC, the parties had streamlined the means by which Dick Smith, ACFS and Toll could arrange for goods to be delivered to Dick Smith from the wharf. The emailed telex release bills facilitated this procedure.

79    However, when MTC gave its instruction to Toll to hold the cargoes, Toll did not do so. It did not change the previously usual procedure. It did not store the cargoes elsewhere than with ACFS, nor did it tell ACFS that the cargoes must be held for MTC. Toll did nothing to maintain the efficacy of the stoppage in transitu; rather by issuing its unqualified, unconditional electronic delivery orders to ACFS after 5 January 2016, Toll converted the cargoes the subject of those orders by giving up possession of the cargoes to Dick Smith or to ACFS as the latter’s agent: Bethell 20 QBD at 617; Whitehead 9 M&W at 534-535. The transit thus came to an end within the meaning of s 47(1) of the Sale of Goods Act.

80    Indeed, once it received MTC’s notice of stoppage, s 48(2) required Toll to redeliver the goods to or according to MTC’s directions. By carrying on business as usual, when MTC’s notice and Dick Smith’s financial position made the position anything but usual, Toll exposed itself to liability for conversion. It should have interpleaded immediately. Instead, it did not act on MTC’s notice, and in that way, lost MTC’s possession of the cargoes.

4.    The interpleader issue – consideration

81    Toll argued that it met the requirements of r 18.05. That provides:

18.05    Neutrality of stakeholder

If a stakeholder applies for relief by way of interpleader, the Court will dismiss the application unless the Court is satisfied that the stakeholder:

(a)    claims no interest in the property in dispute except for charges or costs; and

(b)    has not colluded with any claimant.

Note:    This rule does not affect the Court’s power to dismiss the application or to pronounce judgment against the stakeholder for other reasons. (emphasis added)

82    As the heading to r 18.05 connotes, the rule is concerned to ensure that the stakeholder is neutral. The requirement in r 18.05(b) that the stakeholder has not colluded derives from the equitable remedy of interpleader as explained in Daniell: The Practice of the High Court Chancery (1867) Vol 2 at 1419 and Story’s Equity Jurisprudence (1884) (1st English ed: ed WE Grisby) at §809 p 544, §816-§817, pp 547-550; (1920) (3rd English ed) Ch 8. In Tenterden’s Law of Merchant Ships and Seamen (11th ed; 1867) ed by William Shee at 440-441, there is a discussion of interpleader in cases of stoppage in transitu.

83    A person seeking to interplead must be in a real position of impartiality between the parties: Murietta v The South American Company Ltd (1893) 62 LJKB 396 at 397 per Wills J, 398 per Charles J. There Charles J said that “collusion” in the sense of interpleader processes does not necessarily entail anything morally wrong. Their Lordships said that collusion involved playing “the same game as one of the parties”. Similarly, in Smith v Nixon (1885) 7 ALT 74 at 384, Higinbotham J emphasised that the stakeholder seeking to interplead must have maintained a strictly neutral position between the parties.

84    In my opinion, Toll did not maintain a strictly neutral position. First, it issued the to order bills of lading at MTC’s request. Secondly¸it delivered or released the cargoes to ACFS as agent for Dick Smith and became open to, and MTC has sued it here for, an action of conversion. Neither of these matters involves any morally questionable behavior by Toll. However, by its conduct, it has become an active party in the dispute: cp Bignold v Audland (1840) 11 Sim 23 at 29-30, 59 ER 781 at 784 per Shadwell VC.

85    At MTC’s behest, Toll acted to create new documents of title purporting to alter the rights of the parties under the telex release bills of lading. The telex release bills were “straight” bills because they provided for port to port shipment and named MTC as consignor and Dick Smith as consignee.

86    In The Raphaela S [2005] 2 AC 423 the House of Lords held that a straight bill of lading required delivery of the cargo by the master in the same way as a negotiable bill. As Lord Bingham said (The Raphaela S [2005] 2 AC at 444G-H [6]; see too at 457-458 [45] per Lord Steyn; see also my judgment in Hilditch Pty Ltd v Dorval Kaiun KK (No 2) (2007) 245 ALR 125 at 133 [25]-[31]; see also Beluga Shipping GmbH v Headway Shipping Ltd [2008] FCA 1791 at [14]-[17] where I discussed the principles relating to straight bills):

… the shipper will not wish to part with an original bill to the consignee or buyer until that party has paid, and requiring production of the bill to obtain delivery is the most effective way of ensuring that a consignee or buyer who has not paid cannot obtain delivery. In this case, therefore, as in the case of an order bill, the bill is ‘a key which in the hands of a rightful owner is intended to unlock the door of the warehouse, floating or fixed, in which the goods may chance to be’: Sanders Bros v Maclean & Co 11 QBD 327, 341, per Bowen LJ. (emphasis added)

87    By acting on MTC’s instruction to issue the to order bills of lading, Toll did more than merely hold the cargoes for MTC in accordance with its obligations as bailee under s 46 of the Sale of Goods Act. Rather, Toll attempted to change the locks to the warehouse in a way that would alter the then subsisting contractual arrangements between MTC and Dick Smith. And it did so at a time when, as Mr Arfan-Sayed said, Toll had no clear knowledge of the position between those protagonists.

88    Toll argued that nothing came of the act of issuing a new set of bills. That may be so, but its conduct was not neutral. Moreover, Toll argued that it was entitled to issue the new bills because the telex release bills were sea waybills within the meaning of s 5 of the Sea-Carriage Documents Act 1997 (NSW) and, so, not negotiable. It contended that a transfer of those telex release bills would be, by force of s 9(2)(c) of that Act, without prejudice to MTC’s rights as a contracting party. It contended that accordingly, since Toll thought that MTC had the right to call for the new bills, it (Toll) could create them.

89    First, as I have said, changing the locks to the warehouse not knowing if that was lawful, was not a neutral act. Toll played MTC’s game. Secondly, as I have found above, Toll converted the cargoes and has a real interest as a party to these proceedings rather than being a neutral stakeholder.

90    For these reasons, Toll should not be permitted to interplead.

5.    The conversion issue – consideration

91    As I have found, by issuing the unqualified electronic delivery orders to ACFS as agent of Dick Smith to take actual delivery of the cargoes in Australia under the China SOW Contract, Toll parted with possession of the goods and brought the transit to an end. That rendered ineffective the stoppage in transitu that MTC’s notice of 5 January 2016 had created.

92    I am satisfied that MTC has established that Toll also converted the cargo the subject of the 1795 bill that was released because Toll issued electronic delivery orders for that cargo on 7 January 2016 even though it informed MTC on 5 January 2016 that that cargo had already been released.

93    There is no evidence of the damages to which MTC is entitled and those will have to be assessed.

Conclusion

94    Each of Toll and MTC should have leave to proceed under ss 440B and 440D of the Corporations Act. Dick Smith is entitled as against MTC and Toll to possession of the seven cargoes in dispute. MTC is entitled to damages for conversion of those cargoes against Toll.

95    I will hear the parties and, if they wish, the administrators on the form of orders to give effect to these reasons and as to costs. Toll and MTC should provide the administrators with these reasons, notice of the orders each party seeks and when the matter is relisted.

Associate:

Dated:    15 March 2016