Pacific Composites Pty Ltd v Blue Anchor Line

[1997] FCA 576

CATCHWORDS

PRACTICE AND PROCEDURE - application to amend Statement of Claim to plead additional causes of action - whether amendments give rise to an arguable cause of action - bill of lading altered after issue - allegation of fraud - whether evidence establishes an arguable case of fraud - whether arguable case of recklessness - importance of bill of lading as an instrument of international commerce - whether arguable case of estoppel - defendant cannot be estopped form denying the breach - whether arguable case of negligence.

Federal Court of Australia Act 1976 (Cth), s 22

Federal Court Rules, O 13 r 2(2)

State of Queensland v J L Holdings Pty Ltd (1997) 141 ALR 353, cited

Woodhead Australia (South Australia) Pty Ltd v The Paspalis Group of Companies (1991) 103 FLR 122, cited

Banque Commerciale SA (en liquidation) v Akhil Holdings Ltd (1990) 169 CLR 279, cited

Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563, cited

Hunter Grain Pty Ltd v Hyundai Merchant Marine Co Ltd (1993) 117 ALR 507, cited

Smith v Chadwick (1884) 9 App Cas 187, distinguished

PACIFIC COMPOSITES PTY LIMITED, LERMARNE CORPORATION LIMITED
-v- BLUE ANCHOR LINE, ANL LIMITED & UNITED ARAB SHIPPING CO.

NO NG 377 OF 1996

Tamberlin J
Sydney
30 June 1997

IN THE FEDERAL COURT OF AUSTRALIA )                 
NEW SOUTH WALES DISTRICT REGISTRY )    No. NG 377 of 1996
GENERAL DIVISION                 )
IN ADMIRALTY  )

BETWEEN:          PACIFIC COMPOSITES PTY
  LIMITED
  (ACN 005 952 689)
  First Plaintiff

LERMARNE CORPORATION
  LIMITED
  (ACN 004 834 584)
  Second Plaintiff

AND               BLUE ANCHOR LINE
  First defendant

ANL LIMITED
  (ACN 008 654 206)
  Second Defendant

UNITED ARAB SHIPPING
  COMPANY (S.A.G.)
  Third Defendant

CORAM:       TAMBERLIN J
PLACE:       SYDNEY
DATED:       30 JUNE 1997

MINUTE OF ORDERS

THE COURT ORDERS THAT:

1. Leave is refused to amend the Application and Statement of Claim to plead fraud or estoppel.

1. Leave is granted to amend the Application and Statement of Claim to plead negligence as against the first defendant.

1. The plaintiffs pay the defendants' costs of this application.

NOTE:     Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )    No. NG 377 of 1996  GENERAL DIVISION                  )
IN ADMIRALTY  )

BETWEEN:          PACIFIC COMPOSITES PTY
  LIMITED
  (ACN 005 952 689)
  First Plaintiff

LERMARNE CORPORATION
  LIMITED
  (ACN 004 834 584)
  Second Plaintiff

AND               BLUE ANCHOR LINE
  First defendant

ANL LIMITED
  (ACN 008 654 206)
  Second Defendant

UNITED ARAB SHIPPING
  COMPANY (S.A.G.)
  Third Defendant

CORAM:       TAMBERLIN J
PLACE:       SYDNEY
DATED:       30 JUNE 1997

REASONS FOR JUDGMENT

TAMBERLIN J:

The is an application by the plaintiffs to amend the Application and Statement of Claim to make additional allegations,  grounded in fraud, estoppel and negligent mis-statement, against the first two defendants. The amendments are resisted by the defendants.

The Notice of Motion also sought leave to allege misleading and deceptive conduct in breach of the Trade Practices Act 1974 (Cth) but this amendment was not pressed on the hearing.

The evidence in this matter is virtually complete. The plaintiffs were directed to file all their evidence prior to the hearing of this application on 3 April 1997.

The plaintiffs are holders of a Bill of Lading, dated 19 August 1995 ("the Bill") issued by the first defendant, Blue Anchor Line ("Blue Anchor"). The plaintiffs were consignees of a quantity of resin coated fibres shipped by container. Blue Anchor issued the Bill as a clean bill at Seoul acknowledging receipt of the consignment on board the vessel "Australian Advance" in apparent good order and condition and agreed to carry the consignment from the port of Pusan to Brisbane for delivery in good order and condition. The front page of the Bill indicates that the goods were shipped in a container that did not have refrigeration.

The second defendant, ANL Ltd ("ANL") was the charterer. The third defendant, United Arab Shipping Company, was said to be the owner of the vessel. It did not participate in the hearing of the amendment application.

The consignment was delivered to the plaintiffs in a damaged condition because, it is claimed, it was shipped in a non-refrigerated container.

The amendments sought to the Statement of Claim by the plaintiffs are as follows:

"12.Further and in the alternative, the Defendants or each or one or more of them made the representation that the goods were refrigerated for the period of carriage by sea ("the Representation")

PARTICULARS

The Bill of Lading contained the following statement, "goods are refrigerated for sea shipment".

13.The Representation was false and untrue in that the Consignment was not refrigerated for the period of carriage by sea.

14.The Defendants or each or one or more of them at the time the Representation was made, or caused to be made, knew the Representation to be false and untrue, or made it recklessly not caring whether it was true or false.

15.The Defendants or each or one or more of them made or caused to be made the Representation intending that the Representation would be acted upon by the Plaintiffs or by a class of persons of which the Plaintiffs are included as purchasers of the Consignment.

PARTICULARS

The Defendants or each or one or more of them knew and intended that the Bill of Lading would be relied on by the Plaintiffs to verify that the Consignment had been shipped on terms as required by the contract of sale prior to payment for the Consignment by the Plaintiffs.

16.Further and in the alternative, K N Chunil, as agent of one or more of the Defendants, issued the Bill of Lading containing the Representation.

PARTICULARS

The Plaintiffs rely on the Bill of Lading and paragraphs 2, 3, and 13 of the Statement of Gerd Ramming dated 4 October 1996 in this proceeding.

17.In the premises, the knowledge, Representation and actions of K N Chunil are those of the Defendants or each or one or more of them.

PARTICULARS

The plaintiffs repeat the particulars in Paragraph 16.

18.Further and in the alternative, in making the Representation, each or one or more of the Defendants owed the Plaintiffs:-

a)a duty to take reasonable care that the

b)an obligation not to engage in trade or commerce in conduct which was misleading and or deceptive and or likely to mislead and or deceive, contrary to Section 52 of the Trade Practices Act (1974)(C'th).

PARTICULARS

The obligation referred to in Paragraph 18(b) was owed in circumstances where each or one or more of the Defendants knew that the Bill of Lading would be sent to Australia to the First Plaintiff or to the shipper's order and as a bill of lading would be relied upon as being accurate.

19.In the premises, each or one of more of the Defendants in breach of their duty and or obligation referred to in paragraph 18 hereof:

a)failed to take reasonable or any care that the Representation was accurate;

b)engaged in conduct in trade and commerce which was misleading and/or deceptive and or likely to mislead and or deceive contrary to s.52 of the Trade Practices Act(1974)(Ct'h), in that the Representation was not accurate.

20.In the alternative, the Defendants or each or one or more of them are estopped from denying its breach of the agreement evidenced by the Bill of Lading and are further estopped from denying that it failed to carry out those obligations as stipulated in Paragraph 10 herein, namely to ensure that the holds and other parts of the vessel were safe for the reception, carriage and preservation of the Consignment.

21.By reason of the matters aforesaid, the Plaintiffs have suffered loss of damage.

PARTICULARS

a)Acting on the face of the Representation and in the belief that it was true, the Plaintiffs were induced thereby and completed the contract of sale and paid to Sunkyong Industries Limited by irrevocable letter of credit the price due to it for the Consignment the subject of the Bill of Lading.

b)Resin coated carbon fibre sheet

500 x USG 1253 @ $11.60           US$5,800.00

Resin coated glass fabrics epoxy resin
             200 x GEP224 (black) @ $3.70         7,400.00
             500 x GEP 224 (clear) @ $3.70        1,850.00
             1000 x GEP 224 (white) @ $3.70       3,700.00
             1000 x GEP 213(black) @ $2.60        2,600.00

Subtotal  US$21,350.00

Landed value  US$23,485.00
             Exchange to A$ @0.7358            A$31,917.64

Plus

Air freight costs of obtaining
             replacement goods                  A$6,356.48
             Survey fees  A$296.00

TOTAL  A$38,570.12"

Amendment of pleadings

Applications to amend pleadings are covered by the provisions of O 13 of the Federal Court Rules. Specifically O 13 r 2(2) provides:

"(2) All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding, or of correcting any defect or error in any proceeding, or of avoiding multiplicity of proceedings."

In considering the present application to amend, it is important to bear in mind the observations made in the recent decision of the High Court in the State of Queensland v J L Holdings Pty Ltd (1997) 141 ALR 353. Dawson, Gaudron and McHugh JJ held at 357-358:

"Justice is the paramount consideration in determining an application such as the one in question. Save in so far as costs may be awarded against the party seeking the amendment, such an application is not the occasion for the punishment of a party for its mistake or for its delay in making the application. Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence..."

It is clear from this decision that courts should not be reluctant to grant leave to amend pleadings simply because the party seeking the amendment is late in applying. However it is also clear from the decision, and well settled in principle, that the amendment must give rise to an arguable cause of action or defence: see Woodhead Australia (South Australia) Pty Ltd v The Paspalis Group of Companies (1991) 103 FLR 122 at 128-129.

Plaintiffs' case
The plaintiffs claim entitlement to recover exemplary damages by reason of the conduct and fraud alleged on the part of the first two defendants.

The evidence in support of the additional grounds is said to be found in the Statement of Mr Gerd Ramming, filed on behalf of the first defendant and Blue Anchor, dated 4 October 1996. Mr Ramming is the manager of KN Chunil Shipping Company Ltd, Seoul ("KN Chunil"), the general agent in South Korea for Blue Anchor.

The paragraphs relied on by the plaintiff read as follows:

"12On 16 August 1995 Korea Australia Searoad Service issued a bill of lading for the consignment and the bill of lading was collected on the same day by K N Chunil. Annexed hereto and marked with the letter "E" is a true copy of the Korea Australia Searoad Service bill of lading.

13On 19 August 1995 K N Chunil of behalf of Blue Anchor Line issued a bill of lading for the consignment. A true copy of the Blue Anchor Line bill of lading issued on 19 August 1995 cannot be located.

14On 24 August 1995 a person (whose identity I have not been able to ascertain after exhaustive enquiries) who presented himself or herself as a representative of Sunkyong Industries Ltd, attended at the office of K N Chunil in Seoul, Korea for the purpose of collecting the Blue Anchor Line bill of lading issued on 19 August 1995. This is normal procedure. The person then told Ms T J Yang of K N Chunil that details were missing on the Blue Anchor Line bill of lading and requested her to insert the following words on it:

'Goods are refrigerated (for sea shipment)'.

15Although the ship had departed, Ms Yang inserted the words 'Goods are refrigerated (for sea shipment)' on the rider to the Blue Anchor Line bill of lading without referring the request to a more senior person than herself at K N Chunil.

16Ms Yang then handed the amended Blue Anchor Line bill of lading to the person. ..."

The plaintiffs submit that the conduct referred to in the above paragraphs of the Statement of Mr Ramming demonstrates a course of deliberately dishonest conduct on the part of Blue Anchor. The submission is that this conduct evidences a complete disregard for the status of a bill of lading as "a document of dignity" and its importance in international trade and commerce. The plaintiffs assert that KN Chunil acted on behalf of Blue Anchor as agent for the carrier.  The expression "carrier" is defined in clause 1.2 of the Bill as being the person by whom or for whom the Bill of Lading is signed. The plaintiffs say that the pleadings do not assist to identify the carrier. They say that they ought not be prejudiced by their lack of knowledge as to arrangements between Blue Anchor and ANL and that no distinction can be drawn between the two defendants.

It is contended that leave to amend should be granted in order that the real questions between the parties can be tried in accordance with the court's statutory obligation imposed by s 22 of the Federal Court of Australia Act 1977 (Cth) and pursuant to O 13 r 2(2) of the Federal Court Rules.

It is said that the defendants will suffer no detriment as a result of the proposed amendments. Furthermore, it is submitted that the conduct giving rise to the amendment is conduct of the defendants which was outside the knowledge of the plaintiffs until revealed to them in the statement of Mr Ramming. It is said that there is no unfairness because Blue Anchor has addressed, in evidence, the issues arising from the proposed amendments and that Blue Anchor was advised of the proposed amendments on 28 November 1996. The proposed Amended Statement of Claim was served on the solicitors less than two weeks after that date. The plaintiffs say they acted promptly once the conduct was disclosed and thereby eliminated potential prejudice to the defendants.

Defendants' case
In general terms the submissions made for Blue Anchor are as follows:

1. The amendment has been sought at a late stage and should therefore not be allowed.

1. Fraud is a serious allegation. It must be pleaded with specificity. The pleading amendment sought is too vague.

1. There is no evidence to support an allegation of fraudulent conduct and indeed the case appears to be based on recklessness. There is no arguable case of recklessness.

1. The reference to the goods "being refrigerated (for sea shipment)" is ambiguous and ambiguous statements cannot amount to fraud provided that the interpretation adopted is open.

1. The evidence indicates there was no reliance.

1. The estoppel amendment does not raise a defence. There is no legal principle that there can be an estoppel against denying a breach as opposed to denying a fact.

These submissions are supported by Counsel for the second defendant, ANL. In addition, ANL raises further objections based on a lack of nexus between ANL and the plaintiff. ANL submits that neither Blue Anchor nor KN Chunil had authorisation to execute documents or do anything on behalf of ANL. It was in no sense an agent of ANL.

The Evidence
In addition to the evidence from Mr Ramming there is before me a Statement of Song Hey-Yong an export shipping clerk employed by KN Chunil. Ms Song's statement indicates that she was contacted on 9 August 1995 by a Mr Kim of Sunkyong Industries Limited ("Sunkyong") who said that he had a full container load consignment to be sent to Brisbane. Mr Kim was told by Ms Song that the next vessel departing for Brisbane was the "Australian Advance" with an estimated departure date of 13 August. She was then asked by Mr Kim to supply a twenty foot
container to the Sunkyong factory at Ulsa in Korea. He did not request a refrigerated container. There are notes of this conversation. These record discussion in relation to an NOR container. The term NOR is shorthand for "Not on Refrigeration".

Ms Song explained that goods can be shipped in either a normal container or a "reefer" container (refrigerated). A normal container has a volume of 30 cubic metres and is not used for goods to be shipped under refrigeration because it has no equipment installed in it to provide the refrigeration. Goods which are to be shipped on refrigeration are shipped in a reefer container which is a special type of container with a volume of twenty-four cubic metres. It has special equipment installed to provide refrigeration during carriage of the goods being shipped in it. She points out that a reefer container is, on occasions, used to ship goods not on refrigeration and on those occasions the refrigeration equipment in the reefer container is not operated. When such a container is shipped without operation of the refrigeration equipment installed, it was current industry practice to refer to it as a NOR container.

On 9 August 1995 after her conversation with Mr Kim, her employer, KN Chunil, received a fax from Sunkyong confirming the booking and made a request for an NOR container to be placed at the Sunkyong factory on 12 August 1995.

Fraud
In addition to the general principles governing amendment of pleadings there are specific principles applicable to an allegation of fraud. These principles were recently considered by the High Court in Banque Commerciale SA (en liquidation) v Akhil Holdings Ltd (1990) 169 CLR 279 and Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563. The relevant principles may be summarised as:

1. The fraud must be pleaded distinctly and with particularity.

1. It is not enough to prove that the representation was ambiguous. It must also be proved that one of the meanings open on a reasonable interpretation was false to the knowledge of the maker: Smith v Chadwick (1884) 9 App Cas 187.

1. Falsity must be proved.

1. Inducement and reliance are necessary.

In this case the plaintiffs rely on the fact that the Bill was altered or added to after it had been issued. This is said to support the conclusion that there was fraud or recklessness. However, in the present case the allegations in terms do not allege actual fraud and in argument counsel for the plaintiffs relied on recklessness. Ms Muston submitted that to alter a
bill of lading after the departure of the vessel was of itself indicative, at the very least, of reckless conduct.

The plaintiff emphasises the importance of the Bill as an instrument of international commerce. This importance was emphasised by Sheppard J in Hunter Grain Pty Ltd v Hyundai Merchant Marine Co Ltd (1993) 117 ALR 507 at 518:

".... honesty and integrity in relation to the signing of receipts for goods the subject of bills of lading is essential if persons engaged in international trade are to have any confidence in documents which play such a vital role in relation to the authorisation of the payment of money. If receipts are signed dishonestly or in bad faith, the confidence of the international trading community is undermined and a whole system that was designed to work for the benefit and protection of both parties to a transaction such as this will be called into question.

In this respect I refer to Marine Cargo Claims, W Tetley (3rd ed, 1988), where (p 266) reference is made to the decision of Woolsey J in The Carso (Italian Importing Co v Navigazione) (1930) AMC 1743. There Woolsey J referred (at 1758) to a bill of lading being 'a document of dignity'. He added that courts should do everything in their power to preserve its integrity in international trade, 'for there, especially, confidence is of the essence'".

His Honour also referred to the judgment of Wright J in Evans v James Webster & Brother Ltd (1928) 32 Lloyd LR 218 where his Lordship commented on the fact that persons to whom bills of lading are tendered ought to be entitled to take them at face value.

The alteration effected to the Bill in this case was to endorse the Bill, after the date of issue on 19 August 1995, with the note:

"GOODS ARE REFRIGERATED

(FOR SEA SHIPMENT)"

in circumstances where the face of the Bill, as issued, read:

"1 CNT 20FT. N.O.R. Container"

As noted above, the term "N.O.R." is shorthand for "Not on Refrigeration".

The Bill therefore was contradictory on its face. This fact did not escape the attention of Mr Kenneth Smith, the general manager of the plaintiffs. He said that on or about 14 September 1995 he received the Bill together with other documents. He noted that it was issued clean and that the Packing List stated the "Goods are Refrigerated". This statement also appeared in the invoice. He then noted that the documents were inconsistent.

The above alteration was made on 24 August 1995 when the Bill was picked up from the office of KN Chunil by a representative of Sunkyong.

There is no evidence that Ms Yang, the person who amended the Blue Anchor Line Bill, had any fraudulent intent. There may be some possibility of a negligence claim arising on the material but the evidence does not rise to a level capable of
supporting an allegation of fraud. The mere fact of alteration to the Bill after discussion with a representative of Sunkyong is not of itself indicative of fraud. As pointed out by counsel for Blue Anchor, Sunkyong is the shipper nominated in the Bill and might reasonably have been expected by Ms Yang to have known the details of the storage including the type of container.

On the question of ambiguity counsel referred to the decision of the House of Lords in Smith v Chadwick (1884) 9 App Cas 187. That case concerned a statement in a prospectus as to the present value of the turnover or output of an ironworks establishment. In that case Lord Blackburn said at 201:

"... if with intent to lead the plaintiff to act upon it, they put forth a statement which they know may bear two meanings, one of which is false to their knowledge, and thereby the plaintiff putting that meaning on it is misled, I do not think they can escape by saying he ought to have put the other. If they palter with him in a double sense, it may be that they lie like truth; but I think they lie, and it is a fraud."

However, the facts in that case were different to the present. Here, in my view, the plaintiffs, on the evidence, fall short of establishing an arguable case of fraud. The evidence before me considered in its entirety does not provide any basis for an allegation that there was any fraudulent intent or even recklessness. In Chadwick's case there was intent. Moreover, in the present case the additional statement was not ambiguous. It was simply incorrect. However, it did result in the Bill making two contradictory assertions. Nevertheless, that consequence does not mean that there was dishonest intent or recklessness. In my view the evidence does not make out any reasonably arguable case that there was recklessness.

Accordingly, I refuse leave to make the amendments sought in relation to fraud or recklessness against Blue Anchor.

For the sake of completeness I should record that I am satisfied that although not precisely pleaded the Statement of Claim sufficiently alleges inducement, reliance and damage although allegations of inducement and reliance are not spelt out in detail. Were an amendment permitted these matters would need to be properly pleaded.

Further, in relation to inducement and reliance there is some force in the submission that Mr Smith was aware of the discrepancy of the Bill at the time of delivery. However, reliance is really a question of fact which needs to be resolved. I am not satisfied that the awareness of Mr Smith as to the difference necessarily meant that the plaintiffs were not entitled to rely on the representation.

Estoppel
As to estoppel, I agree with the submission for Blue Anchor that in the present circumstances it cannot be estopped from denying the breach as opposed to denying a fact. On the evidence in this matter there is no substance in the claim
based on estoppel and I refuse leave to amend in this respect. It is not arguable.

Negligence
As to the allegation of negligence in relation to the notation subsequently added to the Bill of Lading I consider that leave should be granted to raise this question, but only on the  basis that the matter is pleaded in detail, with precision, and only if full particulars are given as to duty, breach and damage.

I do not accept the argument that the note subsequently added to the Bill after issue did not misrepresent that the goods were shipped in a refrigerated container or under refrigeration. Literally, the words could possibly be construed to indicate that they had arrived at the wharf in a refrigerated state but were not necessarily refrigerated for the voyage. In my opinion, however, the words "Goods are Refrigerated (For Sea Shipment)" clearly conveys the assurance that they were or were to be under refrigeration during the shipment itself and not simply at some prior stage.

ANL
As regards ANL, in addition to the above considerations, I accept the submission of Mr Nell that the evidence does not arguably establish any relevant nexus between ANL and the plaintiffs such as could sustain an allegation of fraud or recklessness. Nor do I consider that there is a sufficient
nexus or proximity to give rise to a duty of care in negligence on the part of ANL. ANL is yet one step further removed than Blue Anchor from the conduct in question. I cannot perceive any arguable basis on which to contend that ANL is responsible for any statements made by Blue Anchor or its agents as to whether the goods were refrigerated for sea shipment or not.

Conclusion
Accordingly, as regards the amendments in relation to Blue Anchor I refuse leave to amend in relation to fraud or estoppel. However, I grant leave to amend in relation to negligence.

In relation to ANL I refuse leave to make any of the amendments.

As regards costs, since the defendants have been substantially successful I consider the plaintiff should pay their costs of this application.

I certify that this and
the preceding seventeen (17)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.

Associate:

Date:  30 June 1997  

Counsel for Plaintiffs:               Ms L Muston  

Solicitor for Plaintiffs:             Conway O'Reilly

Counsel for First Defendant:           Mr P E King
  Mr M Watts

Solicitor for First Defendant:              Corrs Chambers Westgarth

Counsel for Second Defendant:          Mr G J Nell

Solicitor for Second Defendant:             Ebsworth & Ebsworth        

Date of Hearing:  3 April 1997

Date Judgment Delivered:                   30 June 1997