Fertinova Aust Pty Ltd & Anor v Samardzija
[1994] QSC 151
•22 December 1994
IN THE SUPREME COURT
OF QUEENSLAND Writ No. 337 of 1993
Brisbane
Before Mr Justice Mackenzie
[Fertinova Aust. Pty Ltd & Anor v. Samardzija & Ors]
BETWEEN:FERTINOVA AUSTRALIA PTY LTD
A.C.N. 052 355 530
First Plaintiff
AND:FERTINOVA INTERNATIONAL
(FAR EAST) LIMITED
Second Plaintiff
AND:JACK MIROSLAV SAMARDZIJA
First Defendant
AND:JACKSON CORPORATION PTY LTD
A.C.N. 054 999 138 (In Liquidation)
Second Defendant
AND:F.J. & W.J. TRANSPORT PTY LTD
A.C.N. 010 205 803
Third Defendant
AND:DAVID OUSTON PTY LTD
Third Party
JUDGMENT - MACKENZIE J.
Judgment delivered 22/12/1994
CATCHWORDS: TORT - CONVERSION - dealing with goods in manner inconsistent with owners' rights - demanding sum of money in exchange for return of goods - refusal to return when demand rejected - disposal of part of goods to another company - whether goods converted - whether director of company liable for acts of company
BAILMENT - duty of bailee not to part with goods without authority of bailor - bailee company purported to sell warehousing rights to another company - document facilitating transaction implied that title to goods passed - whether agent of bailor authorised transaction.
DAMAGES - Quantum - deterioration of goods - discount - consequential loss - remoteness.
COUNSEL:J. Sweeney for plaintiffs
A. Hodgson (Solicitor) for 1st and 2nd defendants
S. Blaxland for 3rd defendant
G. Cross for Third Party
SOLICITORS: Thompson King Connolly for plaintiff
A.P. Hodgson & Associates for 1st & 2nd defendants
Barbelor Cooke for 3rd defendant
Paul F. James & Company for Third Party
HEARING DATES: 24 - 27, 31 May, 12 June 1994
IN THE SUPREME COURT
OF QUEENSLAND
Writ No. 337 of 1993
BETWEEN:FERTINOVA AUSTRALIA PTY LTD
A.C.N. 052 355 530
First Plaintiff
AND:FERTINOVA INTERNATIONAL
(FAR EAST) LIMITED
Second Plaintiff
AND:JACK MIROSLAV SAMARDZIJA
First Defendant
AND:JACKSON CORPORATION PTY LTD
A.C.N. 054 999 138 (In Liquidation
Second Defendant
AND:F.J. & W.J. TRANSPORT PTY LTD
A.C.N. 010 205 803
Third Defendant
AND:DAVID OUSTON PTY LTD
Third Party
JUDGMENT - MACKENZIE J
Judgment Delivered 22/12/1994
In mid 1990 the second plaintiff ("Fertinova International") purchased a quantity of liquid fertiliser described as "Fertinova Liquid Fertiliser 15-6-5", manufactured in Austria from a Swiss company. The fertiliser was shipped to Singapore where it was stored in the port area until the authorities there required it to be moved. The alternatives were to move it from the port area to other storage in Singapore or to move it to another country. A decision was taken to transport it to Australia in the hope of selling it principally in Queensland. Fertinova International, through its Singapore agent, engaged the third party as its customs and storage agent in Queensland.
When the fertiliser arrived in Queensland it was duly transported to a warehouse at Colmslie where it remained until it had to be removed because warehousing fees were not paid. In May 1991, David Ouston Pty Ltd arranged for the goods to be moved to the third defendant's warehouse at Rocklea where it remained until December 1992. Throughout the period when it was in the third defendant's warehouse the fees were not kept up to date and only a single payment of $3,300 was made prior to removal from that warehouse, because David Ouston Pty Ltd was unable to obtain funds from either Fertinova International or Fertinova Australia Pty Ltd ("Fertinova Australia") which had been incorporated to act as the marketing organisation for the fertiliser in Australia. Mr Ouston was until March 1993 a director of Fertinova Australia which had little cash flow and was dependent upon advances of money from Fertinova International to discharge its liabilities.
Despite persistent efforts on the part of the third defendant to obtain its warehousing charges, the necessary monies were not forthcoming from Fertinova International to David Ouston Pty Ltd and by November or December 1992 the situation had reached the stage where Mr Ouston suggested that he could do no more to obtain the fees and that the third defendant pursue the matter with Fertinova International which was based in Hong Kong. The person who had responsibility for matters concerning the fertiliser on behalf of Fertinova International was Mr Herbert Berghaeuser. He had made a number of promises to Mr Ouston about the imminent availability of funds but such funds were not forthcoming in sufficient amounts to discharge all debts incurred by Fertinova Australia. The result was that insufficient money was made available to David Ouston Pty Ltd to enable it to discharge the debt for warehousing fees. The events directly relevant to the present action occurred from about November 1993 onwards. The result of these events was that the majority of the fertiliser was placed in a warehouse in the name of the second defendant of which the first defendant was a director and the prime mover.
Prior to the transfer to that warehouse, the third defendant had been given a cheque for $32,000 by the first defendant. When Mr Berghaeuser eventually spoke face to face with Mr Samardzija on 14 January 1993, the latter demanded $45,000 for the return of the fertiliser. Documents suggesting that 1670 10 litre containers of the fertiliser from those invoiced to the second defendant were later transported to the west coast of the United States of America were admitted by consent. As the first defendant is in central Europe and did not therefore give evidence his version of events is not available.
The circumstances surrounding the transfer of the fertiliser from the third defendant's warehouse to that used by the second defendant are of critical importance. Mr Ellis, a director of the third defendant, had delegated the task of collecting the debt for warehousing fees to an employee, Mr Hass. Mr Hass had been employed by the first defendant for a period prior to relevant events and had known him for about 10 years. He had lunch with the first defendant in late November and mentioned that he was having difficulty in collecting the money. However, at that time, there was still some expectation that the storage would be paid and the goods removed by 15 December 1992. At that time the warehouse where the goods were eventually stored was vacant and Mr Samardzija was interested in having goods in it because he was hoping to sell the warehouse and wished to give the impression that it was patronised. Later Mr Hass had further discussions with the first defendant in which Mr Hass says he told him that the third defendant would sell him the warehousing rights for $32,000. The first defendant inspected the goods and on an unspecified day after 15 December, it was agreed that the deal would proceed.
In the event $32,000 was paid to the third defendant on 18 December and the goods were then transported to the other warehouse. The sum of $32,000 was arrived at by Mr Ellis on the basis that in addition to the accrued warehouse charges, a considerable amount of repackaging and repalleting had to be done to enable the goods to be transferred, a considerable amount of labour intensive cleaning had to be done because the fertiliser had leaked from a substantial number of the bottles either because they had fractured or leaked through a safety aperture, and other miscellaneous expenses had been incurred. According to Mr Hass, Mr Ouston, who was not disputed to have authority with respect to the storage of the goods, had previously told him to do what ever he had to do to collect the debt. He had interpreted this as authority to sell the right to warehouse the goods to another person.
The document created at the time of the transfer from the third defendant's warehouse was conceded to be out of the ordinary in the conduct of the third defendant's business. The evidence is that when it was first taken to Mr Samardzija it referred to the quantity of fertiliser and referred to the $32,000 as "full price". Mr Hass gave evidence that when he showed the document to Mr Samardzija the latter required an addition in the form of a warranty that the third defendant had full power to sell the goods. A form of words was taken back to the third defendant's office where it was typed on the document, shown to Mr Ellis and then taken back to Mr Samardzija. The $32,000 was handed over following that. Mr Hass and Mr Ellis conceded that the form of the document was calculated to suggest that property in the goods had passed but said that their intention was only to sell the warehousing rights. Mr Hass gave evidence that his schooling had ceased at grade 5 level.
I digress to note that had the third defendant wished to sell the goods lawfully to recoup its charges it would have been obliged to do so by public auction after due notice to the bailor. (s.6 Warehousemen's Liens Act 1973).
Mr Ouston gave evidence that he was never told that the transaction would be of the kind which occurred. He gave evidence that Mr Hass had telephoned him and told him that the fertiliser had to be moved because the space had been relet for a consignment of goods coming from Adelaide but that they had another warehouse. Mr Ouston said that he took this to mean that the goods were to be shifted to another warehouse under the control of the third defendant and his faxed consent which simply refers to the goods being moved to "another location" is to be read in the context of that conversation. He said he was aware of the cost implications of the transfer of the goods and that he had assumed that the request for written consent had been made so that the charges associated with the transfer could be billed to the client rather than borne by the warehouseman.
Concurrent with these events Sir William Gunn, who had been engaged for a period by Fertinova International as a consultant but who had not been paid, instigated discussions with a view to finding a way in which he, the third defendant and Mr Ouston might be paid what was owing to them. I am satisfied that a meeting was held on 17 December 1992 between Sir William, Mr Ellis and Mr Ouston notwithstanding Sir William's initial suggestion that the meeting had occurred earlier than this and notwithstanding his recollection that Mr Hass was involved. Sir William's evidence is to the effect that he believed that Mr Ellis was not interested in the proposals because he had already been paid. The situation was that he had not at that time been paid by Samardzija. However, the evidence from Mr Ellis supplemented by that of Mr Hass indicates that there had been discussions with Samardzija prior to 17 December and I have no reason to doubt that Mr Ellis believed on 17 December that he would be able to achieve the removal of the goods to Mr Samardzija's warehouse pursuant to those discussions if he wished.
The real issue however is what was said in Mr Ouston's presence about the proposed transaction. Reading Mr Ellis' evidence as a whole, the impression created is that he believed that Mr Hass had at some prior time conveyed to Mr Ouston what the arrangement was to be. I do not read Mr Ellis' evidence as clearly claiming that he personally informed Mr Ouston at the meeting of the nature of the transaction that was in contemplation. Mr Hass' evidence on this point is vague and unsatisfactory. He asserted on several occasions that Mr Ouston knew what was happening, but, on analysis, this is not based on a clear recollection that he had explained the proposal in detail to Mr Ouston. On his evidence, it could only have been in the telephone conversation of 18 December that it occurred, and he conceded explicitly that he could not remember exactly what he said on that day. He could only say that he was sure that he would have mentioned Mr Samardzija's name, without being able to specifically recall, because he "had no reason not to." He conceded that he had not mentioned the sum of $32,000.
In this connection, I should record my observation that Mr Ouston, in my assessment, was a man who would have been unlikely to have given carte blanche to Mr Hass to negotiate a sale of warehouse rights without knowing details such as price and without knowing where the goods were going. It is true that when Mr Ouston found out, as he says, about 21 December that the goods had gone from the third defendant's possession, he was prepared to acquiesce because of Mr Ellis' assurance of a good deal. However, that does not affect my assessment of the most likely version of events as between Mr Hass and Mr Ouston.
One major point of disagreement is whether at the 17 December meeting there was an agreement to continue storing the fertiliser in the warehouse.
A letter dated 18 December 1992 from Mr Ouston to Sir William Gunn states:-"The owner of the warehouse where the fertiliser is stored has agreed to continue storing the fertiliser at a cost of A$1.50 per pallet per week."
A$1.50 per pallet per week represents an increased rate. It is difficult to see why a statement of that kind would be made if there had not been discussions on the matter. The evidence of Mr Ouston that the letter emanated from discussions at the meeting received support from the evidence of Sir William Gunn who says that his understanding was that the product would remain where it was for the time being. The result is that I am satisfied that neither Mr Hass nor Mr Ellis conveyed to Mr Ouston at any material time, in terms definite enough to be understood as such, that the transaction which was entered into with Mr Samardzija was contemplated. The letter of 18 December 1992, which refers to moving the goods to "another location" must in my view be read in this context. To the extent that the evidence of Mr Hass and Mr Ouston differs I prefer the evidence of the latter.
I am satisfied that it was in a conversation on or about 21 or 22 December in which Mr Ouston was told clearly that the goods had been placed in a warehouse owned by someone who wanted goods in it to facilitate its sale. He was told that the person would probably charge a cheap rate of storage and that he had "no problem" with the arrangement because the person came with Mr Ellis' recommendation.
Then on 22 or 23 December, Mr Berghaeuser phoned Mr Ouston and asked if the goods had been moved and why. He was told that it was because the warehouse had been re-rented and because Mr Berghaeuser's promise to pay the outstanding storage by 15 December had not been kept. Mr Berghaeuser was told that Mr Ouston had authorised the goods to be moved and Mr Berghaeuser mentioned that he had transferred $5,000 by way of payment. Mr Berghaeuser had also asked for details of the owner and the address of the warehouse.
Shortly after that conversation, Mr Ouston rang Mr Ellis and asked if he had received the $5,000 referred to by Mr Berghaeuser. Mr Ellis told him that he had not and because he had already been paid, it would be sent back. Mr Ouston learned for the first time that the party who had taken over the warehousing had paid Mr Ellis.
I am satisfied that it was at that point that Mr Ouston became aware that the third defendant had received payment in respect of the goods. I am satisfied that Mr Ouston understood the transaction to imply that the third defendant had been paid whatever was owed in respect of storage and handling and transport to the new warehouse. He denied that he was specifically told that the warehousing rights had been transferred but said that it was "blatantly evident because it was in a warehouse owned by somebody else". I am satisfied that Mr Ouston was prepared to acquiesce in that arrangement in the light of the previous conversation about the cheaper cost of storage and in view of the subsequent lack of objection by Mr Ouston.
On 29 December 1992, following another enquiry by Mr Ouston, Mr Ellis gave him the name and phone and fax numbers of Jackson Corporation. Jackson Corporation was unable to be contacted by phone so Mr Ouston sent a fax asking for the address of the warehouse, the price for storage and enquiring whether the corporation was interested in negotiating a sale of the warehouse because his principal in Hong Kong was looking for one. He then went on holidays and took no part in subsequent events because Mr Berghaeuser had by then come to Australia.
Mr Berghaeuser confronted Mr Samardzija and unsuccessfully attempted to retrieve the goods. During the course of those discussions he rejected Mr Samardzija's proposal that he could have the goods back for $45,000.
It is against this background of facts that the question of liability of the various parties must be determined. As well as the primary proceedings, there are third party proceedings between the third defendant and the first and second defendants and between the third defendant and the third party. There were also third party proceedings by the third defendant against another company which was at one stage the first third party but they were discontinued.
At the end of the trial, with a view to the recoverable fertiliser being secured and returned to the plaintiffs a declaration was made that up to and including 17 February 1993, the second plaintiff was the owner of fertiliser then in the possession of the second defendant. An order was made that the second defendant deliver up the fertiliser to the first plaintiff which had acquired it on 18 February 1993.
One of the uncontradicted facts in the case was that the condition of the fertiliser both as regards its stated composition and packaging had been progressively deteriorating for a long period of time. Evidence was given that even at Colmslie the contents of some containers was leaking, a number of the plastic containers were collapsing and in those that remained intact large crystals were precipitating out of solution. This process continued at the third defendant's warehouse. A consequence of this was that there were considerable difficulties in ascertaining precisely how much fertiliser was actually converted, and how much had been lost through other causes prior to any conversion. I shall return to this later.
The facts found above establish that Mr Ouston was not initially aware of the precise nature and extent of the transaction entered into between the third defendant and the second defendant. He did not initially authorise the sale of the warehousing rights. However, later, when it became apparent that there had been what purported, in his mind, to be a sale of the rights, he acquiesced in that state of affairs. The plaintiff's claim against each of the defendants includes a claim for damages for conversion. A claim in detinue was not pressed. Against the third defendant there is also a claim for damages for breach of duty as a bailee.
There is authority for the proposition that in the absence of any agreement to the contrary a bailee is under an implied duty to keep the goods in his own possession and not to subcontract his custody to a third person (Edwards v. Newland & Co (1950) 2 KB 534). A breach of this obligation renders the bailee answerable for loss or damage occurring while the goods are out of his possession (Jackson v. Cochrane (1989) 2 Qd.R 23). Therefore, to part with custody of the goods without authority, quite apart from any consequences of the accompanying financial transaction and the document generated by it, was a breach of the obligation as a bailee.
What was done by the third defendant actually went somewhat further than merely parting with custody. The warehouse rights were purportedly sold to the second defendant. The second defendant, through the first defendant, was provided with a document which, when read objectively, implied that the second defendant had title to the goods. The document was given deliberately in that form, in the sense that the addition of the critical words had been deliberate although according to Mr Ellis and Mr Hass it was given in ignorance of its potential to permit the representation to be made that the goods were the property of the second defendant.
That element in the transaction went beyond what had been acquiesced in by Mr Ouston whether he be considered as bailor himself or as agent for the plaintiffs. The consequences of this for the third defendant can be left for later consideration. However, there was a conversion by the second defendant by dealing with the goods in a matter inconsistent with the plaintiffs' rights, evidenced at least by the demanding of $45,000 to return the goods, and refusing to return them when that demand was rejected.
The question of the first defendant's liability raises another issue. Liability was based on the proposition that he was a director of the second defendant who was instrumental in causing it to enter into the transactions which constituted conversion by the second defendant. Therefore the case was that he was directly concerned in the acts of conversion by the second defendant. In such cases, there is clear authority that a director in that position is liable for the acts of the company (Performing Right Society Ltd v. Ciryl Theatrical Syndicate Ltd (1924) 1 KB 1, 14; Wah Tat Bank Ltd v. Chan Cheng Kun (1975) AC 507, 514-5; C. Evans & Sons Ltd v. Spitebrand Ltd (1985) 1 WLR 317; Kalamazoo (Aust) v. Compac Business Systems Pty Ltd (1990) 1 Qd.R 231, 258).
However, there was a point taken concerning the sufficiency of the pleadings. It was submitted that liability of the first defendant on the basis that he was a director responsible for the acts of the company was not adequately pleaded. The amended statement of claim (which was identical in this respect to the original statement of claim) delivered shortly before trial alleged that on or about 19 December 1992, the first and/or second defendant dealt with the fertiliser in a manner inconsistent with the second plaintiff's rights as owner, by taking possession of and removing all or part of the fertiliser held by the third defendant at its premises at Rocklea (para. 8). It was also alleged that the first and/or second defendant dealt with the fertiliser in the manner set out in paragraph 8 without the consent of the second plaintiff (para.9). The defence in this respect was a bare denial of paragraphs 8 and 9 of the statement of claim.
As the trial progressed it became apparent that the first defendant was presenting a case that any agreement entered into was made with the second defendant and that the first defendant had obtained no interest in the goods. When it became clear that the plaintiffs were relying on the proposition that the first defendant was liable because he was a director who had procured the arrangement which constituted the initial conversion, the question of sufficiency of the pleadings was raised for the first time. No particulars of the allegations in paragraphs 8 and 9 had been sought before trial. Discussion of the issue resulted in the defence being amended to allege, in paragraphs 5 and 6, that the first defendant acted in dealing with the fertiliser as a Director of the second defendant and that he had in those premises incurred no liability to the plaintiff or otherwise in respect of dealing with the fertiliser.
It cannot be denied that the pleading in paragraphs 8 and 9 does not refer to the first defendant in his role as Director. However, it is not easy to see how the first defendant could have been prejudiced in terms of the way the case would have been conducted had that been clearly expressed. While matters of detail were in dispute, the framework of the facts was not. There was no denial that the first defendant was involved in the negotiations which resulted in the second defendant obtaining the goods. Having regard to the circumstances as a whole, I am satisfied that there is no substance in the objection. The first defendant is therefore liable for the conversion of the goods by the second defendant.
The resolution of the matter depends to a substantial degree on the facts found. I am satisfied that Mr Ouston had authority with respect to matters concerning the storage of the fertiliser in his capacity as a Director of the first defendant and as a Director of the third party which was the customs agent for the plaintiffs. I am satisfied that well before the relevant events, the third defendant knew that the third party was agent for overseas principals. I am satisfied that Mr Ouston did not initially give authority for the sale of the warehousing rights because the nature of the transaction between the third defendant and the first and second defendants was not made explicit to him.
The authority initially extended only to the transfer to another warehouse. I am satisfied that at some time about 22 or 23 December Mr Ouston became aware from the fact that Mr Ellis said that the third defendant had been paid and the fact that the goods were stored in someone else's warehouse that the warehousing rights had been sold and that by his conduct he had acquiesced in what had occurred. I am satisfied that it was within his authority at that time to do so.
The primary claim by the plaintiffs against the first and third defendant was that the agreement between them was not authorised by the second plaintiff and constituted a breach of bailment by the third defendant, conversion by the third defendant and a tort on the part of the first defendant of procuring the second defendant's conversion of the goods. The findings of fact established that although Mr Ouston did not give consent on behalf of the second plaintiff or as principal to the bailment contract to the sale of warehousing rights initially, he acquiesced in such transaction having discovered that what had happened was a transaction of that kind. He did not give approval, whether directly or by acquiescence, to the creation of a document in the form of ex.55. I am satisfied that that document was not intended to evidence a sale of property in the goods to the first defendant.
It was submitted that in the event of such a finding, the act of parting with the goods pursuant to ex.55 was a dealing which was not authorised by Mr Ouston. It was submitted that even if he had consented to the transaction involving the sale of warehousing rights the provision of a document in the form of ex.55 changed the character of the transaction to such an extent that it could not be said that Mr Ouston's consent was fully informed consent. On behalf of the third defendant it was conceded that if the third party had given the third defendant authority to sell the warehousing rights but the goods themselves were sold, the third defendant was liable, subject to the question of repudiation of the original warehousing contract by the third party or the first and/or second plaintiffs.
The point made was that by the failure to pay the storage charges despite demands there had been a repudiation of the contract . However, it was submitted on behalf of the plaintiffs that there had been no acceptance of the repudiation assuming that the facts established it. It was submitted that the subsequent dealings with the goods were inconsistent with acceptance of the repudiation. In my view this is correct.
Returning to ex.55 the effect of such a document would be to clothe the holder of it with apparent title to the goods. Had there been evidence that the document had been used for the purpose of disposing of goods by the first and or second defendants, the question whether the provision of such a document, albeit in ignorance of its possible capacity for misuse, would have cast a different complexion on the third defendant's actions. The reality of the third defendant's situation is that there was a conversion by the disposal of the warehousing rights. However, the disposal of them was, within a short time, acquiesced in by Mr Ouston who had authority to do so. While there has been a technical conversion of the goods during that period there is no evidence of loss occasioned thereby. With respect to the latter period there is no evidence that the provision of ex.55 facilitated any subsequent dealings by the first and or second defendants.
In the circumstances I conclude that the first and second plaintiffs have not established that the third defendant is liable in damages to them. So far as the first defendant is concerned his primary defence was that the rights under the contract with the third defendant passed to the second defendant, not to him. For reasons that have already been expressed, that submission cannot be sustained. As to acts of conversion, the act of demanding $45,000, which was more than any lawful entitlements and of indicating that he would not instigate the return of the goods except for that sum is clear evidence of conversion on the first defendant's part. There was also the later act of disposal of part of the goods to My Life Corporation which was evidence of an intent to act contrary to the rights of the true owner. It was submitted that there was no evidence that the first defendant had been involved in the sale of the 1670 containers which were shipped to the United States. Although the conclusion depends on drawing an inference, in the context of the evidence that the first defendant was the prime mover of the second defendant, I am satisfied that in the absence of any evidence to the contrary on the issue I may safely draw the inference that the first defendant was involved in the disposal of that quantity of fertiliser. The circumstances clearly evidence a conversion. Accordingly the first defendant is liable for the consequences of conversion.
So far as quantum of damages is concerned, at the time when correspondence was entered into with My Life Corporation Pty Ltd about 12,100 litres remained out of the shipment of 16,700 litres, the American company in whose possession the containers were was prepared to release the containers into the possession of the plaintiffs upon payment of almost A$12,000. The cost of shipping the goods to the United States was about $7,000. Presumably if the goods were brought back to Australia a similar sum would be incurred in costs. The goods were also incurring ongoing storage costs in the United States at the time of the discussions. This is a proper case in which to apply the principle that the plaintiff is entitled to enforce a sale and is not required to accept return of the goods. I accept that the goods had some value although the preparation for marketing the fertiliser in Australia was totally inadequate and the overall quantity at the time of conversion was large in proportion to the available market.
Having regard to the evidence I place a value of approximately $4 per litre on the fertiliser. In view of the evidence about loss and deterioration I discount the quantity at the time of conversion in the 16,070 10 litres bottles by approximately 20%. Subtracting approximately $4,000 for repackaging costs if the hypothetical quantity was to be sold the value of the converted fertiliser is allowed at $50,000.
It was also submitted that consequential loss was able to be recovered. Subject to the question of remoteness that proposition may be accepted. The items sought are Mr Berghaeuser's travel costs, the costs of bringing the expert chemist, Mr Viruly, from Singapore to Australia, the cost of Mr Corfield travelling to Melbourne to secure fertiliser there, the costs of storage and transport of the product to the plaintiff's warehouse at Virginia and legal costs incurred in securing the fertiliser. In the end, expenses for five visits to Brisbane were claimed. The first trip was characterised as a loss suffered by the second plaintiff, the purpose was to attempt to locate the fertiliser, to visit the defendants and to secure legal assistance. The cost of that visit was $4,630.
I am satisfied that in the circumstances that expenditure was reasonable and a direct consequence of the dealings with the fertiliser. It was submitted that although these expenditures were made in relation to the matter by the second defendant after 18 February 1993, they were in fact made on behalf of the first plaintiff. It was submitted that, in effect, the liability of the first plaintiff to reimburse the second plaintiff for these expenses. I am prepared to accept that proposition in the circumstances of the case. During the course of the first visit in this category Mr Berghaeuser consulted his solicitors and visited the third defendant for the purpose of locating the fertiliser and inspecting the fertiliser. It was during this visit that the obtaining of an order against the first and second defendants was pursued. I am satisfied that this trip, the reasonable costs of which were $5,008 should be allowed.
The next trip in this category involved the inspection of fertiliser discovered at various sites. Once again the costs are reasonable and should be allowed in the sum of $4,504. During the next visit, for which only 50% of the time is claimed, legal proceedings against New Zealand Shipping in respect of disposal of fertiliser were pursued. Sites where fertiliser was stored were visited and it was during this period that Mr Viruly came to Australia to inspect the fertiliser from the scientific point of view. I am satisfied that the costs are reasonable and should be allowed at $5,512.
During the final occasion an injunction was sought against New Zealand Shipping and arrangements were made to transport some of the fertiliser to Virginia. Mr Sweeney conceded that this case was less supportable than the others. It is not clear to me that the presence of Mr Berghaeuser in Australia was necessary for the limited purposes described. In the circumstances I am not satisfied that there is sufficient basis for allowing this claim.
Mr Viruly was a chemist based in Singapore who, it was said, had technical knowledge of the product and had been associated with it from the beginning. The purpose of the visit was to inspect the fertiliser, assess the damage and form the view as to what might be salvaged. The evidence does not establish that there was anything unique about the fertiliser. It was, like most fertilisers, a product composed of a number of common ingredients. The submission was made that it was unnecessary for Mr Viruly to come to Australia and that it would have been within the competence of local experts to assess the composition of the product at the various locations. I am not satisfied that it was reasonably necessary to Mr Viruly to Australia. However, I am satisfied that it would have been reasonable to engage a chemist to assess the quality and composition of the product in Australia. I will allow $2,000 to represent the cost of investigation and other incidental matters.
Mr Corfield was required to travel to Melbourne to secure some fertiliser which had been sent there. The total expenses were $1,342. I am satisfied that that expenditure was reasonable and relevantly related to the cause of action and those expenses will be allowed in that sum. There was also a claim for storage costs and transport costs. The storage costs relate to fertilisers stored at various warehouses in Sydney, Melbourne and Brisbane. The transport costs represent the cost of transporting the goods from those places to the plaintiffs' warehouse at Virginia. Quotations of $2,016 and $3,312 for transporting approximately the quantities of fertiliser in Sydney and Melbourne to Brisbane were obtained. There is no reason to suppose that those costs are unreasonable and should be allowed. There are also sums of $25 and $774 for transporting quantities to warehouses in Brisbane to Virginia which will be allowed in those sums.
So far as the sum of $3,195 for transferring fertiliser from the Rocklea warehouse to Virginia is concerned, I am not satisfied that that would not have been necessary expenditure in any event if the plaintiffs wished to move all the fertiliser to its own warehouse. Accordingly that sum is not allowed.
In relation to storage costs at the various location, it is in my view plain that storage costs would have been incurred in any event for a substantial period of time given the quantity of fertiliser and the lack of any effective marketing strategy. Had the fertiliser been able to be sold there would have been some saving in storage costs. It is extremely speculative to fix a figure but in my view a global sum of $1,000 would be adequate to allow for additional storage.
The final component of damages is legal costs incurred in actions against third parties in mitigation of loss. A number of interlocutory injunctions were obtained in the present proceedings. According to each of the orders, costs were reserved. There was also an interlocutory injunction restraining a sale against persons who were at one time the fourth and fifth defendants in the present action. There was also an interlocutory injunction granted against New Zealand Shipping restraining the sale of fertiliser. In each of the cases to which I have referred, the order provided for costs to be reserved. The fourth and fifth defendants were not proceeded against in these proceedings and there is no evidence as to whether the question of costs was settled as against them or is to be further pursued. Nor is there any indication in this regard in relation to New Zealand Shipping.
Mr Sweeney relied on Hammond v. Bussey (1888) 20 QBD 79 as authority for the proposition that where the plaintiff claims costs as damages from a defendant which had been incurred in previous proceedings between the plaintiff and some third party, such costs are recoverable as damages subject to the rules of remoteness of damage. The situation is that where the plaintiff has been the successful party in the previous proceedings generally he will be claiming only the extra costs above party and party costs. There is no doubt that all of the steps taken were reasonable. However, in the absence of any indication that attempts to recover costs from the party against whom the order was made were exhausted I would not be prepared to order that the whole of the costs be recoverable in these proceedings. So far as the orders against the present first and second defendants are concerned, the reserved costs will be dealt with in the context of the costs order in these proceedings.
Having regard to the lack of evidence before me as to what the situation is in regard to costs in the various matters I am unable to make any order of the kind sought on the present state of the material.
The formal orders are:-1.I give judgment for the first plaintiff against the first and second defendants in the sum of $74,793;
2.I give judgment for the second plaintiff against the first and second defendants in the sum of $4,630;
3.The actions by the first and second plaintiffs against the third defendant are dismissed;
4.In each case, the third party proceedings are dismissed;
5.I give the parties liberty to make submissions with respect to costs, in writing in the first instance and, if necessary, orally on a date to be fixed.
I direct that the parties exchange their submissions with respect to costs on or before Friday 20 January 1995, and any additional submissions arising thereform on or before Friday 27 January 1995. I further direct that submissions in final form be delivered to my Associate by 4pm on Monday 30 January 1995.
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