El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA [2004] FCAFC 202
ADMIRALTY AND MARITIME LAW – carriage of goods by sea – Hague-Visby Rules – Australian COGSA Art 3 Rules 3, 4 and 8 – method for assessing value of cargo – where no ‘commodity exchange price’ or ‘current market price’ – where ‘normal value’ of goods at destination not determined.
ADMIRALTY AND MARITIME LAW – limitation of liability – bill of lading – how to treat posters and prints enumerated as ‘pieces’ – whether an enumeration of packages or units – whether contractual limitation applies.
STATUTORY INTERPRETATION – construction of Carriage of Goods by Sea Act 1991 (Cth), Art 4 Rule 5(c) – meaning of ‘enumeration of packages or units’ – meaning of ‘as packed’.
International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, 25 August 1924 (the Hague Rules)
International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, 25 August 1924, as amended by the Protocol of 23 February 1968 and the Protocol (SDR Protocol) of 21 December 1979 (the Hague-Visby Rules)
Vienna Convention on the Law of Treaties, Vienna, 23 May 1969 Arts 31, 32 and 33
Leather’s Best Inc v The ‘Mormaclynx’ 451 F.2d 800 (2nd CCA, 1971); [1971] 2 Lloyd’s Rep 476 discussed
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
Continue reading El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA
Sign in free to access the full text
Details
AGLC
El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA [2004] FCAFC 202
Case
[2004] FCAFC 202
Decision Date
CaseChat Overview and Summary
El Greco (Australia) Pty Ltd and Theodorakopoulos v Mediterranean Shipping Co SA is an appeal against a decision to award damages for loss of goods during sea carriage. The central issue was the valuation of the goods, which were posters and prints, for the purposes of assessing damages. The appellants argued that the price agreed upon between the seller and buyer should have been used to determine the market value, while the respondent relied on expert evidence to assess the value at a significantly lower amount. The court was required to decide whether the agreed price was a reliable indicator of market value and whether the expert evidence should be given critical importance.
The court found that the transaction between the parties was not conducted in a business-like manner and that there was insufficient evidence to support the agreed price as reflecting market value. The court accepted that the expert evidence was relevant and should be given weight in determining the value of the goods. The court concluded that the damages should be assessed based on the expert's valuation, rather than the agreed price. The court also found that the appellants' argument regarding the interpretation of a limitation of liability clause in the bill of lading was without merit.
The final orders of the court were to allow the cross-appeal, set aside the previous orders, and direct the parties to file a minute of order for judgment based on the application of the relevant rules, or failing agreement, to file and serve forms of order within 14 days. The appellants were ordered to pay the respondent's costs of the appeal, while the cross-appellant was to pay the cross-respondents' costs of the cross-appeal. The matter was stood over for the making of final orders.
Orders
Orders of the court
1. The cross-appeal be allowed.
2. The cross-respondents pay the cross-appellant’s costs of the cross-appeal.
3. The appeal be dismissed.
4. The appellants pay the respondent’s costs of the appeal.
5. The orders of the Court made on 17 July 2003 be set aside, except the order as to costs.
6. The parties file, within 7 days, a minute of order which is agreed between them to provide for judgment for the second appellant based on the application of Article 4 rules 5(a) and (c) of Schedule 1A to the Carriage of Goods by Sea Act 1991 (Cth) on the basis of there being only one package or unit, that being the container, in substitution for the orders made on 17 July 2003, and which have been set aside; and failing any such agreement, the cross-appellant and cross-respondents file and serve within 14 days forms of order which they contend dispose of the matter.
7. Otherwise, stand the matter over to a date to be fixed for the making of final orders and any argument in connection therewith.
Background
Background to the litigation
By their notice of appeal, the appellants contend, in summary, that:·Judgment should have been found for Mr Theodorakopoulos in the sum of $883,390, plus interest, in accordance with Article 4 Rule 5(b) of the Amended Rules. ·It should have been held that the price agreed between Mr Petrogiannakis (a director of the first appellant) and Mr Theodorakopoulos at arms’ length established the relevant market value of the goods, or evidence of the current market value of the goods in Greece at the time and place the goods ought to have been delivered.·Her Honour should not have given ‘critical importance’ to the evidence of Mr Cocks, called by the respondent as an expert witness, in determining the value of the goods. Alternatively, if Mr Cocks’ evidence was to be accepted and given critical importance, damages should have been assessed at $390,000, plus interest.·As mentioned, the appellants have also appealed against the costs order made by her Honour. I will return to this part of the appeal later.Her Honour’s outline of the evidence describing background material Some of the factual background to the appeal has been outlined in the preliminary observations made by Allsop J in dealing with the cross-appeal. It will, however, assist if further reference is made to her Honour’s outline of the evidence describing that background, as follows:·No detail of the negotiations between Mr Carl and Mr Petrogiannakis was provided. Mr Carl’s prices ($250,000 for land and buildings and $150,000 for the business) were paid. This sum included a significant quantity of prints and posters, although they were not identified in the contract. Their quantity was unknown to Mr Petrogiannakis, who arranged at some point for an inventory to be taken.·Mr Petrogiannakis said that he and his wife commenced operating the poster business after payment of the deposit. It was not clear whether they sold any of the stock prior to negotiating for the sale to Mr Theodorakopoulos. Mr Petrogiannakis said that they sold ‘quite a few’ of the prints and posters in this period, but could not indicate any figure. The records had been lost. (Reference was made to the two fires at the premises in June and September 1999). There was no evidence in respect of the number of posters lost or damaged, what proportion of the total they represented, or how their value was assessed.·Mr Petrogiannakis had known Mr Theodorakopoulos since about 1988. At some time after Mr Petrogiannakis had (in 1999) purchased the poster business, he spoke to Mr Theodorakopoulos at the office of a solicitor whom they had both consulted. Mr Petrogiannakis knew that Mr Theodorakopoulos had sold his commercial properties and was returning to Greece. Mr Petrogiannakis told Mr Theodorakopoulos about his acquisition of the poster business. Mr Theodorakopoulos expressed some interest and later visited its premises in Brisbane.·The negotiations between Mr Petrogiannakis and Mr Theodorakopoulos appear to have taken place over a short period, some three days. Initially, Mr Petrogiannakis sought $18 per poster or print. The negotiations concluded with Mr Theodorakopoulos’ agreement to buy all of the stock for $956,545. Evidence differed as to how this was made up. Mr Petrogiannakis said that the price for the majority of the posters was $7.00, and $5.00 for those which Mr Theodorakopoulos was not particularly keen to buy. Apparently, there was a substantial number of the latter. Mr Theodorakopoulos said that the prices agreed were $7.00 for the larger, and $5.00 for the smaller posters.·Mr Petrogiannakis had no idea of the value of the stock when he purchased the business. Mr Theodorakopoulos also had none when negotiating with Mr Petrogiannakis. Mr Petrogiannakis said that, after he acquired the business, he obtained catalogues, finding that the value of the posters far exceeded what he had paid for them ‘and indeed, they were worth a lot more than was later sought’. (Her Honour commented:‘If this view was reached at an early point it was without the benefit of an inventory and description of the posters and prints, which ranged over a wide number of subjects. No catalogue or price list was produced in evidence.’)·Mr Theodorakopoulos said that he made some inquiries about the amount for which the posters and prints might be sold, claiming that it was a condition of his agreement with Mr Petrogiannakis that Mr Theodorakopoulos ‘could sell the posters and prints at a profit’.·Mr Theodorakopoulos also made inquiries (in Greece) of gypsies who sold through stalls at flea markets. He told them ‘he had posters with different subjects, but he was not specific’. They ‘indicated that he would be able to sell them’.·Mr Theodorakopoulos’ inquiries ‘were also said to have revealed that the total cost of the larger posters would be AUD$9.25 each, after the cost of lamination and payment of local taxes’.·Mr Theodorakopoulos said that ‘he found that the posters could sell in Greece for AUD$25 retail’ and he ‘decided that he would sell them for AUD$20 each’. (Her Honour noted that the source of this advice and how such an opinion was reached ‘was not gone into’.) Later, Mr Theodorakopoulos added that he did not intend to sell them all at once, but a few at a time. ‘In the meantime, he intended to store them in the basement of his brother’s house’.·Mr Theodorakopoulos communicated further with Mr Petrogiannakis (‘presumably confirming his purchase’). An invoice or invoices later issued. (Her Honour observed: ‘Two invoices, dated 10 December 1999, varying slightly in their contents, were produced in evidence. Mr Petrogiannakis did not explain how this came about. The fact of the multiple invoices and the dates when they in fact issued did not ultimately assume importance to the other issues in the proceedings. Their relevance appears to be limited to ... Mr Petrogiannakis’ ... credit’.) ·Mr Theodorakopoulos also provided an irrevocable letter of guarantee to El Greco (Australia) Pty Limited (‘El Greco’). Mr Petrogiannakis said that its purpose was to enable El Greco to sue for any outstanding monies in Greece.·The person who undertook the inventory for the sale to Mr Theodorakopoulos (Mr Schmidt), amalgamated and packed any loose posters or prints in paper. Many, if not most, were still packed and covered in paper, as they had been when delivered to the Brisbane premises.·The shipping documents identify some 200,945 posters and prints. (However, the appellants conceded at trial that this overstated the correct figure ‘by about 70,000’.)·The respondent’s marine surveyor (Mr Pavlidis) described the cargo he inspected at Aigion ‘as consisting of approximately 2,000 packages’.Her Honour’s conclusions on the value of the goods
Evidence
Evidence Before The Court
Her Honour continued (at [53]):‘That is not the only method of assessment. Resale may be another: [Patrick] v Russo-British Grain Export Company Limited [1927] 2 KB 535. In the present case, the evidence permits only an assessment of the value of the goods in Australia. It would, in any event, appear to be the more appropriate, given that the claim is brought on behalf of the owner of the goods.’ (Emphasis added.) (In The Russo-British Case, the buyers (merchants) bought Russian wheat of a specific description for delivery on a named date, and before that date resold the wheat to a third party at a profit. The sellers failed to deliver. On that date, and subsequently, there was no market for Russian wheat of that description. The sellers knew, at the time of sale, that the buyers were buying for resale. It was held that the buyers were entitled to damages as to the difference between the contract price and the resale price. Salter J said (at 538):‘Where a seller of goods fails to deliver, he should pay to the buyer the value of the goods at the time when they should have been delivered. This is the normal measure of damages. It is the measure prescribed by the first branch of the rule in Hadley v. Baxendale [(1854) 9 Ex. 341], and enacted in s. 51 of the Sale of Goods Act, 1893. If at the date of the breach there is an open market for goods of that kind, then the market price is obviously the value to the buyer. If there is no market the value must be otherwise ascertained, and a resale price may be some evidence of such value. But it is clear that loss of profit on resale can never be recovered unless the buyer can bring himself within the second branch of the rule and can show special circumstances and a right to special damages such as is reserved by s. 54 of the Sale of Goods Act, 1893.’) The primary Judge agreed (at [54]) that, as a general rule, the price obtained on a sale between two people in business, at a date close to the valuation date, is ‘the best evidence of value’. However, her Honour added (at [54]):‘That does not, however, require it to be applied where the contract price in question has no apparent basis in market prices or valuations. The transaction between Mr Petrogiannakis and Mr Theodorakopoulos, and the method by which they ascertained a price, could not be regarded as very business-like, or as usual in business, except perhaps a business of the most speculative kind. No confidence can be placed in the contract price as reflecting market value without evidence to support it. The purchase price paid to Mr Carl might have proved a useful guide. It would not support a subsequent sale price, within twelve months, of nearly $1M. I would not accept at face value Mr Petrogiannakis’ suggestion that Mr Carl sold at an undervalue. However, the two payments made by the insurers after the fires suggest that the value of the goods was higher. To give weight to them, as supporting the later price agreed between Mr Petrogiannakis and Mr Theodorakopoulos would require further explanation as to the basis upon which those payments were calculated. This was not provided.’
Decision
Reasons for decision
Some of the factual background to the appeal has been outlined in the preliminary observations made by Allsop J in dealing with the cross-appeal. It will, however, assist if further reference is made to her Honour’s outline of the evidence describing that background, as follows:·No detail of the negotiations between Mr Carl and Mr Petrogiannakis was provided. Mr Carl’s prices ($250,000 for land and buildings and $150,000 for the business) were paid. This sum included a significant quantity of prints and posters, although they were not identified in the contract. Their quantity was unknown to Mr Petrogiannakis, who arranged at some point for an inventory to be taken.·Mr Petrogiannakis said that he and his wife commenced operating the poster business after payment of the deposit. It was not clear whether they sold any of the stock prior to negotiating for the sale to Mr Theodorakopoulos. Mr Petrogiannakis said that they sold ‘quite a few’ of the prints and posters in this period, but could not indicate any figure. The records had been lost. (Reference was made to the two fires at the premises in June and September 1999). There was no evidence in respect of the number of posters lost or damaged, what proportion of the total they represented, or how their value was assessed.·Mr Petrogiannakis had known Mr Theodorakopoulos since about 1988. At some time after Mr Petrogiannakis had (in 1999) purchased the poster business, he spoke to Mr Theodorakopoulos at the office of a solicitor whom they had both consulted. Mr Petrogiannakis knew that Mr Theodorakopoulos had sold his commercial properties and was returning to Greece. Mr Petrogiannakis told Mr Theodorakopoulos about his acquisition of the poster business. Mr Theodorakopoulos expressed some interest and later visited its premises in Brisbane.·The negotiations between Mr Petrogiannakis and Mr Theodorakopoulos appear to have taken place over a short period, some three days. Initially, Mr Petrogiannakis sought $18 per poster or print. The negotiations concluded with Mr Theodorakopoulos’ agreement to buy all of the stock for $956,545. Evidence differed as to how this was made up. Mr Petrogiannakis said that the price for the majority of the posters was $7.00, and $5.00 for those which Mr Theodorakopoulos was not particularly keen to buy. Apparently, there was a substantial number of the latter. Mr Theodorakopoulos said that the prices agreed were $7.00 for the larger, and $5.00 for the smaller posters.·Mr Petrogiannakis had no idea of the value of the stock when he purchased the business. Mr Theodorakopoulos also had none when negotiating with Mr Petrogiannakis. Mr Petrogiannakis said that, after he acquired the business, he obtained catalogues, finding that the value of the posters far exceeded what he had paid for them ‘and indeed, they were worth a lot more than was later sought’. (Her Honour commented:‘If this view was reached at an early point it was without the benefit of an inventory and description of the posters and prints, which ranged over a wide number of subjects. No catalogue or price list was produced in evidence.’)·Mr Theodorakopoulos said that he made some inquiries about the amount for which the posters and prints might be sold, claiming that it was a condition of his agreement with Mr Petrogiannakis that Mr Theodorakopoulos ‘could sell the posters and prints at a profit’.·Mr Theodorakopoulos also made inquiries (in Greece) of gypsies who sold through stalls at flea markets. He told them ‘he had posters with different subjects, but he was not specific’. They ‘indicated that he would be able to sell them’.·Mr Theodorakopoulos’ inquiries ‘were also said to have revealed that the total cost of the larger posters would be AUD$9.25 each, after the cost of lamination and payment of local taxes’.·Mr Theodorakopoulos said that ‘he found that the posters could sell in Greece for AUD$25 retail’ and he ‘decided that he would sell them for AUD$20 each’. (Her Honour noted that the source of this advice and how such an opinion was reached ‘was not gone into’.) Later, Mr Theodorakopoulos added that he did not intend to sell them all at once, but a few at a time. ‘In the meantime, he intended to store them in the basement of his brother’s house’.·Mr Theodorakopoulos communicated further with Mr Petrogiannakis (‘presumably confirming his purchase’). An invoice or invoices later issued. (Her Honour observed: ‘Two invoices, dated 10 December 1999, varying slightly in their contents, were produced in evidence. Mr Petrogiannakis did not explain how this came about. The fact of the multiple invoices and the dates when they in fact issued did not ultimately assume importance to the other issues in the proceedings. Their relevance appears to be limited to ... Mr Petrogiannakis’ ... credit’.) ·Mr Theodorakopoulos also provided an irrevocable letter of guarantee to El Greco (Australia) Pty Limited (‘El Greco’). Mr Petrogiannakis said that its purpose was to enable El Greco to sue for any outstanding monies in Greece.·The person who undertook the inventory for the sale to Mr Theodorakopoulos (Mr Schmidt), amalgamated and packed any loose posters or prints in paper. Many, if not most, were still packed and covered in paper, as they had been when delivered to the Brisbane premises.·The shipping documents identify some 200,945 posters and prints. (However, the appellants conceded at trial that this overstated the correct figure ‘by about 70,000’.)·The respondent’s marine surveyor (Mr Pavlidis) described the cargo he inspected at Aigion ‘as consisting of approximately 2,000 packages’.Her Honour’s conclusions on the value of the goods
Ratio Decidendi
Legal Principle Established
To this extent, and subject to consideration of the cross-appellant’s reliance on cl 21 of the bill, I would vary her Honour’s judgment.The operation, if any, of clause 21 There remains for consideration the operation of cl 21 of the bill. It will be recalled that cl 21 states that where (as here) goods have been packed into a container, ‘it is expressly agreed, that [such] container shall constitute one package for [limitation of liability purposes]’. It will also be remembered that by Article 3 Rule 8 of the Amended Rules, it is provided, inter alia, that any clause ‘lessening’ the carrier from liability for loss to goods ‘otherwise than as provided [by these rules] shall be null and void and of no effect’. As has been seen, in my opinion, by the application of the Amended Rules, specifically Article 4 Rule 5(c), the cross-appellant’s liability is limited to approximately 2,000 packages. However, (assuming that cl 21 was not intended to increase the carrier’s liability by treating the container as an extra package), cl 21 purports to limit liability to one container, plainly a lesser liability. It must follow, in my view, that cl 21 is of no effect here.Orders proposed on the cross-appeal It follows that, on the cross-appeal, I would vary the judgment below to the extent mentioned. Given the outcome, no order should be made for the costs of the cross-appeal. Accordingly, I propose the following orders on the cross-appeal:1. Cross-appeal allowed in part.2.Order that, upon the remitter of the matter to the primary Judge, it be declared that for the purposes of the application of the limitation provisions of Article 4 Rule 5(c) of the Amended Rules, the number of units shall be deemed to be 2,000, or such other number of packages as the primary Judge may then find in accordance with these reasons.3. Make no order for the costs of the cross-appeal. IndexIntroduction and Issues [109]-[120]Jurisdiction [121]-[122]The Commercial Background [123]-[130]The Carriage [131]-[132]Other Matters not in Dispute [133]-[134]The Relevant Parts of the Amended Rules [135]-[138]The Approach to the Construction of the Amended Rules [139]-[148]My Views in Summary as to the Disposition of the Matter [149]-[153]The History and Context of Article IV rule 5 of the Hague Rules and the Hague-Visby Rules [154]-[225]The background to the 1920s conferences [155]-[165]The 1920s conferences [166]-[193]The implementation of the Hague Rules [194]-[205]The 1960s conferences [206]-[225]Judicial Approach to the Hague Rules and Cognate Legislation [226]-[244]The Cross-Appeal [245]-[311]The approach of the primary judge [246]-[247]The submissions of the parties [248]-[255]The disposition of the cross-appeal [256]-[310The Appeal [311]-[318]Orders [319]Introduction and Issues Before the Court are an appeal and a cross-appeal from orders of a Judge of this Court in which judgment was ordered to be entered for the second appellant in the sum of $63,570 plus pre-judgment interest from 17 April 2000 until the date of the orders, 17 July 2003, plus costs up to 28 November 2002. The second appellant was ordered to pay the respondent’s costs from 28 November 2002 onwards.