Hyundai Merchant Marine Co Ltd v Dartbrook Coal (Sales) Pty Ltd
[2006] FCA 1324
•11 OCTOBER 2006
FEDERAL COURT OF AUSTRALIA
Hyundai Merchant Marine Co Ltd v Dartbrook Coal (Sales) Pty Ltd
[2006] FCA 1324
ADMIRALTY & MARITIME JURISDICTION – carriage of goods by sea - contract for cargo - whether binding contract - correspondence of offer and acceptance of terms - whether charterparty conditional upon existence of cargo contract - whether wrongful repudiation of charterparty
ADMIRALTY & MARITIME JURISDICTION - Meaning of force majeure event - Whether force majeure event existed due to non performance of a contract by another party – whether impractability of performance amounts to prevention of performance
DAMAGES - The measure of damage - modern rule where cargo not delivered - shipowner's obligations - whether duty to mitigate loss - whether shipowner obliged to seek alternative employment for vessel - circumstances in which rule operates - onus of proof
DAMAGES - Quantum of damages – cost of hire and voyage expenses including contingencies – cargo leg of the voyage
COSTS - Entitlement to indemnity – whether agent personally liable – whether agent entitled to be indemnified – meaning of wilful misconduct – distribution of costs
Aitken Lilburn v Ernsthausen [1894] 1 QB 773 cited
Basma v Weekes [1950] AC 441 cited
Cobelfret (UK) Ltd v Austin and Butta (Sales) Pty Ltd (unreported, Supreme Court of New South Wales, Brownie J, 24 February 1988) distinguished
Cobelfret (UK) Ltd and Anor v Austen and Butta (Sales) Pty Ltd (unreported, Supreme Court of New South Wales Court of Appeal, Kirby P, Priestley JA, Meagher JA, 5 April 1991) distinguished
Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2005] 1 Lloyd’s Law Rep 443; [2005] 2 Lloyd’s Law Rep 747 applied
Hensley v Reschke (1914) 18 CLR 452 cited
Johnson v Perez (1988) 166 CLR 351 cited
Jones v Barkley (1781) 1 Dougl. 684; 99 E.R. 434 referred to
Koch Marine Inc v D’Amica Societa Di Navigazione A.R.L (The Elena B’Amico) [1980] 1 Lloyd’s Law Rep 75 cited
Lebeaupin v Richard Crispin and Co [1920] 2 KB 714 cited
Mahoney v Lindsay (1981) 55 ALJR 118 cited
Masters v Cameron (1954) 91 CLR 353 cited
Peter Turnbull and Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 cited
PJ van der Zijden Wildhandel N.V. v Tucker [1975] 2 Lloyd’s Rep 240 considered
Rheinoel v Huron Liberian Co.(The Concordia C) [1985] 2 Lloyd’s Rep 55 considered
SIB International v Metallgesellschaft Corp. (The Noel Bay) [1989] 1 Lloyd’s Rep 361 considered
Smith v M’Guire (1858) 3 H&N 554; 157 E.R. 589 considered
Sotiros Shipping Inc v Sameiet Solholt (The Solholt) [1983] 1 Lloyd’s Rep 605 considered
Stanley Yeung Kai Yung v Hong Kong and Shanghai Banking Corporation [1981] AC 787 cited
Tudor Marine Ltd v Tradax Export S.A. (The Virgo) [1976] 2 Lloyd’s Rep 135 cited
Universal Steam, Navigation Co v James McKelvie and Co [1923] AC 492 considered
Wallems Rederij A/S v Muller [1927] 2 KB 99 cited
Carter on Contract, Vol 2, Butterworths at par 41-380
E McKendrick, Force Majeure and Frustration of Contract, 2nd edn, LLP, London, 1995 at pp 8, 24-25
G Treitel, Frustration and Force Majeure, Sweet and Maxwell, London, 1994 at pars. 6-020 – 6-021, 12-017, 12-019
G Treitel, The Law of Contract, 11th edn, Sweet and Maxwell, London, 2003 at pp 727 and 977
J Cooke et a., Voyage Charters’, 2nd edn, LLP, London, 2001 at par. 1.23
L D’Arcy, Schmitthoff’s Export Trade: The Law and Practice of International Trade, 9th edn, Sweet and Maxwell, London, 1990 at p 199
McGregor on Damages, 15th edn, Sweet and Maxwell, London, 1988 at pars 172-3, 179-96
McGregor on Damages, 17th edn, Sweet and Maxwell, London, 2003 at pars 27-062 – 27-066
Scrutton on Charterparties, 19th edn, Sweet and Maxwell, London, 1984 at pp 395-396
Scrutton on Charterparties, 20th edn, Sweet and Maxwell, London, 1996 at pp 388-389, 394
HYUNDAI MERCHANT MARINE CO LTD v DARTBROOK COAL (SALES) PTY LTD & ORS
QUD 190 OF 2004
KIEFEL J
11 OCTOBER 2006
BRISBANE
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION IN ADMIRALTY
QUD 190 OF 2004
BETWEEN:
HYUNDAI MERCHANT MARINE CO LTD
(ABRN 102 471 723)
PLAINTIFFAND:
DARTBROOK COAL (SALES) PTY LTD
(ACN 050 139 841)
FIRST DEFENDANTMARUBENI THERMAL COAL PTY LTD
(ACN 061 468 620)
SECOND DEFENDANTANGLO COAL (DARTBROOK) PTY LTD
(ACN 000 012 813)
THIRD DEFENDANTSSANGYONG RESOURCES PTY LTD
(ACN 071 744 986)
FOURTH DEFENDANTTHE FIRST CROSS-CLAIM
BETWEEN:
DARTBROOK COAL (SALES) PTY LTD
(ACN 050 139 841)
FIRST CROSS-CLAIMANTAND:
MARUBENI THERMAL COAL PTY LTD
(ACN 061 468 620)
FIRST CROSS-RESPONDENTSSANGYONG RESOURCES PTY LTD
(ACN 071 744 986)
SECOND CROSS-RESPONDENTTHE SECOND CROSS-CLAIM
BETWEEN:
ANGLO COAL (DARTBROOK) PTY LTD
(ACN 000 012 813)
FIRST CROSS-CLAIMANT
AND:
MARUBENI THERMAL COAL PTY LTD
(ACN 061 468 620)
FIRST CROSS-RESPONDENTSSANGYONG RESOURCES PTY LTD
(ACN 071 744 986)
SECOND CROSS-RESPONDENTTHE THIRD CROSS-CLAIM
BETWEEN:
MARUBENI THERMAL COAL PTY LTD
(ACN 061 468 620)
FIRST CROSS-CLAIMANTSSANGYONG RESOURCES PTY LTD
(ACN 071 744 986)
SECOND CROSS-CLAIMANTAND:
ANGLO COAL (DARTBROOK) PTY LTD
(ACN 000 012 813)
FIRST CROSS-RESPONDENTDARTBROOK COAL (SALES) PTY LTD
(ACN 050 139 841)
SECOND CROSS-RESPONDENTJUDGE:
KIEFEL J
DATE OF ORDER:
11 OCTOBER 2006
WHERE MADE:
BRISBANE
THE COURT ORDERS:
On the Plaintiff’s claim:
That judgment be entered for the plaintiff against the defendants in the sum of US$495 988.48.
That the first defendant pay the plaintiff’s costs up to and including the date of the joinder of the other defendants and the costs reserved on 3 May 2005.
That all defendants pay the plaintiff’s costs of the proceedings following the joinder of all defendants.
That the plaintiff have liberty to apply within seven days for an order with respect to interest on the judgment sum.
On the first cross-claim:
That the second, third and fourth defendants indemnify the first defendant with respect to its liability to the plaintiff for damages and costs, including reserved costs.
That the second, third and fourth defendants pay the first defendant’s costs of defending the proceedings.
That the second and fourth defendants pay the first defendant’s costs of the cross-claim against them.
On the second cross-claim:
That the second, third and fourth defendants indemnify each other and contribute to the judgment sum in the proportions of 77.5 per cent, 15.5 per cent and 7 per cent respectively.
That the second and fourth defendants pay the third defendant’s costs on the cross-claim.
On the third cross-claim:
That the third cross-claim be dismissed.
That the second and fourth defendants pay the first and third defendant’s costs on the cross-claim.
On all claims:
That the parties have liberty to apply with respect to any order necessary to give effect to these reasons.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION IN ADMIRALTY
QUD 190 OF 2004
BETWEEN:
HYUNDAI MERCHANT MARINE CO LTD
(ABRN 102 471 723)
PLAINTIFFAND:
DARTBROOK COAL (SALES) PTY LTD
(ACN 050 139 841)
FIRST DEFENDANTMARUBENI THERMAL COAL PTY LTD
(ACN 061 468 620)
SECOND DEFENDANTANGLO COAL (DARTBROOK) PTY LTD
(ACN 000 012 813)
THIRD DEFENDANTSSANGYONG RESOURCES PTY LTD
(ACN 071 744 986)
FOURTH DEFENDANTTHE FIRST CROSS-CLAIM
BETWEEN:
DARTBROOK COAL (SALES) PTY LTD
(ACN 050 139 841)
FIRST CROSS-CLAIMANTAND:
MARUBENI THERMAL COAL PTY LTD
(ACN 061 468 620)
FIRST CROSS-RESPONDENTSSANGYONG RESOURCES PTY LTD
(ACN 071 744 986)
SECOND CROSS-RESPONDENTTHE SECOND CROSS-CLAIM
BETWEEN:
ANGLO COAL (DARTBROOK) PTY LTD
(ACN 000 012 813)
FIRST CROSS-CLAIMANT
AND:
MARUBENI THERMAL COAL PTY LTD
(ACN 061 468 620)
FIRST CROSS-RESPONDENTSSANGYONG RESOURCES PTY LTD
(ACN 071 744 986)
SECOND CROSS-RESPONDENTTHE THIRD CROSS-CLAIM
BETWEEN:
MARUBENI THERMAL COAL PTY LTD
(ACN 061 468 620)
FIRST CROSS-CLAIMANTSSANGYONG RESOURCES PTY LTD
(ACN 071 744 986)
SECOND CROSS-CLAIMANTAND:
ANGLO COAL (DARTBROOK) PTY LTD
(ACN 000 012 813)
FIRST CROSS-RESPONDENTDARTBROOK COAL (SALES) PTY LTD
(ACN 050 139 841)
SECOND CROSS-RESPONDENT
JUDGE:
KIEFEL J
DATE:
11 OCTOBER 2006
PLACE:
BRISBANE
REASONS FOR JUDGMENT
In these proceedings it is alleged by Hyundai Merchant Marine Co Ltd (‘Hyundai MM’) that a charterparty agreement came into effect between it and Dartbrook Coal (Sales) Pty Ltd (‘Dartbrook’) on 29 March 2004 whereby Dartbrook agreed to charter a ship from Hyundai MM for the carriage of 65,000 metric tons (10 per cent more or less) from Newcastle, New South Wales to the port of Masinloc in Zambales, Philippines. It is now accepted by the other defendants, Marubeni Thermal Coal Pty Ltd (‘Marubeni’), Anglo Coal (Dartbrook) Pty Ltd (‘Anglo Coal’) and Ssangyong Resources Pty Ltd (‘Ssangyong’), that Dartbrook was acting for them in connexion with the charterparty and the agreement for the sale of coal to National Power Corporation (‘National Power’). Hyundai MM alleges that Dartbrook wrongfully repudiated the charterparty on about 14 April 2004 and that it accepted that repudiation on 16 April 2004. Hyundai MM seeks damages for the breach.
Marubeni and Ssangyong allege that the charterparty was conditional upon an agreement for the sale of coal being concluded and that no binding agreement was reached with National Power. This last mentioned issue also has relevance to the cross-claim by Marubeni and Ssangyong against Dartbrook and Anglo Coal.
In the event that it is held that there was an agreement for charter with Hyundai MM, the defendants put in issue whether it was ready, willing and able to perform in accordance with the charterparty. In particular they questioned whether Dartbrook’s repudiation was so clear as to absolve Hyundai MM from actual performance under the charterparty. Each of the defendants contend that Dartbrook’s inability to ship the coal was for reasons beyond its control and constituted a force majeure event, within the meaning of the charterparty.
In the event that Hyundai MM succeeds in its claim to damages, the basis upon which its damages is to be measured is disputed by the defendants. At issue is whether Hyundai MM was obliged to use a vessel and seek a substituted cargo and whether that forms part of its proof of damage.
As to the quantum of the damages sought by Hyundai, principal amongst the issues raised by the experts is the question as to the likely daily rate of hire of a vessel which complied with the requirements of the charterparty and was available at the relevant time. Some more minor issues remained at the conclusion of the hearing as to allowances which should be made for contingencies and the length of time for the voyage.
Anglo Coal, Marubeni and Ssangyong were joint venturers in a coal mining operation and Dartbrook was their agent for the sale of that coal. Dartbrook seeks an indemnity from the joint venturers in accordance with its Sales Representative Agreements with them. Marubeni and Ssangyong deny that Dartbrook is entitled to an indemnity, because Dartbrook was guilty of wilful misconduct. That misconduct is identified as the entry into the charterparty as agent when a contract for the sale of the coal to National Power had not been concluded. Other issues raised by these defendants on the cross-claim against Dartbrook were not pursued. An application for leave to amend that claim was refused in the course of the hearing.
Anglo seeks orders for indemnity and contribution as between the joint venturers in proportion to the subject of their joint venture agreement. Marubeni and Ssangyong claim an indemnity from, or damages against, Anglo Coal on the basis of its misleading conduct, namely its failure to inform them of Dartbrook’s proposal to enter into the charterparty in the circumstances mentioned.
THE JOINT VENTURE
Although Anglo Coal and Ssangyong are not named in the Dartbrook Joint Venture Agreement document dated 14 December 1993, it is common ground between the defendants that they were parties to it with Marubeni at the relevant time. The objects of the joint venture included the exploration, production and processing of coal. The recitals record the existence of a mining lease with respect to land in New South Wales, a reference no doubt to the Dartbrook Coal Mine. Pursuant to cl 2.9 each party was to indemnify the other from any claims arising out of, or in connexion with, the joint venture agreement. Clauses 2.11 and 2.12 provided:
‘Severalty
2.11The rights, obligations and liabilities of the Parties with respect to the Joint Venture and the carrying out of the objects thereof are several and not joint or joint and several. Each Party is entitled only to a share corresponding to its Interest of any benefits from the Joint Venture and is liable only for a share corresponding to its Interest in all obligations and liabilities incurred by a Party or the Manager on behalf of the Joint Venture
Indemnity and Contribution
2.12If at any time a Party becomes liable in relation to the performance of the objects of the Joint Venture as contemplated by Clause 2.1 to an extent greater than that specified in Clause 2.11, the other Parties shall indemnify that Party in respect of the excess, so that the Parties bear that liability inter se in accordance with Clause 2.11.’
There is no dispute that the parties’ interests under the joint venture agreement were respective: Anglo Coal 77.5 per cent, Marubeni 15.5 per cent and Ssangyong 7 per cent.
Dartbrook was appointed as agent of the joint venture under three Sales Representative Agreements with the other three defendants. The agreements are in identical terms and two of them are dated 30 October 2000. Shell Coal (Dartbrook) Pty Ltd, Showa Coal (NSW) Pty Ltd and Marubeni are named as parties to the agreements in evidence. Shell Coal subsequently changed its name to Anglo Coal. It may be that Showa Coal became Ssangyang. It is not in dispute that the three defendants entered into agreements in those terms.
Pursuant to the agreements, Dartbrook was appointed as agent for the sale of coal. It had responsibility for all matters relating to the coal belonging to the joint venture between the point where it was received for delivery and the point at which it passed to a purchaser or other person. Dartbrook was authorised to negotiate in good faith and to enter into agreements for the sale of coal and attend to its shipment. Pursuant to cl 12.1 of the agreements, and subject to cl 12.2 and cl 12.3, the joint venturers were to indemnify Dartbrook. Clause 12.1 was in these terms:
‘12.1Subject to Clauses 12.2 and 12.3, JV Participant shall indemnify and hold harmless DCS against and shall pay all claims, demands, actions, costs (including costs as between solicitor and client as well as between party and party) losses, damages and expenses whatsoever (collectively ‘claims and losses’) which may be made or brought against DCS or incurred or suffered by it arising out of any Sales Contract entered into by DCS or any charterparty, bill of loading or other contract entered into by DCS in relation to its performance of a Sales Contract or in any other way arising out of or in relation to the performance by DCS of its obligations under this Agreement whether or not any such claims and losses are caused by or arise from the negligence or other tortious act or omission of DCS, its directors, employees or agents or the breach of this Agreement by DCS or in any other manner whatever and whether or not any such claims and losses are made, brought or recovered against or incurred or suffered by DCS as a direct result or as a consequence of all or any of those causes (and whether or not any of those consequences is reasonably foreseeable or not) and whether or not any intervening cause (whether reasonably foreseeable or not) alters the nature or increases the extent of any such claims and losses.’
Clause 12.2 provided:
‘12.2(a) The indemnity in Clause 12.1 does not extend to claims and losses which arise from the wilful misconduct of one or more of DCS’s directors, employees or agents other than independent contractors. The term ‘wilful misconduct’ means any act or omission (including a negligent act or omission) done or omitted with deliberate or reckless disregard for foreseeable and harmful consequences.
(c) DCS indemnifies the JV Participant against any claim, action, damage, loss, liability, cost, charge, expense, outgoing or payment which the JV Participant pays, suffers, incurs, or is liable for in connection with:
(i)any unauthorised representation made or warranty given by DCS in connection with the JV Participant’s Coal;
(ii)any breach of, or default under, this Agreement by DCS. ‘
NEGOTIATIONS BETWEEN DARTBROOK & NATIONAL POWER
Ms Jerene Tan was employed as a marketing manager for Anglo Coal, based in Brisbane. She was responsible for international sales of coal from the Dartbrook mine and the Drayton mine in the Hunter Valley, New South Wales. Although Dartbrook was usually the company selling the coal from the Dartbrook Mine, in this case the contracting party was to be Anglo Coal because the buyer, National Power, had previously dealt with that company and sought it out. It is not however suggested that it was not Dartbrook, through Ms Tan, which was responsible for the negotiations for the sale of coal, as the joint venture would require.
In early March 2004 Anglo Coal’s agent in the Philippines was approached by National Power, which expressed an interest in purchasing about 60 000 metric tons of thermal coal. The amount of coal to be purchased was limited by the maximum draft at the destination port in the Philippines, Masinloc. National Power was seeking to load a Panamax class vessel.
Nearly all coal sold by Dartbrook was sold on an FOB basis, with the purchaser bearing the costs of transporting the goods from the loading port to its overseas destination. On 10 March 2004 Ms Tan sent offers for the sale of coal from each of the Dartbrook and the Drayton mines. The Dartbrook offer, of 50-70 000 metric tons, was for a price of US$55 per metric ton and was to be FOBT Newcastle. The offer was said to be open until 15 March 2004. The offer was the subject of discussion between Ms Tan and Ms Dayao of National Power in the Philippines. At these meetings National Power requested that Anglo Coal resubmit its offer on the basis that Anglo Coal would become responsible for arranging and paying the costs of shipping the coal. The sale of coal from either of the mines on this basis was rare. It was however agreed that Anglo Coal would charter a vessel and that the final price of the coal would include the charter freight rate.
On 17 March 2004 Ms Tan submitted a further offer on the basis requested. The quantity of coal was said to be 65 000 metric tons (+/- 10 per cent) at US$86 per ton. The laycan at load port was 15 to 30 April 2004. The conditions of sale included one that National Power be responsible for demurrage at both loading and discharge ports, the latter being Masinloc. The offer was open until 18 March 2004.
On 19 March 2004 National Power attempted to accept the lapsed offer at $85.70 per metric ton with ‘the terms and conditions of regular supply contract with National Power’ to be applied. Ms Tan did not acknowledge the acceptance out of time and says that the terms proposed by National Power would have been unacceptable in any event. Negotiations continued as to the specification of the coal.
On 23 March 2004 Ms Tan sent a further offer in writing to sell the same quantity of coal for $85.70 per ton. The terms she proposed included demurrage at US$45 000, with National Power to be responsible for demurrage at the discharge port. The contractual specifications with respect to the coal were in the same terms as the offer of 10 March 2004 except in one respect. The other contractual terms differed in some respects from the earlier offer. The offer was said to be open until close of business that day. Ms Dayao called Ms Tan and asked for an extension of time because she was travelling. The Vice-President, Logistics, of National Power also wrote to Ms Tan on the same day. He said that he understood that the terms and conditions of her letter of offer had been discussed at an earlier meeting between her and Ms Dayao on 15 March 2004. He advised that the terms and conditions were acceptable, subject to written confirmation by Ms Dayao when she returned from China. Ms Tan wrote to National Power on 24 March 2004, extending the time until the following day.
On her return Ms Dayao had further discussions with Ms Tan regarding the cargo specifications in the offer of 23 March 2004. After that further negotiation Ms Tan made a written offer to National Power dated 25 March 2004 ‘which will supersedes [sic] all previous offers made to National Power Corporation …’ for the same quantity of coal at:
‘US$85.70 per tonne basis 7040 kcal/kg GDB C & F Masinloc
(FOBT price is US$54.70 per tonne)
(Freight is US$31 per tonne and will be invoiced on BOL tonnage)’Anglo Coal was said to be submitting the offer, with Dartbrook named as the seller. Demurrage was the same as that contained in the offer of 23 March. The contractual specifications for the coal referred to total moisture of 10 per cent and ash of 12.5 per cent, amongst other things. These were relevant to the penalties which might be deducted from the base FOBT price. Towards the conclusion of the letter of offer, under the heading ‘Other Terms and Conditions’ it was said that ‘All other terms and conditions are to be mutually agreed in a new contract’.
By letter of the same day, 25 March 2004, National Power advised that it accepted the proposal ‘on the following basis’. Seven items were listed. The FOBT price was to be $54.50 per ton, but the rates for demurrage and freight listed were the same as those in Ms Tan’s letter of offer under reply. There was to be acceptance of a nominated vessel by National Power within 24 hours. Other matters listed related to the specifications for the coal and the penalties which would apply and included a change from 10 per cent moisture to 12 per cent and a penalty was to apply if the ash content exceeded 12 per cent, whilst Ms Tan’s letter of offer had specified it at 12.5 per cent. Attached to that letter was a document entitled ‘Price Adjustments on Coal Quality’ which provided formulas for an adjusted contract price having regard to the guaranteed moisture content. The letter concluded ‘We hope the above will finally secure the contract between Anglo Coal and NPC’.
On 26 March 2004 Ms Tan wrote to Ms Dayao listing the discharge terms and conditions for the coal shipment. These were terms not previously notified in writing by Ms Tan but she says that she had discussed them with Ms Dayao. On the same day she wrote to personnel at Dartbrook and advised:
‘We finally concluded 65kt to National Power Corporation (NPC) Phillippines at FOB US$54.50! This is for lifting in late April’04. As NPC only want the deal on C&F basis, we have to enter a C/P with the Hyundai Marine. The costing is as follows:
Demurrage base on 14 days (worst case) = US$45K x 14 = $630,000
Less:
Margin from Freight quoted to NPC: U$2.275 x 65,000mt - $47,875_______
Net cost $482,125 i.e US$7.42/mtFOB net of demurrage = US$54.50 less US$7.42 = US$47.08 …’
The President of National Power wrote to Ms Tan in the following terms in a letter dated 29 March 2004:
‘This is to confirm acceptance of your revised offer to supply and deliver 65,000 MT +/- 10 per cent of Dartbrook Coal at US$85.50/MT at load port laycan of April 15-30 2004 as contained in your letter dated 25 March 2004.
We also wish to confirm that all other conditions as advised by Ms Elisa L. Dayao Manager Fuel Management Department, in our letter dated 25 March 2004 (Ref. N0.FMD-04-025) shall be applied for this contract.’
Ms Tan says that the change in the freight rate from $85.70 to $85.50 had been discussed between her and Ms Dayao in the period 25 March to 29 March 2004, as had the coal specifications. I infer that this is said to have occurred prior to the receipt by her of National Power’s letter of 29 March 2004. It is likely that the letter was sent by facsimile transmission, since that was the course followed by National Power with its other letters. The time at which it was received by Ms Tan is not apparent and she was not questioned on this point.
On 1 April 2004 Ms Tan contacted Ms Dayao concerning the nomination of the vessel the Tian Bai Feng and asked whether it was suitable. A reply dated 2 April was received, advising that it was, subject to certain conditions. They were four in number and ranged from Anglo Coal securing a waiver if the Philippine flag vessel was not available; Anglo Coal assuming responsibility for any claim or conflict due to the vessel’s arrival at Masinloc outside the delivery window of 20 to 29 May 2004; Anglo Coal assuming responsibility for any time and cost lost should the vessel exceed the maximum draft; and Anglo Coal assuming responsibility for any damages to National Power facilities attributable to inconsistency of vessel specifications with the contract provisions. Ms Tan says that she did not understand the reference to Anglo Coal’s liability, in the event that the vessel exceeded the maximum draft, to be a rejection of the vessel nominated. Ms Tan responded in writing the same day, advising that the guarantees requested could not be given; that there were already stipulations in the earlier letter of offer of 25 March 2004 concerning the waiver for non Philippine flag vessels; and, generally, that the shipment was to be performed according to the terms and conditions contained in that letter. National Power was advised that the Tian Bai Feng had been nominated, details of it were provided and their confirmation of its acceptance requested. On the same day Ms Tan advised that the charterparty had been finalised with the shipowner, incorporating the discharge terms outlined in the letter of 26 March 2004.
On about 3 April 2004 Ms Dayao advised Ms Tan that there was heavy congestion in the port of Masinloc and National Power required the coal to be delivered in a timeframe which would allow an adequate supply of coal to be maintained. Ms Tan approached Hyundai MM which agreed to change the laycan period to between 26 April and 8 May 2004. National Power was so advised on 5 April 2004 and its draft agreement requested.
National Power forwarded its proposed contract document which contained many terms different from those previously agreed to and which were unacceptable to Anglo Coal, Ms Tan says. On 7 April 2004 she sent a draft sales agreement between Anglo Coal, as an agent for Dartbrook who was said to be agent ‘for the Dartbrook Joint Ventures’. The document followed the terms of the letter of offer of 25 March 2004, but the price was that referred to in National Power’s letter of 29 March 2004, US$85.50 per ton; the FOBT price US$54.50 and the figures for moisture and ash content were listed at 12 per cent, as had been required in that company’s letter of 25 March 2004. The discharge terms contained in Ms Tan’s letter of 26 March 2004 were also included in the draft document. On 8 April Ms Tan forwarded a chronology of the negotiation concerning the agreement. This appears to have occurred in response to discussions about National Power’s proposed contract document. The terms of the chronology suggest that she believed acceptance of the terms proposed by Anglo Coal had occurred on 25 March and acceptance was reconfirmed on 29 March 2004. She asserted that Anglo Coal’s letter of offer provided that all other terms and conditions of the shipment were to be mutually agreed in a new contract, but that the terms proposed by National Power, over and above those contained in the letter of offer, were unacceptable. She said that if National Power was unable to accept the proposed agreement ‘which reflects the terms agreed in the offer letter’ then Anglo Coal gives notice that it will be required to cancel the charterparty Agreement with the shipowner which would result in loss being incurred by it. National Power was asked to reconsider its position.
Over the following week Ms Tan attempted to ‘finalise’ the coal sales contract with National Power but was unable to do so in terms acceptable to Anglo Coal. National Power attempted to impose new and onerous terms. On 14 April 2004 she wrote advising National Power that if it did not sign the draft agreement by 15 April 2004 she would be obliged to cancel the charterparty with the shipowner. She warned that should costs, charges and damages be suffered by Anglo Coal, it reserved its right to claim them from National Power. The agreement was never signed. On the same day Ms Tan advised the ship’s broker:
‘… we regret that due to the end-user requiring conditions over and above than [sic] what was agreed on the accepted offer, we are not able to conclude a contract with the end-user for the performances of the above …’
and cancelled the charterparty.
No action was ever taken by Anglo Coal against National Power for breach of the agreement.
THE CHARTERPARTY
Ms Tan engaged Anderson Hughes, shipbrokers in Brisbane, with respect to the chartering of a ship by Dartbrook. Anderson Hughes in turn contacted Hyundai MM and advised that they had been approached with respect to a cargo of coal from Newcastle to Masinloc in the period 15 to 30 May. The offer received from Hyundai MM was passed on by Anderson Hughes to Ms Tan on 17 March 2004. It was said to be open until the afternoon of the following day. The account was nominated as Anglo Coal but advice of the full official name was requested. The vessel was to be a Panamax bulk carrier. The owners were to nominate a final performing vessel 10 days prior to the vessel’s departure at the loading port, at the latest. The cargo quantity was 65 000 metric tons with 10 per cent and the voyage from Newcastle to Masinloc.
On 22 March 2004 Ms Tan advised the brokers of acceptance of the Hyundai MM quotation subject to a final charterparty agreement to be agreed upon and ‘reconfirmation from our customers (National Power) on our offer and discharge terms’. Negotiations then ensued as to the terms of the charterparty. In the midst of them, in an email from Anderson Hughes of 25 March 2004, it was pointed out to Ms Tan that the charterers may well ask what the connexion between Anglo Coal and Dartbrook was and might even ask for some further explanation respecting the two companies. This apparently came to pass because in an email on the same day Anderson Hughes advised Mr Yang as follows:-
‘Dartbrokk [sic] is a mine which is JV between
Anglo Coal 77.5 percent
Marubeni 15.5 percent
Ssangyong 7 percentDartbrook Coal (Sales) Pty Ltd is sales company on behalf of the JV.’
On 29 March 2004 a ‘full recap of the concluded fixture’ was sent by Anderson Hughes to Hyundai MM. It is not in dispute that Hyundai MM and Dartbrook were in agreement as to all necessary matters at this point.
The document which was then forwarded was in the form of the Americanised Welsh Coal Charter (‘Amwelsh 93’) and bore the date of 29 March 2004, although it was provided by the shipbrokers to Hyundai MM on 2 April 2004. It is not signed by Dartbrook, which appears as the charterer, but no point is taken about this. Dartbrook accepts that it had agreed to the charterparty. Hyundai MM was described in the pro forma document as:
‘Owners of ……… (flag) vessel TBN ……’
(‘To be nominated’). It was to proceed to one safe berth in Newcastle, New South Wales and to there load:
‘… in such safe berth as they shall direct, a full and complete cargo of coal as contracted under the relevant sales contract, tons of
2240 lbs/1,000 kilos* 65,000 .. 10% more or less in the Owners’ option;’Upon being loaded the vessel was to proceed to Masinloc ‘at seawater arrival draft of 14.0 metres’. Freight was set at the rate of US$29.50 per ton. Notice of the date of the vessel’s expected readiness to load was to be given on ‘12/7 days’ and the time for loading was not to commence until 15 April 2004. Lay time was to cease on completion of loading and also on completion of dischargement (cl 6(g)).
In cl 10 ‘Demurrage/Despatch’ it was said that Dartbrook had the option of keeping the vessel on demurrage at the loading and/or discharging port(s). Demurrage was to be paid by the charterers to Hyundai MM at the rate of US$45 000 per day or pro rata for part of a day. Clause 29 permitted Dartbrook to have the privilege of transferring part or whole of the charterparty to others, ‘guaranteeing to the Owners due fulfilment of this Charter Party’. Clause 30 dealt with the address commission, which was set at 3.75 per cent on gross freight. Attached to the form of charterparty were special conditions in the nature of rider clauses.
Clause 33 contained provisions as to the nomination of a vessel. It provided that ‘the Owners are to provide the performing vessel’ within or a period prior to the vessel’s estimated time for arrival at the loading port. The vessel could be rejected if it did not comply with the description of the vessel in the charterparty.
Clause 34 contained the description of the vessel, which the owner was to guarantee was ‘owner/managed/chartered or controlled’ by it at all times. The draft of the vessel was described in subcl (C) as ‘loaded saltwater draft maximum 14 metres’ and subcl (K) provided that the vessel was to be of such size, draft, air draft and other dimensions ‘to permit it safely enter, berth, lay alongside, load and discharge and depart always safely afloat from loading and discharging ports’. It was to be the responsibility of the owners to establish the applicable size, draft and other requirements at the loading and discharging ports and berths ‘and to ensure that the Vessel is loaded so as to comply at all times with such requirements (see also ‘Description of Vessel’ clause)’ (cl 35(A)). Clause 35(B) provided that if the owners or the master permitted the vessel to be loaded with a quantity of cargo so that on arrival at any discharging port it had a draft in excess of the permissible entry draft at that port, Dartbrook was to have the right to require the vessel to proceed to that port or some other port for the purpose of lightening or effecting a complete or partial discharge of cargo. The owners were to pay the costs if that were necessary.
Clause 41 gave Dartbrook the option of loading at other east coast Australian safe ports. Clause 45 contained the force majeure clause, which was in the following terms:
‘45. FORCE MAJEURE
Neither party shall be liable for any failure to perform or delay in performing its obligations under this charterparty (except for the payment of money due), nor shall laytime or time on demurrage count, where the party is being delayed, interrupted or prevented from doing so by reason of any Force Majeure Event.
For the purposes of this charterparty, the term "Force Majeure Event" means:
(A) Any strike, labour difficulty, lock-out, stoppage, dispute or difference with workmen, long shore men, railways or railway men, Lightermen, Tugboatmen, Maritime Union of Australia Labour or other hands essential to the provision or loading or discharging of the cargo or the working of the Vessel or connected with the mining, production, port or facility services at loading or discharging port or any transport and/or handling of the cargo whether inland or at the loading or discharging port or facilities;
(B) Acts of God, accident, breakdown of machinery or equipment, fire, explosion, flood, earthquake, landslip, ice, frost, snow, fog, bad weather at the mines, production or processing works or Shippers' or Receivers' works or ports or facilities, whether loading, discharging or transportation facilities;
(C) Rebellion, revolution, blockade, or any acts of any Government or any subdivision or agency thereof, acts of public enemies, embargoes, civil commotions, insurrections, political disturbances, epidemics, quarantine, riots, acts of the Queen's enemies, arrest and/or restraints of rulers, princes and people, acts of pirates or robbers by land or sea;
(D) Inability to obtain or delays in securing transportation facilities, stoppages of the Shipper's fuel supply, hindrances of whatsoever nature in mining production, processing, loading or shipping of products occurring without the negligence of the Charterer; and
(E)Any other cause, whether or not of the nature or character specifically enumerated above, which is beyond the control of such party.
The Charterer shall not be liable for any negligence, default or error in judgement of trimmers or stevedoring employed in loading and/or discharging the cargo.
Salvage and/or towage for Owner's sole benefit. The Vessel is not liable for losses through explosion, bursting of boilers, breakage of shafts, or any latent defect in the machinery or hull not resulting from want of due diligence by the Owner of the Vessel.
The Shippers and/or Charterers and/or Receivers shall not be liable in damages or otherwise responsible for failure or delay in delivery or loading or in discharging if prevented, delayed or obstructed by any Force Majeure Event. In the event of the cargo not being available through any Force Majeure Event, the Vessel has the liberty to sail without the cargo, or sail with any cargo forming part or parcel of the intended shipment on expiration of reasonable notice of Owners' intention so to do in order to enable the Vessel to keep her itinerary.
In the event of a Force Majeure Event arising:
(i) The affected party shall give the other party prompt written notice containing particulars of such cause or causes except for minor events, and shall take all reasonable steps to minimise any delay so caused;
(ii)The performance of the suspended obligations shall be resumed as soon as practicable after such Force Majeure Event is removed or has ceased.’
CHARTERPARTY NOT PROCEEDED WITH
The vessel first nominated to perform the charterparty, the Tian Bai Feng, was to travel from Tobata in Japan for Newcastle. Hyundai MM subsequently agreed to cancel this nomination and to nominate another vessel at a later date. In their email of 5 April 2004 it was further agreed that the charterparty be amended to read that there be a new laycan from 26 April to 8 May. Other terms of the charterparty were to remain unchanged. Mr Hwang of Hyundai MM said that he agreed to cancel the nomination because he wished to promote goodwill and was looking to further trade with Dartbrook.
Discussion concerning a further nomination followed. The shipbroker advised Hyundai MM that the Australia port authorities required 14 days notice of any arriving vessel and the charterers would appreciate a vessel having an estimated time of arrival of 27 to 30 April 2004.
Hyundai MM searched for an appropriate vessel. On 13 April 2004 Mr Hwang received advice, which presumably he had requested, from Ferrobulk, a shipping broker, of a vessel which would be available in Taiwan at Kaohsiung on 20 or 21 April. The daily hire rate would be US$35 000. The vessel was the Szare Szeregi. Mr Hwang says that the hire rate was viewed as the owner’s opening proposal and ‘in view of the favourable redelivery area, we were optimistic that we could persuade owners to agree a lower rate of hire around US$32 000 – US$35 000 per day’. Those negotiations did not develop, no arrangement was entered with the owners and no nomination was made because, on the following day, the charterers advised that they were not proceeding with the charterparty.
On 14 April 2004 Ms Tan advised Anderson Hughes:
‘I refer to our numerous telephone conversations regarding the above charterparty for loadport laycan in Newcastle of 26 April – 8 May 2004 to Masinloc, Philippines. The receivers (NPC) no longer agrees to accepting delivery of the proposed coal cargo. Unfortunately, Anglo will not be able to load the proposed cargo for this shipment as it will not be accepted by NPC. Furthermore, we are unable to offer an alternative to HMM such as a different discharge port. Therefore, we have no alternative but to give HMM notice that NPC refuses to accept delivery of the cargo. Consequently, Anglo does not require this shipment/charterparty or any substitute. This situation with NPC is not going to change, so both Anglo and HMM must act accordingly. We hope that HMM are sympathetic and understand our situation, which is beyond our control. Kindly advise HMM urgently on this situation and let us know if they have any suggestions. Thank you.’
This advice was passed on to Hyundai MM by the shipbroker in the late afternoon of 14 April 2004. Mr Hwang responded that Hyundai MM might hold the charterer responsible for any consequences resulting from its non-compliance with the charterparty. He enquired whether it proposed any alternative cargo, per cl 41 and asked for a response by ‘0100 GMT/15/Apr./2004’.
On 15 April 2004 Anderson Hughes advised Hyundai MM that they were instructed, that the charterers would not be loading cargo ‘as per c/p dated 29/3/04, including any other options pursuant to clause 41 due to circumstances beyond charterers control’. Mr Hwang responded on 16 April 2004 that it was understood that the charterers had no intention of abiding by the voyage charterparty and intended to cancel it. As a result Hyundai MM had no choice but to claim all losses and consequences which might follow.
Ms Tan says that when it became apparent that National Power would not be bound by the terms of the coal sales agreement, she attempted to find alternate cargo. She contacted two parties unsuccessfully. The email transmissions concerning these enquiries appear to commence in about late April and late June 2004 respectively. She said that she did not consider it possible to find a new cargo on a CFR basis.
On 20 May 2004 Anglo Coal was advised that Hyundai MM claimed damages in the sum of US$841 074.85.
WAS THERE A CONTRACT FOR THE SALE AND TRANSPORT OF COAL?
Hyundai MM pleaded an alternative basis for an award of damages in the event that a contract for the sale of the coal was found not to have been concluded. In that event it would rely upon representations as to the existence of such a contract. It does not now seek to pursue that allegation.
Dartbrook and Anglo Coal do not dispute that an agreement came into existence with National Power by 29 March 2004, albeit one which was subject to the terms being restated in a fuller or more precise form, but not different in effect. It therefore belonged to the first class of contracts referred to in Masters v Cameron (1954) 91 CLR 353 at 360, by which the parties intended to be immediately bound to performance.
Marubeni and Ssangyong however deny that an agreement between Dartbrook and National Power was concluded and allege that Ms Tan knew that it was not in place on 29 March 2004 when she concluded the charterparty agreement with Hyundai MM. Evidence as to her true understanding about the coal sales agreement is relevant to the allegations of wilful misconduct on the part of Dartbrook, which may affect its entitlement to an indemnity from these defendants.
Marubeni and Ssangyong contend that there was a lack of correspondence between the offer and acceptance with respect to a number of contractual terms: the price for freight; the FOBT price; the specifications as to the moisture and ash content of the coal; the terms as to the nomination of a vessel; and the terms and conditions as to discharge. Alternatively it is submitted that any binding agreement was made subject to a formal contract being agreed between the parties. This can be seen from the reference, at the foot of the letter of 25 March 2004, to ‘all other terms and conditions are to be mutually agreed in a new contract’. The formal contract was never agreed.
Mr Lewis is one of the persons having expertise in the shipping industry, who was called as witnesses. He was called by Marubeni and Ssangyong to review the actions of Ms Tan by reference to usual practice. Some of his criticisms were based upon a misunderstanding as to what was being communicated; others were considered by Mrs Richards, who gave evidence for Dartbrook and Anglo Coal, not to reflect usual practice. In particular she said that it was often the case that agreements were concluded without documentation being finalised and signed. In the end result I did not understand Marubeni and Ssangyong to seek to rely upon much of what Mr Lewis had said in his reports. The majority of it was not in any event directed to the matters pleaded and upon which these defendants ultimately addressed. The issues came down to two: whether there was a contract concluded between the parties; if it had not, whether Ms Tan is likely to have understood that to be the case when she committed Dartbrook to the charterparty.
Ms Tan gave evidence that the contractual negotiations occurred in a fast-moving market and involved a considerable amount of discussion and communications by email and facsimile transmission. Ms Tan said that this occurred on almost a daily basis in the period between 25 March to 29 March 2004. It was submitted that this evidence should not be accepted as credible because it was not contained in Ms Tan’s affidavits, and a considerable time had been spent carefully proofing her as to the evidence she was able to give. I do not consider the evidence to be unreliable. I see no reason to disbelieve Ms Tan. It is correct to observe that the affidavit, which deals with the negotiations, focuses upon the sequence and contents of the written correspondence passing between Ms Tan and National Coal. For good reason it was no doubt considered by Ms Tan and the solicitors preparing the affidavits that the written communications between 25 and 29 March 2004 inclusive contained the terms and conditions the subject of agreement. The affidavit refers to oral discussions had by Ms Tan at some, but not all, points. She is said to have travelled to Manila for discussions early in the process and to have had a further discussion with Ms Dayao of National Coal which led to the letter of offer of 25 March 2004. It would be surprising if there had not been substantial discussion about the communications passing. The written exchanges, for the most part, mostly confirm this to have been the case. It may be accepted that by the time Ms Tan sent the letter of offer dated 25 March 2004, she and Ms Dayao had had considerable negotiations and had largely agreed upon the terms.
National Power sought to improve its position on the price of the coal at an earlier point, when it purported to accept the offer of 17 March 2004 at US$85.70 per ton. It was this figure that Ms Tan included in her letter of 25 March 2004, together with an FOBT price of US$54.70 per ton and freight at US$31.00 per ton. Ms Tan says that the reference to a figure of US$85.50 per ton in National Power’s letter of 29 March 2004 was to the figure agreed in the negotiations which took place between 25 and 29 March 2004. This is confirmed by a number of factors. The letter of 29 March 2004 refers to acceptance of Ms Tan’s ‘revised offer’, implying some discussion other than that in the written communications. Consistent with its change to the coal price, National Power had changed the FOBT price in its letter of 25 March 2004, which responded to the letter of offer of the same day. This appears to have been accepted as the basis upon which the parties were proceeding. That agreement on these figures had been reached by 26 March 2004 is confirmed by Ms Tan’s advices to personnel at Dartbrook.
Ms Tan also explained that the specifications for the coal continued to be discussed in this period. To an extent National Power’s letter of 25 March 2004 contained counter offers as to some of the specifications as well as to the price, as discussed above. National Power required the moisture content of the coal to be changed from 10 per cent to 12 per cent and the limit of the ash content reduced from 12.5 per cent to 12 per cent. That letter also included a reference to a further condition, that a nominated vessel be accepted by National Power within 24 hours. There is no reason to think that these matters were not discussed and agreed upon prior to National Power’s letter of 29 March 2004. It confirms that all the matters referred to in the letter written by Ms Dayao on its behalf on 25 March 2004 were to form part of the agreement.
On 26 March 2004 Ms Tan added the terms and conditions relating to discharge. It was pointed out in submissions for Marubeni and Ssangyong that they are not referred to in National Power’s letter of 29 March 2004. Ms Tan however says that she had discussed those matters with Ms Dayao prior to sending the letter of 26 March. This accords with the terms of that letter which commence with the words ‘we list the following discharge terms …’. This does not suggest that further negotiations are being entered into, but that the letter is listing matters which have already been discussed and finalised.
By 25 March 2004 discussion on all topics, including terms relating to discharge, was likely to have been complete. The concluding words of the letter of that date from Ms Tan do not suggest that it was not intended that it take effect as an agreement until a formal contract was prepared. Further discussion then ensued as to the terms relating to freight rate and the coal specifications, initiated by National Power. Variations were agreed. Whilst Ms Tan says that negotiations continued in the period from 25 to 29 March 2004, it is likely that they were completed by the time she wrote, in self-congratulatory terms, to personnel at Dartbrook on 26 March, advising that the letter had been finalised. National Power’s letter of 25 March 2004 had predicted this. National Power’s letter of 29 March 2004 appears to be in the nature of confirmation of what had passed between the parties.
The conduct of the parties after 29 March 2004 also confirms the existence of a binding agreement between the parties. A vessel was nominated by Ms Tan within two days of the last communication about the contract and acceptance of the vessel was provided the following day. When National Power sought some additional conditions, the position taken by Ms Tan, that the terms of the shipment had been agreed, was firm. This was not disputed by Ms Dayao, who proceeded on 3 April 2004 to negotiate a change in the laycan period. It is true that National Power thereafter produced a draft contract document which contained terms and conditions quite different from those agreed. It is not possible nor necessary to draw any inference about whether National Power was motivated by the belief that it was entitled to do so or by the desire not to proceed with the contract for the sale of the coal. More relevant is the conduct of Anglo Coal and Dartbrook, through Ms Tan, which was consistent with a binding contact having been finalised. When it became apparent that National Power might not be intending to fulfil its obligations under that agreement, Ms Tan warned that if she was obliged to cancel the charterparty, and Anglo Coal suffer loss in consequence, a claim might be made against National Power. I do not draw any inference to the contrary about Ms Tan’s state of mind from the references in her emails to the shipbroker. She was no doubt aware that her advices would be passed on to Hyundai MM and she was hoping to extricate Dartbrook from a potential claim for damages. The letter was understandably expressed in neutral terms and accepted to place the matter beyond Dartbrook’s control. The letter is written in terms which simply express a commercial event, one which it is hoped Hyundai MM will accept.
It was submitted for Marubeni and Ssangyong that Anglo Coal or Dartbrook could not have believed that it had a concluded agreement, because no legal proceedings was brought against National Power. The submission tends to overlook the prospect that the principals for whom Dartbrook was acting themselves may have done so. I put that to one side. It was suggested, in response to the submission, that the failure to do so may have been because of uncertainties of litigation in the Philippines, which assumes the proceedings could not have been brought in Australia. It is not necessary to determine that issue. It is just as likely, in a case such as this, that the decision not to sue National Power was a commercial one. It does not necessarily reflect Anglo Coal’s view as to its prospects of success. In any event it says nothing about whether a contract was concluded in fact nor about Ms Tan’s state of mind.
WAS THE CHARTERPARTY CONDITIONAL UPON A CONTRACT BETWEEN ANGLO COAL AND NATIONAL POWER?
For completeness I will deal with the question whether the charterparty was conditional in the way in which some of the defendants contend.
Marubeni and Ssangyong allege that cl 1 conditioned the charterparty to the existence of a contract for the sale of the coal to be shipped. This follows from the specification in cl 1 that the cargo of coal was ‘as contracted under the relevant sales contract’. There was no sales contract and therefore no cargo to load.
Dartbrook and Anglo Coal did not contend that cl 1 excused them from performance. It was conceded by them, correctly in my view, that the words in cl 1 refer to the description of the coal as may appear in a sales contract and that they do not disclose an intention that a sales contract must be in existence before any obligations arise under the charterparty.
A contract for charter may be made conditional upon the charterer obtaining cargo for the agreed loading period, such that a failure to obtain it relieves both parties of their obligations conditionally agreed: see J Cooke et a., Voyage Charters’, 2nd edn, LLP, London, 2001 at par 1.23. Mrs Richards, confirmed that such an agreement, one ‘subject to stem’, is not uncommon. This makes it less likely that the words relied upon by Marubeni and Ssangyong were intended to bear the meaning contended for. Dartbrook did not require a clause in the necessary terms and there was nothing in the parties’ communications to suggest that it was sought. It may be inferred that the parties did not intend to take that course.
WAS THERE A FORCE MAJEURE EVENT?
Dartbrook and Anglo Coal submit that the refusal of National Power to perform the sales agreement excuses them from performance of the charterparty under the terms of cl 45 and in particular sub-cl (E). The words of the clause that are the focus of this condition are that
‘Neither party shall be liable for any failure to perform … its obligation under this Charter Party
…
where the party is being …prevented from doing so by reason of any Force Majeure Event.’
Such an event is defined by sub-cl (E) as ‘any other cause …’ ‘which is beyond the control of such party’. It is submitted that a purchaser’s refusal to proceed with the contract, and to take the coal, prevented Dartbrook from delivering coal, within the terms of the clause. The submission for these defendants is that their obligation under the charterparty was to provide coal for delivery at Masinloc. What was contemplated was not a small cargo. It could not be said to have been practical for the defendants to perform the charterparty absent a purchaser or some other person willing to take delivery of that coal. In every practical sense, it is submitted, the refusal of the buyer to proceed with the contract prevented the defendants from performing the charterparty.
Impractability of performance is not generally recognised as a ground of discharge of a contracting party’s obligations: E McKendrick, Force Majeure and Frustration of Contract, 2nd edn, LLP, London, 1995 at pp 24-25; G Treitel, Frustration and Force Majeure, Sweet and Maxwell, London, 1994 at par 6-021. To the extent that it has been accepted as a ground by American courts, Treitel at par 6-020 observes that they have become increasingly reluctant to regard the increased cost or difficulty of performance as sufficient for this purpose. The assertion that force majeure ‘includes every event which is beyond the control of the parties’ (see L D’Arcy, Schmitthoff’s Export Trade: The Law and Practice of International Trade, 9th edn, Sweet and Maxwell, London, 1990 at p 199) has been regarded as too wide: McKendrick at p 8 footnote 41. In PJ van der Zijden Wildhandel N.V. v Tucker [1975] 2 Lloyd’s Rep 240 the sellers were entitled to cancel the contract if they did not effect shipment in time by reason of war, flood, fire or storm or ‘any other cause beyond their control’. This was held not to protect them when their supplier let them down, since the event did not prevent them from performing by other means.
There is no doctrine in English law which corresponds with the doctrine of force majeure in French law. The use of the words in contracts have required English and Australian courts to give them some meaning. The characteristics by McKendrick at pp 24 – 25, which have been recognised by the courts as constituting a force majeure event have regard to something which is:
(a) irresistible;
(b) unforeseeable;
(c) external to the person claiming discharge; and has
(d) made performance impossible and not merely more onerous or difficult
(and see Treitel at par 12 – 017). In the present case (a) (b) and (d) are not present.
In any event the submission for Dartbrook and Anglo Coal ignores the need to construe each force majeure clause by reference to its words, having due regard to the nature and general terms of the contract: Lebeaupin v Richard Crispin and Co [1920] 2 KB 714 per McCardie J. Here the objective of Dartbrook was to load the specified cargo of coal. The obligation was not dependant upon the existence of a particular purchaser, as previously discussed, and could be fulfilled without a sale to National Power. Clause 45 requires that Dartbrook be prevented from performing that obligation before it is excused. The clause itself gives examples of what may amount to prevention. It includes ‘hindrances of whatsoever nature in mining production’ with the rider that they not be caused by the actions of Dartbrook itself. The requirement that Dartbrook be prevented from performance, in practical terms, implies causation between the event and the inability to perform. Some force majeure clauses have been recognised as operating in this way (see Treitel at par 12 – 019). Nothing in National Power’s refusal to proceed with its contract prevented Dartbrook from providing coal for delivery to Masinloc in accordance with the charter. The ‘practical’ considerations, to which Dartbrook and Anglo Coal point, are indicative of matters which may affect a party which considers itself to be at risk of loss. Proceeding with the charterparty may not have been to their advantage, but there was nevertheless a choice open with respect to performance. They were not prevented from performance. They considered it not be in their interests to do so and chose not to perform.
HYUNDAI MM’S ABILITY TO PERFORM THE CONTRACT
In their defences Dartbrook and Anglo Coal alleged that Hyundai MM would not have been able to perform its obligations under the charterparty because it could not have secured a ship meeting the requirements of the charterparty within the time required for performance. Those defendants alleged that they would not have accepted the nomination of the ‘Szare Szeregi’, or a like vessel, because it did not conform to the description of the vessel required under the charterparty. Further particulars of the allegation identified the requirement as to the maximum draft of the vessel as relevant. After some evidence was given on that matter I was informed that this allegation was no longer pursued. There was evidence that the Szare Szeregi would have been able to discharge the maximum load at Masinloc and that there were other vessels meeting the requirements of the charterparty which were likely to have been available at the relevant time.
Dartbrook and Anglo Coal sought to raise an issue as to whether Hyundai MM was ready and willing to perform the contract. An averment to this effect, on the part of a plaintiff, is usually taken as implied: Hensley v Reschke (1914) 18 CLR 452 at 467 (‘Hensley v Reschke’). Whilst a plaintiff is absolved from further performance, upon their acceptance of a wrongful repudiation by the other party, it is nevertheless necessary for them to show that they were ready and willing to perform their part of the bargain, and this includes their ability to perform: Peter Turnbull and Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 at 253 (‘Peter Turnbull and Co’); Hensley v Reschke at 467. The only allegation of inability to perform was that mentioned above and related to the vessel’s draft. Dartbrook and Anglo Coal also submitted that Dartbrook’s repudiation may not have been so clear as to amount to a refusal to perform. It was said there was a question whether ‘the failure of Dartbrook necessarily conveyed to HMM that, even if HMM performed its obligations, Dartbrook will still not perform its obligations’. If Dartbrook had not clearly done so, it would follow that performance by Hyundai MM was not excused: see Peter Turnbull and Co at 246, 252; Mahoney v Lindsay (1981) 55 ALJR 118 at 119, referring to Jones v Barkley (1781) 1 Dougl. 684; 99 E.R. 434.
Marubeni and Ssangyong’s position on this issue was not entirely clear. They did not plead that Hyundai MM was unable to perform, but alleged that Dartbrook was entitled to repudiate pursuant to cl 33(D) of the charterparty. That clause permits rejection of a nominated vessel if it does not comply with the requirements of the charterparty. These defendants, in written submissions, did not pursue the allegation and sought merely to adopt the position taken by Dartbrook and Anglo Coal. In argument they did not contend that Ms Tan could have rejected the Szare Szeregi.
The additional matter sought to be raised by Dartbrook and Anglo Coal may be dealt with shortly. Dartbrook’s repudiation was clearly made in the advice from Ms Tan of 14 April 2004, which was passed on to Hyundai MM by the shipbrokers. When Hyundai MM queried Dartbrook’s position, it was told that Dartbrook would not be loading cargo. The repudiation was accepted by Hyundai MM by its communication of 16 April 2004.
I turn then to the question as to how Hyundai MM’s damages are to be measured.
THE MEASURE OF DAMAGE
Hyundai MM seeks to prove its damages following upon breach of the charterparty by reference to the consideration due to it under the charterparty (contract freight), together with any demurrage which may have become due to it, from which is to be deducted the expenses of hiring a vessel to perform the charterparty. Dartbrook and Anglo Coal contend that where there has been a failure, on the part of a charterer, to deliver cargo the ‘normal rule’ applies. It is expressed as the difference between contract freight and market freight. There is to be deducted from the freight due under the charterparty the amount that could have been earned by Hyundai MM’s ship carrying other cargo in the period in question. They plead that Hyundai MM’s loss is attributable to its failure to find alternative employment for its ship. In this regard the ship might be either one owned by it or hired in. They also contend that it is not for the defendants to prove that that income could have been made, but for Hyundai MM to prove that it was not. The other defendants join in these arguments.
At the heart of the submissions for the defendants are the decisions in Cobelfret (UK) Ltd v Austin and Butta (Sales) Pty Ltd (unreported, Supreme Court of New South Wales, Brownie J, 24 February 1988); Cobelfret (UK) Ltd and Anor v Austen and Butta (Sales) Pty Ltd (unreported, Supreme Court of New South Wales Court of Appeal, Kirby P, Priestley JA, Meagher JA, 5 April 1991) (‘Cobelfret’). It is submitted that that case involves the application of the normal rule to a case such as this and that it recognises that the plaintiff is under an obligation to seek alternative employment for the vessel which was intended to be used under the charter. This forms part of its proof of damage.
In Cobelfret the charterparty required the delivery of coal over a lengthy period and a number of voyages. The charterer failed to deliver the required quantity of coal. It was necessary for the trial judge, in assessing damages, to construct a number of theoretical voyages.
Cobelfret was the owner of some ships, held others on time charter and at other times hired vessels for voyages. Its claim for damages was based upon the gross freight it would have earned under the charterparty, deducting only the cost of chartering a vessel, from time to time, as the contract required. This approach accords with that taken by Hyundai MM in this case. It did not calculate any net profit it could have made by reason of one of its own vessels, or vessels it already had on time charter, being freed from performance under the charterparty and used in another profit-making endeavour within the charter period.
Brownie J found that about 80 per cent of the vessels used in performing the charterparty would have been vessels obtained by Cobelfret on voyage charter. The balance used would have been its own vessels or vessels which it had on time charter. Neither Brownie J nor the Court of Appeal considered that Cobelfret’s claim as formulated to be inappropriate where vessels of the first kind were utilised. So far as concerned the theoretical charter using its own or time-chartered ships however, it had not shown what profits it had, or could have, earned by using those (two) ships for other cargo. His Honour found that it was likely that they would have made a profit, but he was not in a position to know what it was. His Honour treated these profits as a contingency. The correct approach, the Court of Appeal held, was to deduct two voyages from the calculation of damages on the basis that they were not the subject of proof. His Honour’s approach otherwise and the measure of damages employed were held to be correct.
In the Court of Appeal Priestley JA, with whom the other members of the Court agreed, was principally concerned with the content of the rule stated by Scrutton on Charterparties, 19th edn, Sweet and Maxwell, London, 1984 at pp 395-396 as:
‘So, where a charterer refuses to load, the older cases indicate, as the ship owners measure of damages, the loss of profit on the charter (ie the freight to be earned less expense of earning it), against which the ship owner must give credit for what profit he can earn by a substituted employment of the ship. And it was said that he must mitigate the damages by accepting such substituted employment. It would be more accurate to say, and nowadays it is thought would be said, that his true measure of damages is the loss of profit he sustains by breach of the charterparty less the profit he can earn by using the ship elsewhere during the same period, just as a servant’s damages for wrongful dismissal are the wages he would have earned under the broken contract less what he can earn elsewhere by being set free.’
and whether the requirements of mitigation have become incorporated into the normal measure in more modern times, as suggested in McGregor on Damages, 15th edn, Sweet and Maxwell, London, 1988 at pars 172-3, 179-96. His Honour appears to have accepted both statements as reflecting the modern approach. Cobelfret did not deny the correctness of this approach. It argued that there could be a deduction of market freight only in very limited circumstances. His Honour considered what possibilities were open, following upon the defendant’s breach, and held that the only circumstance where Cobelfret could not have earned income from its two vessels was if no cargo had been available. This would provide the only basis for making no deduction from the contract freight.
Scutton on Charterparties, 20th edn, Sweet and Maxwell, London, 1996, Art 193 at p 394 says that in an action against a charterer for not loading a cargo the measure of damage is:
‘the amount of freight which would have been earned under the charter after deducting the expenses of earning it and any net profit the ship made, or might, have earned during the period of the charter on a substituted voyage.’
and goes on to say that if the expense of earning freight on a substituted voyage of the same duration is the same as on the chartered voyage, the same result is arrived at by taking the difference between the charterparty rate of freight and the market rate of freight. In relation to the duty to mitigate (at Art 192, p 388, note 4) the authors say that a plaintiff is under a duty to mitigate its loss and damages will not be awarded for losses that it could reasonably have avoided. In relation to the ‘so-called duty’ reference is made to Sotiros Shipping Inc v Sameiet Solholt (The Solholt) [1983] 1 Lloyd’s Rep 605. There Sir John Donaldson M.R. said (at p 608) that a plaintiff is under no duty to mitigate his loss despite the habitual use by lawyers of the phrase ‘duty to mitigate’. As a matter of causation however a loss may be directly attributable to a breach of contract ‘unless avoidable by some reasonable further action’, and that is a question of fact. Scrutton (at note 4) continues in the same terms as the previous edition (at [73] above).
McGregor on Damages, 17th edn, Sweet and Maxwell, London, 2003 at par 27-062 deals with the ‘growth of the modern measure’ of damages where there has been a failure to supply cargo. The author says that:
‘The normal measure of damages may be stated today as the contract rate of freight less the market rate of freight. This is calculated by taking not the gross amounts of the contract and the market freights but the net amounts after the costs of earning the freights. The market freight is deducted on the ground that this sum was or could have been earned by the defendant on the claimant’s refusal to supply cargo. This is in accordance with general principles and in particular with the measure of damages in an action for non-acceptance of goods sold. However, this measure allowing for the deduction of market freight developed slowly in carriage contracts.’
In connexion with contracts for the sale of goods, Carter on Contract, Vol 2, Butterworths at par 41–380 notes that the prime facie rule, which relies on a comparison of market price and contract price, assumes that the plaintiff will (or should) mitigate loss by going into the market. G Treitel, The Law of Contract, 11th edn, Sweet and Maxwell, London, 2003 at p 977 says that where a seller fails to deliver, the buyer must go into the market at the relevant time to buy substitute goods. This requirement finds expression in legislation concerned with the sale of goods.
McGregor (from par 27-063) traces the development of the rule. The general rule as to the measure of damage is taken to have been stated and applied in Smith v M’Guire (1858) 3 H&N 554; 157 E.R. 589, and as ascertained by the calculation of:
‘ … the freight to be earned, and the deduction of the expenses which the shipowner would be put to in earning it; and what the ship earned (if anything) during the period which would have been occupied in performing the voyage, ought also to be deducted.’
In that case Martin B expressed some doubt as to whether the shipowner was obliged to look for employment for his ship, but McGregor regards this as being wrong ‘now that the rules as to mitigation have been worked out, and the contrary view is stated in later cases’ (at 27-065). Scrutton is of a similar opinion (at Art 192, p 389 footnote 31). McGregor refers to statements in Aitken Lilburn v Ernsthausen [1894] 1 QB 773 and Wallems Rederij A/S v Muller [1927] 2 KB 99, to the effect that the shipowner is bound to search out other cargo or otherwise he would not be able to recover full damages.
McGregor points to the difference between stating the measure of damages as ‘contract rate of freight subject to mitigation’ and as ‘contract rate less market rate of freight’ as lying in the practical matter of onus of proof. Suggesting the latter as the ‘modern rule’ (at par 27-066), the author explains that the effect is that a claimant will recover only contract rate less market rate unless the claimant can prove that in the particular circumstances substitute freight was not, and could not reasonably have been, earned. He cites two decisions as apparently supporting the modern rule: Rheinoelv Huron Liberian Co. (The Concordia C) [1985] 2 Lloyd’s Rep 55 (‘The Concordia C’) and SIB International v Metallgesellschaft Corp. (The Noel Bay) [1989] 1 Lloyd’s Rep 361 CA (‘The Noel Bay’).
In the Concordia C the ‘guiding principle’ confirmed by Bingham J (at 57) was that ‘the owners damages should be such sum as would put them in the same financial position as if the Rheinoel charter had been performed,’ noting that the principle is easy to state but far from easy to apply. In applying that principle it was considered necessary to reduce the net revenue which the owners would have earned under the charter by the net amount which they did in fact earn during its currency. In the The Noel Bay Staughton LJ at 363 likewise described the shipowner’s entitlement as taking into account the money they in fact earned.
None of the cases which make reference to a substituted cargo and an obligation, on part of the shipowner, to obtain it, suggest that there is a ‘rule’ to that effect which is of universal application, applying in every case involving a failure to supply cargo. The reference in the ‘rule’ to the deduction of market freight, which was or could have been earned, expresses no more than what a shipowner, having a vessel available for the charter, would do in the ordinary course of business and acting reasonably. It is assumed that the shipowner would go into the market and obtain a substitute cargo. Likewise where a shipowner breaches a charterparty it is assumed that the charterer will charter a substitute vessel and this is reflected in statements of the ‘normal’ measure of damage: Koch Marine Inc v D’Amica Societa Di Navigazione A.R.L (The Elena D’Amico) [1980] 1 Lloyd’s Law Rep 75 (‘The Elena D’Armico’). It is the operation of mitigation principles which are responsible for the rule. This was pointed out in Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2005] 1 Lloyd’s Law Rep 443 (‘The Golden Victory’) (appeal dismissed [2005] 2 Lloyd’s Law Rep 747). It is not therefore to be seen as stating a new principle.
A general, but not universal, rule as to damages must, in any event, give way in a particular case to solutions which fairly compensate a plaintiff: Johnson v Perez (1988) 166 CLR 351 at 355 -356. In The ‘Golden Victory’ Langley J considered that the ‘normal measure’ referred to in The Elena D’Amico, was merely a prima facie rule and the ‘governing principle’ remains that the measure of damage is the loss directly and naturally resulting, from the breach of contract. The application of principles relating to mitigation must be understood in this light.
Hyundai MM owns ships and charters ships both on long and short term. Part of its business is the carriage of cargo by hiring vessels. In the present case it had contracted as an owner, but the vessel to be nominated was not limited to one of its own vessels. Clause 34(A) of the charterparty recognises that the vessel might be provided from any such source. Its terms reflect the concern that Hyundai MM have control of the vessel used.
The situation with respect to Hyundai is similar to that of Cobelfret. A factual difference however is that it was known that Cobelfret would have two ships on time charter for the purposes of the charterparty in question. They were at their disposal and able to be used. It was obliged to mitigate for this reason. This accords with the approach taken in the cases referred to above. The basis upon which the ‘rule’ proceeds is that there is a vessel available for use. That circumstance, and the shipowner’s failure to use it for substituted cargo, are the only grounds for a conclusion that the loss claimed against the charterer was not a consequence of the breach of contract, but flowed from the shipowner’s unreasonable inaction.
If it could be concluded that Hyundai MM had available to it a ship to take substitute cargo a short time after 16 April 2004, the profits that ship could have earned must be taken into account against contract freight. This accords with what might be expected in practice, as Mrs Richards said. An owner would simply be pursuing revenue for ‘his fleet’. It is simply a matter of comparing income streams. It will be recalled that Scrutton, 20th Edn, Art 193, makes an observation to similar effect. At a practical level there would have been no reason why a shipowner with a vessel available could not have gone into the market for substitute cargo. At the relevant time there was more cargo than ships available.
Mrs Richard’s view, that Hyundai MM would have had a vessel available, appeared to have two bases. She considered that in a fleet such as Hyundai MM’s a vessel could be made available by it. The second was that Hyundai MM should have maintained the fixture on the Tian Bai Feng, not the least because it was at a good price. The latter does not provide a basis for an assumption that a vessel was available at the date of acceptance of repudiation, or shortly thereafter. It is not even relevant to mitigation, since Hyundai MM could not have known, when it agreed to alter the laycan dates and not take a fixture on the vessel, that Dartbrook would later repudiate the charterparty.
In my view the basis for the rule, upon which the defendants rely, is the existence of a particular factual situation – one where, as a result of the charterer’s repudiation, the shipowner has a vessel available for use. In these circumstances the ordinary application of rules as to mitigation require the shipowner to seek another cargo for that vessel to limit the loss at which would otherwise suffer, or explain why that was not possible. The rule does not itself create a factual situation pertaining to the shipowner. It does not operate, like a rule of evidence, so as to create an assumption. Each case, where damages are claimed because of a failure to deliver cargo, will turn upon its own facts and the evidence relating to the position of the shipowner. Where it is not apparent that the shipowner would have had a vessel available, the rule does not operate to require it to prove that it did not. In a case such as the present it is for the defendants to allege and prove that the shipowner was in a position such that it could reasonably have avoided some of its loss.
The defendant’s submissions themselves reflect the state of the evidence. They were required to submit in the alternative: that either Hyundai MM could have used its own vessel or that it should have used a vessel hired by it. The latter submission recognises the likelihood that that is what Hyundai MM intended to do in this particular case. By the time the charterparty was terminated Mr Hwang had sought out two vessels to hire for the voyage. No vessel had been fixed when the breach occurred. The state of the evidence did not permit the application of the rule.
In my view the ‘normal rule’, which may apply where cargo is not delivered and which requires a shipowner to find substitute cargo, has no application in the present case.
MITIGATION OF DAMAGE
I deal with this topic although it seems to me that the defendants may well be taken to have abandoned it, in favour of an outcome based upon the ‘normal rule’ to which reference has been made.
Mrs Richards made the general comment, in her second report, that there were numerous other cargoes and vessels available to Hyundai MM. This was said in the context of the issue relating to the rate of hire derived from reports of fixtures. I did not understand Mrs Richards at this point to say that Hyundai should have chartered another vessel, since her view was that it would use its own. She was dealing with the case as presented to her. If that was her view, it was contrary to the other expert evidence and that of Mr Hwang.
Neither Mr Lewis nor Mr Everton considered it to be usual practice to fix upon a vessel without having a cargo. Although the market at the time favoured owners, its movements may now be viewed in hindsight. There was a real risk that Hyundai MM would expose itself to a greater loss if it did so. Finding cargo takes time and in the prevailing market it would not be sensible to seek out a cargo and then find a vessel.
The defendants have not identified a course of action open to Hyundai MM which it could be said it should reasonably have taken.
THE QUANTUM OF DAMAGES
Mr Everton produced two calculations for loss of profit (Ex 28) – one based upon the use of the Szare Szeregi and the other on the Tian Bai Feng. The Szare Szeregi was not likely to have been used and some questions have been raised about her operational ability. The Tian Bai Feng is considered by Mr Everton to fairly represent a conforming vessel of the class required. I do not understand this to be disputed. In particular Mrs Richards subsequently accepted that other vessels available were able to carry the quantity of cargo this vessel could. The voyage income is therefore:
Freight: 71,500mt x US$29.50 – 3.75% 2 030.153.13
Demurrage: 10.94 days x US$45 000 – 3.75 % 474 012.00
US$2 504 165.13Whilst Mrs Richards and Mr Lewis earlier disputed the likelihood of demurrage being payable, this was not maintained in submissions.
The principal issue in the calculation of damage concerned the cost which Hyundai MM would have incurred in hiring a vessel. The daily rates which the experts said would likely have been incurred were US$35 500 (Mr Everton); US$37 000 (Mrs Richards) and US$37 500 (Mr Lewis). Hyundai MM’s own calculation was based on US$32 000 per day, which Mr Hwang considers he would have achieved if negotiations in connexion with the fixture of the Szare Szeregi had concluded, although he conceded in his evidence that the outcome may be as high as US$35 000. Mr Everton considered that Mr Hwang’s approach was somewhat optimistic, given in particular that the fixture report of the vessel on 15 April 2004, for a trip which also had redelivery to the Philippines, was at the rate of US$35 500 per day. Hyundai MM nevertheless submitted that it could have achieved a lesser price, either because of its market power or experience and success-rate in negotiations, as evidenced by the rate it achieved for the Tian Bai Feng. No such inference could however fairly be drawn from the evidence, such as it was.
Mr. Everton considered that the daily hire of US$35 500 was fairly representative of rates with respect to other available vessels which met the requirements of the charterparty. The reports of the fixtures do not bear that out. Of the eight qualifying vessels identified as qualifying, other than the Szare Szeregi, five were available at the relevant time. The average rate of hire of those vessels was US$37 500.
Although Mr Everton’s evidence on the usefulness of the earlier fixture of the Tian Bai Feng as a guide varied somewhat, I understood there to be general consensus amongst the witnesses that the rate at which it was fixed was well below market levels at the time and not appropriate to be used.
None of the witnesses suggested that the daily rate could be ascertained with precision. A difference of US$2000 or US$2500 is however of some significance to the claim and may imply that there is some distinction drawn by the charterers with respect to vessels or advantages with respect to redelivery.
The dry cargo market was operating at high levels and high freight rates were evident in the period when Hyundai MM would have had to fix upon a vessel. The fixtures of vessels which conformed to the requirements of the charterparty suggest the figures for which Mrs Richards and Mr Lewis contend. The rate at which the Szare Szeregi was fixed was alone in this class. Possible reasons were advanced for this. Mrs Richards suggested that it was because the vessel would be known to be less economical and take longer on a voyage. Mr Everton considered that the difference in the rates was explained by the fact that the vessels fixed at between US$37 000 and US$38 500 had a redelivery at Japan and not the Philippines, as was the case with the Szare Szeregi. Redelivery to the Philippines would be more attractive since it positioned a vessel better to be redeployed. Mrs Richards disagreed with the approach. It is not possible to reach a firm conclusion as to the reason why the Szare Szeregi’s rate of hire differed from others in the market at the time.
Since the rate of hire for the Szare Szeregi differs from the average of rates for vessels reported in the period when Hyundai MM would have fixed a vessel, the question which arises is whether Hyundai MM was likely to have been able to conclude a fixture of it, albeit at the rate of US$35 500. If such a finding is not possible, the only other conclusion open is that the rate it would have to pay for other vessels of the requisite class and specifications was in the order of US$37 500. I do not consider the evidence permits the finding that Hyundai was likely to have succeeded. It is possible that it may have done so, but equally possible that, given the demand for vessels and the short time in which negotiations had to be concluded, Hyundai MM would have been outbid. Its opening offer was considerably lower than that sought by the owners. The rate reported as obtained by them was even higher. There is nothing to suggest that it was more likely than not that Hyundai MM would have succeeded in obtaining the fixture. The rate of US$37 500 should be applied.
At the conclusion of the trial differences of opinion remained with respect to a few assumptions upon which voyage expenses, in addition to hire, should be calculated. The first of these was the amount allowable for the contingency that some further anticipated costs would be incurred. Mr Everton had already allowed 5 per cent for contingencies on expenses, for potential delay at sea, as had Mrs Richards. Mrs Richards allowed another two days for the potential for time lost in port, but conceded that it was not appropriate where the vessel was on demurrage once there had been a delay in Newcastle, which seemed likely on the evidence. Mr Lewis allowed another day for contingencies, but this was for the same reason that Mr Everton and Mrs Richards had allowed 5 per cent, namely delay in the voyage. No basis was shown for a further increase in the figure for contingencies, particularly when an extra day’s costs was said by Hyundai MM to represent something in the order of US$40 000 and the defendants did not dispute this.
Mr Everton assumed, for the purposes of his calculations of the cost of the voyage, that the delivery leg would be a distance of 4392 nautical miles. Marubeni and Ssangyong relied upon Mr Lewis’ opinion that it would be 4442.8 miles, the average of the length of the voyage of the five vessels referred to in connexion with rates of hire. The difference is some 50 nautical miles, about 3.5 hours. If those defendants were correct in this contention, the expense could increase in the order of US$5000. The principal reason for the difference in the figures is that the voyage to which Mr Lewis has regard had delivery from China. The Tian Bai Feng would have been delivered from Japan. The evidence suggests a number of other vessels would have also been delivered from Japan, as Mr Lewis acknowledged. They may have been delivered from a port closer to Newcastle. No reason was shown why, in these circumstances, a vessel was more likely to have been delivered from China and why it was necessary to add to the allowance already made for contingencies with respect to the voyage.
The next point taken by these defendants relates to the cargo leg of the voyage between Newcastle and Masinloc, which Mr Everton calculated as 3972 miles and Mr Lewis calculated at 4018 miles. I see no reason to doubt Mr Everton’s figure, which was derived from a website used by the industry. Mr Lewis merely used Hyundai MM’s figure, but it was not explained why it was more reliable or included what it is.
With the adjustment to the rate of hire following my finding, the calculation with respect to this expense is:
47.64 days x US$37,500 – 3.75% = US$1 719 506.25
Allowing for the other voyage expenses, calculated by Mr Everton at US$288 670.40, the net profit on the voyage which Hyundai MM has lost is US$495 988.48.
JUDGMENT AGAINST DARTBROOK?
There is no doubt that Anglo Coal, Marubeni and Ssangyong are liable to Hyundai MM as the principals for which Dartbrook contracted. The question arises as to whether Dartbrook is itself liable.
In the charterparty Dartbrook was shown as the charterer. The document itself, concluded on 29 March 2004, contained no reference to Dartbrook’s principals, the three joint-venturers. The shipbrokers however had obtained information about the parties to the joint-venture and that Dartbrook sold its coal. It passed this information on to Hyundai MM on about 25 March 2004.
Generally speaking, where a party signs a contract without qualification as to the capacity in which they are signing, they are taken to be contracting personally. This may be otherwise where disclosure of the agency is made, but it needs to be clear that the party is acting as agent in the legal sense: Treitel, Law of Contract at p 727. In Universal Steam Navigation Co v James McKelvie and Co [1923] AC 492 an agent was not held personally liable where they had signed ‘as agent’. The question was what that meant. Lord Sumner (at 501-502) considered that, in the circumstances of the case, the words could only mean: ‘I am not liable but someone else is and he only’. On the other hand the words ‘This vessel was chartered on behalf of …… for account of …’ was not held to mean that the parties intended the agent not to be liable as charterer: Tudor Marine Ltd v Tradax Export S.A. (The Virgo) [1976] 2 Lloyd’s Rep 135.
In the present case there was no qualification made by Dartbrook as to the capacity in which it contracted. The knowledge of a third party of the existence of the principal is not sufficient to excuse an agent from liability: Stanley YeungKai Yung v Hong Kong and Shanghai Banking Corporation [1981] AC 787 at 795. To do otherwise would permit oral evidence to contradict the written agreement: Basma v Weekes [1950] AC 441 at 451. In the present case there is nothing to suggest that the parties intended that Dartbrook not be liable as charterer. Even if one were to have regard to Hyundai MM’s state of knowledge, it could not be assumed that it understood Dartbrook was not intended to have that liability. It merely knew that it was acting for the joint venture in connexion with its sale.
DARTBROOK’S INDEMNITY
Marubeni and Ssangyong however deny that Dartbrook is entitled to be indemnified as agent. The grounds for this have now reduced to one, wilful misconduct. Clause 12.2 of the sales representative agreement excludes an indemnity where there has been such misconduct. ‘Wilful misconduct’ is defined, for the purpose of the clause, as ‘any act or omission (including a negligent act or omission) done or omitted with deliberate or reckless disregard for pursuable or harmful consequences’. The allegation however depends upon the conduct of Ms Tan in agreeing to the charterparty on 29 March 2004, at a time where there was no sales contract with National Power. Insofar as the denial of an indemnity requires knowledge, it was Ms Tan’s belief that she had concluded an agreement with National Power on 26 March 2004. Even if the agreement did not come into effect until National Power’s confirmation of 29 March, there is no evidence that it came into effect on that day but after the charterparty was agreed upon. The argument for Marubeni and Ssangyong does not rely upon fine timing. The evidence would not permit such a finding in any event. Rather their case was put upon the basis that no binding agreement was ever reached with National Power. I have found to the contrary. Dartbrook is entitled to be indemnified in accordance with cl 12.1 of the sales representative agreement. That indemnity extends to costs.
CLAIMS AGAINST ANGLO COAL
There is no dispute between the three joint venturers that the joint venture agreement governs the extent of the indemnity and contribution each should provide to the other in the event that they are held liable to Hyundai MM. Marubeni and Ssangyong however seek an indemnity and contribution or damages from Anglo Coal. It is alleged that it knew or can be taken to have known, of Dartbrook’s actions because of the control it had over that company. It therefore knew when Dartbrook intended to commit to a binding charterparty with no corresponding sales contract. It was obliged to inform the other joint venturers and a failure to do so amounted to misleading and deceptive conduct, it is alleged. The findings made with respect to the contract being concluded with National Power remove any factual basis for this allegation.
JUDGMENT, INTEREST AND COSTS
There will be judgment for Hyundai MM against all defendants in the sum of US$495 988.48. Hyundai also foreshadowed a claim for interest at the rates provided by the Rules of Court. It was not clear whether this was intended to refer to a pre-judgment claim for interest. I will give liberty to apply within seven days for that purpose. Hyundai should also have its costs including reserved costs. The question is which defendants should bear them.
Costs were reserved on 3 May 2005 by Spender J when the second set of trial dates was vacated because Dartbrook had decided to join the joint venturers to the proceedings. It could have done so at an earlier point and I do not understand it to dispute that, as between it and Hyundai MM, it should pay the costs thrown away.
Dartbrook however is entitled to an indemnity for costs generally. I do not see why the indemnity would not apply to the reserved costs and no defendant has suggested that they do not. Marubeni and Ssangyong submit that they should be liable for costs only after their joinder. That would be the usual course, but in any event Dartbrook is entitled to be indemnified with respect to the costs it incurred by being sued on the charterparty.
In relation to Hyundai MM’s costs, there will be orders that Dartbrook pay Hyundai MM’s costs up to and including the date of the joinder of the other defendants and the costs reserved on 3 May 2005. All defendants will be ordered to pay Hyundai MM’s costs thereafter.
On the first cross-claim there will be an order that the other three defendants indemnify Dartbrook with respect to its liability to Hyundai MM for damages and costs and an order that they pay Dartbrook’s costs of defending the proceedings. Marubeni and Ssangyong should pay Dartbrook’s costs of the claim against them.
On the second cross-claim, there will be an order that Anglo Coal, Marubeni and Ssangyong indemnify each other and contribute to the judgment sum in the proportions of 77.5 per cent, 15.5 per cent and 7 per cent respectively. Marubeni and Ssangyong will pay Anglo Coal’s costs on the cross-claim.
There will be orders dismissing the third cross-claim by Marubeni and Ssangyong against Dartbrook and Anglo Coal and that they pay Dartbrook and Anglo Coal’s costs on that cross-claim.
There will be liberty to apply which respect to any matter required to be dealt with by order in accordance with these reasons.
I certify that the preceding one hundred and sixteen (116) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel.
Associate:
Dated: 11 OCTOBER 2006
Counsel for the Plaintiff:
Mr J Sexton SC
Solicitor for the Plaintiff:
Thynne and McCartney
Counsel for the First & Third Defendant:
Mr K Fleming QC
Solicitor for the First & Third Defendant:
Blake Dawson Waldron
Counsel for the Second & Fourth Defendant:
Mr M Speakman QC
Solicitor for the Second & Fourth Defendant:
Dibbs Abbot Stillman
Date of Hearing:
6, 7, 8, 9, 12 and 13 December 2005
Date of Judgment:
11 October 2006
Hyundai Merchant Marine Co Ltd v Dartbrook Coal (Sales) Pty Ltd [2006] FCA 1324
West End Landco Pty Ltd v Medina Property Services Pty Ltd [2025] VSC 544
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