Cosco Container Lines Co Ltd v Unity Int'l Cargo Pty Ltd
[2012] NSWDC 122
•29 March 2012
District Court
New South Wales
Medium Neutral Citation: Cosco Container Lines Co Ltd v Unity Int'l Cargo Pty Ltd [2012] NSWDC 122 Hearing dates: 14 and 15 February 2012 Decision date: 29 March 2012 Before: Rolfe DCJ Decision: Verdict for the Plaintiffs in the amount claimed, $63,712.00.
The plaintiffs are entitled to an award of interest under the Civil Procedure Act (2005) and the Uniform Civil Procedure Rules calculated at the prescribed rates.
Legislation Cited: Civil Procedure Act (2005)
Uniform Civil Procedure RulesCases Cited: Carrington Shipways Pty Ltd v Patrick Operations Pty Ltd (1991) 24 NSWLR 745
Brandt v Liverpool (1924) 1KB 575
Malaysia International Shipping Berhad v VISA Australia Pty Ltd (2003) USCA 64
Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165
Ringrow Pty Limited v BP Australia Pty Limited (2005) 222 ALR 306
Dunlop Pneumatic Tyre Co Limited v New Garage and Motor Co Limited (1915) AC 79
AMCV-UDC Finance Ltd v Austin (1986) 162 CLR 170
Interstar v Integral (2009) 257 ALR 292
Philip Bernstein (successors) Ltd v Lydiate Textiles Ltd (unreported decision of the English Court of Appeal)
R J & M Bezzina Pty Limited & Ors v Saxby Mortgages Pty Limited (2004) NSW CA 211Category: Principal judgment Parties: Cosco Container Lines Co Ltd (first Plaintiff)
Five Star Shipping & Agency Company Pty Ltd (second Plaintiff)
Unity Int'l Cargo Pty Ltd (Defendant)Representation: Counsel:
E G H Cox (Plaintiff)
I G B Roberts SC (Defendant)
File Number(s): 10/208626 Publication restriction: Nil
Judgment
The 1st plaintiff, Cosco Container Lines Co Ltd ("Coscon") engages in the carriage of goods by sea using shipping containers.
The 2nd plaintiff, Five Star Shipping & Agency Company Pty Ltd ("Five Star"), is the exclusive Australian agent of Coscon. Both Coscon and Five Star are part of a large group of companies known as the Cosco Group.
The defendant, Unity Int'l Cargo Pty Ltd, conducts the business of freight forwarding and customs brokerage.
The plaintiffs' claim relates to charges the plaintiffs allege the defendant owes them when the plaintiffs' shipping containers were not returned within what the plaintiffs describe in their statement of claim as "the prescribed time".
The plaintiffs' containers had been loaded with fibreglass and wool in China. Pursuant to two seaway bills numbered COSU 0105208480 and COSU 0105208490 dated 25 October 2009, the containers were shipped for delivery to the defendant as named consignee from the port of Xingang, China, on the vessel "Ling Yun He", voyage 216 south to Brisbane and Sydney.
On 13 June 2006 the plaintiffs and defendant had entered into the ImportNet Agreement ("INA")for the delivery and loan of containers (exhibit B p 1). This was a contract between the parties which governed the use of the plaintiffs' containers.
The INA expressly incorporated Coscon's standard bill of lading terms and conditions and the terms and conditions of its standard Equipment Handover Agreement ("EHA").
Generally speaking, the plaintiffs' practice, after goods have been shipped on board a vessel and prior to the vessel and cargo arriving at the port of discharge, is to issue to the consignee and the "Notify Party", so-named on the seaway bill, a document described as the "arrival notice". The arrival notice records the estimated time and date of the vessel's arrival and the location at which containers can be collected. An arrival notice is usually sent by facsimile or email approximately five days prior to the anticipated arrival date.
Where, as in this case, an INA has been signed by a party such as the defendant and that party has been identified as the consignee on a seaway bill, electronic delivery orders are sent to that party once that party confirms to the plaintiffs that freight and local port charges have been paid.
A delivery order provides the holder of it with the critical information which is needed to collect goods from a container terminal. Coscon's practice is to issue a separate delivery order for each container. A delivery order does not identify a consignee by name; rather, the Coscon computer system links details of the container number and seaway bill number to the details of the named consignee on the seaway bill because its number appears on the delivery order.
The delivery order contains a unique pin for access to the container terminal. Anyone going to the terminal to obtain goods must use the pin to do so.
Between 26 November 2009 and 28 March 2010, Five Star, as agent for Coscon, issued delivery orders to the defendant.
The delivery orders incorporated Coscon's standard terms and conditions, as well as the EHA terms set out on the reverse side of each order.
The defendant acted as the Australian agent of Sunlight Global Logistics Int'l Co Ltd ("Sunlight"). Sunlight is a freight forwarding company based in Tianjin, China. The evidence establishes the usual procedure adopted by the defendant and Sunlight, followed in this case, was:
(a) The defendant received from Sunlight the seaway bills which Coscon issued to the shipper listing the containers comprising the shipment.
(b) The defendant received from Sunlight house bills it had issued to the shipper. Each house bill was a separate contract of carriage: Carrington Shipways Pty Ltd v Patrick Operations Pty Ltd (1991) 24 NSWLR 745. Thus, in reality, the defendant was performing part of Sunlight's obligation under each contract.
(c) The defendant received from Five Star the delivery orders for the containers shipped under the seaway bills, and
(d) Once payment had been made to the shipper for the goods, the defendant provided the receiver of those goods with the delivery orders issued by Five Star so the receiver could obtain delivery of the containers containing the goods.
The evidence establishes that, as between the plaintiffs and the defendant, as a matter of practice, all charges invoiced by the plaintiffs to the defendant were paid by the defendant. The defendant looked to the receiver of the goods, either to put it in funds for this purpose or reimburse it for payments made to the plaintiffs. The plaintiffs were not concerned with or involved in these arrangements.
The plaintiffs had no contract with the receiver of the goods, in this case, Global Fibreglass Services Pty Limited ("Global Fibreglass").
As a practical matter, the dispute in this case arose because Global Fibreglass went into liquidation. This meant the defendant would not be reimbursed by Global Fibreglass if it paid the charges invoiced to the defendant by the plaintiffs. Therefore, the defendant decided not to pay the plaintiffs' charges. The defendant disputes that it is liable to do so.
The plaintiffs' primary case is that they are entitled to rely on the INA to recover their charges from the defendant. The plaintiffs rely on Clause 6 which provides:
"That all equipment and/or containers, once emptied, are to be returned to the nominated container depot(s) in a clean, dry and undamaged condition within the time stipulated by the applicable tariff. Should this not occur, the charges as outlined in the said tariff governing the carriage of cargo will expressly apply."
As can been seen, the clause imposes two obligations. First, empty containers are to be returned to the nominated depot in an undamaged condition within the stipulated time - in this case, 10 days "freetime". Secondly, if containers are not returned within the freetime, charges stipulated in the plaintiffs' tariff start to apply.
The plaintiffs also rely on Article 3 of the EHA (incorporated into the INA) which provides:
"The merchant shall complete promptly and expeditiously the use for which the equipment has been loaned and shall return the equipment safely and expeditiously to the Company (Five Star Shipping & Agency Company Pty Ltd or its Agents) at the place received or such other place or places as the Company may designate in the same order and condition as at the commencement of the loan."
Article 1 of the EHA provides:
"The equipment is loaned to the merchant (The merchant includes the consignee/notify party or the receiver of the goods) on the terms and conditions provided and is subject to the payment by the merchant to the company of container demurrage charges as set out in the COSCO demurrage policy."
The plaintiffs say that the defendant is "the merchant" referred to in Article 1 and that the charges they are seeking to recover are the charges stipulated in their tariff.
The parties agreed that the issues for the Court to determine are, first, whether the defendant is liable to pay the plaintiffs' charges under the INA. Secondly, (if necessary), whether the defendant is liable to the plaintiffs as the named consignee of the seaway bills and, thirdly, (if necessary), whether each delivery order was a separate, implied contract based on the principles discussed in Brandt v Liverpool (1924) 1KB 575.
Mr I G B Roberts SC appeared for the defendants. In his primary submissions dated 14 February 2012 and submissions in reply dated 17 February 2012, Mr Roberts set out in detail his client's case on these matters. It is therefore not necessary to set out those submissions in this judgment.
The defendant's primary submission was that it was not a "merchant" as defined in the INA.
The defendant's submission ignores a number of important matters. First, the plaintiffs had no contract with Global Fibreglass. Secondly, the defendant was not acting as agent for Global Fibreglass. As noted earlier, the defendant was performing part of Sunlight's obligations under the freight forwarder's houseway bill.
If the defendant's submissions were accepted, this would mean that the terms of the INA would have no operation: see Malaysia International Shipping Berhad v VISA Australia Pty Ltd (2003) USCA 64 at [9] per Buchanan, JA. The plaintiffs' submission that the contractual provisions in the INA constitute a distinct container use contract should therefore be accepted. As pointed out by counsel for the plaintiffs, Mr EGH Cox, Clause 6 of the INA does not use the word "merchant". On the face of it, therefore, the defendant is bound by the INA because it signed the document: Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165.
The defendant sought to read down the INA. Relying on the definition of "merchant" contained in the EHA, the defendant submitted that it meant only a party who had physical possession and control of containers. However, the definition of merchant is deliberately broad, the parties objective intention being to refer to individuals and corporations which are not parties to the INA, such as persons unpacking a container. In this respect, in relying on the submission based on Article 4 of the EHA that liability only attaches to the person in possession of the containers (such as, here, Global Fibreglass), the defendant has overlooked the following words in Article 4:
"... the merchant shall be responsible to the Company for the performance of the terms and conditions herein provided notwithstanding that the equipment may be in the possession, use or operation of any other person ..."
Accordingly, subject to dealing with the question of penalty, the plaintiffs are entitled to succeed on their primary claim in contract. It is therefore unnecessary to determine the second and third issues earlier referred to.
It is common ground that, after issue of the delivery orders to the defendant, each of the plaintiffs' 19 forty foot containers were collected from the terminal and that both were returned to the plaintiffs' possession after the agreed 10 days "free time". In this respect, the defendant's contention is that under the INA its liability is to pay "detention or demurrage charges", the relevant provision requiring it to do so is a penalty and therefore the provision is unenforceable.
In Ringrow Pty Limited v BP Australia Pty Limited (2005) 222 ALR 306 at para 12 the High Court proceeded on the basis that Dunlop Pneumatic Tyre Co Limited v New Garage and Motor Co Limited (1915) AC 79 continued to express the law applicable in Australia on penalties. At 86-87 in that case Lord Dunedin provided the following formulation:
"2 The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine convenanted pre-estimate of damage ...
3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach ...
4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are:
(a) It will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach ...
(b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid ...
(c) There is a presumption (but no more) that it is a penalty when "a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage."
In applying the above principles, as a first step it is necessary for the defendant to establish that the contractual provision in question constitutes payment for breach of contract: AMCV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 185; Interstar v Integral (2009) 257 ALR 292 at 321.
For their part, the plaintiffs submit that contractual provision they rely on does not fit this description.
The defendant submits that its failure to ensure the containers were returned on time is a breach of contract. Consequently, the obligation to pay the plaintiffs' charges should be seen as a pre-estimate of the plaintiffs' liquidated damages. I do not agree.
In my opinion, it is important to bear in mind that the Court is dealing with commercial parties to a commercial agreement. As has been frequently stated, (see the reference by Allsop, P in Integral at 322 to the unreported decision of the English Court of Appeal in Philip Bernstein (successors) Ltd v Lydiate Textiles Ltd and the dicta of Giles, JA at [29] in R J & M Bezzina Pty Limited & Ors v Saxby Mortgages Pty Limited (2004) NSW CA 211) the ordinary rule is that contracts should be enforced, pacta sunt servanda, unless they can be brought within a limited category of cases, such as those dealing with penalties, where, for reasons of public policy, the Court refuses to give effect to the agreement of the parties.
Although there was an obligation on the defendant to return the containers at the conclusion of the 10 days free time, there was no amount immediately payable by the defendant if this was not done. Rather, the parties agreed that the defendant would hire the containers until their return at the agreed contractual rate. In my opinion, this was a separate obligation which was not contingent on any breach. Looking at it this way, therefore, the provisions relied on by the plaintiffs do not operate as a penalty.
Accordingly, there will be a Verdict for the Plaintiffs in the amount claimed, $63,712.00.
The plaintiffs are entitled to an award of interest under the Civil Procedure Act (2005) and the Uniform Civil Procedure Rules calculated at the prescribed rates.
I will now hear the parties on costs.
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Decision last updated: 27 August 2012
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