FEDERAL COURT OF AUSTRALIA

MSC Cruises SA Geneva v Gallipoli Cruises 2015 Pty Ltd [2016] FCA 884

ORDERS

THE COURT ORDERS THAT:

1.    The respondent pay the applicant the sum of €794,363.50, inclusive of prejudgment interest of €17,577.50, pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth).

2.    The respondent pay the applicant’s costs fixed in the amount of $22,000.

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

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

RARES J:

1    On 29 September 2011, MSC Cruises SA Geneva entered into a voyage charter party of a “musica” class passenger ship with Gallipolli Cruise 2015 Pty Limited (the charterer). The charter party was for a voyage in the period between 26 March 2015 and 30 April 2015 at a base rate of hire of €11,555,000 plus certain additional sums, some of which were payable in United States dollars, in accordance with provisions of the charter party.

2    Ultimately, MSC nominated MSC Orchestra, a musica class vessel, to perform the charter and she was placed at the disposal of the charterer on 26 March 2015. The charterer redelivered MSC Orchestra in accordance with the charter party at the Port of Civitavecchia on 30 April 2015.

This application for default judgment

3    MSC has applied for default judgment under r 5.23 of the Federal Court Rules 2011 (Cth) on the basis that the charterer, having been served, is in default because it has not attended at any hearing of the proceedings. The dispute arises from the circumstance that on about 5 February 2015, MSC and the charterer agreed in an email exchange that, at the charterer's request, it would pay all outstanding amounts in euros rather than in US dollars. The charterer said in the email exchange that it had concerns about its exchange rate risk at that time since the Australian dollar appeared to be declining in value as against other currencies.

4    It appears from the statement of claim that the charterer applied the conversion rate between United States dollars and euros applicable as at 29 September 2011, being the date of entry into the charter party, rather than the rate prevailing at the times of payment. In the statement of claim, MSC claims that the differential between what the charterer paid as the euro equivalent under the charter party and the amounts that were due and payable in the euro equivalent of United States dollars at the various due dates while the voyage was being performed in March and April 2015, totalling the sum of €776,786. This sum also includes three invoices that MSC raised dated 25 March 2015, 27 April 2015 and 30 April 2015 that MSC alleges that the charterer did not pay.

5    The principles upon which the Court proceeds in applications for judgment by default are well settled and I described them in Searson v Salmon [2014] FCA 748 at [6]-[9]. The statement of claim pleaded the parties’ entry into the charter party and the requirement in cl 11 that the charterer would pay the hire and other charges to MSC “in the currency, in the amounts and on the dates stated in appendix 3” to the charter party. The original charter party is in evidence before me. Moreover, cl 12 of the charter party, the effect of which is also pleaded in the statement of claim, provided that the charterer would pay all amounts due under the provisions of the charter party, in appendix 3, for hire and other charges in full and without deduction or set-off.

6    As pleaded in the statement of claim, the charterer paid MSC in full in accordance with the charter party up to the time of the latter’s invoice of 27 December 2013. The next payment fell due on 11 March 2015 and it was for a sum expressed in United States dollars in the charter party. When the charterer paid that sum in euros, it paid €4,564.84 instead of paying the euro equivalent of the sum due as claimed by MSC at the then prevailing conversion rate, being €4,750, a deficiency of €185.16.

7    On 8 April 2015, the charterer paid €1,797,624 in respect of MSC’s invoice of 20 March 2015, which appears to represent the conversion value of €1,877,420.60 at a different rate to the euro equivalent at that date claimed by MSC, resulting in a deficiency of €79,796.60. In contrast, the charterer paid in full another instalment of hire, pursuant to MSC’s invoice of 20 March 2015, of nearly €2 million on 1 May 2015. Next, the charterer failed to pay three invoices that MSC issued on 25 March 2015, 27 April 2015, and 30 April 2015 for, respectively, €350, €268,733.40, and €427,906. Thus, the three totally unpaid invoices, and the two underpaid invoices, comprise the amount MSC now claims in the proceedings of €776,786.

8    MSC also claimed in the alternative that, to the extent that the discussions leading to the variation in the charterer’s obligation for paying in US dollars to pay in euros, may have allowed it to do what it did in using the September 2011 exchange rate, the charterer engaged in misleading and deceptive conduct, in contravention of s 18 of the Australian Consumer Law, that is in Sch 2 of the Competition and Consumer Act 2010 (Cth). MSC seeks damages in respect of that claim under s 236 of the Australian Consumer Law.

9    It is not necessary to consider that alternative claim, because I am satisfied that, under cll 11 and 12 of the charter party, and having regard to the commercial purpose of the variation, the only reasonable interpretation that a person in the position of the parties could have placed on the agreement to vary the obligation to pay all outstanding amounts in euros was that, in calculating what was payable, the prevailing exchange rate at the time the obligation fell due would be used. Accordingly, I am satisfied that MSC is entitled to claim so much of the amount sought in the statement of claim as represents the unjustified short payments in euros of the US dollar equivalent sums, together with the other amounts which were due, but unpaid.

10    I am satisfied by the evidence of Veronica Phillips that she served the charterer, on 10 May 2016, by prepaid post addressed to its registered office, with the originating application filed on 9 May 2016 and the statement of claim. The cover sheet of the originating application made the proceedings returnable on 2 June 2016, on which occasion there was no appearance for the charterer, constituting a default under r 5.22(c). On 2 June 2016, I ordered that the charterer file and serve its defence on or before 15 June 2016, and stood the proceedings over, originally, for directions on 17 June 2016. After the charterer failed to comply with its obligation to file and serve its defence on 16 June 2016, I varied the return date of the permission I had granted on 2 June 2016 to MSC to file and serve an interlocutory application and affidavit of support seeking default judgment so that it would be returnable on 24 June 2016.

11    The interlocutory application for default judgment came before me on 24 June 2016. There was no appearance for the charterer. However, because of a number of matters that I raised with MSC’s solicitor about certain aspects of its evidence, including the way in which it calculated its claim for interest on the judgment sum sought in foreign currency, I adjourned the matter to, originally, 8 July, but on 4 July 2016 varied that to today.

12    I am satisfied by the evidence of Toni Murtanovski, a solicitor working for MSC’s solicitors, that on 23 June 2016 he sent an email to Shane Hodges who is, on the evidence, the director, secretary and sole shareholder of the charterer, attaching a copy of MSC’s interlocutory application filed on 23 June 2016, Mr Murtanovski’s affidavit in support of the same day and an affidavit of Mr Stefano Celada dated 22 June 2016. Mr Celada’s affidavit sought to prove that the whole of the amount claimed in the statement of claim remained unpaid as at that date. Mr Murtanovski obtained a read receipt for his email.

13    On 29 June 2016, Mr Murtanovski sent an email with a letter both to Mr Hodges’ email address and by post to the charterers’ registered office on 29 June 2016 enclosing a copy of the orders I had made on 24 June 2016 and he obtained a read receipt for the email. On 4 July 2016, Mr Murtanovski sent a further letter to Mr Hodges by email and to the charterer by express post to its registered office, enclosing a copy of the orders that I made on that day fixing the adjourned hearing of the interlocutory application to this morning. Mr Murtanovski also obtained a read receipt for that email.

14    One of the issues that I had raised with Mr Murtanovski at the hearing on 24 June 2016 dealt with the way in which MSC had sought to calculate interest using the prejudgment rate calculated in accordance with Practice Note CM 16. That rate is based on the cash rate for interbank loans in Australian dollars fixed by the Reserve Bank of Australia from time to time plus four per cent. Because the amount MSC claimed was denominated in euros, I do not consider that use of the rates in the Practice Note is an appropriate way of estimating what would be necessary to compensate MSC for the charterer's failure to discharge its obligation to pay in euros, as opposed to what may have been the position had that obligation to pay been denominated in Australian dollars, for the reasons I gave in Suzlon Energy Limited v Bangad (No. 2) [2014] FCA 1173 at [6]-[10].

15    Subsequently, Mr Murtanovski obtained from the website of the European Central Bank (ECB), being the bank responsible for the issue of the euro, its data for interest rates applied in respect of monetary financial institutions (MFIs) for new euro denominated loans to euro area non-financial corporations. He then applied the rates, so obtained, for a loan to a non-financial corporation for amounts over €250,000 and up to €1,000,000 on a floating rate loan after three months initial rate fixation for the period from April 2015 to April 2016. Those were the latest rates available on the ECB’s website up to yesterday. Mr Murtanovski multiplied the amount set out in each of the invoices the subject of MSC’s claim by the ECB interest rate he had obtained for the respective periods up to April 2016 and divided it by 365 days. He then multiplied that amount by the number of days in the relevant month. He allowed a 28 day grace period from the date of each invoice as there had been no due date placed on any invoice. He arrived at a total interest sum of €17,577.50 up to today, extrapolating the average of the January 2016 to April 2016 interest rates as being the ones that ought be applied up to the present time. That rate was 1.95% per annum.

16    I am satisfied that the methodology Mr Murtanovski applied to arrive at the amount of interest in euros sought appears to be reasonable and to provide an appropriately compensatory sum of interest on the amounts due. I am also satisfied by the affidavit of Elio Cordi, MSC’s head of accounting, affirmed on 6 July 2016 that the whole of the amount claimed remains unpaid.

17    MSC also seeks a lump sum order for costs. It relies on the estimates of costs calculated by its solicitor, Paul Taylor, a partner in the firm of solicitors acting for it, set out in his affidavit of 6 July 2016. Mr Taylor explained the basis upon which he calculated the costs, which MSC seeks, of $23,262.20. He identified relevantly the costs that his firm billed to MSC for services it has performed or will perform in connection with obtaining the orders I will make today for default judgment and compared those to, first, what under its costs agreement with MSC, his firm was entitled to charge on the one hand and, secondly, his estimate of what amount MSC would claim in a bill of costs filed in accordance with the scale of costs and charges in Sch 3 of the Rules. He included in the estimates both filing fees for the originating application and the interlocutory application totalling $4,770, together with counsel’s fees of $5,500. In the end, Mr Taylor calculated that the fees that would be included in a bill of costs filed in accordance with Sch 3 would total $33,608. However, MSC sought only a total of $23,262.20. I have reviewed the detailed breakdown in Mr Taylor's affidavit of how he arrived at the costs in his calculations. He did not seek to charge any sum for a number of items of work done that could have been allowed in some amount. I am satisfied that Mr Taylor’s approach to the sum that MSC now claims for costs appears in substance to be generally reasonable.

18    Of course, the overarching purpose of the civil practice and procedure provisions, set out in s 37M of the Federal Court of Australia Act 1976 (Cth), includes considerations of cost and efficiency. Having regard to the evidence before me, I am satisfied that it is appropriate to make a lump sum costs order under r 40.02(b) so as to avoid the unnecessary cost of a taxation in what is a relatively straightforward matter, in which the charterer has made no attempt to appear or file a defence. The quantification of costs to be awarded in such an exercise of discretion is not capable of precise calculation. Indeed, judges are not familiar with, or ordinarily expected to apply themselves to the taxation of a bill of costs. In my opinion, a fair lump sum costs order in all of the circumstances will be the sum of $22,000.

Conclusion

19    For these reasons, I will order that the charterer pay MSC €776,786, together with €17,557.50 in prejudgment interest and MSC’s costs fixed in the amount of $22,000.

Associate:

Dated:    4 August 2016