Charas Constructions Pty Ltd v Megatop Cargo Pty Ltd
[2023] FedCFamC2G 295
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Charas Constructions Pty Ltd v Megatop Cargo Pty Ltd [2023] FedCFamC2G 295
File number(s): SYG 2025 of 2020 Judgment of: JUDGE D HUMPHREYS Date of judgment: 21 April 2023 Catchwords: CONSUMER LAW – Australian Consumer Law – Carriage of Goods by Sea Act – breach of contract – failure to exercise due care and skill – misleading and deceptive conduct – cross-claim – payment of consideration for services and disbursements. Legislation: Australian Consumer Law (Cth) ss 18, 60, 63, 236, 267
Carriage of Goods by Sea Act 1991 (Cth)
Sea-Carriage Documents Act 1997 (Cth)
Cases cited: Cro Travel PL v Australian Capital FinancePL [2018] NSWCA 153
James v USM Events Pty Ltd [2022] QSC 63
Jones v Dunkel (1959) 101 CLR 298
Montgomerie v United Kingdom Mutual Steamship Association Ltd (1891) QB 370
Rickhuss v The Cosmetic Institute Pty Ltd (No 2) [2020] NSWSC 393
Division: Division 2 General Federal Law Number of paragraphs: 137 Date of last submission/s: 17 April 2023 Date of hearing: 22-23 February 2023 Place: Parramatta Counsel for the Applicants: Mr Vincent Solicitor for the Applicants: HWL Ebsworth Counsel for the Respondent: Mr Rares Solicitor for the Respondent: Versace Lawyers ORDERS
SYG 2025 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: CHARAS CONSTRUCTIONS PTY LTD ACN 602 418 691
First Applicant
COSTA CHARALAMBOUS
Second Applicant
AND: MEGATOP CARGO PTY LTD ACN 068 131 466
Respondent
order made by:
JUDGE D HUMPHREYS
DATE OF ORDER:
21 April 2023
THE COURT ORDERS THAT:
1.The application of Charas Constructions Pty Ltd Acn 602 418 691 and Costa Charalambous filed 26 August 2020 be dismissed.
2.Judgment in favour of the Respondent and Cross-Claimant with the Applicant and Cross-Respondent to pay the Respondent and Cross-Claimant the amount of $5,959.36.
3.The Applicants to pay interest on the amount ordered in Order 2.
4.The Applicants to pay the Respondent’s costs as agreed or assessed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE D HUMPHREYS
The object of art is not to reproduce reality, but to create a reality of the same intensity - Alberto Gacometti
INTRODUCTION
The second applicant, Mr Costa Charalambous is an avid and serious art collector. He is also a Director of Charas Constructions Pty Ltd (“Charas”), the first applicant. Mr Charalambous purchased a work by Urs Fisher, a New York based artist, known as ‘Sunset’, executed in 2016. It is a contemporary work of art. It is a mirrored image of a face executed in silkscreen technique onto aluminium.
Sunset has been valued in excess of $600,000.00, based on the cost of purchase at auction and delivery into Australia. This valuation included a buyer’s premium of 25% at auction, GST payable on the importation, freight and insurance.
After initially purchasing Sunset, and importing it into Australia, in September 2018, Mr Charalambous decided to return Sunset to the United States for sale at auction. He consigned it to appear at the Christies LLC “May 2019 Post-War and Contemporary Afternoon sale” at the Gagosian Gallery in New York. The respondent, Megatop Cargo Pty Ltd (“Megatop”) was engaged to transport the work to New York for this purpose.
Mr Charalambous states that he has used Megatop to transport various artworks on at least 30 previous occasions.
It is uncontested that Sunset suffered minor damage during transportation to the United States. It is alleged this damage was as a result of poor packing. This damage was conserved or repaired at a cost of USD$1,350.00.
Sunset failed to sell at auction in May 2019. It was then transported to Christies Fine Art Storage Service Facility in Brooklyn. In around July 2019, Mr Charalambous via his agent, the first applicant, instructed Mr Mick Veljanovski, an employee of Megatop, to transport Sunset from New York to Sydney.
The work arrived in Sydney in October 2019. When Sunset was unpacked at Megatop’s warehouse and offices in Sydney, it was apparent that it had suffered serious damage during transportation from New York to Sydney. The cost of conservation or repairs to rectify the damage has been estimated at AUD$12,000 plus GST.
As a result of the damage and subsequent conservation, it has been estimated that Sunset has suffered a diminution in value of approximately 8.4%, or $45,951.00, based on the valuation provided.
The applicants seek the recovery of damages against the respondents for the cost of the conservation or repairs, together with the diminution in value of Sunset due to the requirement to conserve the damage.
The respondent denies liability for the damage, causation of the damage and the quantum of damages sought. In a Cross-Claim, the respondent seeks payment of the sum of $5,959.36 plus interest, which relates to costs incurred in shipping another art work or works by the respondent to Australia on behalf of the applicants.
It seems to be common ground that this amount is due and owing in relation to the transport of separate art works from Italy to Australia but has not been paid.
THE STATEMENT OF CLAIM
The applicants claim that in or around June 2019, they entered into an agreement with the respondent to collect Sunset from Christies Fine Art Storage Service Facility, in Brooklyn New York and transport it to Sydney.
It is alleged the contract was partly oral and partly in writing. The applicants assert that an implied term in the contract was that the service provided would be with due care and skill. This included properly packing the work for transportation. The representation that the service would be provided with due skill care and attention, was implied, as it arose from previous dealings between the parties.
The applicants allege that Sunset was damaged as it was not secured to a transport or travel frame causing it to shift during transport. Two wooden battens dislodged during shipping or were left loose during the packing of Sunset.
The applicants allege the pursuant to s 60 of the Australian Consumer Law (“the ACL”), the express terms of the contract which seek to exculpate the respondent’s from liability from any damage contained in clauses 7 and 8 of the “conditions of contracts” documentation located on the respondent’s website are void ab initio.
The applicants further allege that any representations in the contract that the transportation of the work would be carried out was due skill care and attention, were misleading, and in contravention of s18 of the ACL.
In an amended Defence, filed by leave during the course of the hearing, the respondents inter alia denied that they were negligent and rely upon paragraphs 7, 8, 9 and 22A(iii) of the conditions of contract.
The applicant denies that s 63 of the ACL applies to them as the contract was not in relation to the transport or storage of goods for the purposes of a business, trade, profession, business or occupation carried on or engaged in by the applicants.
The applicants deny that that as a result of the applicant’s failure to lodge a claim within 14 days of the receipt of the goods, the respondent has lost the opportunity for claiming against the carrier, and is therefore suffered damage as a set off to the applicant’s claim.
THE EVIDENCE
The Applicant’s Evidence
The applicants called three witnesses, being Mr Charalambous, Mr Paul Jarvis, an art packer employed by Mr Charalambous, and an expert art valuer, Mr Colin McWilliam.
Evidence of Mr Charalambous
Mr Charalambous swore two Affidavits, dated 2 March 2021 and 19 May 2021. He deposes that since approximately 2015, he has engaged the services of Megatop to transport various artworks all over the world on numerous occasions. He estimates that he has used them on at least 30 occasions.
Following the purchase of the work Sunset, in around September 2018, after the work was consigned to appear in a Christies auction in New York, the applicants state they engaged Megatop to transport Sunset from Sydney to New York.
Following the transport of Sunset to New York, Mr Charalambous claims he was advised that the work had suffered minor damage during transport. This was reported to Mr Veljanovski, an employee of Megatop. The damage was conserved or repaired at a cost of USD$S1,350.00. Sunset subsequently failed to sell at auction.
Mr Charalambous states that in or around July 2019, he sent an email to Mr Veljanovski instructing Megatop to transport Sunset back from New York to Sydney.
On 17 July 2019, a company called AWA Ship, acting on directions from Megatop, collected Sunset from Christies’ storage facility and prepared it for transportation to Sydney. Mr Charalambous claims the work was left open at Christies for inspection prior to it being shipped. The inference is that Sunset left Christies undamaged. Upon its arrival in Sydney, Mr Charalambous states he became aware that Sunset had suffered significant damage during transport. In a telephone call with Mr Veljanovski, he stated words to the following effect:
Charalambous: Mick, we’ve got a problem. The Urs Fischer has arrived damaged because it wasn’t packed properly. You need to sort this out.
Veljanovski: No problem. Whatever the issue is we’ll get it sorted for you, you’re a good customer.
Mr Charalambous goes on to state that he had contact with Christies in New York who confirmed that the work was not damaged prior to leaving the storage facility.
Correspondence ensued between Mr Charalambous and Mr Veljanovski, over the course of the next two months. It was indicated by Mr Charalambous that he wished to have Sunset conserved or repaired and provided Mr Veljanovski with an estimate for the conservation or repairs at a cost of USD$S25,000.00. Mr Veljanovski replied “Once we rec (receive) the claim we will send it off to our insurance brokers for processing”. A claim was duly made.
On 6 February 2020, Mr Charalambous received an email from Mr Veljanovski stating that Megatop denied liability for the claim.
In his second Affidavit, Mr Charalambous, admits that Charas is a company and is able to defer GST payments on imported consignments. He denies that the company was engaging in a business or trade in relation to Sunset. All artworks imported by Charas were done so in its capacity as Mr Charalambous’ agent, and that he personally is the owner of Sunset.
He denies that he was ever told that Megatop did not handle fine arts or high-value artwork for personal use. He denies that Smartshift were Charas’ nominated Packers.
He denies that he was informed by Megatop at any time that it was the standard procedure for the consignor and consignee to obtain a condition report prior to transport. He states he would expect that Megatop or their agent would unpack the work to check it before collecting to ensure it was in good condition and that it was in fact the item that it had been engaged to transport.
Mr Charalambous claims that immediately upon becoming aware of the damage to the work, he engaged in correspondence with Megatop. The reason why no formal claim was made within 14 days was because he relied upon the email he received from Mr Veljanovski, outlined above.
He denies Megatop ever drew to his attention to the conditions of the contract and, in particular, the conditions relating to the insurance of goods being transported. He claimed Megatop had always held themselves out to him, as being an “all-inclusive” service provider that looked after every detail when transporting goods.
In cross-examination, Mr Charalambous claimed he was not aware that Megatop was a freight forwarder. He agreed that in an email dated 12 August 2019 (Court Book page 224) Mr Veljanovski referred to himself in the signature block of the email as “Freight Forwarding”.
Further, Mr Charalambous agreed that in a freight arrival notice issued by Megatop to Charas on 3 September 2019, (Court Book page 225) Megatop referred to itself at the top of the document as “International Freight Forwarders and Licenced Customs Broker”.
In response to a question (Transcript page 47) if Mr Charalambous understood that what Megatop does is to organise for someone to ship a painting from wherever in the world to you, he responded “I understand that now. After the painting was damaged”.
Mr Charalambous was later asked some questions about the terms and conditions under which he originally purchased Sunset and arranged for its transport to Australia in 2016. An invoice from the Gagosian Gallery (Court Book page 258) specified that “shipping, crating and insurance charges were the responsibility of the purchaser and are not included in the sale price.”
Further, in a document signed by Mr Charalambous dated 1 May 2017, (Court Book page 255), he indemnified Gagosian from any damage occasioned by any reason including from any packing and crating and shipping of the work. Mr Charalambous was required to procure a “wall to wall” fine arts insurance to cover these risks.
Mr Charalambous was also taken to an email trail beginning at Court Book pages 228 through to 230. This was a quote for the shipping of Sunset back into Australia. Under Mr Veljanovski’s signature block the following appears:
Megatop Cargo trades in accordance with its trading conditions, incorporating certain conditions, limitations and indemnities and shall be entitled to the full benefits of, and rights to, all limitations and exclusions of liability in accordance with these conditions. Megatop Cargo’s trading conditions are available on request.
Mr Charalambous agreed that above was in an email sent to him by Mr Veljanovski on 27 June 2019.
The Court accepts Mr Charalambous evidence on the basis that what he has recounted is correct. As to whether the view he had formed as to the legal liability for Megatop in relation to damage to Sunset is credible is another matter.
The Court finds it difficult to accept that, as an avid art collector of works of significant value, Mr Charalambous would not have been aware of the need for insurance for damage in transportation and taken some considerable care to ensure that his interests were fully protected.
Evidence of Mr Jarvis
Mr Jarvis swore an Affidavit dated 13 May 2021. Mr Jarvis is a director of PLJ Arts Pty Ltd trading as Smartshift. Smartshift is a provider of fine art delivery and installation services in the Sydney area.
Upon being told that Sunset was available for delivery following its importation back into Australia on the second occasion, Mr Jarvis attended Megatop’s warehouse. He deposes that he sought out Mr Veljanovski, who was is an upstairs office and asked him words to the effect “Hi Mick, I’m here to collect Costa’s Urs Fischer. Can you point out the crate for me’? He then followed Mr Veljanovski downstairs where the crate containing Sunset was identified. He unpacked Sunset by using a cordless drill to unscrew the screws from the top of the crate. Apart from removing the top, he states he did not move the crate. Upon removing the top of the crate, Mr Jarvis deposes he observed that there was a loose split pattern from which protruded a screw that had apparently broken loose from travel frame inside of the crate. In his view, this split batten should have been underneath the work. A split batten is a device used to fix heavy objects to walls, or in the case of artwork being shipped, to the inside of a crate for transport. However, when he removed the top of the crate, it was visible and loose towards the side at the top of the crate.
Mr Jarvis also observed some damage to Sunset. He deposes that following identifying the damage, he went upstairs to find Mr Veljanovski. He said to him, “I’ve un-crated the Urs Fischer and the split batten has broken off the inside of the crate. It looks like the way it was packed has caused some damage to the artwork. You should come and take a look”.
Mr Jarvis took various photographs which are attached to his Affidavit. Particularly, at Court Book pages 198, 199 and 200 are photographs which show Sunset still in the crate, with a protective layer of plastic over it. In one corner is a split batten with a screw protruding from it, together with another loose screw in the corner. The plastic immediately above the batten appears to have been pierced in a number of occasions by sharp object, most likely the batten with the screw embedded in it.
In cross-examination, Mr Jarvis denied that he used a crowbar to take the top off the crate. He denied that when he unpacked the crate, he had applied force which would have dislodged the split batten.
Mr Jarvis appeared to be a credible witness who had significant experience in the packing and unpacking of fine artworks over an extended period of time. The Court accepts his evidence that he carefully took the lid off the crate using a cordless drill and did not damage the crate or artwork in the process. His observations of the loose split batten, which he assumes came from a travel frame used to secure the artwork within the crate, are consistent with the Court’s observations from the photographs attached to his Affidavit.
Evidence of Mr McWilliam
Mr McWilliam swore an Affidavit on 9 December 2020. He described himself as a valuer in the field of fine and decorative arts and has been undertaking this work for 45 years. Many of his valuations relate to Australian and international paintings.
Attached to his Affidavit were various documents including a copy of the Federal Court of Australia expert evidence practice note, a copy of his Curriculum Vitae, and a copy of his letter of instructions from the applicant’s solicitors. His actual report is relatively short.
Mr McWilliam states that, in his view, the damaged artwork, Sunset 2016, had a retail replacement or insurance value, in a pre-damaged condition, in August or September 2019 of $668,250.00. In its damaged condition, after conservation, the work in August or September 2019 had a retail replacement value of $608,850.00.
Retail replacement value is defined as the price at which the artwork could be purchased for from a reputable dealer or commercial gallery. The value in appeal of the artwork in a damaged condition is limited. Notwithstanding that, even a successfully restored artwork, with minor, if any, evidence of damage, could not be sold at the same price as a work in pristine condition.
It is to be noted, that Mr McWilliam did not set out the basis upon which he had arrived at the valuation set out above. Over objection, the report was received into evidence on the basis that evidence could be led by the applicant’s as to how the valuation was arrived at, including the methodology. Cross-examination would then be permitted. An adjournment overnight was allowed for certain documents to be provided to the respondent. It was indicated to the respondent that should they wish to seek an adjournment for another valuation from an alternative expert to be obtained, such an application could be made and would be considered by the Court. In any event, no such application was made.
During the course of both further examination in chief and cross-examination, it became clear that the basis of the valuation arrived at was based on one bid lower than the estimated price advertised by Christies at auction, in US dollars, plus any buyer’s premium at auction. This was stated to be 25% of the price at the fall of the auctioneers hammer, plus freight, insurance, and GST payable on the importation of a similar work of art into Australia.
It was noted that at auction, Christies would charge a sellers premium of approximately 4.25% on any sale price, in addition to any buyer’s premium. Thus, the proceeds on sale payable to the owner following auction, must be taken to be net of any buyer’s premium, seller’s premium and other after sales costs such as freight, insurance and GST payable on import into Australia.
Mr McWilliam presented as a reliable and credible witness. The Court accepts his evidence without hesitation and accepts his valuation as expert evidence.
If Megatop is liable, then the diminution in value relates to the net proceeds to a seller, which would be auction price less 4.25% as a seller’s premium and with a reduction of 8.8% due to the damage. Given a sale price of $468,000.00, less a reduction in value of 8.8% results in a figure of $422,049.00, or a reduction in value of $45,951.00. To that should be added the conservation costs of $13,200.00, making a total of $59,951.00.
The Court is of the view that the proper loss to the applicant as a result of the damage is this amount and not the $60,000.00 amount originally quoted by Mr McWilliam.
The Respondent’s Evidence
Evidence of Mr Veljonovski
Mr Veljanovski swore three Affidavits. The first dated 8 December 2020, the second 13 April 2021 and the third 9 February 2023.
In his first Affidavit, Mr Veljanovski states that he is employed as a Logistics Officer by Megatop. He describes Megatop as an international freight forwarding company and licenced customs broker. The company arranges international freight transportation and the clearance of freight though Australian customs and quarantine processes.
Since 2014, Megatop has been retained by Charas to handle the import or export of at least 30 consignments of art works.
On 20 June 2019, Mr Veljanovski was contacted by Mr Charalambous to arrange for Sunset to be shipped, (as compared to air freighted) from New York to Australia. Subsequently, Mr Veljanovski arranged for America Worldwide Agencies (“AWA”) to collect Sunset from Christies in New York and arrange for it to be shipped to Sydney by sea. On 20 August 2019, Mr Charalambous signed a written authorisation for AWA to act as his forwarding agent from the United States (Court Book page 232).
Sunset was subsequently shipped from New York to Australia via Long Beach.
In his second Affidavit, Mr Veljanovski claims it is Megatop’s policy not to handle high value artwork for personal use. The Court notes this seems at odds with the fact that it had acted previously for Mr Charalambous to ship Sunset from New York to Australia and its subsequent return to New York, as well as acting for Mr Charalambous on 29 other occasions. The Court does not accept this claim. The Court accepts that the client for the purpose of the shipping was Charas. The relevant customs declaration and entry for Sunset shows Charas as the owner.
As to the minor damage suffered in shipping Sunset to New York initially, Mr Veljanovski claims that it was packed and sealed by Smartshift as Charas’ nominated packer. On return, Sunset was packed by Christies and made ready for collection by AWA at the storage facility in Brooklyn.
At paragraph 24 of his 13 April 2021 Affidavit, Mr Veljanovski states as follows:
In respect to this shipment, when the cargo arrived at AWA, it was noted that the artwork was not in a suitable crate to be loaded in a container for international transport. AWA provided an outer crate to house the inner crate already housing the artwork. There was no internal packing done by the forwarder, only an outer crate supplied.
A copy of photos of the outer crate are attached to Mr Veljanovski’s Affidavit.
Mr Veljanovski goes on to state that when the crate arrived at Megatop’s warehouse, he inspected it and found that the outer crate was intact and in perfect order and condition. There was no damage report by the shipping line. There was also a clean receipt issued by the transport company in the United States which also confirmed there was no damage to the crate prior to the shipment departing New York
On 23 October 2019, Mr Jarvis arrived at Megatop’s warehouse. Mr Veljanovski confirms the events following relating to the discovery of damage to Sunset and the loose batten within the crate as shown in various photographs.
Mr Veljanovski opined it was the responsibility of the owner/shipper to ensure that Sunset was properly packed for shipping and securing Sunset to a travel frame.
Me Veljanovski points to clause 21(A)(1) of Megatop’s cargo standard terms and conditions. That is a requirement for an owner to place a notice of intent to claim with Megatop within 14 days. In this case he claims it was 4 months.
Second, Mr Veljanovski asserts Megatop are not insurers. Clause 7 and 12 of the terms and conditions respectively specify that ‘the goods are at the risk of the customer’ and ‘insurance will not be arranged except with the express instructions of the customer’.
Mr Veljanovski’s third Affidavit simply indicates Megatop have used AWA for many years as their agent in the USA.
In cross-examination, Mr Veljanovski agreed that he chose AWA to arrange transportation of Sunset from the United States. He agreed that there was always a risk of damage. He was asked if he ordinarily recommended insurance to cover risk. He stated in this case, ‘No’. He agreed he did not recommend insurance. He agreed that an email that Charalambous sent to him on 28 June 2019 included the following (as written):
Mick, Im away for th next month let’s get it back by sea.
Lets try and not damage it this time.
Mr Veljanovski stated he did not understand what that comment related to and that he was not aware until later that Sunset was damaged during shipment to the United States. The Court does not accept that Mr Veljanovski would have received such a comment and not sought to ascertain what it referred to. This affects Mr Veljanovski’s overall credibility as a witness.
Mr Veljanovski was unable to point to any signed authority from Mr Charalambous in which he authorised AWA to provide an additional crate over that which already housed Sunset. He agreed however, that he was invoiced USD$175.00.00 by AWA for the recrating.
Evidence of Adam Godijn
Mr Godijn describes himself, in an Affidavit sworn 31 January 2022, as an art conservator, currently employed as the Head of Conservation, Fine and Decorative arts at the International Conservation Services located in Chatswood, New South Wales.
In his expert report, dated 16 November 2021, Mr Godijn states he examined Sunset on a wall under normal, torchlight and ultraviolet light. In his opinion, Sunset is inherently prone to damage as it has no protective framing or glazing. It is a heavy artwork with exposed edges and difficult to handle. In his view, the artwork was in fair condition with multiple dents across the service, one of the upper right face corner and another in the local middle area. Numerous scratches over the service was seen particularly, on the face right side. There were minor losses of surface media around the edges of the painting, one in the face left upper edge and one in the lower face left corner. Two areas of previous possible retouching was seen under ultraviolet light.
In his opinion, the damage the painting in the form of dents, knocks, abrasions, scratches was most likely caused by physical impact. From the locations of the damage, in his view the loose split batten is as shown in photos, being a piece of timber with screws protruding, may have contributed to the damage during transport. Some of the damage to the proper top left and proper bottom right in the form of bruised edges is unclear how this would have been caused in transport.
In his view, referencing the condition report completed in New York in 2018 by Gagosian, it appears that the damage resulted during the time from that report and the photographs being taken on unpacking at Megatop in July 2019. In his view, it was not possible to determine that all the damage had occurred during the transport from New York to Sydney.
In his view, the cost of repairs for the damage which was of unclear origins was $1,500.00 plus GST. The cost of repairs for damage which may have been contributed to during transport with $10,500.00 plus GST, making a total of $12,000.00 plus GST, or a total of $13,200.00 including GST.
In cross-examination Mr Godijn indicated that he was not in a position to give any estimate as to the reduction of the value of Sunset due to the damage. This was not his field of expertise. Normally, he stated he worked with Mr McWilliam on such matters.
INITIAL FINDINGS OF FACT
Based on the above evidence, including the documents attached to the various Affidavits, the Court is reasonably satisfied as to the following facts:
A. Megatop transported Sunset to New York in around September 2018 on behalf of Mr Charalambous. Sunset suffered minor damage during its transport to the United States on consignment to Christies for sale. This damage was repaired or conserved prior to going to auction.
B. Following an unsuccessful auction, Sunset was taken to Christies’ storage facility in New York.
C. Mr Charalambous via Charas arranged with Megatop for Sunset to be transported by sea from the US to Australia. In making the arrangements, Mr Charalambous specifically drew to the attention of Mr Veljanovski that he did not want Sunset further damaged in transport.
D. Megatop then retained AWA in the US to arrange for the transport of Sunset by sea to Australia. The Court accepts that Sunset left Christies undamaged and any damage sustained occurred during shipping.
E. AWA recrated Sunset in the US prior to it being shipped on the basis that the crate it had been received in from Christies was insufficient for sea transport. Had there been any obvious damage to Sunset, the Court is satisfied this would have been reported by AWA at that time.
F. When Sunset arrived in Australia, it was taken to Megatop’s warehouse where it was unpacked by Mr Jarvis. Upon unpacking, it was discovered that a batten was visible that had come loose from the travel frame. The batten contained at least one screw and there was another loose screw within the area when Sunset had been packed. The plastic cover over Sunset was damaged. The damage appears to be consistent with perforation by a sharp object.
G. The Court is satisfied that the damage occasioned to Sunset was caused by loose battens with protruding screws and this occurred during shipping from the US. The Court accepts that Mr Veljanovski, in an email to Christies, stated that in his opinion Sunset was not secured to the travel fame which caused it to shift in transit and that there were two loose wooden panels (battens) with 8 screws that caused the damage to Sunset. This accords with the Court’s view.
H. While not necessary to so find, the Court is of the view that the most likely cause of the damage to Sunset occurred due to faulty packing of the work by Christies prior to it being picked up at their storage facility in New York.
I. The Court is not satisfied that Sunset was damaged during the unpacking process by Mr Jarvis. Had the work been damaged by the loose batten prior to AWA recrating it, there is a reasonable inference this would have been reported by AWA at the time they sought authority to place an outside crate around the travel frame.
J. Mr Charalambous reported the damage by telephone to Mr Veljanovski and Megatop on the day it was discovered. The Court finds this report amounted to a verbal Notice of Intention to claim. Mr Veljanovski said Megatop would get the issue ‘sorted’. The use of the word ‘sorted’ does not, in the Court’s view, amount to an acceptance of liability for the damage rather, as explained by Mr Veljanovski, assistance with making a claim on insurance. If a written Notice of Intention to Claim was required within 14 days, then it was reasonable for Mr Veljanovski to have informed Mr Charalambous at the time of the conversation, instead of just saying Megatop would get it ‘sorted’. The Court finds that the telephone call amounted to a Notice of Intention to Claim.
K. Based on Mr Godjin’s report, the Court accepts that a reasonable cost to conserve or repair the work is AUD$12,000.00 plus GST, or AUD$13,200.00 inclusive of GST.
L. Based on Mr McWilliam’s report, the Court is satisfied that there has been a diminution of value of the resale value of Sunset of $45,951.00. This figure is based on the loss to the seller on resale and not an insurance replacement value, which includes a buyer’s premium, and other costs associated with a similar work being purchased and transported from the US to Australia.
ISSUES FOR DETERMINATION
Australian Consumer Law
The applicants claim that Megatop breached s 60 of the ACL by not exercising due care and diligence as a result of insufficient packing and/or negligent handling of Sunset. The applicants further claim that Megatop engaged in misleading and deceptive conduct prior to entering into the contract in that they represented they would exercise due care and diligence when transporting Sunset, and deliver it to Sydney in the same condition as received in New York.
Section 60 of the ACL provides as follows:
If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due skill and care.
Section 60 of the ACL is subject to an exception in s 63(1)(a) which provides for an exception to the application of the guarantee for services supplied under:
a) A contract for the or in relation to the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored…
Section 63(2) provides for the following exception:
To avoid doubt, Subsection (1)(a) does not apply if the consignee of the goods is not carrying on or engaged in a business, trade profession or occupation in relation to the goods.
The respondent submits that Charas engaged in an agency business when dealing with Megatop.
The applicant submits that first, Charas is a construction company and does not deal in the acquiring of acquiring or selling artwork. Second, Charas was in a disclosed principal agreement and the ordinary rule is that the agreement entered into was between the principal and the third party. That is, the contract was between Megatop and Charalambous: Montgomerie v United Kingdom Mutual Steamship Association Ltd (1891) QB 370 at 371.
Third, it is asserted that Megatop has already admitted, and therefore it is not in dispute, that “Charalambous, via Charas, entered into an agreement with Megatop”: Paragraph 9 of the Statement of Claim and admission in the Amended Defence.
Charalambous gave evidence that the artworks he purchased were for his personal use and that he used Charas as his agent. The Court accepts that this is correct and at all times Charalambous was the effective and beneficial owner of Sunset. The Court does not accept the respondent’s submission that Charas carried on two lines of business, first as a construction company and second as an import agent for Mr Charalambous. Accordingly, Charas was not acting in a manner that exempted it from the operation of s 60 via s 63(2) of the ACL.
Whatever the situation may have been as to who the owner of Sunset was from the point of view of Gargosian was irrelevant as concerns Megatop. Based on the history of the relationship between Charalambous and Veljavonski, including the fact that he had imported 30 odd art items using Megatop, some of which Mr Veljanovski had personally delivered to Mr Charalambous at his private residence, the Court finds that Megatop knew that Mr Charalambous was the disclosed principal and that Charas acted as the agent.
It is further put on behalf of the respondent that even if Charas was not engaged in a business, Mr Charalambous was. This claim is based on cross-examination: transcript pages 66-67. In that exchange, Mr Charalambous stated that he had brought some 130 art works into Australia. He agreed that he was concerned as to the damage to Sunset in case he wished to sell it at some future point of time. He agreed “Yes, or trade it for another piece of art at a price higher than he paid for it’.
The Court does not accept this evidence alone is conclusive that Mr Charalambous had a business or trade in relation to art. It is in the very nature of a collector to collect works but not always to keep them indefinitely. Collectors may dispose of items when they tire of them or when they no longer suit the particular emphasis or taste of the collector. To on sell a work, so as to buy other works is not dispositive of a person engaging in a business for the motivation of profit, which is the foundation of a business, as compared to the pleasure of collecting and admiration of the works. Many collectors buy and sell works over time. The Court is not satisfied that Mr Charalambous was an art dealer, engaged in the buying and selling of art solely for profit. Accordingly, s 60 of the ACL applies and is not excluded by operation of s 63 of the ACL.
The Carriage of Goods by Sea Act
The respondent next seeks to rely on s 18 of the Carriage of Goods by Sea Act 1991 (Cth) (COGSA), which reads as follows:
The provisions of this Act prevail over the Provisions of Division 1 of Part 3-2 of Schedule 2 to the Competition and Consumer Act 2010, as that Division applies to a law of the Commonwealth, to the extent of any inconsistency.
It was submitted that the relevant international law that applies is the Hague Rules (known as the Brussels Convention) as incorporated with modifications in the US Hartner Act.
Reliance is placed on the text “Shipping Law” 4th Edition by Professor Martin Davies and Anthony Dickey QC who state that:
The unmodified version of the Hague Rules governs bills of lading and similar documents of title for inwards-bound international carriage to Australia from Hague Contracting States that have not modified the Rules (such as the United States).
The Court accepts that the Hartner Act applies via the COGSA. The relevant Bill of Lading in this matter, which has been provided to the Court, included the following clause:
Except as otherwise provided herein this Bill of Lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States of America, approved April 16, 1936 [also known as the Hartner Act], which shall be deemed to be incorporated herein and nothing herein contained shall be deemed a surrender by the Carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. The provisions stated in the said Act (except as otherwise specifically provided herein) shall govern before loading on and after discharge from the vessel and throughout the entire time the Goods are in the custody of the Carrier, if this Bill of lading is issued or delivered in a locality where there is in force a compulsory applicable Carriage of Goods by Sea Act, ordinance or statute of a nature similar to the International Convention for the Unification of Certain Rules relating to Bills of Lading dated at Brussels, August 25, 1924. It shall be subject to the provisions of said Act, ordinance or statute and rules thereto annexed. (b) The carrier shall be entitled to the full benefit of, and right to, all limitations of, or exceptions from, liability authorised by any provisions of sections4281 to 4288, inclusive, of the Revised Statutes of the United States and amendments thereto and of any other provisions of laws of the United States or of any other country whose laws shall apply.
It was submitted that if the Court were to find that Megatop is a carrier (which is denied), then ss 3(6) and 4(2) of the Hartner Act apply. Section 3(6) requires that a notice of loss or damage is to be given in writing within three days to the carrier or his agent at the port of discharge before or at the time of removal of the goods into the custody of the person entitled to delivery thereof and that removal shall be prima facie evidence of delivery by the carrier the goods. The applicant submitted that this was only required where the loss or damage is not apparent, which was not the case here as the damage was clearly apparent to all parties.
Section 4(2) of the Hartner Act states that neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from… (n) insufficiency of packing. Further, pursuant to s 4(5) of the Hartner Act limits damages to the carrier or the ship to an amount of USD$500.00.
It was further submitted that even if the Hartner Act did not apply, that would only revert the applicable law back to the amended Hague Rules. Article 3, Rule 6 also has a 3 day time limit and limits damages to, as at the time of the respondent’s written submissions of SDR 666.67 or AUD$1,343.30.
It was further submitted that a similar result is achieved by using the terms of the Bill of Lading itself, as opposed to COGSA. The applicable Australian law is s 10 of the Sea–Carriage Documents Act 1997 (Cth) (“SCDA”). It was submitted that s 10 of the SCDA gives privity that is lacking under terrestrial common law and any liability under a Bill of Lading is imposed on the consignee.
The Bill of lading in this matter provides as follows:
3. It is understood and agreed that other than the said Carrier no person whatsoever (including the Master, officer and crew of the vessel, all servants, agents, employees, representatives, and all stevedores, terminal operators, crane operators, watchman, carpenters, ships cleaners, surveyors and any other independent contractors whatsoever) is or shall be deemed to be liable with respect to the goods as carrier, bailee or otherwise howsoever in contract or in tort.
If, however, it should be adjudged that any other than said carrier is under any responsibility with respect to the Goods, all limitations of the exoneration from liability provided by law or by the terms hereof shall be available to such persons as here in described in contracting for the foregoing exemptions, limitations and exoneration from liability, the carrier is acting as agent and trustee for and on behalf of all persons described above, all of whom shall to this extent be deemed to be a party to this contract evidenced by this Bill of Lading, it being always understood that said beneficiaries are not entitled to any greater or further exceptions, limitations or exonerations from liability than those that the Carrier has under this Bill of Lading in any given situation.
21. … The shipper, consignee, receiver, holder of this Bill of Lading, owner of the Goods and person entitled to the possession of the Goods are jointly and severally agree fully to protect and indemnify the carrier and to hold it harmless in respect to any injury or death of any person, or loss or damage to cargo or cargo unit of any other property… even though such injury, death, loss or damage is caused in whole or in part by the fault of the Carrier or unseaworthiness.
It was submitted the effect of the above sections of the Bill of Lading impose on the consignee, Charas, or the owner, Mr Charalambous agree to indemnify first the carrier and second any other person relevantly, the respondent, Megatop.
The Court does not accept that, based on the evidence and given the large number of transactions Mr Charalambous had with Megatop that he was unfamiliar with the terms and conditions upon which they traded and which were also included on their website. Further, the Court finds that the terms and conditions of the relevant Bill of Lading Number 68924961 were incorporated into the terms of the contract between the applicants and Megatop.
IS MEGATOP A CARRIER OR A FREIGHT FORWARDER?
It was submitted however, that it was clear that Megatop was not a carrier but rather a Freight Forwarder. The Court accepts this submission. The documentation and evidence, including oral evidence provided to the Court, clearly indicates that at all times Megatop described itself and acted only as a freight forwarder, not a carrier. That is, Megatop merely arranged with other persons, being carriers, for the transportation of goods. It did not transport the goods itself. The analogy was given of the difference between a travel agent and an airline. If bags were lost in transit, the respondent of any claim for loss occasioned would be the airline, not the travel agent. The Court accepts this analogy.
Megatop described itself as a Freight Forwarder on its website. Mr Veljanovski signed off emails with the signature block of “Mick Veljanovski, Freight Forwarding”. The letterhead Megatop used also stated “Megatop Cargo Pty Ltd Freight Forwarders and Licenced Customs Broker”.
Having made this finding it is not necessary to consider the liability of Megatop as a carrier.
THE LIABILITY OF MEGATOP AS A FREIGHT FORWARDER
Even as a freight forwarder, it was submitted that the indemnity set out above applies to them as s 64 of the ACL does not apply where an exception is granted pursuant to s 275 of the ACL.
Section 275 of the ACL provides as follows:
Limitations of liability etc:
If:
a)there is a failure to comply with the guarantee that applies to a supply of services under Subdivision B of Division 1 of Part 3–2; and
b)the law of a State or Territory is the proper law of contract;
that law applies to limit or preclude liability for the failure, and recovery of that liability (if any), in the same way that it applies to limit or preclude liability, and recovery of liability, for a breach of a term of the contract of the supply of the services.
It was submitted that based upon the statement of the High Court in Moore v Scenic Tours Pty Ltd (2020) 268 CLR 326 at [37], the interoperation between ss 275 and 64 of the ACL is that Commonwealth Parliament have said that if a state Parliament wants to set up any regime that has the effect of limiting or precluding liability or recovery under the ACL, guarantees then the ACL will give way to that. What s 64 of the ACL does is state that if the contracting parties want to exclude, restrict or limit liability, (not recovery) then they cannot. However, the SCDA imposes an indemnity in a bill of lading onto a consignee. If that s 275 imposition conflicted with s 64, then s 275 would prevail given that it is an exemption to s 64 of the ACL. It was submitted, however, that there is no conflict. An indemnity only operates once a s 60 guarantee produces liability. After that identical reciprocal liabilities created by the indemnity which limits or precludes the recovery of damages under the guarantee (but not the liability) by providing a full (reciprocal) answer to it. It was submitted that no part of the indemnity imposed by the SCDA expressly contradicts the liability provision in s 64(2) of the ACL.
It was submitted the only liability of a Freight Forwarder was first, to take reasonable care in choosing a carrier and second, when the freight forwarder is in possession of the goods: Cro Travel PL v Australian Capital FinancePL [2018] NSWCA 153 at [34]-[35], [37] and [42].
Reliance was placed upon the statement of Mr Veljanovski in his Affidavit of 9 February 2023 that he chose AWA as the shipper based on his previous experience in dealing with them. This statement was not challenged in cross-examination and no evidence was called to suggest otherwise. The Court is not satisfied that negligence on the part of Megatop is established in relation to the selection of AWA as the carrier for Sunset.
No allegation as to negligent warehousing has been made. The Court has already found that any damage occurred in transit due to insufficient or faulty packing. The Court is thus unable to find any negligence, and therefore liability, on the part of Megatop as a freight Forwarder.
CAN THE APPLICANTS RELY UPON SECTION 236 OF THE ACL?
The applicants claim damages under s 236 of the ACL. This section states:
Actions for Damages
1) If:
a)a person (the claimant) suffers loss or damage of another person; and
b)the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of loss or damage by action against the other person, or against any other person involved in the contravention.
As against this, s 15 of the ACL states as follows:
Contraventions of this Schedule
Conduct is not taken, for the purposes of this Schedule, to contravene a provision of this Schedule merely because of the application of:
…
b)A provision of Division 1 of part 3-2 (other than section 66(2)) …
This includes the care and skill guarantee in s 60 of the ACL.
Megatop asserts that this Court has no jurisdiction to award damages for a breach of guarantee under s 236 of the ACL relying upon Rickhuss v The Cosmetic Institute Pty Ltd (No 2) [2020] NSWSC 393 at [51]–[65] and James v USM Events Pty Ltd [2022] QSC 63 at [348]. The Court accepts this submission. Section 267 of the ACL provides a mechanism for a claim for damages which cannot be otherwise remedied and is not taken to contravene a provision of the ACL. Section 267 deals with major and non-major failures in the supply of services and rights that flow therefrom, including the right to terminate the contract.
WAS MEGATOP’S CONDUCT DECEPTIVE OR MISLEADING?
Megatop submits that none of the representations said to amount being misleading or deceptive conduct were particularised. Instead, they relied upon the following representation by Mr Charalambous that was contained in a text sent to Mr Veljanovski prior to the work being transported from New York to Sydney (reproduced as sent):
Mick im away for th next month lets get it back by sea
Lets try and not damage it this time.
The Court understands that the reference to damage refers to the minor damage occasioned to Sunset in the course of its original shipment to the US for sale. The Court notes that this damage was conserved after Sunset arrived in New York and prior to it going to auction.
Mr Veljanovski did not reply to this text. In his evidence, he did not provide a satisfactory explanation to not replying, stating that he was not sure what was being referred to as the damage issue was dealt with by the export team of Megatop, whereas he worked in the import team.
Given Megatop did not make the representation, but rather were silent in response to the communication, the Court does not accept this silence amounted to representation that Megatop that Sunset would not be damaged in transit.
Even if the Court is wrong in this conclusion, that the silent representation (as claimed by the applicants) was a reasonable basis upon which to conclude that the work would not be damaged, the evidence is that AWA were selected due to the good reputation they enjoyed as regards handling and shipping of artworks.
The Court is also not satisfied that that the applicants relied upon this representation to use Megatop. The Court notes that there is little if any evidence that the representation, if it was one, was the basis upon which the applicants chose Megatop. In the Courts view, by the time of the text that decision had already been made. Accordingly the claim under s 18 of the ACL must fail.
THE IMPACT OF THE CARRIAGE OF GOODS AT SEA ACT
The respondent noted that the applicant submitted in oral submissions that s 18 of the ACL overrides the COGSA. Claiming “the section 18 misleading and deceptive conduct claim cuts across any of these allegations concerning the carriage of goods by sea and the Hague Convention and like because you can’t contract out of that provision”.
The respondent notes that COGSA is not a contract, rather a mandatorily applicable statute. Thus, COGSA has force of law. COGSA is a specific piece of legislation aimed at dealing with the liability incurred in international transport. The ACL is a later general statute.
Reliance was placed on the text by Pearce “Statutory Interpretation in Australia” 9th Edition at 7.20 where the following was said:
One of the most frequent situations in which the question arises whether a latter statute impliedly repeals an earlier is where a provision in the act dealing specifically with a particular topic conflicts with a provision in the later act that deals generally with the topic along with others. .. The approach adopted by the courts to resolve such conflicts is stated as distinctly by O’Connor J in Goodwin v Phillips [1908] HCA 55 at 14
Where there is a general provision which, if applied in its entirety, would neutralise a special provision dealing with the same subject matter, the special provision must be read as a proviso to the general provision and the general provision, in so far as it is inconsistent with the special provision, must be deemed not to apply
The court accepts that COGSA is a specific piece of legislation aimed at dealing with liability incurred in international transport, and the ACL is a later general statute. Accordingly, COGSA applies to a s 18 claim in relation to a s 60 claim under the ACL.
OTHER ISSUES
The applicants raise a number of other miscellaneous issues which can be conveniently dealt with together. Firstly, the applicant submissions make reference to an implied term of the contract and to breach of contract. It was submitted this appears to be no more than a confusion between the old Trade Practices Act 1974 (Cth) position, where guarantees were implied as contractual terms, and the ACL position where they are not. The Court is satisfied that the applicants have not pursued the claim that they had an implied term of contractual agreement.
The respondent raises certain complaints in relation to the issues of credit in relation to Mr Veljanovski. These have been dealt with fully above
The applicants also rely directly on part 5.4 of the ACL. The respondent submits this was not pleaded, was not opened upon orally and thus, cannot be relied upon in closing submissions. The Court accepts this submission.
The applicants also complain the two members of the export team and at least one employee of AWA were not called. The Court is not satisfied that any Jones v Dunkel (1959) 101 CLR 298 inference can be drawn against the respondents for not calling additional witnesses other than Mr Veljanovski and Mr Godjin. The Court notes that it was the applicants, as the plaintiffs, who bear the burden of proof on the balance of probabilities of any fact relevant to the issue of causation.
DISPOSITION
For the above reasons, the Court is not satisfied that liability has been proven as against the respondents for the damage caused to Sunset. Accordingly, the application is dismissed.
THE CROSS CLAIMS
As noted above, it was not disputed that two invoices for arranging cargo carriage are currently unpaid by the applicants to the respondent. The first is for transporting Sunset from New York to Sydney in the amount of $3,268.71.
The second relates to a later shipment of an artwork from Italy to Sydney in the sum of $2,673.08. The Court is satisfied that there was no argument between the parties that those were the prices agreed to in the services were rendered. The amounts remain unpaid. Having found in favour of the respondent in relation to the substantive claim in relation to liability for the damage occasioned a Sunset, no basis exists for the Court to find for the plaintiffs on the basis of a set-off , or indeed any other basis, in relation to the amounts claimed in the cross-claim
Accordingly, the Court finds in favour of the respondents in the amount of $5,959.36, plus interest.
COSTS
The Court will hear from the parties in relation to costs, noting that the costs should normally follow the event with the applicant being unsuccessful in all aspects of the claim.
I certify that the preceding one hundred and thirty-seven (137) numbered paragraphs are a true copy of the Reasons for Judgment of Judge D Humphreys. Deputy Associate:
Dated: 21 April 2023
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