Hines Exports P/L v Mediterranean Shipping Co No. DCCIV-96-711

[2000] SADC 71

HINES EXPORTS PTY LTD v MEDITERRANEAN SHIPPING COMPANY
[2000] SADC 71

Judge Lunn.
Civil.

Background

1. By the end of the trial there was no dispute about the following matters, and in any event they are proved on the evidence.  In 1995 the plaintiff carried on business as a meat exporting company.  The defendant is an international shipping company.  In early 1995 the plaintiff had an agreement with the defendant about the freight rates which the defendant would charge to it for shipping the plaintiff’s meat exports to various parts of the world including South Africa.

2. In about March 1995 the plaintiff bought a quantity of frozen crumbed mutton from Alliance Meat Packers (“Alliance”), which operated a cold store at Campbellfield near Melbourne.  The plaintiff was intending to export the mutton to Capital Meats (“Capital”) in South Africa with which it had a contract for the sale of it.  The plaintiff’s agreement with Alliance was an “FOB” contract which required Alliance to deliver the mutton to a ship in the Port of Melbourne which the plaintiff had arranged to transport it to South Africa.  The property in the mutton only passed from Alliance to the plaintiff when it went on board the ship.

3. Pursuant to its previous agreement with the defendant the plaintiff arranged for the defendant to transport the mutton from the Port of Melbourne to Cape Town by ship.  To enable this to occur the defendant delivered on about 22 March 1995 refrigerated containers, which it either owned or hired, to the Campbellfield Cold Stores where Alliance loaded them with the mutton which it was selling to the plaintiff.  This case is only concerned with one of these containers, and I will confine this narrative to the container numbered SCXU8018314 (“the container”).  After having been filled with the mutton and sealed by a Commonwealth Government Quarantine Inspector the container was transported to the Port of Melbourne under some arrangement made by Alliance.  It is unclear whether the defendant was a party to transporting the container from Campbellfield to the Port of Melbourne, but certainly the plaintiff was not a party to it.  The container was then loaded onto the ship “Annamaria” which had been arranged by the defendant to take it to South Africa.  On about the day after its loading, which was about 4 April 1995, the defendant issued a Bill of Lading for the container which was then sent to the plaintiff.

4. The “Annamaria” took the container to Durban where it was transhipped to the “Briana” which arrived at Cape Town on 27 April 1995.  Capital in South Africa had on-sold the mutton in the container to Lucky Star Meat Wholesalers (“Lucky Star”), but the terms of the agreement between Capital and Lucky Star are unknown.  On 15 May 1995 the container was deposited at the premises of Lucky Star in Cape Town where it was subject to a South African Government Veterinary Inspection which was a necessary step in the importation of the mutton into South Africa.  The inspection revealed that the mutton in the container was no longer frozen.  The inspector declared the mutton unfit for human consumption and ordered its immediate destruction or dumping.  The freezer unit on the container was found to be in good working order, but a lower door seal was missing which had allowed warm air to enter the container during the voyage.  This, combined possibly with the general poor condition of the container, caused the meat to thaw and spoil.  This action was commenced on 7 June 1996.

Course of the trial

1. At the trial the plaintiff tendered paragraphs 1 and 3 to 12 of a Notice to Admit Facts and a number of documents which were also subjects of the Notice.  These were deemed to be proved as the defendant had not responded to the Notice.  The plaintiff only called one witness, John Hines, the managing director of the plaintiff.  I accept his evidence.  Apart from tendering one document through the cross examination of Mr Hines, the defendant did not adduce any evidence.  Many relevant aspects of the case were not the subject of any direct evidence.  The lack of direct evidence meant that fairly technical points were taken by counsel about what had, and had not, been proved.

The Notice to Admit Facts

1. By failing to respond to the plaintiff’s Notice to Admit the defendant was deemed by Rule 54.02(1) to have admitted the facts and documents set out in it.  The defendant’s counsel did not seek to resile from the operation of this rule.  However, he submitted that effect could not be given to the paragraphs numbered 3 to 12, other than 7, because each mentioned “the shipment”.  The paragraph No 2, which was not tendered, contained a definition of “the shipment”.  I reject his submissions on the point.  The facts whose admissions were sought in the Notice are to be interpreted in the light of the issues raised on the pleadings.  It is not necessary to put definitions into a request for admissions where the meanings of terms are quite plain from what has already been admitted or referred to in the pleadings.  From the pleadings, and without reference to the untendered paragraph 2, it is plain that the shipment referred to is that of the container containing the mutton from the Port of Melbourne to South Africa.  If the defendant contended that “shipment” in the paragraphs of the request to admit facts which were tendered had some different meaning from that indicated by the pleadings, it should either have tendered paragraph 2 itself for that limited purpose or alternatively have answered the request to admit and taken issue with what was put forward as to the meaning of “shipment”.

2. The deemed admitted facts from the Notice are not as explicit or as well drawn as they might have been.  While they are to be construed against the plaintiff insofar as there is any ambiguity or uncertainty about them, nevertheless, where it is fair and just they are to serve their intended purpose of limiting the issues which the plaintiff would otherwise be required to prove at trial.  In a claim for only about $34,000 plus interest there is an obvious need to obtain admissions on matters on which there is no real dispute as the witnesses necessary to prove many of the facts would have had to have come from either Victoria or South Africa.  However, I am not required necessarily to act on such admissions where they are contrary to other more reliable evidence: Berry v Lowcock (1980) 27 SASR 108 at 113.

Negligence of the defendant

1. Paragraphs 5 to 7 of the deemed admissions state as follows:

   “5.... The defendant’s servants or agents were aware of the purpose for which the container was to be used, namely for shipping of the shipment from Melbourne to Durban, South Africa by way of ship and to arrive in merchantable condition.

   6.Prior to supplying the container the defendant through its servants or agents arranged a pre-trip inspection of the container to ensure that it was fit for such purpose as referred to in paragraph 5 hereof.

   7...... The container did not have adequate door seals, appropriately fitted, sealing gaskets and cracked insulation panels at the base of the doors.”

Paragraph 5 refers to Durban, and not to Cape Town, but there is no material difference, and other evidence satisfies me that the defendant was always aware that the purpose for which the container was to be used was for shipping the mutton to Cape Town and that it was to be suitable for the mutton to be in a merchantable condition when it arrived in Cape Town.  Paragraph 6 establishes that the defendant’s servants or agents did inspect the container before delivering it to Campbellfield to ensure that it was fit for such a purpose.  The defendant’s counsel argued that paragraph 7 was not sufficiently directed towards the point of time at which the container was delivered to Campbellfield.  I reject this.  The use of “appropriately fitted” in it can only apply to a point in time immediately before the container was filled with the mutton and was sealed by the Quarantine Inspector.  I reject the defendant’s argument that I should infer that the damage to the container was caused in the course of Alliance loading it at Campbellfield after it had been delivered there by the defendant.  While it is strange that the Quarantine Inspector did not note the matters referred to in paragraph 7 and do something about them, I am not prepared to draw any inference that therefore the container was in proper condition when it was delivered by the defendant in the face of the deemed admission in paragraph 7 and on the inference which I draw against the defendant by virtue of it not having called its servants or agents who inspected the container, as was admitted in paragraph 6, to say that it was in proper condition.  Paragraph 7 needs to be read as if “had” was inserted before “cracked insulation panels”, which is consistent with the other evidence.

1. From the matters contained in the background facts set out above, and in paragraphs 5 to 8 of the deemed admitted facts, I find that the defendant owed a duty of care in tort to the plaintiff to ensure that the container which it supplied at Campbellfield to transport the mutton was in a suitable condition to enable the mutton to remain properly frozen for its anticipated trip to South Africa.  I further find that the defendant was in breach of that duty by reason of the matters referred to in deemed admission 7 and that this breach was the cause of the meat being condemned and destroyed in South Africa on 15 May 1995.  This cause of action in tort arose before the container was loaded onto the ship and it could have been raised independently from any carriage of the container by sea.

The Contract

1. I reject the plaintiff’s submission that it had a contract with the defendant for the hire of the container separate from its contract for the shipment of the mutton.  The provision of such a container by the defendant was an integral part of its performance of its contract with the plaintiff.  All shippers provided the necessary containers for such carriage of meat by sea.  The container never passed into the possession of the plaintiff and the plaintiff never obtained any legal rights in respect of it by hire, bailment or otherwise.  The price charged by the defendant was inclusive of its provision of the container.  Thus the defendant’s provision of the container was merely an incident of the contract for the shipment of the mutton, and a part of it.

2. Although the evidence on it is sparse, I find that a contract between the parties for the shipment of the mutton to South Africa was entered into orally shortly before 22 March 1995 when the defendant delivered the container to Campbellfield.  The Bill of Lading was not then in existence and so its issue was not part of the formation of the contract.  The defendant’s counsel contended that its terms and conditions, once it was issued on about 4 April 1995, evidenced the terms of the contract.  I do not accept this.  While it is possible to infer from past dealings of a similar nature between the parties that particular terms were standard for contracts made between them: Brogden v Metropolitan Railway Co (1877) 2 AC 666; Empirnall Holdings Pty Ltd v McMachon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 528, there is no sufficient evidence of it here. While the plaintiff expected a Bill of Lading to be issued by the defendant, and expected it would be in a standard form, Mr Hines had never studied the previous Bills of Lading which had been issued by the defendant to it and was not in a position to say whether the detailed terms in the Bill issued for this transaction were the same as those in Bills used in previous transactions. Whether a standard form of Bill of Lading had previously been used in the transactions between the parties was something very much within the knowledge of the defendant, as it had issued the Bills. Its failure to adduce any evidence to show that the terms and conditions in the Bill of Lading here were the same as those in previous dealings with the plaintiff leads me to draw an inference that they may not have been the same: Insurance Commissioner v Joyce (1948) 77 CLR 39 at 49.

3. The defendant’s counsel relied upon a decision in Pyrene Co Ltd v Scindia Steam Navigation Co Ltd [1954] 2 All ER 158, but there at 164 Devlin J made it clear that the operation of a subsequently issued Bill of Lading as evidencing the terms of the contract was conditional upon the parties entering into the contract in the expectation that it would be in particular terms which they knew or expected the Bill of Lading would contain. This was the interpretation placed upon that decision in Teys Bros (Beenleigh) Pty Ltd v ANL Cargo Operations Pty Ltd [1990] 2 Qd R 288 where it was held that the parties needed to have contracted habitually on terms which contemplated the issue of a standard form Bill of Lading. Accordingly, I hold that the various terms and conditions in the Bill of Lading relied upon by the defendant did not form part of the contract between the parties, and thus the plaintiff is not bound by them.

Article 3 Rule 6 of the Hague Rules

1. It was not disputed that by virtue of the Commonwealth Carriage of Goods by Sea Act 1991 No 161 the amended Hague Rules contained in Schedule 1 to that Act applied here to the carriage of the container by sea.  Although it was not expressly pleaded in the defence, it was accepted in the course of argument that the defendant could raise Article 3 Rule 6 of those Rules which was in similar terms to a clause in the Bill of Lading.  The relevant part of the Rule is:

   “..... The carrier ..... shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered. ......”

2. It is necessary to consider whether the liability referred to in Rule 6 extends to a liability arising before the commencement of the carriage of the goods under the contract of carriage between the parties.  Article 1(b) of the amended Hague Rules states:

   “(b).. ‘Contract of carriage’ applies only to contracts of carriage covered by a Bill of Lading ..... insofar as such document relates to the carriage of goods by sea, ..... from the moment at which such Bill of Lading ..... regulates the relations between a carrier and a holder of the same.”

Here the contract of carriage between the parties only began when the container was loaded onto the ship.  Its earlier delivery from Campbellfield was arranged by Alliance and was not subject to the Bill of Lading.  It was held in Teys Bros Pty Ltd v ANL Cargo Operations Pty Ltd (above) that the time bar in Article 3 Rule 6 did not apply to a liability arising before the contract of carriage between the parties had commenced.  Although this decision was criticised by the High Court in Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231, it was not on this point. This conclusion is not inconsistent with the latest review of the authorities on Article 3 Rule 6 by the Court of Appeal of Victoria in Anglo Irish Beef Processors International v Federated Stevedores Geelong (1996) 140 ALR 658. Accordingly, the plaintiff’s cause of action in tort as I have found above is not barred by this provision.

1. There was an argument before me about when the one year period began to run which depends upon whether there had been delivery of the goods or when they should have been delivered.  Paragraphs 10 and 12 of the deemed admitted facts state “10.  Capital Meats did not receive or have the shipment delivered to it” and “12.  The shipment was not allowed lawful entry into South Africa and was not delivered to Capital Meats.”  However, as I have found that the mutton was on-sold by Capital to Lucky Star any delivery to Capital is irrelevant.  It is unclear what “delivery” means in its context  in Rule 6 and whether the mere deposit of the container at the premises of Lucky Star, as apparently occurred, is sufficient for it.  The plaintiff submitted that the South African quarantine requirements had to be satisfied and the recipient had to be in lawful possession of the Bill of Lading before there could be delivery of the mutton.

2. It is unclear whether all or some of these issues may be governed by South African Roman Dutch law. No evidence was adduced on the point. It may be that Section 11(1) of the Carriage of Goods by Sea Act 1991 makes it Victorian law. It is uncertain whether there is a presumption that the law in South Africa is the same as South Australian law in these circumstances: see Civil Procedure SA, volume 2, para 18,645.10.

3. In view of my conclusion above that Article 3 Rule 6 does not bar the claim based on the tort committed before the commencement of the carriage by sea, I need not pursue the point.

4. No other provision of the Hague Rules was pleaded or raised as a bar to the plaintiff’s claim.

Proof of the plaintiff’s loss

1. Where the goods which are appropriated by a vendor to fulfil an obligation on a contract of sale are destroyed before the completion of the contract by the tortious act of a third party, prima facie, the measure of the vendor’s damages would usually be the price which was payable for them under the contract of sale and not their general market value.  (There is no suggestion that the plaintiff bought other mutton to enable it to fulfil its contract with Capital.)  The dilemma here is that I have no evidence about what stage had been reached in the performance of the contracts of sale between the plaintiff and Capital, and between Capital and Lucky Star, at the time when the mutton was destroyed.  Capital had paid South African customs duty on the mutton, but I cannot draw any inference from this about whether the property in the mutton had passed to Capital.  There is no evidence about the terms of payment under the contract between the plaintiff and Capital, or what was that purchase price.  I do not know whether Capital or Lucky Star had become legally liable to pay the price of the mutton in the container to the plaintiff, or indeed whether the plaintiff had received payment for that mutton.  As the proper measure of the plaintiff’s damage is its loss of the purchase price under the contract of sale, I cannot on the evidence before me make any finding as to either what was the price payable to the plaintiff or whether the plaintiff has lost the benefit of it.

2. A further problem in the proof of the loss is that the only evidence of it is what is contained in a report of 24 May 1995 from Winterton & Stanbury Pty Ltd (“Winterton”) who were Marine Surveyors and Loss Adjustors in Cape Town.  The report deals with the “insured value of loss”.  It is unclear from the report who held the policy of insurance with the insurer for which Winterton was acting and what under the terms of that policy was the entitlement for the recovery by the insured for the destruction of the mutton.  There is nothing in the documents to say that the insured was the plaintiff or that the amounts referred to in the report as being the measure of the loss were based on the price for the mutton payable by Capital to the plaintiff, and not on some other basis of value.  I do not understand why the report on page 5 refers to “Sue and Labour costs debited to Capitol Meats” (sic) if the property in the mutton in the container still remained with the plaintiff.  The entry in note II on page 5 of the report to “Invoice value of loss US$21,289.12 insures for $23,418.30” suggests that there is some difference between the invoice value and the insurance value.  It is unclear what “invoice value” there relates to, and whether it refers to an invoice between the plaintiff and Capital, or between Capital and Lucky Star or some other invoice.

3. In relation to the consequential loss claimed of R3,188.82 for the dumping and ancillary expenses it is not shown that this was an expense for which the plaintiff was responsible.  The notation quoted above about “Sue and Labour Costs debited to Capitol Meats” (sic) suggests to the contrary.

1. The amounts expressed in the Winterton report, insofar as they can be acted upon, were expressed in US dollars and South African rand.  While it is possible to give judgment in this Court in terms of foreign currency: see Civil Procedure SA, para R84.01.40, usually the best course is to adduce evidence of the proper conversion rates so that the trial Judge can decide whether it is more appropriate to give judgment in terms of Australian dollars.  However, that in itself is not a bar to the plaintiff succeeding.

2. When this problem about the assessment of the plaintiff’s damages surfaced in the course of addresses the plaintiff’s counsel sought leave to recall Mr Hines on the topic.  (By then Mr Hines was back in Melbourne.)  I declined to allow that, but indicated that if the point was still material after my reasons were published, as indeed it is, the plaintiff could renew its application.  The defendant had opposed the application and indicated that it also would wish to re-open its case to adduce further evidence on the topic of the use of standard forms of Bills of Lading.

3. On the evidence presently before me I find that the plaintiff has not proved that it has suffered any quantifiable loss as a result of the negligence of the defendant.  If judgment is to be entered on the basis of the evidence as it now stands, it must be judgment for the defendant.