PS Chellaram & Co Limited v China Ocean Shipping Company

[1992] HCATrans 63

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S66 of 1991

B e t w e e n -

P.S. CHELLARAM & CO LIMITED

Appellant

and

CHINA OCEAN SHIPPING COMPANY

First Respondent

FIVE STAR SHIPPING & AGENCY

COMPANY PTY LIMITED

Second Respondent

MASON CJ
BRENNAN J
DEANE J

Chellaram(3) 1 5/3/92

DAWSON J

TOOHEY J
GAUDRON J

MCHUGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 5 MARCH 1992, AT 11.56 AM

Copyright in the High Court of Australia

MR A.W. STREET:  May it please the Court, in this matter I

appear with my learned friend, MR D.D. FARTHING.

(instructed by Sly & Weigall)

MR A.R. ASHBURNER:  May it please the Court, I appear in

this matter for the respondents with my learned

friend, MR G.J. NELL.	(instructed by Norton Smith
& Co)

MASON CJ: Yes, Mr Street.

MR STREET:  If Your Honours please, I seek to hand up an

outline of submissions which I would invite

Your Honours to read at the outset before I develop the ropositions. Your Honours will appreciate

from 1ving seen the appeal book that clause 10/2),

whic is the first ground of appeal, is a matter

whict1 was raised for the first time in the Cou.::-t of

Appeal before Their Honours at that stage following

the second day of hearing.

In neither the judgment of the Chief Justice

nor in the judgment of the President was attention

given to the language within clause 10(2), and in

particular the words that are apparent,

"liabilities under the bill of lading". Nor was

attention given to the nature and object of the

contract, or the fundamental departure from an

essential term that clearly occurred in the present

case.

We say in the first propositions that we have

developed that clearly there was a conversion.	We
say a conversion on its face according to the

natural and ordinary mean~ng of clause 10(2) does
not fall within its scope. So, on a literal

application of the test identified in Darlington

Futures in respect of the natural and ordinary

meaning of the words found in clause 10(2),

"liability in conversion", which we would say is

clearly what arises in the present case, so far as

the releasing of the goods, the intentional act of
release without surrender of the bill of lading

amounting to a conversion, is not within the

natural and ordinary meaning of clause 10(2). That

is the first proposition which we seek to advance

in relation to clause 10(2). We have two further

propositions that we seek to develop - - -

BRENNAN J:  Do we find clause 10(2) in the judgments and in

the documents which are introduced at page 116?

MR STREET:  I was going to take Your Honours in detail to

the judgment shortly .. I was seeking to identify
the nature of the argument, but Your Honour is

quite correct; clause 10(2) can be found at

Chellaram(3) 2 5/3/92

page 235 in the appeal book and it may be

convenient, as we have sought to collect the

relevant clauses together in what we have called "A

summary of facts" to perhaps hand up the summary of facts that sets out the terms and conditions within

the bill. I do not invite Your Honours to read it,

I will seek to take Your Honours to the relevant

portions during the course of the submissions.

BRENNAN J: If I remember correctly, Mr Street, you were

kind enough to favour us with a readable copy of

the bill of lading in the application for special

leave.

MR STREET:	Your Honours, I do have, and I will seek to hand up to Your Honours, what is the best copy we are
able to provide.  Your Honours will recall that the
argument that the reverse side was illegible had
failed before the Court of Appeal as a matter of construction, giving rise to no incorporation at all, but, Your Honours, relevantly clause 10(2) is
set out in the summary of facts that we have sought
to hand up to Your Honours, at page 5. I will take
Relevantly, the bill of lading is a to order bill.
Your Honours, in due course, to the bill of lading. required endorsement and there is evidence that I
will give Your Honours a reference to that it would
have been recognized within the shipping industry
that such an endorsement would be expected. Be
that as it may, at page 5 of the written summary of
the facts, Your Honours will see emphasis given to
the relevant words found in clause 10(2). Those are the words found in clause 10(2) that we say, on
their natural and ordinary meaning, plainly do not
cover a liability in conversion.

We say, in so far as necessary, that it is

made even clearer when one goes to clause 10(3)

where wider language is there found and, again,

Your Honours will see the emphasis we have added to

the wider language found in clause 10(3). Similar

wider language can be found in clause 22(3) and

that appears at page 6 of the written summary of

facts that we have handed up to Your Honours.

So, ou+ primary submission that we seek to

advance is that conversion is not, on the natural

and ordinary meaning of the clause, caught by

clause 10(2). We advance two further submissions

in relation to clause 10(2); the first being, if it
is not within its natural and ordinary meaning,

then there is at least ambiguity and, again, we say

we fall within the second qualification found

within Darlington Futures where ambiguity is to be

construed contra proferentum and we say - - -

Chellaram(3) 3 5/3/92

DAWSON J:  Why is not failure to deliver the goods within

10(2)?

MR STREET: Because, Your Honour, we say that there is a

separate liability which we pleaded as a cause of

action in conversion. Now we say that action in

conversion is not encompassed within the words used when taken together with the difference in language

found elsewhere. So where is says "liabilities

under this Bill of Lading", that, in our respectful submission encompasses acts in the performance of -

or purported performance - of the contract. It

does not encompass acts outside the purported

performance of the contract.

Your Honours, we say either natural ordinary

meaning does not catch conversion. Alternatively

we say it is ambiguous and falls within the contra

proferentum rule. Finally, we say as a third
proposition, having identified the first two, that

this is a case where, as a matter of construction,

modification by implication is necessary to give

effect to the true intention of the parties,

falling within the language that is to be found in

the passages that I will take Your Honours to

shortly as cited in Darlington Futures; in other

words, that in the present case, as the question

similarly was asked by Lord Denning in the Sze Hai

Tong v Rambler Cycle case, would the parties, if

asked the question, have answered that they

intended this clause to encompass the carrier

converting the goods.	The answer must have been,
"Of course not".	The true intention of the parties
could not possibly have encompassed conversion.	We
say necessary modification by implication is the
third proposition that we will seek to develop.

Your Honours, we do seek to draw comfort from

the other language found within the bill, and that

other language we have sought to emphasize in
clause 10(3). Clearly the words "all liability

whatsoever in respect of the goods" have a much	wider compass and scope than the words "of all
liabilities under this Bill of Lading".

The scope of the discharge that is focused

upon in clause 10 ( 2), in our respectful submissio'n,

is of a much narrower compass. If it be, on its

natural and ordinary meaning, not one which catches

conversion, then we say there is no reason why the
Court should strain to give effect to a limitation

clause that does not bear that meaning.

Your Honours, if I can turn very briefly to

the first two propositions that we have identified

in the appellant's propositions. There is perhaps

not much need to labour the significance of the

Chellaram(3) 4 5/3/92

the less in this case there was evidence in

nature and object of the bill of lading, but none

relation to its significance and I simply would

seek to draw very briefly Your Honours' attention

to some of that evidence. For example, at page 42,

a Mr Gill, who is a manager of the Sydney branch of

the Banque Nationale de Paris, obviously of

international origin - and his qualifications are

set out earlier at page 38 - was giving evidence

from about line 1 through to line 20 in respect of

the importance and use of bills of lading.

Your Honours, that importance of a bill of

lading in its use as a document of title and
ability to obtain delivery of the goods was also

the subject of some evidence by a Mr Joseph, who

was a man of considerable experience as an agent

for a shipowner. He was a gentleman from Malaysian

International Shipping Corporation's local agency,
called MISC Agency (Australia) Ltd, that appears at

page 44. At page 45 he had some extensive

experience, as appears about line 10, with Burns

Philp and obviously experience with MISC. At

line 25 he gives some evidence again of the

importance of documents of title recognized,

obviously, within the shipping industry. at the bottom of page 45 the very last question,

Your Honours will also see the recognition within

the shipping industry of the importance of

endorsement, where it is a two order bill. I draw

Your Honours' attention to that in passing.

If I could go then to the face of the bill of lading itself, which Your Honours have had handed

up. It is set out in the appeal book but it is

perhaps more convenient if Your Honours could look

at the enlarged copy. Under the heading "Received
in apparent good order and condition" one finds the

second sentence in that paragraph is of

significance:

One of the Bills of Lading must -

and we emphasize the word' "must" -

be surrendered duly endorsed in exchange for

the goods or delivery order.

Again, irrespective of the nature and object of this contract, here we have identified what we

would say is a matter of fundamental significance

in relation to what is, in essence, a document of

title and to be used as such representing the

goods.

Chellaram(3) 5/3/92

The other matter which perhaps Your Honours have already observed obviously is the reference

under "Consignee To Order", which I have sought to

emphasize already, and Your Honours will see at the

very bottom, although it is probably partially

obscured and I do just draw Your Honours' attention

to it. It says:

(Terms continued on back hereof)

So, Your Honours, what is identified somewhere on

the face is encompassed as being "terms" because

they are continued on the back. We would say that

the significance of the surrender of the bill of

lading is reinforced by the sentence that follows,

namely, "on presentation of this document duly

endorsed" et cetera. The whole nature of the

contract is one which envisages the surrender or

presentation of the bill of lading in order to

obtain delivery of the goods.

What occurred in the present case, as is

clearly manifest from the judgments, is that the

respondents obtained a document, which appears at

page 134 in the appeal book. They obtained, for

their own protection, on 20 June - and the goods

were released, according to the evidence, on

24 June - a letter of indemnity, and what appears, if I can describe it as such, as a personal letter

of indemnity. It is with that comfort that the

respondents released the goods.

Your Honours, in considering the wider

proposition, that is our third proposition, in
respect of the intention of the parties and whether
necessary modification by implication is required -
if the language does not, as we have sought to put,
fall within the first two propositions of natural
ordinary meaning or ambiguity - we say that the

conduct of the parties is relevant and, first of

all, we say most significantly the conduct of the

respondents. That post-contractual conduct is

relevant to intention, we say, is recognized within

White v Australian and New Zealand Theatres Limited

(1943) 67 CLR 266, and has been followed by the .,

majority of the Court of Appeal in New South Wales

in a judgment that I will seek to give Your Honours

reference to. In White v Australian and New

Zealand Theatres, the relevant passages in the judgment of Chief Justice Latham appear at pages

270 to 271; in the judgment of Justice Williams at

280 to 281.

It is the subject of discussion by Greig and

Davis, supporting post-contractual conduct relevant

to construction and intention, at pages 433 to 434

in The Law of Contract, and it is also supported in

Chellaram(3) 6 5/3/92

the third supplement at pages 100 to 101 where they

cite the Court of Appeal's decision in Hide & Skin

Trading v Oceanic Meat Traders, (1990) 20 NSWLR

310.      The relevant passage appears in the judgment

of Justice Priestley at page 328.

BRENNAN J: What is this conduct designed to prove?

MR STREET: Whether, Your Honours, it was within the

intention of the parties that an act of this nature

was encompassed by the bill of lading. What we say

is no clearer - - -

BRENNAN J: Conduct of what nature, misdelivery?

MR STREET: 

No, Your Honour, release of the goods without

surrender of the bill of lading, an intentional act
of releasing the goods amounting to a conversion.

BRENNAN J: Well, which of those, because they do not

necessarily correspond, do they?

MR STREET:  Your Honour, the latter, unquestionably, we

would say, is outside the intention of the parties,

and that qualification is necessary to give effect

to that intention. Namely, it could not have been

the intention that the goods could be converted by
the carrier. What we seek to draw comfort from is
saying, in support of that, look at the conduct of

the respondents, they themselves recognized that by

seeking to obtain a letter of indemnity. Why else

would they obtain a letter of indemnity, one might

ask, but for the very reason that it is recognized
that it will be outside the scope of the bill of

lading. And, Your Honours, the proposition that

delivery - I withdraw that. The proposition that

release without the surrender of the bill of lading

amounts to a conversion is not new. It is the

subject of observation and endorsement in a number

of authorities.

DAWSON J:  I must say, Mr Street, I find some little

difficulty. If what was done was outside the bill

of lading, it meant that the bill of lading

required something to be done and what it required

to be done was under the bill of lading. It was

the failure to do that that gives rise to the

complaint.

MR STREET:  Your Honour, we say what the bill of lading

covers is acts of purported performance. This is

not an act of purported performance under the bill
of lading. This is an act outside, we would say,

the intended or purported performance under the

bill of lading.

Chellaram(3) 5/3/92

DAWSON J: But we are talking of liabilities under the bill

of lading.

MR STREET:	Your Honour, perhaps the way in which it is better expressed is that this was not an authorized
act and was not within the intended mode of
performance of the contract on either basis then that is the language, I think, that one finds again
in Darlington being cited in the judgment of
Chief Justice Barwick and Justice Taylor in Sydney Corporation v West, where it is quoted in
Darlington v Delco, 161 CLR 500, at 510, where it
said:

But in our view it has no application to

negligence in relation to acts done with

respect to a bailor's goods which are neither

authorized nor permitted by the contract.

We would say that in the present case the acts here
are neither authorized nor permitted by the

contract and we say that recognition of what is the

parties' intention - and clearly that is the object

of the exercise of construction, to give effect to

the true intention of the parties - requires one to

take into account not only, as we have sought to

say, the nature of a bill of lading and its

significance in commerce and utility as such,

depending upon its ability to represent the goods,

but also on the terms of the bill itself in the

present case, on the face that we have taken

Your Honours to. We go further and say, "Take into

account also the most telling of conduct, namely

the obtaining of the letter of indemnity.". We say

that, in itself, is conduct that recognizes what

must have been the intention so far as an act of

this nature is concerned.

BRENNAN J:  Mr Street, what is the obligation of a shipper

or a stevedore where the bill of lading has been

destroyed or its transmission been delayed and the

true owner is seeking possession of the goods?

MR STREET:  Your Honours, what may arise from the goods

being lost at sea - - -

BRENNAN J: 

No, not the goods being lost at all, the bill of

lading being destroyed accidentally, or its
transmission being delayed.

MR STREET: Well, Your Honour, the consequence of what may

arise in those circumstances will perhaps vary

depending upon what conduct an alleged consignee

takes. I think without further definition,

Your Honour, my response would be this: that there

is the world of difference between a loss of the

goods through, be it fire, be it at sea or be it by

Chellaram(3) 5/3/92

a negligent delivery, to what amounts to a

conversion by the carrier.

BRENNAN J: Well, let us say that the true owner of the

·goods comes to the stevedore and says, "I have not

got the bill of lading, but these are my goods.

The reason why I have not got it is that it is

delayed in the mail, but I need these goods

immediately." The stevedore says, "I cannot give

them to you without the bill of lading", and he

says, "I will give you an indemnity" which, in the

terms of the indemnity that was given in this case,

says that, "I will give you the bill of lading

which is duly endorsed by me to you as soon as I

receive it." Now, is that a breach if he delivers

it to the true owner?

MR STREET:  If there is no act that intentionally wrongfully

deprives the true owner of the goods there can be

no conversion, Your Honour. So perhaps it follows

as a matter of course that there cannot be a

conversion. The problem cannot arise. The only

thing that gives rise to the conversion in the
present case is the intentional act of wrongfully

depriving the owner of the goods.

BRENNAN J:  Somebody who is known to be the owner, do you

mean?

MR STREET:  No, Your Honour. We say that in relation to a

bill of lading representing title to the goods,

that it follows, as was recognized in the

Privy Council in the case that we have cited in The

Jag Shakti, that it must amount to a conversion if

the goods are delivered without presentation of the

bill of lading if they are not delivered to the

true owner.

But, Your Honours, what I was seeking to try

and extract was assistance from the letter of

indemnity being obtained as going to the true

intention of the parties so far as the necessary

modification by implication is concerned, because

we would postulate that if it was not the case that

it was expected that the bill of lading itself

would have provisions that would apply to a

conversion by the carrier then one would assume

that there would be no such need for the letter of

indemnity.

But can I go further than that, Your Honours.

The letter of indemnity in the present case is post contractual conduct that we say can be taken into

account. But there is also, within the agency

agreement that Your Ho_nours will find at page 132

in the appeal book - and, of course, here, the

conversion, just picking up perhaps what was said

Chellaram(3) 9 5/3/92

by Justice Brennan, is not just the stevedore but

also the carrier and it is not a stevedore, it is the ship's agent, and the evidence establishes it is the general agent and not a stevedore; there is

no stevedoring as such that arises in this case.

But at page 132, at line 10, one finds a

provision in what was the agency agreement between

the two respondents. What it identified was that:

The delivery of goods to consignees shall be

effected exclusively on production of original

bills of lading, or in exceptional cases on

provisions of a good bank guarantee.

Again, although we will seek to make use of

this later aspect in reference to the Himalaya

clause, we say that this again is pre-contractual

conduct identifying that it is not anticipated that

if one delivers goods without the presentation of

the bill of lading, that you are going to be

protected. What one needs in those circumstances

is a good bank guarantee; the intention must be

clear.

It was not within the intention of the parties

that conduct of this nature of converting the goods

would be within the scope as a matter of

construction of the bill of lading. Your Honours,

the recognition of this conduct amounting to a

conversion is one that is touched on by Carver in

Carriage by Sea, thirteenth edition, and I think it was included on the cases to which reference would

be made, in paragraph 1593.

MASON CJ: 

Why are we concerned with this issue of

conversion, Mr Street? I have not followed that at
the moment.

MR STREET: 

Your Honours, I had sought to link the

significance in part to the conduct of the present

case as conduct amounting to a conversion. That	the cause of action of conversion was pleaded is
clear on the pleadings. We say that conversion is
not a liability under the bill of lading, and that
was the significance of the reference. All I was
seeking to do was make good the proposition that it
is recognized as such as a conversion both in
practice and at law. I do not perhaps need to do
more than give Your Honours the reference that
Your Honours already have.

The proposition is found in Carver in the

passage I have just referred to. It is found also

in passages in Schmit~off's Export Trade, ninth

edition - which perhaps if I could have leave, I

would seek to hand up copies of - identifying no

Chellaram(3) 10 5/3/92

more than the same proposition, that presentation

without delivery of the bills of lading amounts to

a conversion. Your Honours, I will not seek to

take Your Honours to the cases that we have

identified but we say that the acts in the present

case relevantly must amount to a conversion.

Their significance, in answer to Your Honour

the Chief Justice's question, is that it falls

within our first proposition that I sought to

develop, that conversion does not fall within the

natural and ordinary meaning of the language found

in clause 10(2).

MASON CJ: Well, that is the principal obstacle that you

face.

MR STREET: Clause 10(2) is the first hurdle that we seek to

pass; that is so, Your Honours. What was done in

the Court of Appeal, and perhaps I should take

Your Honours back to the judgments in that regard,

at page 241 - and, as I have said, it is not a

matter that was touched by the trial judge - the

Chief Justice turns to consider whether the first

limb, if I can call it as such, of clause 10(2)

bites and, what he says in relation to the first

limb is that "the act - in the present case - does

not constitute delivery", and we would embrace and

adopt His Honour's construction of the first limb

of clause 10(2). And His Honour came to that
conclusion at page 242 at line 12, and said that

then leaves the question of the second sentence.

What His Honour did not do in his analysis

that then follows, leading to the conclusion that

appears at 243 point 15, is that he did not link in

the second sentence to the subject-matter of the

discharge which, plainly, it must be read with.

The second sentence has no content and meaning

unless it picks up the language found in the first

sentence, namely that it is dealing with the

prospect "of a discharge of all liabilities under

this Bill of Lading".

That language must necessarily be what the

second limb or second sentence of clause 10(2) is

intending to achieve. However, the Chief Justice

in the reasoning that he sets out says that it is

to be read as "total loss of goods", is to be

understood in that context, and then, having said

"total loss of goods", he says:

In the context of the Bill of Lading,

there is no reason why handing the goods over

to someone who was not entitled to possession

of them, and thereby depriving the true owner

Chellaram(3) 11 5/3/92

of them, could not also result in total loss

of the goods.

Your Honours, we say there that the error that

he first makes is the failure to give attention to

and meaning to the language we. have identified,

"liabilities under the Bill of Lading" in

comparison to, we seek to stress, the language one

finds in clause 10(3) and clause 22(3). Nor has

His Honour, at page 243, given any content to the

nature and object of the contract. Now, that such

a course is, we say, required flows from what was

said in Darlington Futures v Delco, namely that

construing this clause it gives no content
whatsoever to the reference to nature and content
of the contract if o~e is able, in the present

case, to ignore the very nature of this contract.

The conduct in the present case, we submit,

defeats the object of the contract. That the
object of the contract was one whereby the bills
would be presented to obtain delivery, we say is

inherent in what was identified on the face of the

bill, and we say that that proposition is one in

which we seek to draw comfort from what was said in

Nissho Iwai, which I will seek to take Your Honours

to in a moment.

What is clear is that the Chief Justice gave

no analysis or reasoning picking up the nature and content in the words he used and, we would say, on

its face quite the contrary to what His Honour

says, there is no reason whatsoever why those words
would be construed as intended to catch a

conversion.

The President touched the matter on a broader

basis, and I will seek to develop shortly his judgment in so far as it concerns Article III rule 6, but if I could just take Your Honours to

what he says in relation to clause 10(2). At

page 297 in the President's judgment -

Justice Samuels, of course, agreed with the

Chief Justice - at page 297 the reasoning of the

President is set out, and again, relevantly,

nowhere does it encompass reconciliation of the

first limb and the language found in the first limb

so far as it refers to liabilities under the bill

of lading. Nor does His Honour give any content or

weight to the nature and object of the contract in

coming to the conclusion, which he does at about

line 20, where he says it may perhaps be under

either limb, but:

It is unnecessary to resolve in this appeal

which of the two time provisions applies

Chellaram(3) 12 5/3/92

although I would presently favour the view

that the goods were "totally lost".

In other words, His Honour, like the Chief Justice,

prefers the view, and we would say that that is
consistent with reasons given by the Chief Justice

that the first limb does not apply and we seek to

adopt that, but what he - - -

DEANE J:  Mr Street, what if the goods had been totally lost

by negligence and you sued for negligence, would

you say that 10(2) did not apply because you had

sustained your damage by negligence?

MR STREET:  No, Your Honour, for a number of reasons, but

can I just develop them. First of all, negligence,

be it loss at sea, be it by fire, arising out of

the purported performance of the contract, would be

covered.

DEANE J:	Well, say they were lost by the deliberate arson of an employee.
MR STREET:	Your Honour, deliberate arson by an employee

might not amount to a deliberate conduct of the
employer. What we say is that in the present case

this is deliberate conduct by the employer, namely,

deliberate conduct by the carrier. I would seek,

if I can, to answer Your Honour's question in that

way, by saying that here the act concerned is the

act of the carrier. If the carrier had pushed the

cargo over the side deliberately, if the carrier

had set fire to it himself, that is tantamount to

the same thing as dumping them and leaving them on

the wharf, which is what the Privy Council in the

New York Star, Lord Wilberforce said was

commercially unreal and not contemplated by the

contract. We would pick up what His Lordship, Lord

Wilberforce said, in the context of what is

commercially unreal and not contemplated by the

contract in the bill of lading as conduct in the

present case being conversion and we would say that

it would be commercially unreal to suggest that

such was sought to be encompassed.

BRENNAN J:  Was it a breach of contract, this act of

conversion?

MR STREET: Conversion, no, Your Honour. Conversion, as

such, is independent of contract.

BRENNAN J: But was it also a breach of contract? The act

which constituted the conversion, was that act a

breach of contract?

Chellaram(3) 13 5/3/92

MR STREET:  Your Honour, there was no finding, as such, from

recollection, although perhaps I should just

withdraw from - - -

BRENNAN J: Whether there was a finding or not, there is no

doubt as to what the facts were.	In point of law,
was that act a breach of contract.

MR STREET:  Your Honour, I think perhaps I should just take

a moment to answer that properly. I think that it

was said by the trial judge that there had been

established certain breaches. Your Honour, at

page 162, in answer to Your Honour

Justice Brennan's question, there is a statement at the bottom:

A breach of the contract of carriage has

accordingly been estab~_shed. In addition,

negligence in the custody of the goods - What he does not address, although he recognizes

the argument, is conversion. That argument is one

which Your Honours will see appears at page 169, at

about line 4.

Then, it was argued that the defendants converted Chellaram's goods -

His Honour did not come to a finding about

conversion, in answer to Your Honour

Justice Brennan's question.

BRENNAN J: Perhaps you can help, Mr Street, but at the

moment, looking at the authorities to which you

drawn our attention, Schmitthoff and Carver, and at

the Sze Hai Tong Bank case at page 586, the way I

read them - perhaps I am misreading them - is that a delivery to a person who does not produce a bill

of lading and who is not the owner amounts both to

conversion and a breach of contract. But it is the

same act which amounts to both things. And if that

be so, then, of course, the next question is, "Why
isn't that covered?".	·

MR STREET: Well, Your Honours, we would then seek to

maintain our position that the language used in the
clause refers to liabilities under the bill of
lading and does not encompass, as we say,

conversion. In other words that, no doubt a clause

can be drawn of wider scope, but on its natural and

ordinary meaning it does not have that content and,

Your Honours, that is the basis on which we then

seek to say, if that is wrong, then there is at

least ambiguity - in the present case real

ambiguity, not strain~d construction - and we say

real ambiguity should be construed contra

proferentum.

Chellaram(3) 14 5/3/92

To the extent that that is wrong, what we then

say is that it is clear from the decision that

Your Honour referred to in the Sze Hai Tong case

that, from the question that was rhetorically posed

and asked, "Would the parties have intended this

conduct to be caught by the terms of the bill of

lading?", the clear answer to that would be, "No",

that the true intention of the parties could not

have been that conversion was encompassed by this

clause. We say that gives rise to necessary

modification by implication, namely that it does

not catch conversion of the goods by the carrier.

So, Your Honours, that is the substance of the

conduct in the obtaining of the letter of indemnity

submissions we seek to advance in that regard.

and also in the agreement itself, referring to the

need to obtain a good bank guarantee, reinforce

that last submission that we have sought to

develop.

Can I take Your Honours briefly to the decision in Nissho Iwai, which we say does assist

in this area. Your Honours, at page 227 there had

been identified the main object of the goods - at

the bottom of page 226.	I apologize, Your Honours.
That is in 167 CLR 219.

The joint judgment identifies the object asserted in argument as the main object at the

bottom of page 226 and over on to page 227. At

about point 5, what is said is this:

In determining whether an exemption clause should be construed so as to apply to an event

which has defeated the main object of the

contract, much must depend upon the nature of

the events which the clause identifies as

giving rise to the exemption from liability.

In the present case, we would say that much must

depend upon the nature of the liabilities

discharged seeking to apply the same reasoning.

The nature of the liabilities discharged are

liabilities under the bill of lading. In other

words, we seek to take that one step further:

liabilities arising from purported performance

under the contract of carriage, not liabilities

arising from unauthorized acts outside the intended

performance of the contract.

Your Honours, at the bottom of that paragraph,

there is reference to the nature of those events

that give rise to the.exemption clause in that

case. To the extent that it is necessary, we say

that the nature of the events which one finds in

Chellaram(3) 15 5/3/92

this bill of lading, which are encompassed by

either exemptions or exclusions, are events arising

in the purported performance of the contract.

Nowhere does one find in the present case

exemptions, we submit, being given to the carrier

in respect of acts not authorized by and not in the

intended performance of the contract.

We say that there is no reason in those

circumstances to say that such is encompassed

within the clause, as was said in Nissho Iwai, for

there, there were clearly events identified in the

joint judgment that could be said to fall within

what was the provision there concerned.

But we say that the nature of the liabilities

discharged are liabilities under the bill of lading

and meaning and content, we say, must be given to

that, taking into account the nature and object of
the bill. Your Honours, the concluding relevant

part in the Nissho Iwai decision appears at

page 228 where the reasoning is brought to its

conclusion:

In the circumstances of this case, the main

object of the contract provides no ground for

concluding that non-delivery of the goods was
outside the protection of cl. 8(2).

Having identified events that bring that within

compass. We just say in the present case,

Your Honours, that to use a similar expression, the

nature of all liabilities discharged are

liabilities, we say, that must arise out of

purported performance of the contract.

Your Honours, perhaps I might just pose this

last rhetorical question in relation to

clause 10(2) and it is this, which is, no doubt,

the test that Your Honours must ask: is the

implication that clause 10(2) does not apply to the

release of goods without surrender of the bill of

lading amounting to a conversion necessary to give

effect to what the parties must be understood to

have intended? And that is picking up the language found in Darlington. And we say the answer must be

unequivocally yes, for the very same reasons given

by Lord Denning in Sze Hai Tong.

Your Honours, one further reference before I

conclude on that point is this: it was recognized

in the judgment of, as Your Honour then was,

Justice Mason and Justice Jacobs in the New York

Star, that this conduct could, as a matter of construction, be outside the clauses of exemption

or limitation, and we seek to embrace that as a

recognition of the significance of the nature and

Chellaram(3) 16 5/3/92

object of the contract in relation to conduct of

this nature and, Your Honours, that appears, if

Your Honours would permit me to give the reference

in that regard, in 139 CLR in the judgment that

starts at page 231. It appears at page 282 in the

joint judgment and we embrace it as a recognition

of the significance of the object, starting at point one on page 282:

A delivery of the goods to a stranger without

requiring the production and exchange of a

copy of the bill of landing would be an act

which, even though unauthorized by the

carrier, might create a vicarious liability in
the carrier.

In the present case, it is unquestionably the act of the carrier, so that problem does not arise:

Further, it might be outside the immunity provisions of the bill of lading on the true construction of the latter.

Now, we do not seek to traverse beyond

construction, and our arguments are founded on
construction, but we say that within the realm of

the construction there must be legitimate scope and

there must be real effect given to what is

recognized as the nature and content or nature and
object of the contract. If that reference is to
have meaning and content in construction, we say

this is a case where, clearly, that content gives

rise to the consequence we seek to propound in

relation to clause 10(2). I note the time,

Your Honours. If Your Honours are proposing to sit

on - I will seek to continue if that be the case.

MASON CJ:	How are we going for time, Mr Street?
MR STREET:	Your Honour, I have concluded clause 10(2) and I

am happy to adjourn on a high, Your Honour, but I

am also happy to continue.

MASON CJ:	I think we might continue for a short time.
MR STREET:	If Your Honours please. The next proposition

that we have sought to deal with in our list of
topics and propositions is the question of

Article III rule 6. It arises perhaps only in this

way: the Chief Justice expressed a view in his

judgment that there was support for the contention

that the Hague Rules had no application outside the

scope of discharge. We embrace what was said

there, and I will take Your Honours to it.

BRENNAN J: This only arises irt reply, does it not?

Chellaram(3) 17 5/3/92

MR STREET:  Your Honours, I was going to seek to say

that Article III rule 6 - we have arguments that we

say it clearly does not apply. We have identified

it in our propositions. I will not seek to develop

it beyond saying that we would also have - if it be

the case that it were held to apply, we do have

instruction argument that we would seek to address,

but I will deal with that in reply if it emerges.

Your Honours, that takes us to the Himalaya

clause. At the outset, in relation to the Himalaya clause, could I take Your Honours again to 139 CLR.

Having said that, Your Honours, other than a

reference to what we would say is a pigeon-holing of the agency agreement as a Himalaya clause, the
Chief Justice gives no consideration to its scope,

or whether it is effective. The President referred

to it in passing, but gave no consideration to it

whatsoever. That pigeon-holing of what I would

seek to call "agency contract" is, we would say,

the source of significant error in the present

case.

If one goes to page 234 in the New York Star,

139 CLR, there is set out what is the Himalaya
clause, or agency agreement, that was the subject
of consideration in that decision. Your Honours,

the first very significant factor that we seek to

catch is what was picked up in this Himalaya clause

at about line 8 is a reference to certain conduct: while acting in the course of or in connection

with his employment.

Those words, "while acting in the course ..... of his

employment" are picked up by the words where we

have the start of the Himalaya clause slightly

further down, where it says -

Carrier acting as aforesaid -

perhaps I should start a few lines further up where

it starts -

without prejudice to the generality of the

foregoing -

that is the first limb of the clause. It then

seeks to address that -

provisions in this Clause, every exemption,

limitation, condition and liberty herein

contained and every right, exemption from

liability, defense and immunity of whatsoever

nature applicable to the Carrier or to which the Carrier is entitled hereunder shall also

be available and shall extend to protect every

Chellaram(3) 18 5/3/92

such servant or agent of the Carrier acting as

aforesaid.

That "acting as aforesaid" is entirely absent from

the clause, or so-called agency agreement, to be found in the present case. That gives rise to a

number of problems.

We say it gives rise to defeating compliance

with the first two criteria of Lord Reid; we say it gives rise to defeating the fourth requirement of Lord Reid when it comes to consideration. But

can I just identify a further matter of

significance in distinction to the clause that I

will take Your Honours to in a moment in this bill

of lading, namely, at the end of the clause, or

agency agreement, it is said:

and all such persons shall to this extent be

or be deemed to be parties to the contract in

or evidenced by this Bill of Lading.

That portion, in other words, that part of what was
the agency agreement considered by the High Court
in the New York Star, is also missing in the

present case.

Could I take Your Honours briefly to what the

Himalaya clause does say in the present case, and

conveniently, Your Honours, it is set out on page 4
of the summary of facts that I handed up to

Your Honours. It is the second sentence in 5(2),

and it says as follows:

Without prejudice to the foregoing, every such

servant, agent and sub-contractor shall have

the benefit of all provisions -

it does not identify them like one finds in the New

York Star, but perhaps that might fall within the

fine distinctions referred to by Lord Wilberforce,

but we say the two matters we have earlier

identified are not fine distinctions -

contained hereim benefitting the Carrier as if

such provisions were expressly for their

benefit -

There is no identification of the act of

consideration, or what might be said to be the

offer, or how one extracts an offer or a promise

out of this:

and in entering into this contract the

Carrier, to the extent of those provisions,

does so not only on his behalf, but also as

Chellaram(3) 19 5/3/92

agent and trustee for the servants, agents and

sub-contractors.

Again, totally absent is the intention recognized

in the last part of the Himalaya clause or an

agency agreement referred to in the High Court,

namely, that such persons shall be deemed to be

parties. So, there is no deeming to be parties

and, we would say, that on its face there is no

scope for finding either that the first or second

limbs could be satisfied in relation to Lord Reid,

and we do not, if I can indicate at the outset,

take issue with the concept of an agency agreement recognized in Midland Silicones v Scruttons. What we say is that those requirements are not made out

in the present case either by the clause itself or,

as a matter of fact, when one comes to look at the

conduct. We would say, a clearer case of an act

that could not be consideration is an act which is

one not done in reliance on the bill of lading,

namely, the handing over of goods without the

surrender of the bill of lading.

BRENNAN J: Following your argument, are you saying that

there has to be consideration as between -

MR STREET:  Yes, Your Honour, I apologize. We say that

there are four criteria, and I do apologize if I

have accelerated the argument at an inappropriate

pace. We say there are four criteria that were

recognized as giving rise to an agency agreement,

and the most useful place to find that is if

Your Honours would go to 1975 Appeal Cases, the New

York Star, and it appears at page 154. At

page 166 there is reference made at about line C:

But Midland Silicones left open the case where

one of the parties contracts as agent for the

third person; in particular Lord Reid's

speech spelt out, in four propositions, the

prerequisites for the validity of such an

agency contract -

That is what it is, we would respectfully submit -

There is of course nothing unique to this case

in the conception of agency contracts;

And then what is identified is the speech of

Lord Reid:

"I can see a possibility of success of the

agency argument if -

and then he identifies the four criteria,

relevantly:

Chellaram(3) 20 5/3/92

(first) the bill of lading makes it clear that

the stevedore is intended to be protected by

the provisions in it which limit liability,

Can I just pause there, Your Honours. This, of

course, is not a stevedore. Whatever reasoning may
justify the scope and content of the New York Star

or The Eurymedon in relation to stevedores does not

apply in relation to the general agent of the

carrier. But none the less the necessary

requirement is that:

the bill of lading make it clear that the
stevedore is intended to be

protected ..... (secondly) the bill of lading

makes it clear that the carrier, in addition

to contracting for these provisions on his own
behalf, is also contracting as agent for the
stevedore that these provisions should apply

to the stevedore ..... (fourthly) that any

difficulties about consideration moving from

the stevedore were overcome.

Your Honours, the best analysis to start with

in looking at what is required to satisfy those

requirements is what was done by Their Honours the

Chief Justice and Justice Jacobs in The New York

Star. I would seek to take Your Honours very

briefly - - -

MASON CJ: Perhaps you might take that up after the

adjournment, Mr Street.	We will adjourn until
2.15.

AT 12.59 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

MASON CJ: Yes, Mr Street?

MR STREET:  May it please Your Honours. Before the

adjournment, I was seeking to take Your Honours to

the way in which, in the joint judgment of the

Chief Justice and Justice Jacobs in the New York

Star, 139 CLR, the first and second requirements

laid down by Lord Reid had been dealt with in order

to identify the manner that they were addressed in

that case. In 139 CLR at page 269, at the bottom

of the page, what is said is this:

Chellaram(3) 21 5/3/92

It is not now disputed that the first and

second conditions mentioned by Lord Reid were

satisfied in this case. The bill of lading

makes it clear that the stevedore is intended
when acting in the course of or in connexion
with his employment to be protected by the

provisions limiting liability -

Could I just pause there, Your Honours. That

language of "acting in the course of or in

connexion with his employment" flows from the

language that I took Your Honours to in the New

York Star clause where, Your Honours will recall,

at page 234 I identified the reference within the

Himalaya clause to "acting as aforesaid", picking

up the earlier language that said "while acting in

the course of or in connexion with his employment". Those words are absent in the present case.

The absence of those words in the present case, we

respectfully submit, reinforce the proposition that

quite apart from consideration, the first

requirements are not satisfied. We seek to get

some joy from that by going to what the Privy

Council said in 144 CLR. It is found at page 300.

I apologize, Your Honours; the passage that I was

referring to in the joint judgment appeared at the

bottom of page 269 on to page 270, so far as I did

not give Your Honour Justice Gaudron that

reference.

Your Honours, in the Privy Council's decision, again still dealing with this question of tt3 first

and second requirements of Lord Reid, if one goes to page 304 in the judgment - and can I just draw

attention at the outset, because it is perhaps

relevant, that it appears from the first paragraph

that the principles identified in The Eurymedon, or

in New Zealand, Satterthwaite, were not the subject

of any argument before the High Court, according to

the Privy Council at page 304.

Be that as it may, picking up whatever The Eurymedon is intended to give effect to, at about

point 4:

First, as to the Board's decision in

Satterthwaite's case. This was a decision, in

principle, that the Himalaya clause is capable

of conferring upon a third person falling
within the description "servant or agent of

the Carrier (including every independent

contractor from time to time employed by the

Carrier)" defences and immunities conferred by

the bill of lading upon the carrier -

and here we emphasize these words -

Chellaram(3) 22 5/3/92

as if such persons were parties to the

contract contained in or evidenced by the bill
of lading.

Now, that is the importance that is identified by Lord Wilberforce in the nature of the decision in

The Eurymedon. Those words:

as if such persons were parties to the

contract contained in or evidenced by the bill

of lading -

as I sought to take Your Honours to at the outset

are absent from the Himalaya clause in the present

case, or agency agreement. In other words, what

was seen as the principle on which The Eurymedon
was founded is not present in this agency agreement

and irrespective of whether the agency agreement in

The Eurymedon be one that is correct in principle,

we say the principles there identified do not give

effect to an agency agreement in the present case.

Your Honours, the same significance about the reference to being a party to the contract was also

picked up by the Chief Justice,

Sir Garfield Barwick, in 139 CLR - and I apologize

for jumping back and forwards between the two, but

I propose to do that for some little time whilst I

take Your Honours through the relevant parts of the

two, but going back to 139 CLR at the bottom of

page 244, where it says:

Cases such as Tweddle v Atkinson and other

cases listed in the notes to pars 315 and 329
of Halsbury's Laws of England ..... have no
place, in my opinion, in the resolution of the
question whether the appellant was a party to

the arrangement in the relevant clauses in the

bill of lading.

Now, again, we emphasize the word "party".

That is the inquiry on which His Honour was

embarking in the approach that he adopted to what

he described as an arrangement. And having got to

this point, can I say that there a fundamental

difference found within the judgment of the
Chief Justice in his analysis of what the agency

contract is to that found in the joint judgment of

Their Honours the Chief Justice and Justice Jacobs.

We say not only is there a difference of a

fundamental kind between those two. We say that

you find a difference again in what was done in the

Privy Council and their approach, and I will seek

to develop that if I can in a moment.

Chellaram(3) 23 5/3/92

But what we do say is so far as the first and

second requirements are concerned, this agency

agreement evidenced by clause 5 in this bill of

lading does not meet the criteria that was being

identified by the Chief Justice, by

Lord Wilberforce, and we say by Their Honours in

the joint judgment of the Chief Justice and

Justice Jacobs as to the first and second limbs.

Can I move then, Your Honours, to what is

perhaps the fundamental problem with The Eurymedon
as such, but also more importantly, the fundamental

problem for the second respondent in this case to

get the benefit of the agency agreement even if it

be that somehow the first and second limbs were

able to be said to be satisfied, and that is the

fourth requirement, namely, of consideration.

Your Honours, at page 271 in the joint

judgment, and it may perhaps just be of assistance

if I identify before taking Your Honours through it

what we say are the different approaches. We say

that in the joint judgment one finds an approach to
this agency contract which is that somehow there is

an offer contained in the language used in the New

York Star clause, and that offer is excepted by

conduct which is said to be conduct referable to

the offer on the assumption that the offer was known to the stevedore. That is the reasoning

adopted in the joint judgment.

In the present case there is immediately at

the outset a problem with the absence of similar

language is that in the New York Star extracting

any offer at all, quite apart from any act that

could be said to be referable to an offer. In the

judgment of the Chief Justice, contrary to the

approach adopted by the joint judgment, the

Chief Justice said that what was in existence here

was a bilateral arrangement, as he described it,

and he expressly refuted the proposition that one

could extract from the clause an offer. He also

emphasized the point which was emphasized in the

dissenting judgments in The Eurymedon, but there is

no promise to be found emanating from, relevantly

here, not a stevedore but the general agent. No.

promise to found any consideration can be extracted

from the clause in the present case.

The Chief Justice's approach, therefore, in

saying that there was no offer is directly

inconsistent with what was said by the joint

judgment of the Chief Justice and Justice Jacobs.

In the Privy Council, Lord Wilberforce appears to

have embraced, in a general sense, what was said by

the Chief Justice, but having embraced what was

said by the Chief Justice he then goes on to say

Chellaram(3) 5/3/92

"but the two alternative bases of consideration

identified in The Eurymedon are still relevant".

Both of those alternative bases are inconsistent with the analysis of the Chief Justice in relation

to the question of consideration. One analysis in

The Eurymedon was that it was a unilateral contract or a unilateral agreement that became binding on

the performance of the act, relevantly, the act

identified because of the clause being the act of

performance of services identified under the

contract of employment.	We have no similar act
here.

The alternative analysis, if it not be in a

unilateral contract, The Eurymedon had adopted in

the majority was that it was a Carlisle-type offer

capable of acceptance by anyone who performed the

act. Those two alternatives were not alternatives

that were embraced by the Chief Justice in his

reasoning in the case.

With those opening remarks, can I take

Your Honours to more closely the reasoning that was

adopted for the purpose of identifying that the

fourth requirement in the present case cannot have

been sustained.

At page 271, in the joint judgment in 139 CLR,

at the bottom of the page, after a reference to Reg

v Clarke, which, of course was an offer capable of

acceptance so far as an act referable to that offer

is concerned:

But their Honours appear to have overlooked

the circumstance -

and this is in relation to the Court of Appeal's

judgment -

that proof of performance of the conditions to
an offer by a person who knows of its existence will in general constitute prima facie evidence of acceptance of the offer.

This analysis that is the reason for rejecting the

Court of Appeal is founded on the premise that

there is an offer to be extracted from the clause·.

In the present case, it is our respectful submission that no amount of straining of the

language can extract an offer, in the present case,

contained in this clause. In other words, this

agency agreement does not have an offer.

Even if it were, somehow, to be given the most

benevolent construction to give it an offer, there

is certainly nothing in the present case that could

amount, we would submit, to an acceptance of it;

Chellaram(3) 25 5/3/92

and I will take Your Honours back to the evidence

shortly.

Their Honours continue to develop the

significance of acts referable to an offer at

page 272 and, at page 273 at about point 3, say:

In our view the Court of Appeal in the

present case could and should have drawn the
inference that the appellant discharged the

goods in reliance on the shipper's promise or

offer of which it was aware. The contract

here is indistinguishable from the contract

upheld by the Judicial Committee in The

Eurymedon.

And there is a passage there that I will not seek

to read. Continuing:

In such a context an inference that the stevedore has acted in reliance on the

shipper's promise or offer is so much more

compelling than the inferences which were

sought to be drawn in the situations which

arose in R v Clarke ..... and in the Australian

Woollen Mills Case.

Common sense and knowledge of human

affairs indicate the evident probability of

the appellant acting in reliance on the

shipper's promise or offer when he discharges

the goods so long as he has knowledge of the

existence of that promise or offer.

Your Honours, again, pausing there, here, if there

be no offer that can be extracted, it must follow

that there can be no act that is referable to it.

The acts that occurred, of course, are acts by a

general agent, not a stevedore. There was no

evidence of services provided.	The only evidence
as to the activity of the second respondent was its

activity of releasing the goods without surrender

of the bill of lading.

Having just referred Your Honours to that,

could I take Your Honours briefly back to the

evidence in that regard, and it is summarized in

the summary of facts that I handed up to

Your Honours. I take Your Honours to this evidence

simply as a matter of convenience. At page 7 of

the summary of facts in reference to the letter of

indemnity, there is a question asked and an answer

set out at the bottom of the page:

Chellaram(3) 26 5/3/92

Q. One of the reasons why letters of indemnity

are only used in extreme circumstances is

because Five Star -

that is the second respondent -

recognises that as a breach of its duty to the

owner of the goods, is that not right?

A. That is correct.

And, Your Honours, at page 8 further evidence is

set out, and this is evidence of Mr Brundish, who

is the manager of the second respondent, and

relevantly what is picked up at first is:

Q. Indeed the instructions that Five Star had

from COSCO was that such a release was only to

take place on a bank guarantee.

As Your Honours will recall, the agency agreement

that I took Your Honours to was not a personal

letter of indemnity.

A. That is correct.

Q. In the present case that did not take place, did it?

A. That is correct.

Q. The conduct of Five Star in the present

case releasing the goods on the letter of

indemnity was one which meant that Five Star

was not acting upon the production of any bill

of lading, is that right?

A. That is correct.

And then there are some further questions in

relation to acting outside the clause in the agency

agreement, and Your Honours will see the evidence

about the delivery being without the production of

the bill of lading and without the authority of

Chellaram, and over on to page 9, that a carrier,

in order to determine who to deliver, needs to know

who the holder of the bill of lading is.

Your Honour, there is no act in the present case so far as releasing goods without delivery of

the bill of lading, that could be said to be

referable to an offer to be extracted from the

Himalaya clause or agency agreement, and even if

one were able to find in some way something that

constitutes an offer, .in the present case, the act

of the second respondent, in our respectful

submission, is an act not in reliance upon any bill

Chellaram(3) 27 5/3/92

of lading as is abundantly clear from the answer

given by Mr Brundish, the manager of the second

respondent, it is an act which cannot be said to be

referable to any offer, if there could be an offer,

extracted from the bill of lading.

DEANE J: But, Mr Street, if agency existed, that is, if the

carrier had authority to enter into a contract on

behalf of all those people who might be involved in
carrying your client's goods, putting aside the
question of authority, what is wrong with this
clause? What it says is: you agree with the

carrier and all the people that are designated that

to the extent they get involved in carrying your

goods or in relation to your goods, their liability

is limited.

MR STREET·	Your Honour, what we say is wrong with the clause is this, that given the acceptance of Wilson
v Darling Island Stevedoring, 95 CLR, that a person
who is not a party to the contract cannot take the
benefit - and that does not seem to have been the
subject of challenge in the Privy Council - the only way that a party can get such benefit, leaving
aside trust - and this is not being run on trust - is by agency contract.

That agency contract must have certain

criteria that should be established. It is in this

area that Your Honour Justice Deane raises the

question of why should it not be given some

benevolent interpretation, that the public policy

considerations are ones that we seek to find

comfort in, because the public policy

considerations that are identified - and I will

take Your Honours to them - by Justice Stephen and

Justice Murphy are considerations that we say are

powerful considerations for anything but a

benevolent interpretation.

DEANE J: But assume that your client had said to X, an

employee of the carrier, "If you will get involved

in the carriage of my goods to the extent that your

normal duties require, I promise you your liability

will be limited in this way", and that employee
said, "Very well, on the basis of that promise I

will get involved in the carriage of your goods in

the normal way my duties require", why is that not

a perfect contract?

MR STREET: Well, Your Honour, I think inherent in

Your Honour's proposition is the promise by the

employee. That is absent, Your Honour, and that promise cannot be extracted and that is what was

said by the Chief Justice, Sir Garfield Barwick.

If I could take Your Honours perhaps back to what

Chellaram(3) 28 5/3/92

he has said in that regard.	If Your Honours go to
139 CLR at page 243 - - -

DEANE J: But, when you are dealing with a contract for the

benefit of a stevedore, you have moved into a

different territory of relationship, have you not,

because - I do not know much about this area of law

but I thought the stevedore did not act as either

employee or agent of the carrier -

MR STREET:  But an independent contractor?

DEANE J: Yes.

MR STREET: Well, Your Honour Justice Deane is correct, in

my respectful submission, so far as it being an

observations made in the Privy Council by Lord	independent contractor, but there are none the less significant features - and he picks up what was
said in The Eurymedon - of the Himalaya clause is
the ability of the law to give effect to what was
said to be the commercial intentions in accordance
with existing legal principles. Now, that means
that what Their Honours were saying was that there
was able to be extracted here something in
accordance with existing legal principles, albeit
that we have this divergence of approach between
the joint judgment, between the Chief Justice,
between what is said in The Eurymedon as to how
general principle apply. What we say in the
present case - and we do not have to go as far as undoing The Eurymedon - to give effect to an agency
agreement requires that certain criteria be met and
that is the criteria identified by Lord Reid, and
we say, recognizing that general principles can give effect to such an agreement, we say there is
no such agency agreement to be found in the present
case, and if there is no promise to be found in the
clause, and clearly one cannot extract a promise
out of it, and if there is no offer, one has failed
at the outset before looking to see if there is an act referable to the offer. But we say, in any event, there is no act referable to the offer that
could meet that point.
But could I take Your Honours to the passage I was just seeking to refer to of the Chief Justice
at page 243, and His Honour, I think, in the first
paragraph picks up the very point that Your Honour
Justice Deane was referring to where he refers to
the carrier acting:

with the authority of the appellant as its

agent to make an·arrangement with the
consignor for the protection of the appellant,

as an independent contractor participating in

Chellaram(3) 29 5/3/92

the handling of the cargo, again using

"handling" in a neutral sense.

Can I interpose there? This, of course, is not a

stevedore handling cargo:

To that arrangement there were two parties,

the consignor and the appellant. By later

accepting the bill the consignee became a

party to the arrangement with the consignor.

I can see no validity in a suggestion that the

bill of lading could not at the one time

contain a contract of carriage between the

consignor and the carrier and an arrangement

between consignor and stevedore, made through

the agency of the carrier, to regulate the

relationship of consignor and stevedore, when

the stevedoring work was undertaken -

but emphasize, Your Honours, when the stevedoring
work was undertaken. That picks up the language of

the clause. Continuing:

For my part, I find no difficulty in

interpreting the arrangement made by the bill of lading and its acceptance by the consignor as providing that if, in fact, the appellant

stevedored the cargo, leaving aside for the

moment what the stevedoring involved, the
appellant should have the benefit of the
clauses of the bill including the benefit of

the time limitation expressed in cl 17 of the

bill of lading. I am unable to treat the

clauses of the bill of lading as in any

respect an unaccepted but acceptable offer by

consignor to stevedore.

Now, that is directly inconsistent with the line

that has been taken in the joint judgment:

Indeed, I do not think the bill can be

the consignor. The consignor and the

appellant as stevedore were ad idem through the carrier's agency upon the acceptance by the consignor of the bill of lading as to the

protection the stevedore should have in the

event that it stevedored the consignment.

interpreted as containing an offer at large by

And, again, Your Honours, we say that must be

picking up the language found in relation to the

stevedoring of the consignment:

But this consensus lacked the essential of

consideration. The appellant through the bill

of lading made no promise to stevedore the

cargo -

Chellaram(3) 30 5/3/92

and, Your Honours, we again pick that up in answer

to what Your Honour Justice Deane had raised in the

analogy that Your Honour put a moment ago, namely,

there is no promise here in the New York Star

Himalaya clause. Moreover, in the present case,

even less could it be said that one could extract a

promise, in our respectful submission.

It is appropriate, if Your Honours would

permit for me to continue in so far as His Honour

the Chief Justice develops further his reasoning-in

relation to this arrangement, and I apologize for

reading slabs of this:

Thus, whilst I would not analyse the situation

obtaining on the acceptance of the bill of

lading as an exchange of promises, I would not

analyse it as merely the making of an offer

susceptible of acceptance by an act of the

stevedore done in purported acceptance of the

offer. For this reason I have described the

bill of lading in so far as the carrier there
purports to act for the appellant as an

arrangement. To agree with another that, in

the event that the other acts in a particular
way, that other shall be entitled to stated

protective provisions only needs performance

by the doing of the specified act or acts to

become a binding contract.

Your Honours, pausing there, there is no specified

act here and, we say, there is clearly no acts that

have been done in performance.

Whether or not the arrangement is susceptible of unilateral disavowal before the stated act

is done need not be discussed. Here the act

was done. The performance of the act or acts

at the one moment satisfied the need for

consideration and attracted the agreed terms.

Then His Honour goes on to identify his problem

with the use of the language "unilateral" or

"mutual" and continues, about two or three lines

further down:

As I see it, we have here an arrangement, a

compact with agreed conditions to attend the

performance of certain acts, which are not

promised to be done. True enough that, until

such performance, the consensus has nothing

upon which to operate.

Your Honours, again we say that that must be what has occurred in the present case. Even if one

could extract some consensus from this clause,

there was nothing done here to give that consensus

Chellaram(3) 31 5/3/92

operation to take effect as between the appellant

and the second respondent.

BRENNAN J:	Mr Street, do you seek to challenge the reasoning which appears at pages 243 and 244?
MR STREET:	Yes, Your Honour, in so far as I have to. respectful submission I do not have to go that far, In my
but I would not shy away from the problem of saying
that this is inconsistent with what is said by the joint judgment. It is not consistent with what in fact is said by the Privy Council. And one cannot
reconcile the two, but in embarking on analysis
which is necessary to look at what the fourth
consideration must be, we say that it is
appropriate to look at what has been said to identify what principle can be extracted.

And, Your Honours, can I just say, in looking

at this question of whether or not one should

entertain a consideration of what is meant at

pages 243 and 244 in the High Court's judgment,

this: firstly, that The Eurymedon was not the

subject of any argument before the High Court when

the New York Star was delivered. Secondly, this is

an area in which there has now been legislative

interference - intervention, perhaps, is the better

description. There has now been passed a Carriage

of Goods by Sea Act, giving effect to the Hague

Visby Rules.

Could I seek to hand up to Your Honours a copy

of a document that was in evidence in the court

below that sets out the Hague Visby Rules - it was

part of the appeal book below - relevant to this

end: it sets out the Hague Visby Rules. In the

Hague Visby Rules that the legislature has now

enacted, together with the Hamburg Rules - at the

moment the Hague Visby are in force - there is

express statutory extension of protection to

certain parties.

In Article IV BIS, which Your Honours will

find at page 67 it starts on the documents that

have been handed up from the appeal book below, and

this was one of the amendments to the Hague Rules.

Rule 1 extended the application to tort and

contract; that perhaps is not relevant directly so
far to this question. But, rule 2:

If such an action is brought against a servant or agent of the carrier (such servant or agent

not being an independent contractor), such

servant or agent shall be entitled to avail

himself of the defences and limits of

liability which the carrier is entitled to

invoke under these Rules.

Chellaram(3) 32 5/3/92

What we say is what Justice Stephen recognized in

the public policy comments that he has espoused in

the New York Star was that if there were

considerations of comity that should be taken into

account in respect of a provision of this nature,

they were best dealt with by international

convention. That is exactly what has happened and

that convention has been enacted.

So to the extent of answering Your Honour

Justice Brennan's inquiry of whether there is some question raised as to - - -

MASON CJ: When you say "has been enacted"?

MR STREET:  Your Honours, there was an Act passed called the

Carriage of Goods by Sea Act 1991, No 160 of 1991.

It now gives effect in Australia.

MASON CJ:	Now, is this point that we are debating a somewhat academic point because the matter is now
governed by legislation?
MR STREET:	Not quite, Your Honour, because as His Honour

Justice Deane identified - and no doubt it awaits

another day - the language used in BIS IV, which is

an international convention does not include

independent contractors. Be that as it may, this

is not a stevedore that we are presently confronted

with. But what we say is, in considering whether

the principles identified on pages 243 and 244

should be reconsidered, there has now been

legislative intervention which was what

Justice Stephen had identified as the way in which international comity was to be recognized by giving effect to a convention.

We say, taking that together with the

divergence of reasoning that we have sought to

identify, and taking it perhaps together with the

observations of the Chief Justice in one of the

articles to be found addressing the development of

Australian contract law, since the termination of contact with the Privy Council in Future Directions

in Australian Law, (1987) 13 Monash University Law

Review 149, to the extent that one has to identify

what is the proper principle of an agency contract,
we would say that to the extent necessary the Court

should permit what is identified at pages 243 and

244 to be agitated.

If it is not necessary in so far as determining this appeal because of the absence in

any event of what would be otherwise the

requirements of an agency contract, then it does

not arise, but I do not wish to be seen as adopting

it.

Chellararn(3) 33 5/3/92

MASON CJ:	Was this point debated in the courts below?
MR STREET:	Your Honour, the New York Star was the subject of written submissions attacking it at first
instance before the trial judge.  The trial judge,
because of the reasoning that he adopted, did not
find it necessary to deal with the Himalaya clause.
In the Court of Appeal, attack was made on the
Himalaya clause. That attack was the subject of
rejection, as Your Honours can see, in more or less
what we have described as a pigeon holing of the
agency agreement as a Himalaya clause.

We say the agency agreements can vary and

should be construed according to general principles

of contractual law. Applying general principles of

construction to this clause, we say it does not

satisfy the requirements. I think in answer to a

question that Your Honour the Chief Justice has

raised, we did attack the Himalaya clause.

MASON CJ: It is not dealt with in the judgments, is it, in

the Court of Appeal?

MR STREET:  No, Your Honour, and that problem is one which

is not because it was not raised in submissions;

it is simply because it has been given effect.

Your Honours will no doubt recall that there have

been a number of cases that have touched Himalaya

clauses of different forms, and Your Honours

recently rejected an appeal from the Court of Western Australia in relation to the Himalaya clause in Rockwell Graphic Systems Ltd v Fremantle

Terminals Ltd. There it was rejected because, as I

read Your Honours' judgment at 65 ALJR 514 - - -

MASON CJ: Yes, but in some of these instances, the ground of the application has been a desire to challenge the existing decisions, but it has emerged, on

consideration of the application, that really the

case turns on some other question.

MR STREET: Yes, Your Honour.

MASON CJ: But you are not seeking to challenge the existing

decisions, and nor did you before the Court of

Appeal or at first instance. It is understandable that you would not have.

MR STREET:  Your Honour, I do not think it is quite right to

say I did not seek to challenge the New York Star

at first instance to the extent of the

requirements. The subject-matter of the appeal,

that is the compliance with the requirements of

Lord Reid, was raised in the first instance, and

was raised in the Court of Appeal, unequivocally.

The development of the argument before the trial

Chellaram(3) 34 5/3/92

judge was more confined; the development obviously

of the argument before the Court of Appeal was more

confined. The scope to agitate it on a broader

basis is obviously only before Your Honours. We do

not wish to bite off more than we can chew.

MASON CJ:  I do not understand that the basis on which you

are putting it to us now is a basis which would

have been precluded before the Court of Appeal.

MR STREET: 

Your Honour, the submission being put in

relation to the satisfaction of the requirements I
identified was clearly put before the Court of
Appeal, so that if that is the question that

Your Honour the Chief Justice is focusing upon,

that was put. To the extent that one is trying to identify what the principle is in The Eurymedon or in the New York Star, we only seek to go to the

stage of saying that the correct principles are

identified in Lord Reid's judgment, and if those
requirements can be satisfied or we do not

challenge at all the concept of an agency contract,

we say if those requirements can be satisfied then

effect will be given. All we are seeking to do

here is first of all distinguish The Eurymedon and

the New York Star from the nature of the agency

agreement that applies in the present case. Having

distinguished it, we do not need to go further, and

unless invited to, I will not go further.

MASON CJ: 

You are not being invited.

BRENNAN J: 

Mr Street, is it right to say that Five Star

became bailee of these groups?

MR STREET:  Your Honour, I do not think there is any

evidence to that effect and I do not think there is

an admission to that effect.

BRENNAN J: Did the conversion consist of delivery of

possession to the wrong persons?

MR STREET:  The conversion consisted of authorizing the

release of the -

BRENNAN J: Release from?

MR STREET:  Your Honours, I am slightly uncertain as to

whether it was held by a particular terminal or

not. Would Your Honour ju~t excuse me one moment?

BRENNAN J: Well, the question is release by either party

from its own custody or possession.

MR STREET:  I think there was evidence that the container

was at a terminal; that terminal was not owned by

the second respondent. I think there is evidence

Chellaram(3) 35 5/3/92

to this effect, that the container would not be

released by that terminal without the authority of

the second respondent.

BRENNAN J:  The terminal must have been holding it for one

of the parties.

MR STREET:  Your Honour, the only party it could have been

holding it for would be the first respondent, which

is the carrier, and that answers Your Honour's

question I think, that the second respondent could

not have been a bailee.

BRENNAN J: Well then, the second respondent could not have

been the converter.

MR STREET: Well, Your Honour, in my respectful submission,

that does not logically follow. An act done by a

party intentionally to wrongfully deprive the true

owner of the goods, be it as a - - -

BRENNAN J: Well, who did release them, the first or second

respondent?

MR STREET:  The second respondent on behalf of the first

respondent.

BRENNAN J: Well, why are we concerned with agency problems?

MR STREET:  Under the agency agreement. I apologize,

Your Honour. Because there are two limbs to our

case, and I apologize if I have not made it clear.

If we fail on construction of clause 10 and

Your Honours find that clause 10 bites as a time

bar, then there still arises the question, "Can the
second respondent get the benefit of that time

bar?"

BRENNAN J:	Why does the second respondent need it?
MR STREET: Because the second respondent has a liability in

the present case, having authorized the release of

the cargo. His Honour held that both respondents

had been negligent, so that be it conversion or be

it negligence - - -

BRENNAN J: Whatever authority the second respondent had to

release it, it must have been an authority it had

by virtue of some arrangement with the first

respondent.

MR STREET: Yes, and Your Honour, in that regard, one of the

points I sought to make before was that the limited

authority contained in the agency agreement was one

that goods could be released without production of

the bill of lading if a good bank guarantee was

Chellaram(3) 36 5/3/92

obtained. So the second respondent was not even

acting under the authority of that agency

agreement.

BRENNAN J:  I was not directing my question to you about the

authority to do what was done, but the authority

which gave the second respondent the power to do

what it did.

MR STREET:  Your Honour, I think all I can do is go back to

the agency agreement because it clearly identifies

some power that it has.

BRENNAN J: Well, then, if there was some power that it had,

why is the power which it acquired not something
which is done which falls within the bill of

lading, in the same way as a stevedoring activity

might fall within the bill of lading?

MR STREET:  I apologize, Your Honour. I had not sought to

come back to this question.

BRENNAN J:  How do you distinguish the second respondent

from the stevedore?

MR STREET: 

The services provided by a stevedore are

primarily services of, more often than not,
discharging or loading the ship and handling the

goods in to a terminal or out of - off the ship or

on to the ship.  The acts of - the second

respondent in the present case was what was called

a general agent. That was the admission that was

given in evidence by Mr Brundish.  They were not

ever described as - - -

BRENNAN J: That may be so; call it what you like, but it

could only get involved as a party to this

litigation, could it not, if it was doing something

with respect to the cargo which was said to be

converted?

MR STREET: Quite so, Your Honour.

BRENNAN J: Where then is the point of distinction between

that and the stevedore in the cases you have been

referring to?

MR STREET:  The distinction is one which we have sought to

make good firstly because, in relation to the

Himalaya clause - - -

BRENNAN J: What is the distinction?

MR STREET:  A stevedore primarily is involved in the

handling of the goods; the general agent is the

representative of the carrier who will either

require presentation of the bills or, in the

Chellaram(3) 37 5/3/92

present case, participate in - which is what

occurred - the release of the goods without the

presentation of the bill. I am at some difficulty

to identify it beyond that, but I do seek to take

Your Honour back to the agency agreement to try and

answer Your Honour's question, because I think it

does take it somewhat further. At page 132, the

nature of the acts are provided for.	In clause 4,
for example:

The Agents shall be entitled to sign bills of

lading on behalf of the ship's master.

That is not something that a stevedore does.

As a matter of principle they may not antedate or date back any bills of lading nor may they accept letter of indemnity.

Again, this is obviously addressing the time of

issue of bills. Then:

The delivery of goods to consignees shall be effected exclusively on production of original

bills of lading, or in exceptional cases on

provisions of a good bank guarantee.

What we sought to make good was that that conduct

in the present case, that is requiring or not

requiring the surrender of the bill of lading, is

conduct by the second respondent, which is not

conduct that a stevedore engages in.

DAWSON J: That is clear enough, but what is the difference?

Do you say it cannot constitute the accsotance of an offer or the doing of something whict could

constitute consideration?

MR STREET:  We would say that the release without surrender of the bill of lading cannot constitute any

consideration.

DEANE J: But have you not got an anterior problem, and that

is this: when you have a carrier purporting to

contract for itself, its servants and agents, it is
an obvious thing to treat the consideration moving

from the carrier as consideration given on behalf

of all parties benefiting, and authority is clear

that in that context it is simply irrelevant that a

particular employee, or a particular agent, did not

give consideration over and above that given by the

carrier on behalf of its group. I mean, that is

said in all the judgments in Coulls, I was just

looking at, in 119 CLR.

MR STREET:  Your Honour, in the present case what we say is,

that there is no such promise of performance by the

Chellaram(3) 38 5/3/92

stevedore. There must be a consideration moving

from the stevedore.

DEANE J:  No, the carrier gave consideration. On its side

were the carrier, the servants and the agents.

There is no requirement of the law of consideration

that when you have a contract by A with B, C and D,

that each of B, C and D must give consideration.

It suffices if B gives consideration on behalf of

them all.

MR STREET:	Your Honour, the difficulty I have with that is this, that does not accord - - -
DEANE J:	I see the force that it does not accord with the

approach adopted in the stevedore case.

MR STREET: That, then embraces this, that if that is the

correct approach to apply, that the consideration, contrary to what is said in the joint judgment and

contrary to what is said by the Privy Council and

the Chief Justice is to be approached from that

basis, then we would say that that requires the

Court to apply general principles of interpretation

to find such an agreement, and we say that is where

public policy comes in identified by

Justice Stephen and Justice Murphy, that no

benevolent interpretation should be given to this

type of clause, and if no benevolent interpretation

is to be given, then the Court should not embark

upon what was picked up by the dissenting Lords in

the Privy Council and rewriting the contract for

the respondents.

If they wish to create a clause that does

achieve what Your Honour Justice Deane is referring

to, it can be spelt out, but it is not spelt out,

we respectfully submit, in the present case. It is

not spelt out, not merely because of the absence of

the identification of acts that could be referable

to an offer accepted, or the absence of any

promise; it also does not meet that criteria of

identifying that it is intended to be a party that

we have taken Your Honours to. But - - -

BRENNAN J:  Mr Street, have you finished answering

Justice Deane?

MR STREET:  Yes, Your Honour.

BRENNAN J: Because I want to take you back to the other

approach which I was discussing with you earlier,

and draw your attention to the pages on either side

of page 132, namely, 131 and 133, where the agent

undertakes by clauses. (2) and (3) on 132 to do

certain things, and if you go to 133, there is a

remuneration provided for the agent for each call

Chellaram(3) 39 5/3/92

discharging and a rate - there is a percentage of
the total of net freight shown in the cargo
manifest. That rather suggests, does it not, that
there were active duties for the agent to perform

physically, with respect to cargo?

MR STREET:  Your Honour, I think it is fair to say that

there was evidence given on that very question by Mr Brundish about the remuneration; the method of remuneration being derived from the total freight

payable, but there was no evidence of any acts.

There was no evidence of any conduct and what we

would say is, if it is to be the case that one

construes that the clause is saying if we do

anything in relation to this cargo, which we say it

does not say, it still has to~? an act referable

to the offer. T. at was the ar. ysis of reasoning

that Their Honours, the Chief stice and

Justice Jacobs referred to and there is nothing

here that could meet that requirement.

But, can I take Your Honours back to those public policy considerations to make good the

submission that no benevolent approach should be

adopted.

In the judgment of Justice Stephen in 139 CLR

258 - and perhaps I should pause before I do so. Can I just say, Your Honours, that in the United

States, the only decision of the Supreme Court there has said that such clauses are to be

approached with the approach of strict

construction, and it is strict construction that we

say is the effect to be given by reason of these

public policy considerations. What is said at

page 258 is:

Nor am I, with respect, satisfied that, either

in the interests of international commercial

comity or upon grounds of public policy, this

is a case in which the language of the parties

ought to be strained in an endeavour to give
it an efficacy which, according to its

ordinary meaning, it does not possess.

Those observations are clearly directed to an

interpretation of the Himalaya clause. His Honour
continues:

On the score of public policy the observations of Sheppard J at first instance

are of cogency. His Honour thought it proper

to refer to aspects of the evidence which had

disturbed him, aspects which suggested a lack of effective supervision and perhaps a degree of irresponsibility on the part of those whose

task it was to care for goods discharged in

Chellaram(3) 5/3/92

the port of Sydney. As his Honour points out,

while to enable such persons to contract out

of liability may reduce freight and
stevedoring rates, it may also tend to
increase insurance premiums for consignees.

The vice lies in the relative inability of the

latter, although bearing the burden of

increased premiums, or of their insurers, to

insist upon reasonable diligence on the part

of the employees of the carrier or its

contractors; they wholly lack the power to
control those employees. At the same time the

carrier and its contractors, in a position to
exercise control and supervision, lack the
incentive to do so which the sanction of
increased premiums or possible liability
involves. This divorcing of the power of

control from any liability for the

consequences of its non-exercise not only

attracts that natural antipathy to exemption

clauses and to the saving of "grossly
negligent people from the normal consequences

of their negligence" -

and His Honour refers to Justice Fullagar in Wilson

v Darling Island Stevedoring -

but may also be thought to be positively
undesirable in the public interest.

Can I just pause there before I seek to read the balance of His Honour's judgment in that

regard? Justice Fullagar's observations made in
relation to the Court's approach - in that case it
was said to be exemption and exclusion clauses or

limitation clauses - was that, in essence, public

policy dictated that the courts not encourage

wrongdoers from being relieved of the liability for

their acts. The way in which that was achieved -

that policy consideration - was strict

construction.

That public policy impact is one that seems to

be recognized within Darlington Futures v Delco,

because in Darlington Futures v Delco the passage

of the Chief Justice in the New York Star is cited

with apparent approval which refers to being

strictly construed. We say that concept of

limitation or exclusion clauses being strictly

construed is the same policy that is recognized and

been recognized by Justice Stephen and was

recognized by Justice Fullagar in making those
responsible liable but for - clear words -

relieving them from liability.

We say that public policy consideration is one

that impacts on whether a benevolent interpretation

Chellaram(3) 41 5/3/92

is to be given to this Himalaya clause or this

agency agreement as it is in the present case.

There is a further public policy consideration

which at one and the same time bears on the

question of international commercial comity.

While it is in the interests of great

fleet-owing nations that their ocean carriers,

and the servants and independent contractors

which they employ, should be as fully

protected as possible from liability at the

suit of shippers and consignees, the interest

of those nations which rely upon those fleets
for their import and export trade is to the

contrary. It was in response to such national

interests that the United States of America

and Australia, which both fell into the latter

category, enacted the Harter Act of 1893 and

our own Sea Carriage of Goods Act 1904,

measures which circumscribed the carrier's

freedom to contract out of liability. Each

was more stringent than were the subsequent

Hague Rules. Many nations, particularly

developing nations, have come to regard those

Rules as unduly favouring carriers at the

expense of cargo owners, especially because of

the quite restricted duration of the carrier's compulsory period of responsibility which they

impose, ending as it does immediately upon

discharge.

We would remind Your Honours that that also impacts

on that Article III rule 6 issue.

It is not clear to me that Australian courts

should regard it as in any way in the public

interest that carriers' exemption clauses,

effective before loading and after discharge,

should be accorded any benevolent

interpretation, either so as to benefit

carriers or so as to benefit independent

contractors by extending the scope of such

clauses to include such contractors. If
public policy does not dictate such a course,

neither do considerations of comity.

And reference is given to the International Trade

article. His Honour then further says that

international comity is not likely to be further

promoted by such a clause. At page 260, about

point 5, His Honour says this -

Anything approaching uniformity of the

law affecting international trade is no doubt

difficult of attainment but it may be that the

path to it lies rather by route of

international conventions and subsequent

Chellaram(3) 42 5/3/92

national legislation than by the adoption of

any deliberate direction in the judicial
interpretation of the parties' documents in
particular cases.

Your Honours, that observation applies particularly forcefully in the present case because that is

exactly what has taken place.

There has now been legislative intervention by

giving effect to an international convention.

That, in our respectful submission, reinforces the

considerations identified by Justice Stephen that

no benevolent interpretation should be given

because this is an agency agreement.

Justice Murphy, of course, joined in the

observations made by Justice Stephen as appears at

page 285. We seek to embrace those considerations
by saying that it is clear that Australia is a

shippers' as opposed to ship owning nation, that

those considerations impact in the approach to be
adopted as to whether a benevolent construction

should be given to this clause.

Your Honours, a strict construction was

adopted in Robert C. Herd & Co v Krawill Machinery

Corp, (1959) 359 US 297. The relevant passage,

Your Honours, appears at page 305:

Similarly, contracts purporting to grant

immunity from, or limitation of, liability

must be strictly construed.

That observation made there in relation to the

Himalaya clause in Herd's case, we would say, is

consistent with the approach that should be

adopted.

GAUDRON J:	Mr Street, what is it I am supposed to construe?
MR STREET:	I apologize, Your Honour.  I was seeking to

support the proposition of strict interpretation.

GAUDRON J:	Of what?
MR STREET:	Of the Himalaya clause.

GAUDRON J: Is the issue issue not whether the Himalaya

clause has effect rather than what it means? I

mean, if it has effect its meaning is clear, is it

not?

MR STREET:  No, Your Honour .. In my respectful submission,

its meaning is not clear in the present case.

GAUDRON J:	I see. What is it that is not clear?
Chellaram(3)	5/3/92

MR STREET: Firstly, Your Honour, it does not identify what

act is said to be fulfilment of its application,

that is, what act of performance gives rise to its

operation. Secondly, it does not identify that to
the extent found in the New York Star, it is
intended that to that extent the general agent in

this case is deemed to be a party to the bill of

lading. They are the extents to which it does not

make clear, we would say, the requirements

identified by Lord Reid. But we say further than

that, that the act that occurred cannot be

referable to such a -

GAUDRON J: That is clause 10, though, is it not? That goes

back to clause 10, does it not?

MR STREET:  No, Your Honours. I am seeking to identify acts

referable by way of consideration or fulfilment as

was being spoken of by the Chief Justice in

relation to the Himalaya clause. Could I perhaps

hand up to Your Honours an extract from Palmer on

Bailment that does actually discuss the Himalaya

clause at some length, but relevantly cites the

decision in Raymond Burke Motors.

DEANE J: There is nothing in the foreword about this.

MASON CJ: Just general approval, that is all.

MR STREET:	Your Honour, I have deprived my learned friend of the page reference by handing up all copies, and
deprived myself of it, likewise.

DEANE J: Would you like mine back?

MR STREET:  No, Your Honour. I will seek to identify it, if.

Your Honours would excuse me one moment.

DEANE J: It is page 1625, Mr Street.

MR STREET:  Thank you, Your Honour. Your Honour, the same

reasoning as was identified in Raymond Burke, we

say, is the reasoning that is applicable in the

present case.	We have given Your Honours reference
to it in the list of authorities.	The decision

reinforces the proposition that there can be acts

that will not be within the requirement of ·

consideration necessary under the fourth

requirement of Lord Reid, and we say the acts in

the present case - which, on the evidence of

Mr Brundish were said to be acts outside, or at

least not in reliance on, the bill of lading -
cannot constitute consideration moving from the
stevedore.

If it cannot constitute consideration moving from the stevedore, we say, at this stage the wider

Chellaram(3) 44 5/3/92

proposition identified by Justice Deane is not able

to be satisfied from this clause.

Your Honours, that approach to strict

construction also echoes language again found in

the joint judgment of Justice Mason as he then was,

and Justice Jacobs at page 276 in 139 CLR.	At
about point 6, what is said is this - having
referred to the need for the requirements of

Lord Reid to exist, at about point 4 - and we

embrace that requirement in the present case - but

what is said at the end is:

Commercial expectation could thus be

reconciled with a strict reading of immunity

and limitation clauses in general.

This clearly is a clause, we would respectfully

submit, within the embrace of what Their Honours

were there referring to.	The Himalaya clause works
exactly the same consequence.	We say that again

reinforces the approach of strict construction that

should be adopted.

Even if it not be strict construction, we say

that on its natural and ordinary meaning, this

Himalaya clause does not purport to satisfy the

requirements of Lord Reid and that there is no

evidence that would satisfy those requirements.

Your Honours, the only things I would then

seek to deal with, just if I can very briefly, were

matters that Your Honour Justice Brennan had raised

before lunch in relation to breach of contract as such and conversion. We would say that it is not

the same acts that give rise to breach of contract

as give rise to conversion.	We say the elements
are different.

In any event, we would remind Your Honour of

what is said in the New York Star in 144 CLR at

page 305. What is said there, at about point 8, is

this - and it merely takes one back to the same

question that we have already dealt with, of

construction. It says:

The proposition that exemption clauses may be

held inapplicable to certain breaches of

contract as a matter of construction of the
contract, as held by the House of

Lords ..... and indorsed in Australia ..... was

not disputed.

We say as a matter of construction, in any event,

that same question arises and we rely on the

reasons we sought to develop in that regard.

Chellaram(3)	5/3/92
BRENNAN J:	What is the distinction between the breach of

contract and conversion in terms of the factual
elements?

MR STREET:  Your Honour, I have been slow in picking up the

substance of Your Honour's point, and I should

apologize in that regard, but breach of contract

was only alleged as against the first respondent.

So as against the second respondent, there was no

cause of action advanced asserting breach of

contract. So there is a difference between the

two, to start with, that we would seek to

emphasize, namely cause of action in negligence and

conversion was advanced against both respondents.

Cause of action in contract was advanced only

against the first respondent. We say that in part

impacts in any event on such construction.

But secondly, we would say it is, firstly, the

act of intention in conversion or the ingredient of
intention that is necessary in relation to

satisfying the element; secondly, that it is the

wrongful depriving of the owner of the goods that

amounts to the conversion, whereas the act in

relation to the breach of contract, if it be an

act, is perhaps the breach of the term on the face

of the bill. We say that the two are different.

BRENNAN J:  What is it that is the act that is done or the

intention that is formed by any person which

satisfies one or other cause of action?

MR STREET:  Your Honour, the intention in relation to

conversion is the intended act of releasing the

cargo, in the present case.

BRENNAN J: What is it in the breach of contract?

MR STREET: There intention is irrelevant, and it is

.BRENNAN J:	Be it so, what was the act?
MR STREET:	The breach of the term relating to - on the

face of the bill that bills must be surrendered.

BRENNAN J: What was the act, though?

MR STREET:  Your Honour, strictly we would maintain that it

was not requiring the surrender of the bill of lading, because the language used is "bills of lading must be surrendered". That is the language.

But, Your Honour, driven to it, if I have to go to

it in the alternative I say it is the act of
releasing the cargo but, prirna facie, I say that is

not the language that·is found in the term on the face, and the act that is breached is the failure

Chellaram(3) 46 5/3/92

to require the surrender of the bill of lading,

which is different, in our respectful submission.

Your Honour Justice Deane, I think, also

raised the question of, if the genuine owner

required release of the cargo, what could one do?

In that regard, could I just hand up copies of what

was or was not done in the present case; copies of

exhibit 1 which were the conduct that the second

respondent engaged in in the present case in order

to satisfy, in so far as it sought to, the

obtaining of authority. The answer to Your Honour

Justice Deane's question was that one could seek to

obtain authority from the owner. But here that was

not done and His Honour Justice Carruthers held

that there was no authority obtained. But the

documents handed up, exhibit 1, plainly indicate

that no attempt was made to obtain such authority

in the present case and, Your Honours, the evidence

that we refer to in the summary of facts, in so far

as the acknowledgement by Mr Brundish that the acts

in the present case were ones that were recognized

to be a breach of duty to the owner, in our

respectful submission, reinforces the submissions

we have sought to put in relation to intention. If

the Court pleases.

MASON CJ: Thank you, Mr Street. Yes, Mr Ashburner.

MR ASHBURNER:  May I hand up the outline of submissions and

may I also hand up, in order to complete the appeal

book, the amended defence which was filed pursuant

to the leave of the Court of Appeal given during

the course of the hearing of the appeal. If I may

shortly just explain that amended defence I have

just handed up. Item 3 at page 19 of the appeal

book is the defence which was filed at the

beginning of the trial. At page 197 of the appeal

book there is then a further amendment. That was

filed pursuant to leave given at the trial, but

during the appeal it was noticed that that document had not met up with the papers and therefore it was	refiled and it, in fact, was the one in relation to
which the trial was operated. The one I have just
handed up was filed pursuant to the leave of the
Court of Appeal. May I come then to the argument
and deal firstly with the several grounds in which
the appellant seeks to challenge the interpretation of clause 10(2) of the bill of lading.

In my respectful submission, the correct

starting point is the clear statement of principle

of this Court in Darlington Futures Ltd v Delco

Australia Ltd, 161 CLR 500. The relevant passage

starts half-way down the page on 510 and continues

to the top of the next page, 511. The Court has

been taken to it already so I will not seek to read

Chellaram(3) 47 5/3/92

it to the Court again. That passage was cited and

approved and applied by this Court in Nissho IWAI

Australia Ltd v Malaysian International Shipping

Corporation Berhad, 167 CLR 219, the relevant

passage being at page 227 at about point 2 of the

page.

Many of my learned friend's submissions, in my

respectful submission, appeared to be difficult to
reconcile with the fullness of that approach and

were in error for that reason. In my respectful

submission, the judgment of the Chief Justice

correctly applied those principles and arrived at

the correct conclusions upon them as, indeed, did

His Honour the President, Mr Justice Samuels agree

with the Chief Justice.

Paragraph 3 of my outline mentions an argumen=

which was put below but is not put in this Court

and I do not, therefore, seek to take further time

on it. Paragraph 4 of the outline then seeks to

deal with the argument which was put, that the
circumstances of the delivery were beyond the

purview of clause 10(2), and once again, the

reasons of the Chief Justice in the passage I there

refer to in paragraph 4, in my respectful

submission, are abundantly correct.

A further ground that was put which, I think,

was not put before the Court of Appeal but emerged

for the first time during the special leave

application in this case, was that the matters in

question do not come within the wording of
clause l0(2) because the relevant causes of action
sued on are not - or not all of them - liabilities
under the bill of lading within the meaning of

clause 10(2). In my respectful submission, in the

light of the principles I have referred to and, in

particular, in the light of what the then

Chief Justice said in Port Jackson v Salmond &

Spraggon, 139 CLR 213 at 250, one-third of the way

down the page, and in the Privy Council

in 144 CLR 305, regarding the need to avoid narrow,

pedantic or fine distinctions. That argument fails

and I would respectfully seek to call attention to

a number of considerations which support that.

First, may I remind the Court that it has been abundantly clear for a very long time that a bill

of lading is not its~lf a contract, but merely

evidences an antecec~nt contract, and I refer in my
outline to two of the authorities that so decide, J

Sewell & Nephew v James Burdick, (1885) 10 AC 74,

the relevant passage being at 105, and the case of

the Ardennes, (1951) -1 KB 55, the passage being

at 59. When once it is recognized that a bill of

lading is not itself a contract but merely

Chellaram(3) 48 5/3/92

evidences one, that already demonstrates, in my submission, that clearly it is inappropriate to

give any literal interpretation to the clause, or

it could just have no significance at all.

Then, if I could take the Court to some of the

specific words of the bill because plainly 10(2)

has to be read in the context of the remaining

provisions of the bill.

Firstly, can I take the Court to the wording

of clause 5(4), which is conveniently at page 234

of the appeal book. That provides that:

The defences and limits of liability provided

for in this Bill of Lading shall apply in any

action against the Carrier for loss of or damage to the goods whether the action be

founded in contract or in tort.

So that that, in my respectful submission,

demonstrates that the wording of - my learned

friend tells me that there is an error there, that

in the second last line of 10(4) as it appears on

page 234, the word "of" should not appear, it

should read:

Carrier for loss or damage to the goods - a point of distinction which, in my respectful

submission, is not of substance.

What one gets, in my respectful submission,

from 5(4) is that, plainly, clause 10(2) is to be

construed as giving rise equally to rights or

immunities with respect to causes of action in tort

as in contract and so, plainly, the clause, in my

submission, has to be construed as applying to

either causes of action.

Second, if I can call attention to the provision of clause 5(2), which is on the same page

in the appeal book, page 234, the second half of

that clause provides that:

every such servant, agent and sub-contractor
shall have the benefit of all provisions
contained herein benefiting the Carrier as if

such provisions were expressly for their

benefit.

When all of those circumstances are brought
together with the applicable principle of

interpretation and the firm statement, both in this

Court and the Privy Council, about the need to

avoid narrow, pedantic and fine distinctions, then,

in my respectful submission, what emerges is clear,

Chellaram(3) 49 5/3/92

that the intention of clause 10(2) is very much

wider than any narrow or literal reading of it

would indicate and it covers, as a result, any

liability relating to the goods which are the
subject of the bill of lading and, in particular,
where the particular events give rise to a

liability for breach of contract against the

carrier, the shipping company, that will always be

a liability under the bill of lading within the

meaning of clause 10(2), and that will be the same

whether the action is brought against the carrier

or against the agent.

My learned friend sought to gain some comfort

from an analysis which was highly critical of the

second r~?spondent' s action3 in releasing the goods

without 0~taining the endo~sed bill of lading and

having only obtained an in.iemni ty from the

consignee. In my respectful submission, the

submissions are not relevant but are in any event

mistaken in their attempt to characterize the

second respondent's activity in that way.

Can I take the Court to page 139 of the appeal

book in the findings of the trial judge where

His Honour conveniently sets out the relevant

materials. It shows the heinousness of what was done was of a very much lesser degree. It was a

mere mistake but was not anything wilful or

anything of that kind. What was done was that -

reading from line 4 on page 139:

On 18 June, Five Star -

which was the second respondent, the agent -

telexed Costran -

and from the previous page, at line 6, it emerges

that Costran is the Hong Kong agent of the shipping
company, the first respondent.	So the Sydney agent

telephones the Hong Kong agent in the following

terms -

"Have received request from consignees

G.E. Gemson (Aust) for release without B/L on

personal g'tee of -

and then the goods are mentioned -

we prepared to assist by release on

personnel -

which plainly should be "personal"

g'tee providing you have legal document in

form of g'tee to cover total costs Sydney -

Chellaram(3) 50 5/3/92

and the sum of money is mentioned.

Please confirm by telex soonest as bonding

20th. Regards Fivestar."

Costran replied by telex in the following terms:

"Ryt 3298 dated 18/6/85. We hv no objection

that u release the cargo to consignee personal

guarantee. But be sure u will collect the
freight n all other charges sat your side

before release cargo."

It is necessary to note at this stage,

that Costran did not obtain Chellaram's

consent to the release of the goods without

production of the bill of lading, but Five

Star wrongly assumed that Costran had obtained

such consent.

So that the degree of negligence was pretty

slight. Although His Honour did find that it was a

breach of duty, it was in making the perfectly

natural assumption that the Hong Kong agents of the

shipping company would not send back a telex like

that without first obtaining the approval of the

appellant.

Viewed in that light, in my respectful

submission, much of the attempted rhetorical force

of my learned friend's submissions disappears. It

was not a case of wilful calculated misbehaviour or

anything like that, but a very slight breach of

duty due to a very natural misunderstanding.

My learned friend also submitted that the

circumstance that the second respondent obtained

the guarantee in itself gave rise to some severe

adverse implication against the defendant, some

heinous one or other. In my respectful submission,

when that evidence is viewed, the heinousness of it

thing to do, having wrongly but understandably	simply disappears. It was a perfectly natural
assumed that the consent of the appellant was obtained.

The result was that there were four causes of

action relied upon in the claim against the defendants. There was a cause of action in contract against the first respondent, the shipping

company, and at page 162, a finding of breach of

contract is made. There was a claim of conversion,

and the relevant passage appears to be at 169, but
no finding of conversion was made.

There was a claim in negligence, and at the top of page 162 at the foot and at the top of

Chellaram(3) 51 5/3/92

page 163, a finding of negligence was made against

the second respondent, negligence in what was said
to be custody of the goods, which is perhaps

slightly loose language. The fact giving rise to

the finding of negligence was the producing of the

document permitting the goods to be removed from

the store without having received either consent or

the endorsed bill of lading. The fourth cause of

action sued upon was bailment. Again, there is no

finding of any liability under that.

My learned friend also sought to get some

comfort from the reasons for decision of this Court

in Nissho Iwai Australia Ltd, 167 CLR. He read

from page 227 of the joint reasons for judgment, at

about the middle of the page. If I may, however,

just read the rest of that paragraph to put it into context. The Court then proceeded to say, at about point 6:

If the happening of a stipulated event will

always result in the defeat of the main object

of the contract, there will be no scope for

holding that that object requires the

conclusion that the exempting clause is not
applicable to that event. But even in cases
where the occurrence of the events stipulated
in the exemption clause will not always defeat
the main object of the contract, the nature of

those events may nevertheless give rise to the

interference that the clause was intended to

apply to those events even when they occur in

circumstances which defeat the main object of

the contract.

Here, in my respectful submission, it is

relevant to note that clause 10(2) is not one which

upon any construction of it is one which can be

fairly described as being intended to defeat, or
having the effect of defeating, the main object of

the contract. It does not excuse the carrier, the

first respondent, from any obligation arising under

the contract. It does not excuse the second

respondent from doing anything which it may choose

to do in its capacity as agent for the first

respondent. What it does do, relevant to this

purpose, is not effect any obligations but merely

to impose a condition upon the way in which an

action for damages for breach may be vindicated,

namely that it be commenced within nine months. So

that, in my respectful submission, viewed in that

light, the comfort that my learned friend sought to

get from the Nissho Iwai decision vanishes.

In the result, in my respectful submission,

the court below achieved the correct interpretation of clause 10(2) of the bill of lading, applying the

Chellaram(3) 52 5/3/92

correct principles. There simply is no error that

has been demonstrated and therefore the first two

grounds of appeal going to matters of construction

ought to be dismissed.

If I could come next to my learned friend's attack upon the Himalaya clause and the references

he has made to the evidence. The outline of

argument I prepared was upon an assumption which

proved to be partly unfounded, that what my learned

friend would seek to do would be to mount a head-on

attack upon the principles enunciated in this Court

and the Privy Council. He did make some limited

attack but not the wholesale one that I was
anticipating and therefore to the extent that he

did not make the fully fledged attack what I have outlined there is partly beside the point. In my

respectful submission, nevertheless, what I have

outlined there with the references to the

authorities of the particular passages is a useful

starting point.

In my respectful submission, what there has

now developed is an orthodox analysis in this area

in terms of the traditional principles and concepts

of contract law, which leads in the usual case to the result that an agent or stevedore or other in

like position is entitled to the benefit of

restrictive provisions, time limitation clauses and

the like, in a bill of lading or analogous

document.

In the New York Star and the earlier

Satterthwaite case, there are two analyses, both of

which, in my respectful submission, are clearly

correct, clearly orthodox and are clearly

applicable upon the evidence in this case and, as

Your Honour Mr Justice Deane pointed out in

argument, there is, of course, available a third

argument also, in my respectful submission, clearly

applicable on the evidence here, which also leads

to the same result.

May I shortly take the Court to the evidence

which is relevant to the three modes of analysis.

Before doing so though, may I submit that it is not

correct, in my respectful submission, for my

learned friend to be critical, if he was, of the

way in which this aspect of the case was dealt with

in the Court of Appeal because there, unless my

memory is very much wo~se than I believe it to be,

there was no attempt by a detailed analysis of the

evidence to demonstrate a lack of fulfilment of any

of the ingredients of·any of the traditional

analyses.

Chellaram(3) 53 5/3/92

It was rather done in other ways, primarily

concentrating upon points of construction of the
bill of lading, and then with a great deal of
discussion about other matters which are not

immediately relevant. So, in my respectful

submission, it comes as no surprise that there is

not the sort of detailed analysis in the judgments

of the Court of Appeal, but the evidence is there

and it does not take any very great time to take

the Court to it.

The first analysis, in my respectful

submission, which it is convenient to go to, is an

analysis in terms of there being an offer by the
appellant evidenced by the bill of lading, accepted

by the agent, the second respondent, that

acceptance taking the form of the performance, what

it did in relation to the goods, and that

performance, what it did being done with knowledge

of the bills of lading and their terms and the

particular provisions, including 10(2). The

consideration supporting it is the performance of

that activity, and there can be no doubt, in my
respectful submission, that there is a clear intent

to enter into legal relations.

The second analysis that I would seek to come

to second is that there is an offer by the

appellant, that offer being evidenced by the terms

of the bill of lading, that it was accepted by the

first respondent at the time, that is to say, that

the acceptance of it is also evidenced by the bill

of lading, and that the first respondent so

accepted it on behalf of the second respondent.

There are then two alternative formulations of it.

The first is that the acceptance was done by the

first respondent with the authority of the second

respondent. The second analysis is that even if there was no authority, express or implied, that the act of the first respondent was ratified by the

second respondent, the ratification taking the form

of the filing of the various defences which plead

the immunities and like in the bill of lading.

The third analysis is the one put forward in

argument by Your Honour Mr Justice Deane, and that

is that there is an offer and there is an

acceptance both evidenced by the bill of lading,

that that gave rise to a joint contract with both

the first respondent and the second respondent;

that the consideration for it is the consideration

moving from the first respondent, the shipping

company, as evidenced by the bill of lading, and

upon that view of it, the activity by the second respondent, the agent in Sydney, is not relevant

either to offer acceptance or consideration. It

merely becomes relevant as the events which gave

Chellaram(3) 5/3/92

rise to the claim against it, and therefore the

occasion upon which the reliance is placed on the

time limitations in clause 10(2).

As to the first of those analyses, the

Satterthwaite analysis, if I could so call it, the bill of lading Your Honours have already been taken

to. In my respectful submission, clearly that

contains an offer. The acceptance, in my

respectful submission, is the performance of the
second respondent with knowledge. As to
performance, there is a good deal of evidence, and

I seek not to take up too much time on it. At page 139 of the appeal book, line 27, there is

reference to Five Star, the agency, company, second respondent, arranging the release of the goods. At

page 71 in line 16 in the evidence there is

evidence that the second respondent actually

released the goods. At page 163 in line 5, in the

trial judge's reasons, he says:

For the sake of completeness it should be
noted that during the course of his evidence,

Mr A.M. Brundish, Shipping Manager of Five

Star, fairly conceded that Five Star had

delivered the cargo without production of the

bill of lading and without the authority of

Chellaram to do so.

There is a good deal more evidence, but perhaps it

is tedious to go to the lot of it. In my

respectful submission, there can be no doubt

whatever that the agency company did something in

relation to the goods in intended performance of
the sort of role for it which was envisaged by the

bill of lading. It made a mistake. If the

alternative is true and it did nothing, then there

would be no basis upon which it could have been liable and it would have disappeared from these

proceedings.

As to knowledge of the bill of lading, there

is again a good deal of evidence. At page 68 of
the appeal book - my learned friend tells me that

knowledge of the bill of lading on the part of the

agent and, in particular, the time bar provisions

in clause 10(2) is not in issue and so I will not

take the Court further to that. I should just

mention in passing, though, that at page 68 line 30

there is evidence that the second respondent, the

agency company, is a joint venture of the first

respondent and another company, Burns Philp, for

the purpose of doing the agency work throughout

Australia. So that there is in fact a very close

relation between the first and the second

respondents; they are related corporations. The

Chellaram(3) 55 5/3/92

consideration then is the performance and that is

the same evidence to which I have already adverted.

And so, in my respectful submission, on that

traditional analysis, all of the evidence is there

and there simply is no scope for any attack upon the

compendious conclusion of the Court of Appeal, the

Court of Appeal being quite correct to deal with it

compendiously given that there was no detailed

attack on the details of the evidence.

On the alternative approach, that emanating

from Chief Justice Barwick in the New York Star and

approved by the Privy Council, again, the offer is

constituted by the bill of lading and I do not, I

submit, need to go further than that. The

acceptance is by the bill of lading and, again, it

is simply a matter of the terms of it.

Then, on the two alternatives of agency, that is to say the first respondent having the express

or implied authority of the second respondent and

the second alternative of ratification, it is

perhaps necessary to go to a little of the

evidence.

As to authority, at page 68, lines 26 to 27,

there is evidence that:

The second respondent is the port agent of the

first respondent in Sydney -

and that is, of course, merely a specific example

of the general Australia-wide relationship

demonstrated by the formal agency agreement to

which the Court has already been taken.

At the same page, page 68, line 33, its role

was the first respondent's -

agent for managing vessels entering

Australia -

At the next page, 69, in the first five lines,

there was no written agreement between the two

companies by which the second respondent authorized

the first respondent to do things on its behalf.

But, in the next couple of lines, there is some

belief that there was an oral agreement although

first hand admissible knowledge of it was not with

the witness. It is clear that the agency agreement

does not authorize it, of course.

At page 69, in lines 13 to 15, the role of the

second respondent as the general agent of the first

respondent throughout Australia emerges and at

lines 17 to 18, that the second respondent does all

Chellaram(3) 56 5/3/92

of the first respondent's agency work; no one else

does. At 27 to 30, on the same page, that there
was never any objection by either party, the first

or the second respondents to the provisions in the bill of lading put in primarily between COSCO, the

first respondent, and the appellant.

There is the evidence to which I have already

referred, of the companies being related

corporations, the agency company being a joint

venture company between the first respondent and

another company. In the light of all that, in my

respectful submission, there is a clear and very

strong case for an implication of authority from the second respondent to the first respondent to enter into the very kind of contract on its behalf

which is contained in this bill of lading, this

bill of lading being a standard form about which it
has had knowledge for very many years prior to the

relevant time.

The alternative approach is ratification. The

principles in this regard, in my respectful

submission, are correctly dealt with in a decision

of the New South Wales Court of Appeal called

Lifesavers (Australasia) Ltd v Frigmobile Pty Ltd,

(1983) 1 NSWLR 431, the relevant passage being in

the judgment of Mr Justice Hutley at 437, from just

below letter e, going over to 438 to letter f. I

had not intended to refer the Court fully to that,

but the argument has taken a different form and

perhaps I should refer to those principles.

To the extent to which they may have been

challenged by my learned friend, I did not

understand him to be dealing with ratification at

all in this Court or below, and so perhaps he does

not challenge any of this, but in my respectful

submission, His Honour gets the principles exactly

right there.

MR ASHBURNER: Well, my learned friend says that he does not

seek to challenge it, so in that event I will not

seek to take up any further time.

MR STREET:  I do not seek to challenge the third limb of

Lord Reid, Your Honours, which is the question of

authority, and I have not sought to.

MR ASHBURNER:  I am obliged for that, and I can pass on then

at once.

On the third analysis, again, in my respectful

submission, all of the ingredients are there.

There is plainly an offer and an acceptance and it

is no straining of the language at all to treat it

as, therefore - the language of the bill of

Chellaram(3) 57 5/3/92

lading - as being intended to give rise to a

contract between three parties, the appellant and

both the respondents. There is no doubt, in my

respectful submission, that there is consideration

for it immediately. The promise to carry the goods

by the first respondent and the actual carriage of

it would be sufficient for that.

In the light of Coulls v Bagot, there is no

requirement, in my respectful submission, for there
to be consideration moving also from the second

respondent, and so, again, in my respectful

submission, that represents a third perfectly

orthodox analysis leading to the conclusion reached

by the Court of Appeal. Each of the three

analyses, in my respectful submission, are ones
which enable the courts to give effect to the

reasonable expectations of reasonable commercial

people. Each of them are a fully adequate

explanation of why it is that His Honour

the Chief Justice Sir Garfield Barwick in Salmond

and Spraggon and the Privy Council both emphasized

that it is the ordinary case that bills of lading

will give rise to restrictions on liability, and

the like, on the part of stevedores and the like.

It will be exceptional if they do not and that is

the reason why in both places there is deprecated

any approach of seeking to go to the clauses with

hostility or seeking to elaborate fine distinctions

or the like.

In my respectful submission, therefore, there

is a clear case here that the second respondent was

entitled to the benefit of clause 10(2), and as I

have already submitted, clause 10(2) correctly

construed is clearly applicable in these

circumstances.

My learned friend did also seek to distinguish

the earlier cases upon the ground that the second

respondent is only an agent, whereas in those cases

the Court was concerned with a stevedore but, in my

respectful submission, if the position is crystal

clear, as it generally is for a stevedore, then it

will be even clearer in the case of an agent. As

is established by the evidence here, it is clear

that the relationship between an agent and a

shipping company is even closer. They are more

clearly in each other's contemplation than the

stevedoring company, who may be rather employed ad

hoc. Particularly is that so when there is a formal
agency agreement when, as here, the second

respondent does all the first respondent's agency

work in Australia and the second respondent is a

joint venture company- owned by the first

respondent.

Chellaram(3) 58 5/3/92

My learned friend also sought to distinguish,

or seek to have the Court overrule the earlier

authorities upon the footing of public policy but,

in my respectful submission, again that does not

lead to the conclusion he seeks. In my respectful

submission, it is at best speculative for the Court

to seek to go into the area of whether, if the

Himalaya clause is not effective, that will lead to increased efficiency, a reduction in negligence or carelessness or the like, and a reduction in
expenses, a reduction in claims experience or the

like. It is equally plausible, perhaps sadly more

so, to contemplate that in the ordinary course of

humanity, once the insurance is taken out people

tend just to forget it and forget the risk and

carry on in their normal way. Having paid the

premium, the matter is simply forgotten until the

next premium comes around.

There is also a strong contrary circumstance

in my respectful submission, and that is this, that

ordinary speaking, it will be much cheaper and more

efficient for there to be first party insurance rather than third party or liability insurance. When it is the first party insuring, the first

party knows precisely what the goods are and

precisely what the value is and the premium'may

therefore be calculated precisely in relation to
those matters as well as in relation to the

particular risk against which coverage is sought.

When it is liability insurance there is the problem

that it has to cover a variety of events, a variety

of goods of differing value and, what is more, the
claim may not just be for the value of goods, it

might also encompass consequential loss. So that

in general, in my respectful submission, it is

simply inappropriate for the Court to venture into

that area. That is something more suited to an

inquiry in parliamentary legislation in the light

of it.

Further, in my respectful submission, it is

clear that those policy matters did not receive the

approval of the majority of this Court or of the

Privy Council. In my respectful submission they are misconceived and do not lead to the conclusion that the orthodox and proper application of the

concepts of offer, acceptance, consideration and so

on lead to the usual answer that indemnity is given
on the facts of this case to the agency.

May I then come to the remaining ground of appeal, namely, the application of the Hague Rules

in these circumstances. This matter only arises if

the Court is against the respondents on the other
matters I have already argued. If the Himalaya

clause is effective and if rule 10(2) receives the

Chellaram(3) 59 5/3/92

interpretation for which I contend, then the

Hague Rules point becomes unnecessary to determine.

But in my respectful submission there are two

alternative analyses, both of which are correct and

both of which lead to the conclusion that the

Hague Rules were applicable at the time when this

loss occurred and that their application means that

the respondents are entitled to judgment on that

ground also.

The matter is the subject of a deal of

authority, none of it altogether satisfactory and
none of it precisely in point. It is therefore, I

submit, necessary to go first to the detailed

provisions of the Hague Rules in order to look at
them before then going to the particular decisions

to see how they have dealt with it. Before doing

so I should perhaps make it plain what the two

alternative analyses are for which I contend. The

first of them is that the Hague Rules naturally and

properly construed do apply and were still

applicable at the time when these goods were

misdelivered, notwithstanding that they were of

course no longer on the vessel;	it was well after
discharge from the vessel.

MASON CJ:  Mr Ashburner, at this stage it may not be

necessary to trouble you further. The Court will

take a short adjournment and consider the course

that it will take in this matter.

MR ASHBURNER:  May it please the Court.

AT 4.14 PM SHORT ADJOURNMENT

UPON RESUMING AT 4.29 PM

MASON CJ:	Mr Ashburner, we need not trouble you further.
MR ASHBURNER:	May it please the Court.
MASON CJ:	Mr Street, do you wish to reply to what

Mr Ashburner has said?

MR STREET:  I do, Your Honours. Can I deal firstly with the

question of clause 10(2) in reply, and the point

that my learned friend sought to make by reference

to clause 5(4). In that regard, could I take

Your Honours very briefly to that clause again,

from which my learned friend sought to draw some

Chellaram(3) 60 5/3/92

comfort. It appears at page 234 in the judgment of

the Chief Justice.

Firstly, Your Honours, the point that we would

identify is that there is, as has been corrected, an error. What it talks of is "loss or damage to

the goods". The scope that that has, we say, is

limited; limited by reference to the words "loss

to goods". In Nissho Iwai, loss to goods was

expressly held or referred to as not meaning goods

lost.

We say "loss to goods" within clause 5(4),

which is the expression that is used, in

contradistinction, Your Honours, to the language

found in clause 6 that is immediately below, "loss

of or damage to", that what is caught by

clause 5(4) is only the loss to goods and it does

not have the wider scope of goods lost.

I would very briefly wish to take Your Honours

to Nissho Iwai to make good that submission in relation to what was there held in relation to similar language. That is found in 167 CLR. If

Your Honours would go to page 228. Bear in mind,

Your Honours, that the expression here found was of wider import, namely it was "loss or damage to or

in connexion with goods", as Your Honours will see

from about point 5 at page 228.

The argument that the words "loss or damage to or in connection with Goods" in cl 8(2)(d) do

not cover "loss of goods", based on these

textual considerations, is not without force.

However, as we have already pointed out, the

argument, if accepted, would result in a

construction of cl 8(2)(d) producing

unacceptable consequences.

What is then said at the top of page 229:

Accordingly, the words "loss ... in

connection with Goods" in cl 8(2)(d) should be

read as covering "loss caused by loss of

goods".

So, Your Honours, the language that was held in

that case to be able to extend to loss of goods was
the additional words which are not present in the

present case in connection with the goods.	And in
this case again, we seek to reinforce the

submission advanced that clause 5(4) is limited to

loss to goods, not goods lost, by reference to what

one finds in the language again at page 234 in the

first line of clause 6, where it says:

Chellaram(3) 61 5/3/92

The Carrier shall not be liable for loss of or

damage to goods.

Having taken Your Honours to that distinction, we

would say that distinction gives rise to this

significance, namely, that on its face clause 5(4)

does not extend to a tort in the present case

relating to goods lost. It does not assist in the

construction of clause 10(2).

So, Your Honours, we say that no joy in the

present case is to be found from reference to
clause 5(4), and for the reasons that we identified
before, we say that on its natural and ordinary

meaning in so far as clause 5(4) is concerned, it

does not pick up goods lost. It should be read

contra proferentem, or alternatively, by

modification by necessary implication.

Be it in either case, any one of the above, it

is clear the clause 5(4) does not extend the scope,

we respectfully submit, of clause 10(2) and, in our

respectful submission, that has some logic in that

what was being dealt with in clause 5(4) was of

more limited content than what was to be dealt

with, for example, in clause 6. So, Your Honours,

in our respectful submission, the starting point

that my learned friend took the Court to is one

which does not sustain a wider ambit of

clause 10(2). So one still has the language that

has to be reconciled and the difference in language

found in clause 10(3), where the wider words of

"all liability whatsoever in respect of the goods"

are found and we maintain that if the object of the

contract is to have some content identified in

Darlington Futures and, in our respectful submission, it must be given some content in the

present case, that object is being defeated in the

present case and where one has the language as

found, we would respectfully submit that

clause 10(2) is not able to be construed as giving

rise to an effective time limitation.

If Your Honours are against the appellant on

those submissions, there remains the question of

the Himalaya clause. In relation to the Himalaya

clause, can we advance this? That is,

Your Honours, what my learned friend said to the

Court was that the act of release - and the

evidence it never got any higher than this - was

held to be the consideration or the performance of
the necessary prerequisite to give rise to an

enforceable agency agreement.

Your Honours, that is the only act that was

identified. No other·act in relation to the goods

was the subject of evidence. That cannot be, in my

Chellaram(3) 62 5/3/92

respectful submission, an act that can constitute

consideration where, as in the present case, there

is no identification in the clause - that is the

Himalaya clause in this case - of what acts were to

be performed, and to give this clause scope of

extending an agency contract cannot be reconciled

New York Star The
with what was said in the or extension there to acts of performance that were

focused upon as giving rise to the nature of the

offer or the conduct that gave rise to a binding

arrangement, nor, in our respectful submission,

does the omission of the reference to "deemed to be

parties", which is absent in the present case,

satisfy the requirements of Lord Reid.

In our respectful submission, the

considerations that were identified in the judgment

of Lord Wilberforce, that the four requirements

must exist, must be real. If one is to give that

reference to the finding of those four requirements

any content, then they must be able to be

identified in the present case, and we say that the

content cannot be given, in our respectful

submission, to those first and second requirements,

or, more importantly, the fourth requirement of

consideration when one looks at what is said to be,

on the arguments presented by my learned friend,

the act of consideration.

TOOHEY J:  Mr Street, it is clear, is it, that clause 5(4)

is "loss or damage", is it, that it is not "loss of

or damage"?

MR STREET: Yes, Your Honour.

TOOHEY J: It is just that I cannot pick up a legible copy

but I notice on page 242, the Chief Justice deals

with the provision as if it is "loss of or damage".

MR STREET: Quite. Yes, Your Honour, I think that error may

well have been picked up and I would embrace that.

TOOHEY J:  I am not suggesting that there was an error or

that it was picked up. What I am suggesting is

that on page 242, line 15, the Chief Justice deals

with the bill and the relevant provision as if it

read "loss of or damage to" which is the way in

which the subclause is quoted earlier in his

judgment.

MR STREET:  Yes, Your Honour, and that, in my respectful

submission, is unequivocally incorrect, as if one

has the ability to pick up exhibit A that I handed up I think Your Honours will be able to see at the end of clause 5, the words saying:

Chellaram(3) 63 5/3/92

Carrier for loss or damage to the goods.

So, Your Honours, there is no question - and

Your Honours can see it is the last line at the end

of clause 5.

TOOHEY J: Are you speaking of the document that you handed

up?

MR STREET:  Yes, Your Honours. It is extremely difficult to

read, Your Honours, but none the less it is legible

if one studies it. It does say:

apply in any action against the Carrier for

loss or -

the last word in the last line is "or" and the word

immediately before that is "loss".

Your Honours, if I can embrace what

Your Honour Justice Toohey has just identified,

that, in our respectful submission, perhaps

reinforces the ground on which we would seek to say

that the reasoning of the Chief Justice in so far

as he construed clause 5(4) in that way together

with clause 10(2), was clearly wrong and proceeding

on a wrong premise because the clause does not say

such. The thrust of the argument we seek to

advance is, of course, that if clause 5(4) does not

work any extension of clause 10(2), then the

submissions we have earlier advanced in relation to

conversion and the like have even greater force and

we say that to read the words "loss to goods" as

meaning "goods lost" is, in our respectful

submission, a construction not open on the natural

ordinary meaning of the words.

BRENNAN J:  Mr Street, what was the text of this clause that

was given to the Court of Appeal?

MR STREET:  Your Honour, the respondents handed up a bill of lading that was a blown up version, which I think

we took some issue with, and we handed up an

equivalent document to what we have handed up

before Your Honours, it is my recollection; that

is, we handed up a blown up copy of the bill of

lading. Can I just, in that regard, say this:

there was - the Chief Justice did have the original

as well, but it was suggested that this argument

was not developed, and that was the second matter

that my learned friend sought to say in relation to

clause 10(2). Can I just say, in that regard, in

the supplementary written submissions by

respondent, which were the submissions put to the

Court of Appeal, what·we said was this:

The language used in subclause (2) -

Chellaram(3) 64 5/3/92

that is of clause 10 -

nine months after delivery of the goods cannot

be made out, as there is no such delivery. In

this regard delivery must mean delivery under

the bill of lading. The same expression in

relation to liabilities under this bill of

lading qualifies the second sentence in

subclause (2), and again it is submitted that

it can have no operation in respect of a

liability arising otherwise than under this

bill of lading. It does not have the added
breadth of language whatsoever. Further,

there is no basis for reading the reference

to, in the case of total loss of goods, to

encompass anything beyond the breach of

contract.

Your Honours, there was then given reference to

West v Darlington. It was not correct, as my

learned friend sought to put, that this argument

was not developed before the Court of Appeal. What we seek to say is that when taken into account with

the error that Justice Toohey has pointed out flows

in the reasoning of the Chief Justice - - -

TOOHEY J:  I do not want you to attribute to me a statement

that the Chief Justice was in error, Mr Street.	I
am simply pointing out that the judgment is

internally consistent in its reference to the terms

of the bill of lading and later quotations.

MR STREET:  Your Honour, I resile from the bolder assertion

and put it this way: that is, that there is an

error that has been continued in His Honour's

reasoning in relation to clause 10(2) and its

scope.

McHUGH J: Except it did not affect His Honour's reasoning

at all; he just said there are various provisions

in the bill of lading dealing with the subject of

loss of or damage to the goods.

MR STREET:	Your Honour, I think in the present case, what His Honour has picked up though at page 242,
line 12, is total loss of the goods.

McHUGH J: That is the phrase in 10(2).

MR STREET:  Yes, Your Honour, but I think then if one goes

down, what one sees on the next line:

There are various provisions of the Bill

of Lading dealing with the subject of "loss of

or damage to the ·goods".

Chellaram(3) 65 5/3/92

Your Honours, those words, "loss of", are not the words found in clause 5(4); it is "loss or damage

to". So, Your Honours, in our respectful

submission, that reference at line 15 at page 242

is clearly picking up what has operated in

His Honour's mind in relation to the scope of

clause 5(4), and we say that it does not have that

scope.

But, Your Honours, that was all I wish to put

in relation to clause 10(2). In relation to the

Himalaya clause, we would respectfully submit that

the requirements to be satisfied should be ones

that are real and not in the context of merely an

assertion of evidence through unidentified

performance, or performance that is directly

inconsistent with the acts under the bill of lading

and, Your Honours, it was conceded by Mr Brundish

that the conduct that he was engaging in was not

conduct under the bill of lading and was conduct

that was recognized by Five Star as a breach of

duty to the owner of the goods. Your Honours, in
those circumstances, that is the only conduct in

breach of duty to the owners of goods which, it is

said, in some way, to amount to consideration.

Your Honours, the last matter, in relation to

the Himalaya clause, which I seek to address is

this: my learned friend sought to draw comfort

from what was said by Justice Deane in relation to

a promise by the carrier to perform. That is the

very antithesis - that is the possibility of

consideration being the promise by the carrier - of

what is found in the New York Star in the judgment

of Lord Wilberforce, where what His Honour says in

the New York Star, was - His Lordship says in The

Eurymedon is that a promise to perform an

obligation under which one is already bound, namely

the promise by the stevedore to perform the

obligation that it is bound to perform to the

carrier, is good consideration. It was not around

the other way, that His Lordship was picking up the

prospect of consideration when he made observations

in respect of a performance of an obligation in

respect of which one is already bound. Your

Honours, that appears in the judgment at page 186

in 1975 Appeal Cases.

Your Honours, in our respectful submission,

the matters are ones in which the differences in
the present case are of significance and would

require the Court to look at the Himalaya clause

and give effect to it.

Your Honours, can I say one last thing,

perhaps in anticipation and that is this:

Your Honours, in so far as it might otherwise be

said that this were not an appropriate vehicle for

Chellaflam(3) 66 5/3/92

looking at the Himalaya clause, we do maintain that the justice of the case in the present case, so far

as the appellant is concerned, would require the

Court to determine the issue where, as we would

maintain, the agency agreement in the present case,

is clearly one that is bad, and where the appellant

being, according to the evidence, a sole trader, is

one who, if it be correct, is being denied recovery

in circumstances where as a matter of injustice in

the case, it is clearly a clause in the present

case that does not meet the requirements, and there

is no evidence to support it. If the Court

pleases.

MASON CJ: Thank you, Mr Street.

We do not think that the attack on

Chief Justice Gleeson's judgment, in so far as it

relates to clause 10(2) of the terms on the back of
the bill of lading, succeeds. Indeed, we agree
with all that His Honour says about the

construction and effect of that subclause. It

seems that His Honour referred in his judgment to

an incorrect version of clause 5(4), but we do not

regard this reference as derogating from the

correctness of His Honour's reasoning in so far as

it relates to the construction of clause 10(2).

Nor are we persuaded by the argument advanced

on behalf of the appellant seeking to challenge the
decision of the Court of Appeal on the ground that
the second respondent was not entitled to the

benefit of clause 10(2). In that respect, we are

satisfied that the second respondent was a party to

the contract evidenced by the bill of lading, and
that there was consideration to support the promise

made to it.

It follows that the appeal must fail, and it

is unnecessary to consider the other matters which

would be involved in the appeal if we had been in

favour of the appellant's contentions on

clause 10(2).

The appeal is therefore dismissed with costs.

AT 4.50 PM THE MATTER WAS ADJOURNED SINE DIE

Chellaram(3) 67 ·~ 5/3/92