Orica Australia Pty Ltd v Limit (No. 2) Ltd
[2011] VSC 65
•8 March 2011
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
ADMIRALTY LIST
No. 8028 of 2006
| ORICA AUSTRALIA PTY LTD | Plaintiff |
| v | |
| LIMIT (NO. 2) LTD | Defendant |
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JUDGE: | Pagone J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 31 January, 1-3, 7 February 2011 | |
DATE OF JUDGMENT: | 8 March 2011 | |
CASE MAY BE CITED AS: | Orica Australia Pty Ltd v Limit (No. 2) Ltd | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 65 | |
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INSURANCE – Maritime – Entitlement to indemnity for compensation paid to third party – Whether the word “include” was used in the policy to add or elaborate upon a preceding paragraph or to “mean and include” so as to identify exhaustively the coverage – Mitigation of loss – Extent to which the insured can act in its own commercial interests – Affirmative case needed to establish what would have occurred in alternative circumstances – Need to establish currency of loss by evidence.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Thompson SC with Dr C Parkinson | Clayton Utz Lawyers |
| For the Defendant | Mr G Nell SC with Mr H Austin | HWL Ebsworth Lawyers |
HIS HONOUR:
Orica Australia Pty Ltd (“Orica”) claims from Limit (No. 2) Limited (“the underwriter”) under a contract of insurance for losses and expenses incurred from an incident occurring in North America in late 2004 involving M.V. Poolgracht (“the vessel”) chartered from Spliethoff Transport BV as agent for the owner of the vessel (“the owner”). The charter had been to ship a cargo of bagged ammonium nitrate from Three Rivers Quebec, Canada to Port Alma in Australia. The cargo shifted during the voyage causing the vessel to list which required the vessel to deviate from its planned course. The vessel made port at Davisville, Rhode Island in the United States of America where the cargo was substantially re-stowed and continued on its voyage. The owner of the vessel claimed compensation from Orica for costs associated with the incident and was paid US $2,422,228.20. Orica claimed upon its insurance indemnity under the contract of insurance in respect of the compensation Orica had paid to the owner of the vessel. $782,723.34 was paid by the underwriter to Orica in respect of its claim prior to the commencement of the proceedings. The underwriter, however, disputes any further obligation under the contract of insurance and also maintained an affirmative defence which was described either as a failure by Orica to mitigate its loss or a failure by Orica to establish that the disputed amounts claimed were causally related to the insured incident.
Orica’s liability to the owner of the vessel for losses suffered
Orica must establish that it is liable to the owner for it to claim against the underwriter. The underwriter does not press an argument that Orica was not liable to the owner for the manner in which the cargo was stowed and accepts that it had a prima facie liability to the owner of the vessel under clause 5(a) of the charterparty in respect of the negligent stowage of the cargo on the vessel. Clause 5(a) of the charterparty required the cargo to be put into the holds, loaded, stowed and taken from the holds and discharged “by the Charterer; free of any risk, liability and expense whatsoever to the Owners”. The clause also required Orica to provide and lay all dunnage material as required “for the proper stowage and protection of the cargo on board” and was made responsible for, and to pay, the cost of removing their dunnage after discharge of the cargo under the charterparty.
Orica purchased from a related company, Orica Canada Inc, approximately 6,500,000 metric tonnes of bagged ammonium nitrate on FOB terms. That meant that the title and risk in the cargo passed to Orica as the cargo passed the rail of the carrying vessel. Between 10 and 17 December 2004 stevedores loaded, stowed and lashed the bagged ammonium nitrate in the lower hold and tween deck of the vessel. The ammonium nitrate was contained in 5,725 flexible intermediate bulk containers of which 4,971 were filled to a weight of 1,200 kilograms and 754 were filled to a weight of 900 kilograms. The total weight of the loaded cargo was 6,468,793 metric tonnes. The cargo was loaded and stowed by stevedores retained by Orica Canada Inc.
It is common ground that the cargo shifted within the vessel during the voyage causing the vessel to list to port by 25-30 degrees when steaming in heavy weather in the North Atlantic Ocean. The underwriter admitted that the flexible intermediate bulk containers were lashed and secured in a manner that was inadequate to prevent them from shifting within the vessel at sea. It also admitted that pursuant to the terms of clause 5(a) of the charterparty Orica was liable as between itself and the owner for the manner in which the cargo was loaded onto and stowed on the vessel by the stevedores. The issue between the parties to this proceeding is, therefore, the extent (if any) that the underwriter is liable to Orica under the terms of the contract of insurance.
Orica’s entitlement to insured indemnity
The source of any entitlement by Orica for indemnity from the underwriter arises from an insurance slip for charterer’s liability for the period 30 September 2004 – 30 September 2005. The slip described the interest covered as marine insurance world wide arising from Orica’s activities including as charterers of vessels but excluding bareboat or demise charterers. The conditions of insurance provide that the insurance is to indemnify Orica for events arising out of its activities as charterer. Relevantly, the conditions provide:
This policy is to pay such sum or sums as may be necessary, required or deemed appropriate in the settlement of amounts of Compensation to third parties following an accident or occurrence involving a vessel chartered by the Insured for the carriage of a cargo owned by or consigned to or sold by the Insured or in which the Insured has any interest whatsoever.
For the purpose of this policy the Compensation referred to in the immediately preceding paragraph shall include:
(1)In consideration of the premium charged, Underwriters agree to indemnify the Insured in respect of:
(a)their legal and/or contractual liabilities to third parties, owners and/or disponent owners of the Chartered Vessel(s), which are covered by; the United Kingdom Mutual Assurance Association (Bermuda) Ltd. standard form of certificate and/or under their club rules for charterers’ risks published and in effect at the inception of this insurance, but subject always to the limit of this insurance and further; Underwriters retain all rights reserved by such Association in the said certificate and/or their club rules;
[…]
(c)their legal and/or contractual liabilities for physical loss of or physical damage to the Chartered Vessel, including demurrage payments as specified in the charter party arising out of detention or loss of use of the Chartered Vessel and as a consequence of physical loss or physical damage to such Chartered Vessel.
[…]
(2)It is further agreed to reimburse the Insured for an amount not exceeding AUD 10,000,000 in respect of payments made by the Insured in the nature of social, moral or sympathy payments, or where the commercial interest of the Insured depend upon such payments being made, all following an accident or occurrence causing claims under (1) above.
[…]
Orica’s principal contention is that its claim against the underwriter comes within the first paragraph of the terms quoted above without any need to consider the impact or effect of the operative parts in (1) or (2) coming after the word “include” in the second paragraph. The underwriter contended, however, that the coverage provided by the first paragraph is limited to the terms and circumstances in sub-clauses (1) and (2) following the word “include” in the second paragraph or, alternatively, that the terms of the first paragraph do not provide independent coverage beyond the coverage provided by the words after the word “include” in the second paragraph. Orica’s alternative position in response is that its claims may properly be made under sub-clauses (1)(a) or (c).
The principal field of dispute between the parties, therefore, turns upon the proper construction of the clause set out above and, in particular, upon the effect of the word “include” in the second paragraph. In Dilworth v The Commissioner of Stamps[1] Lord Watson said that the word “include” may sometimes be used to enlarge the meaning of words or phrases occurring in the body of a statute but that it may also be susceptible of another construction, namely, as equivalent to “mean and include” and in that case that the word include “may afford an exhaustive explanation of the meaning which” must be attached to the words or expression.[2] In that case the Privy Council did not need to consider which of the senses of the word “include” had been used by the relevant section of an enactment.
[1][1899] AC 99.
[2]Ibid 105-6. The principle enunciated in Dilworth has been approved in Australia where the context has required: see, Batchelor & Co Pty Ltd v Websdale [1963] SR (NSW) 49, 52-3 (Sugerman J); YZ Finance Co Pty Ltd v Cummings (1964) 109 CLR 395, 398-9 (McTiernan J); Giles v Woodward [1985] 2 Qd R 91,94 (McPherson J).
The text which falls to be construed in this case is an insurance policy. The words used in the policy are to be given their ordinary meaning unless there is reason to do otherwise, and given a business like interpretation.[3] Counsel were not able to find any case in which the ambit of coverage of an insurance clause had been construed by reference to the impact of the word “include” in the manner contended on behalf of the underwriter. I can see no reason to construe the word “include” in this policy as being used in the sense of “mean and include” so as to identify exhaustively the ambit of coverage provided by the policy. There is nothing in the terms of the policy indicating that the coverage in clauses (1) and (2) of the second paragraph was intended to cover the whole of the broader category described in the preceding paragraph or in any way to limit that coverage. The preceding paragraph states in clear terms that the policy is to pay the sums “as may be necessary, required or deemed appropriate in the settlement of amounts” of compensation to third parties following an accident or occurrence. The words used in the first paragraph are descriptive of coverage. An intention to limit the extent of coverage to the terms and circumstances identified in sub-clauses (1) and (2) of the second paragraph could have been achieved, if that had been intended, by a number of drafting devices such as the continuation of the first paragraph with the word “being” or “namely” or “meaning” followed immediately by sub-clauses (1) and (2) of the second paragraph. The words used in the second paragraph preceding sub-clauses (1) and (2) also suggest that the word “include” was being used in the sense of adding, removing doubt or elaborating upon the preceding paragraph rather than to govern the coverage described in the first paragraph. It does so by stating that what was referred to in the previous paragraph was to “include” the matters set out in the sub-clauses which followed rather than to “mean” them exhaustively. The choice of the word “include” rather than “mean” in the context of a clause referring back to an earlier description should not be assumed to have been intended to carry a meaning other than the usual meaning. The words immediately preceding sub-clauses (1) and (2) could easily have provided that what had been provided for in the first paragraph would “include and mean” that which followed in sub-clauses (1) and (2) if the parties had intended to limit insurance coverage in the way the underwriter contended. In the context of an insurance contract to be read and acted upon by insured and insurer, and to be given a business like interpretation,[4] I consider it more likely that the word “include” was used in its usual meaning rather than the meaning urged upon me on behalf of the underwriter. A different conclusion might have been appropriate if it had been shown that the word “include” had come to have the meaning urged by the underwriter but, that construction seems to have no previous application amongst the decided cases identified or relied upon by the litigants in this dispute.
[3]McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579, [22] (Gaudron J).
[4] QBE Insurance Ltd v Nguyen (2008) 100 SASR 560, [14] (Doyle CJ); McCann v Switzerland Insurance
Australia Ltd (2000) 203 CLR 579, 589 (Gleeson CJ).
One contention relied upon by the underwriter in support of its construction was that the contrary construction relied upon by Orica was said to make the terms in sub-clause (2) unnecessary. Sub-clause (2) imposes a maximum reimbursement of $10,000,000 in respect of payments “in the nature of social, moral or sympathy payments, or where the commercial interest of the Insured depend upon such payments being made”. The argument for the underwriter was that the specific limitation of $10,000,000 for payments under sub-clause (2) would be of no effect if an entitlement for payments falling within that exemption also fell within the first paragraph quoted above where the $10,000,000 limitation is not found. I do not accept this construction or that the relationship between the two provisions is as the underwriter contended. The operative terms of the first paragraph identify the obligation as being to pay sums “necessary, required or deemed appropriate in the settlement of amounts” of compensation to third parties. This requires that the payment be in the “settlement” of amounts whilst the payments identified in sub-clause (2) are wholly unlinked to an obligation to pay in the context of a “settlement”. On the contrary, it is clear that the payments contemplated by sub-clause (2) are amounts in respect of which there is no obligation to pay but are paid by the insured ex gratia. They are described as being in the nature of social, moral or sympathy payments rather than “in the settlement” of compensation.
Orica led evidence of losses and expenses incurred as against the owner amounting to US $2,422,228.10. US $656,336 was incurred for berthing costs between 20 January and 22 February. US $2,800 was paid for tarpaulins used in relation to the need to stow and re-stow the ammonium nitrate. US $57,824 was paid for advance DA costs including the costs associated with the berthing and un-berthing of the vessel such as the need for pilotage, immigration and customs inspections and controls. US $802,816.88 was paid for detention costs at a daily rate of US $12,500. US $22,708.75 was paid for National Cargo Bureau inspections which were conducted to obtain approval from the United States Coast Guard for the vessel to depart the port of Providence. US $12,631 was paid for staff costs itemised in various invoices for the expenses of Mr Fokkens and crew needed to conduct works in connection with the consequences of the incident. US $865,112.71 was paid by way of stevedoring costs as a result of the vessel berthing in Providence. These expenses plainly related to the need to unload and reload the cargo as a result of the incident. Orica accepts that it has received payment on 22 June 2006 of US $782,723.34 leaving a balance owing of US $1,639,504.90. The individual amounts total to $2,420,229.20 being $1998.9 less than the amount claimed. The difference may be explained as errors in rounding up but does not appear to be in dispute.
The conclusion I have reached in respect of the first paragraph in the clause makes it unnecessary for me to consider whether the claims might otherwise come within sub-clauses (1)(a) or (c) as Orica maintained in the alternative. However, it may be desirable that I express my conclusions in general terms about the submissions concerning those clauses.
Orica’s reliance upon clause (1)(a) brings into operation for the purposes of the slip the liabilities covered by the United Kingdom Mutual Assurance Association (Bermuda) Ltd club rules for charterers’ risk published and in effect at the inception of the insurance. Clause (1)(a) does not purport to qualify or limit the operative clause of any part of the insurance slip by incorporating the club rules or otherwise. The exclusions and conditions contained in the club rules, therefore, only apply to rights arising under them and not to those arising by any other operative provision within the insurance slip.
Rule 2 section 17A of the club rules confer liability upon Orica under clause 5(a) of the charterparty. The underwriter, however, contended that its liability under rule 2 section 17A did not extend to that component of Orica’s claim referable to vessel detention because any payment had to be made with the consent of the underwriter.
Rule 2 of the club rules sets out the general provisions to apply to the risks covered by the association as set out in sections 1 to 26 of rule 2. The definition of owner includes the charterer which, for present purposes, means Orica. The risk covered by section 17 concerns cargo liabilities including the liability for a failure properly “to load, handle, stow, carry, keep, care for, discharge or deliver the cargo or out of unseaworthiness or unfitness” of the ship. That liability would apply to the event in this case, however the liability is expressly limited by rule 5 G(viii) which provides:
Claims by or against the Owner relating to demurrage on, detention of or delay to an entered ship unless such demurrage, detention or delay forms part of a claim recoverable from the Owner for liabilities in respect of cargo within the scope of these rules or is, within the consent of the Managers, included in the settlement of such a claim. [emphasis added]
The underwriter contended that this exclusion was engaged because any liability in Orica would require something comparable to “the consent of the managers” and there was no comparable consent for the payment of detention. For these purposes the consent of the managers may relevantly be accepted to mean consent by the underwriter as the consent that would be comparable to, or correspond with, that of the managers upon the application of the club rules in circumstances where Orica (the charterer) was treated as the owner within the terms of the club rules.
It is sufficient for me to dispose of this argument to note that the requirement for consent arises under the exclusion only after the use of the disjunctive “or”, and that any claim by Orica under the rules would fall within the words preceding the word “or”, namely “such demurrage, detention or delay” which formed “part of a claim recoverable from” Orica for liabilities in respect of cargo within the scope of the rules. The underwriter further contended that even so the amounts were not payable because the money paid by Orica was not “found to be recoverable”. The exclusion is not engaged if the amounts are recoverable from the owner. In this case that means that the exclusion in rule 5 section G is not engaged if Orica was obliged to make the payments. That liability under the rules relevantly arose by operation of rule 2 section 17A and, therefore, it follows that the exclusion was not engaged.
Orica’s alternative claim under clause 1(c) is another matter. In this respect Orica would need to establish a liability for physical loss of or physical damage to the chartered vessel. There have been cases which have held that damage may be found from loss that did not amount to physical change or injury to the fabric of a vessel,[5] however this policy expressly requires the damage to be “physical” damage. No such damage occurred in this case. The evidence was that however difficult it may have been for the ship to continue with the cargo inappropriately stowed, no physical damage had occurred to the ship and that the ship was able to continue to sail immediately when the cargo was re-stowed. However widely one might read the meaning and ambit of the word “for”[6] as used in clause 1(c) in identifying the requisite link between liability and loss or damage, such damage as there was, was not physical damage to the vessel as expressly required by the policy.
[5]The Field Steamship Company Ltd v Burr [1899] 1 QB 579; see, Ranicar v Frigmobile Pty Ltd [1983] Tas R 113, 116 (Green CJ); Switzerland Insurance Australia Ltd v Dundean Distributors Pty Ltd [1998] 4 VR 692, 704 (Ormiston JA); Plovidba v Transco Overseas Ltd (“The Orjula”) [1995] 2 Lloyd’s Rep 395, 399 (Mance J); Transfield Constructions Pty Ltd v GIO Australia Holdings Pty Ltd (1996) 9 ANZ Insurance Cases 61-336, 76,715 (Meagher JA with Clarke and Sheller JJA agreeing).
[6]Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd (2006) 14 ANZ Insurance Cases 61-715, 75,769 (Spigelman CJ with Beazley and Hodgson JJA agreeing).
Orica’s failure to accept settlement offer
The next issue to consider was variously put as either a failure to mitigate loss or as a failure to establish that the loss was caused by the insurable event. The difference between the two competing ways in which the claim was put can be significant. The parties, however, treated the two as essentially the same and Orica made no point about the underwriter not having adequately pleaded the issue as one about causation.
The factual foundation of the underwriter’s claim was that Orica’s liability to the owner, at least to some extent, would not have arisen had an offer made by the owner on 15 January 2005 been accepted by Orica. The vessel berthed at Davisville Rhode Island on 29 December 2004. It had sailed from Canada on 17 December 2004 and had been ordered to anchor by the United States Coast Guard on 21 December 2004 after the incident causing the vessel to list to port was reported to the United States Coast Guard. On 22 December 2004 the vessel proceeded to Jamestown Anchorages following survey of the vessel. On 23 December 2004 the United States Coast Guard ordered the owner to retain the vessel at anchor at Jamestown until a cargo offload and re-stowage plan with supporting calculations was provided by the owner. On 28 December 2004 the United States Coast Guard gave permission to the master and owner to berth the vessel at Davisville. The vessel could not sail as from that date unless the cargo was discharged or the problem of its stowage had been corrected.
The problem was not solved immediately and after some time the owner sought to put some pressure upon Orica to find a quick solution. On 15 January 2005 the owner wrote to Orica with a suggested solution to the problem. The solution included what may be accepted for present purposes to have been an offer (a) that the remaining cargo on board the vessel be discharged at Providence in the United States, (b) for Orica to take delivery of all of the cargo at Providence as a substituted port of discharge, (c) that Orica would take full responsibility for the cargo at Providence and deal with the US Coast Guard and all other local authorities, (d) that Orica would pay all costs incurred by the owner at Providence and all future costs following discharge of the cargo, and (e) that the owner would waive their detention claim against the plaintiff under the charterparty for the detention of the vessel from 22 December 2004 to 22 January 2005 (then assessed for 31 days at US $387,500.00), and that the owner would retain the freight earned upon the shipment of the cargo. The offer was not accepted and there may be some doubt about whether it was ever capable of practical acceptance. Mr Fokkens, an employee of the owner and a person actually involved in the relevant events in early 2005 gave evidence about the “offer” and a subsequent repetition of the “offer” as having been made more to put pressure on Orica to resolve the problem quickly rather than in any realistic contemplation of its acceptance. In any event, the underwriter contended that the offer ought to have been accepted and that the failure to accept the offer resulted in Orica incurring more liabilities than it would have incurred had the offer been accepted at the time.
Whether the point is put as a failure to mitigate loss or as a question of causation, Orica’s obligation to the underwriter did not require it to sacrifice its commercial interest in favour of the insurer. In City Tailors Ltd v Evans[7] the Court of Appeal considered an insurance policy which contained a clause expressly requiring the assured to mitigate loss.[8] Bankes LJ said:
[7][1922] 91 LJKB 379.
[8]Ibid 380.
I do not think that the condition can be read as imposing an obligation upon the assured in the event of a fire to continue their business in fresh premises in order to reduce the underwriters’ loss.[9]
[9]Ibid 382.
Atkin LJ said:
The clause clearly compels the plaintiffs to do what they can to diminish the loss at Old Street by reducing so far as possible the effect of the fire there and producing as much output there after the fire as is reasonably necessary … But I do not think that it involves them in the obligation to take any steps to carry on the business elsewhere … I can see no such obligation in the words.[10]
[10]Ibid 387.
In AFG Insurances Ltd v Mayor, Councillors and Citizens of the City of Brighton[11] Mason J said (with whom McTiernan and Menzies JJ agreed):
[11](1972) 126 CLR 655.
To say, as it has been said, that the insured should take reasonable steps to extinguish the fire, to allow firemen access to the fire, to remove his property to a place of safety and (in the case of an insurance against loss of profits) to keep up his output is to say no more than that the insured should take those practical and reasonable steps as a matter of self-help which his own self-interest would dictate. It is quite another thing to say that after the fire has taken place and caused loss the insured should exercise a legal right in circumstances where its exercise will work a radical change in the nature of the property of which the insured is lessee and will diminish the value which the right would otherwise have for him. The consequence to the respondent would be to make it the lessee of unimproved land for the balance of the lease and to leave it liable on the covenant to pay rent. Plainly it would be to the advantage of the respondent to obtain the insurance moneys and rebuild the premises. The respondent would in that event be restored to his enjoyment of a lease of premises with the same improvements as before the fire. The right of removal attaching, as it would, to the entire building, would, if exercised, have a greater value than the right if exercised in relation to the charred remains of the existing structure.
When regard is had to these circumstances it cannot be said that the respondent was under a duty to the appellant to exercise the right conferred by cl. 3 (e) of the lease. To so hold would be to compel the respondent to pursue a course which was disadvantageous to it and which would work a detriment to it.
Although an insured person is in general not entitled to recover more than an indemnity under a policy of fire insurance, he is entitled to recover a full indemnity.[12]
In Noble Resources Ltd v Greenwood (“The Vasso”)[13] Hobhouse J said of an obligation to minimise or avoid a loss:
On the correct construction of the clause more has to be shown than merely that some step was not taken. Underwriters have to show that the step was a proper one which a reasonable assured, having regard to the interests of himself and the insurers and to the provisions of the policy, should have taken.[14]
It follows from these passages that assuming an obligation to mitigate (or assuming a question about whether the loss may be said to be considered proximate),[15] an insured facing an incident is entitled to have regards to his, her or its own interests at least to some extent. To lose the protection of the coverage the insurer needs to show that the indemnity sought by the insured flows from something other than the incident. An insurer will not be denied indemnity unless the proximate cause of the loss was “not the peril insured against, but the failure of the insured to take reasonable steps to protect it”.[16] For the insurer to maintain that the claim is not within the policy it must make an affirmative case that causally links what is sought against the insurer with something beyond the insured event sufficient to break the link between loss and insured event. That has not been achieved by the underwriter in this case.
[12]Ibid 662-3.
[13][1993] 2 Lloyd’s Rep 309.
[14]Ibid 313.
[15]State of Netherlands v Youell [1998] 1 Lloyd’s Rep 236, 244 (Phillips LJ).
[16]Allison Pty Ltd v Lumley General Insurance Ltd (2006) 200 FLR 394, 434 (Heenan J).
The fundamental requirement for acceptance of the offer of 15 January 2005 was the complete discharge of the vessel. The evidence was that this option was simply not available. The evidence of Mr Fokkens was that the person with relevant authority in the United States (Captain Landry of the United States Coast Guard) had informed him in no uncertain terms that a complete discharge of the cargo at Davisville would not be permitted. The evidence of the decision makers at Orica and, of the owner, was that they understood the position of the relevant authorities in the United States, and were firmly of that view, that a complete discharge was not an option. Mr Fokkens was cross-examined extensively about his conversation with Captain Landry and said that the United States Coast Guard did not want any of the cargo on US soil for security and safety reasons, that the position which had been put to him was that they would not allow the whole of the cargo to be discharged and that the ship needed to sail with as much cargo as possible. Mr Fokkens was called to give evidence by Orica but he was not an employee of Orica either at the time of the relevant events or at the time of giving evidence. Mr Devaraj, who was a relevant decision maker at Orica at the time, and who gave evidence on its behalf, was equally clear in his view that the option of a complete discharge of the cargo was simply not open to Orica at the time because of the position taken by the relevant US authorities.
Ammonium nitrate is an explosive material and I have no reason to doubt the evidence that the United States Coast Guard did not want such a large quantity of dangerous explosives to be discharged (in the sense of unloaded) on American soil without a clear plan for its security and forward transportation. The course adopted by Orica was one that was reasonably adapted to provide a solution to the problem that had revealed itself from the inappropriate stowage of the ammonium nitrate on the vessel. The solution adopted enabled as much of the cargo as possible to be re-stowed on the vessel in containers leaving only that minimum part of the cargo on United States soil that could not be re-stowed on containers on the vessel in place and available to continue the journey. Furthermore, the evidence of Mr Devaraj was that the option of a complete discharge of the cargo was one which would have seen Orica incur much greater costs. At one point in his evidence he estimated (without challenge) those additional costs at several million dollars. Furthermore, the underwriter did not provide a reliable affirmative case that lower costs would have been incurred if a complete discharge had been effected through the offer. The highest that its case went was to assert that some costs would not have been incurred had the option of the offer been taken (assuming that it could have been taken) leaving unestablished (beyond that absence) what would have been the case. In other words, no reliable case was made to establish what would have happened upon the hypothesis of the offer having been accepted beyond the self evident assertion that some expenses would not have been incurred.
Some costing was apparently done on behalf of Orica at the time to estimate the comparative costs of a complete discharge of the cargo as compared with a partial re-stow. It is not surprising that such estimates were sought by Orica at the time. The fact was that the vessel could not continue with the cargo as it had been stowed and that the cargo needed to be dealt with somehow. There were in theory three possible options: (a) to re-stow completely the cargo on the vessel, (b) to re-stow part of the cargo on the vessel and deal otherwise with the cargo not re-stowed and (c) to discharge the entire shipment for subsequent transportation. The first option was ruled out as physically not possible with that vessel and that quantity of that cargo. The second option was possible and was the one ultimately adopted. The third option would see Orica’s costs to the owner potentially reduced but would involve Orica in additional costs consequential upon that course being adopted. Amongst those costs was the shut down of a mill in Australia because of Orica’s potential inability to meet orders. Such considerations, particular to the business activities of Orica, were not extraneous to the consequence of the incident but, rather, were a necessary incident flowing from the incident. It is clear that what Orica took into account were factors relevant to, and flowing from, the incident in order to produce the most efficient and cost effective solution. Orica was permitted to take into account reasonable factors in its own interests in finding a solution to the incident which had caused it loss and damage. The steps it took (including the non acceptance of the “offer”) were reasonable. The claims flowed from the insured incident and not from an extraneous event or from an unreasonable step to mitigate its loss from the incident. There is no evidence of Orica sacrificing the interest of the insurer to profit from the insurer. There is no evidence of Orica seeking to use the provisions of the insurance policy to profit for itself from the insurers. Rather, all of the evidence shows a commercial enterprise moulding options to deal expeditiously with the insured event in all the circumstances. In my view all of the costs incurred were causally occasioned by the incident and flowed reasonably from Orica’s attempt to minimize any losses flowing from the incident. The incident was caused by the defective stowage. The solution to that incident was to re-stow part of the cargo in containers as quickly as possible and to deal otherwise with only that part of the cargo that could not be re-stowed.
The only potential evidence suggesting that the United States Coast Guard might have permitted the complete discharge of the cargo was the speculative evidence of Captain Scott who was called on behalf of the underwriter. Captain Scott is a retired officer of the United State Coast Guard whose opinion was sought about whether the United States Coast Guard would have approved a plan to discharge and transport inland in the United States all of the ammonium nitrate cargo as an option to solve the problem of the cargo shifting on the vessel. Captain Scott was not one of the actors or participants in the events at the time. Captain Scott was not informed before giving a written opinion (for the purpose of this proceeding) of the position which Captain Landry had communicated to Mr Fokkens at the time of the event. At best his evidence was that permission to offload all of the cargo was a possibility which, in certain circumstances, the United States Coast Guard might have considered and agreed to. One can readily enough accept that there could well be circumstances in which the United States Coast Guard simply had to accept the possibility of a complete discharge of the cargo from the vessel. The actual facts, however, were that Captain Landry’s oral position as communicated and understood by Orica and the owner was that a complete discharge would not be permitted. On any view the entire cargo had to be dealt with by a solution that went beyond a temporary discharge at Rhode Island for the benefit of the vessel owner. The evidence of Captain Scott does not undermine or detract from the force that those who had to make the decision were told, and believed, that a complete discharge was not amongst the options open to them and that, even if it were, that the consequential expense and losses would be much greater than the course in fact adopted.
Currency of judgment
Orica’s statement of claim sought judgment in US currency. The case was prepared upon that basis and conducted upon that basis. At the conclusion of the evidence Orica claimed an entitlement to an order for judgment in Australian dollars rather than US dollars.
Judgment may be entered in Australian currency where that is appropriate. In Siemens Limited v Schenker International (Australia) Pty Ltd (No 2)[17] Barrett J entered judgment in Australian currency notwithstanding that the relevant transactions were largely in German currency. In that case the plaintiff was an Australian company operating in Australia. It kept its books of account in Australian currency and conducted a large part of its business in Australian currency even though it entered into some German currency transactions.[18]
[17][2001] NSWSC 742.
[18]See also BHPB Freight Pty Ltd v CoscoOceania Chartering Pty Ltd (No 4) (2009) 263 ALR 63.
The guiding principle concerning the currency in which judgment should be entered is that it should be the currency which best reflects the plaintiff’s loss.[19] In the absence of the parties otherwise providing by contract, “the damage should be calculated in the currency in which the loss was felt”[20] or “which most truly expresses [the] loss”.[21] This requires evidence if the matter is in dispute. Counsel for the underwriter resisted the claim for judgment in Australian currency contending that it had been open to Orica to have pleaded its entitlement to damages in Australian currency and that the underwriter would have conducted its case differently had Orica’s case been one for an entitlement to judgment in Australian currency. I accept that submission. Orica carried the burden of proving its loss and the burden of proving that its loss was suffered in Australian currency. The underwriter was entitled to be put on notice of a claim that the loss may have been suffered in a currency other than the currency appearing in the prayer for relief in the statement of claim. It has been deprived of the opportunity to test the evidence and I am not confident that an order in its favour in Australian currency best reflects the currency of its loss. It may be accepted that Orica is a public company in Australia but I have no evidence before me about its general currency dealings or its stock of foreign currency at the time of the incident. This is, therefore, not a case where it can confidently be said that the point sought by Orica to be made (without amendment to the pleadings) was merely a question of law or one in which all of the facts relevant to the question had been established beyond controversy.[22] Accordingly, such order as will be made shall be in United States currency.
[19]Owners of the MV Eleftherotria v Owners of the MV Despina R (‘The Folias’) [1979] AC 685, 697-8, 702 (Wilberforce LJ with Diplock and Salmon LLJ agreeing); Mitsui OSK Lines Ltd v The Ship Mineral Transporter [1983] 2 NSWLR 564, 569 (Yeldham J); BHPB Freight Pty Ltd v CoscoOceania Chartering Pty Ltd (No 4) (2009) 263 ALR 63, 64-5 (Finkelstein J); Attorney General of the Republic of Ghana v Texaco Overseas Tankships Ltd [1994] 1 Lloyd’s Rep 473, 478 (Lord Goff).
[20]Attorney General of the Republic of Ghana v Texaco Overseas Tankships Ltd [1994] 1 Lloyd’s Rep 473, 478 (Lord Goff).
[21]Services Europe Atlantique Sud (SEAS) v Stockholms Rederiaktiebolag Svea (‘The Folias’) [1979] QB 491, 514 (Lord Denning MR); Attorney General of the Republic of Ghana v Texaco Overseas Tankships Ltd [1994] 1 Lloyd’s Rep 473, 477-8 (Lord Goff).
[22]Federal Commissioner of Taxation v Brambles Holdings Ltd (1991) 28 FCR 451, 455 (Sheppard J).
Orders
I propose to make orders in favour of the plaintiff in the terms in which they have been sought in the statement of claim. However, I was informed that the underwriter is sued, in effect, as a representative of a number of underwriters and that its individual liability to Orica is of a particular percentage of the total claim. Accordingly I will hear the parties about the formal terms of the orders and about any question concerning costs.
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