S.K. Networks Australia Pty Ltd v ACI Plastics Packaging

[2007] NSWLC 22

Local Court of New South Wales

CITATION:	S.K. Networks Australia Pty Ltd v ACI Plastics Packaging [2007] NSWLC 22
JURISDICTION:	Civil
PARTIES:	S.K. Networks Australia Pty Ltd ACI Plastics Packaging
FILE NUMBER:	5630/06
PLACE OF HEARING:	Downing Centre Local Court
DATE OF DECISION:	07/06/2007
MAGISTRATE:	Magsitrate B A Lulham
CATCHWORDS:	Contract – construction of contract – meaning of “month of shipment”
LEGISLATION CITED:
CASES CITED:	Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1981) 149 CLR 337 Darlington Futures Limited v Delco Australia Limited [1986] 161 CLR 500 Toll v Alphapharm (2004) 219 CLR 165 Clyde Navigation Trustees v Laird (1883) 8 Applicant Case 658 Re Comptoir Commercial Anversois and Power, Son & Co [1920] 1 KB 868 JMowbray, Robinson & Co v Rosser (1922) 91 LJKB 524 Esmail v Rosenthal J & Sons Ltd [1964] 2 Lloyd’s Rep 447
REPRESENTATION:	Mr B. Lum (Counsel for Plaintiff) De Mestre & Company Plaintiff’s (Solicitor for Plaintiff) Ms S Chrysanthou (Counsel for Defendant) Edwin Davey Commercial & Litigation Lawyers (Solicitor for Defendant)
ORDERS:	Judgment for the plaintiff in the sum of $36,158.94. The defendant is to pay interest on the sum of $36,158.94 from 1 November 2005 to be calculated by the registry. Costs follow the event. The defendant is to pay the plaintiff’s costs and disbursements of the proceedings as agreed. In default of agreement within 28 days, the costs and disbursements are to be assessed under the Legal Profession Act.

Reasons for Decision

1    On or about 11 March 2005 S.K. Networks Australia Pty Ltd (S.K. Networks) entered into a written contract with ACI Plastics Packaging (ACI) for the sale and purchase of pet resin for bottled use for the months of April, May and June 2005. Clause 3, 4 and 5 of the contract provided as follows:

3. Effective period
The shipment of the products shall be performed from April 2005 to June 2005.
4. Delivery
CFR Melbourne in Sea Bulk
5. Price of the products shall be determined by average of Far East Exports (approved) price (hereinafter PCI price) posted by ‘PCI Monthly Business Report’ issued on the month of shipment by following formula. (It is not necessary for the purposes of this decision to set out the formula).

2    Agreed Facts and Issues were handed up. They were only signed by the solicitor for the plaintiff, but Ms Chrysanthou agreed that the following facts were not in issue:

7. The pet resin was delivered to the shipping company’s yard in Busan, Korea on 26 April 2005.


8. The pet resin was loaded onto the ship (MSC Alabama 0509) on 30 April 2005.


9. The ship left Busan, Korea on 1 May 2005.



THE ISSUE FOR DECISION

3    The parties agreed that the dispute between them requires the court to determine the meaning of the words ‘the month of shipment in Clause 5’.

4    The plaintiff contended that ‘the month of shipment’ was April as the goods purchased by the defendant were loaded on the ship on 30 April.

5    The defendant contended that ‘the month of shipment’ was May as the ship left the port on 1 May.

6    The parties agreed that if the court finds that ‘the month of shipment’ was April, then in accordance with the formula, the plaintiff is then entitled to the amount claimed in the Statement of Claim of $36,158.94.

THE EVIDENCE RELIED UPON BY THE PARTIES

7    The plaintiff relied on the affidavit its Manager-Chemicals Jimmy Park. Mr Park deposed that the pet resin was loaded onto the ship on 30 April 2005. The ship sailed on 1 May 2005.

8    The defendant relied on the affidavit of Mike Morgan who at the time of the contract was the technical and overseas and operations manager of the defendant. Mr Morgan attached to his affidavit documents which were relied upon in submissions by the defendant:

1. Bill of lading – The bill of lading includes the following notation – shipped on board date 1st of May 2005 .


2. S.K. Network’s chemicals certificate of analysis – It contains the following reference – shipped on board 1st of May 2005.


3. S.K. Network’s Commercial/Tax Invoice – It notes sailing on or about 1st May 2005.


4. S.K. Network’s Packing List – It refers to sailing on or about 1st of May 2005.


5. S.K. Network’s Certificate of Confirmation – It notes shipping date 1st of May 2005.


6. S.K. Network’s packing declaration – Dated 1st of May 2005.


7. S.K. Network’s shipping advice – It notes goods have been shipped by MSC Alabama on 1st of May 2005.




THE PARTIES’ SUBMISSIONS

Ms Chrysanthou

9    Ms Chrysanthou submitted that the contract was drafted by the plaintiff. Therefore any ambiguity that arises as to the meaning of a term of the contract will be interpreted against the plaintiff under the principle of contra proferentem (Darlington Futures Limited v Delco Australia Pty Limited [1986] 161 CLR 500 at 510 per Mason, Wilson, Brennan, Deane and Dawson JJ). She further submitted that words in a contract are taken to be read in their natural and ordinary meaning.

10    She submitted that the parole evidence rule excludes extrinsic evidence of intention. She pointed out the rule in Australia was outlined by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981) 149 CLR 337 at 352:

‘The true rule is that evidence of surrounding circumstance is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning, but it is not admissible to contradict the language of the contract when it has a plain meaning.’

11    She further submitted that such evidence is not admissible to the extent that it is adduced to prove the intention of a party. Evidence as to actual intention is precluded by the parole evidence rule, because the language of the contract itself should not be set aside in favour of the intentions of the parties (Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1981) 149 CLR 337 at 352 per Mason J).

12    I would add that the High Court has set out the proper approach to the construction of a contract such as this in Toll v Alphapharm (2004) 219 CLR 165 at (40):

13    ‘It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.’

14    Ms Chrysanthou submitted that the words month of shipment in clause 5 of the contract are ordinary English words and should be read in their natural and ordinary meaning – the date when the goods were shipped or left port. In further support of that submission she referred to the various documents attached to Mr Morgan’s affidavit and the references therein to various events taking place on the 1st May.

Mr Lum

15    Mr Lum relied on the Macquarie Dictionary definition of ‘shipment’ as follows:

‘The act of shipping goods etc; the delivery of goods, etc for transporting.’

16    He submitted that the word ‘shipment’ denotes more than just the shipping of goods, but refers to the act of shipping goods. He submitted that ‘shipment’ the act of shipping goods, must include the loading of the goods on the ship. The shipment began from the time that the goods were loaded on board.

17    He referred to a definition of ‘shipment’ from Butterworths publication Words and Phrases Legally Defined. I will refer to that extract when giving my reasons for my decision.

18 Mr Lum referred to s 35 of the Sale of Goods Act for the proposition that the delivery of the goods to the carrier for the purpose of transmission to the buyer, is prima facie deemed to be a delivery of the goods to the buyer.

19    Mr Lum referred to the definition of the term ‘CFR Melbourne’ (used in the contract) by a document published by the International Chamber of Commerce which provides as follows;

‘Cost and freight means that the seller delivers the goods when the goods pass the ship’s rail in the port of shipment.


The seller must pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss or damage to the goods as well as any additional costs due by events occurring after the time of delivery are transferred from the seller to the buyer.’

20    The effect of those provisions was that the title and risk to the goods passed to the defendant when the goods were loaded onto the ship, that is on the 30 April 2005.

DECISION

21    It was not disputed between the parties that the month of shipment would be based on the first day of the shipment. The question was whether the first day was on 30 April when the goods were loaded, or 1 May when the ship sailed. I find, applying the test of what the reasonable man would understand by the language in which the parties have expressed their agreement, that the word ‘shipment’ has the dictionary meaning of the act of shipping goods. That is the ordinary and natural meaning of the word. I am satisfied on the same test that such definition covers more than the actual movement of the goods on the sea, but also includes the loading of the goods onto the ship. In my view, the loading of the goods must be part of the shipment and is incorporated in the meaning of the word ‘shipment’. It follows from that reasoning that the month of shipment in this case, was 30 April 2005. That was the first day of the shipment, being the date of the loading of the ship. That finding is supported by the fact that the title and risk to the goods passed to the defendant when the goods were loaded onto the ship. They were no longer the plaintiff’s goods – they belonged to the defendant.

22    Ms Chrysanthou referred to the number of documents prepared by the plaintiff in relation to the transaction which referred to the date of the 1st of May 2005. None of those documents referred to the term ‘month of shipment’. The Bill of Lading for instance, refers to the term ‘shipped on board’ as taking place on the 1st of May 2005. That is clearly a different concept and the document does not refer to the term ‘month of shipment.

23    If the parties intended that the freight rate would be fixed not on the ‘month of shipment’, but when the goods were ‘shipped on board’, then the agreement could have provided for that requirement. The agreement did not do so.

24    Mr Lum in his submission set out an extract from Words and Phrases Legally Defined (2nd Edition, Butterworths). I have read the entry in the publication. I propose to set out the extract in full:

‘Shipment of the goods normally means putting the goods on board a ship. However, where the contract involves an antecedent land transit, it may be the usage and practice of the trade to issue a through bill of lading and to regard shipment as being made in the interior at the time when the goods are put on rail. In such a case the seller performs his duty to ship the goods by putting them on the rail. Where the word ‘shipment’ appears expressly in the contract and the contract is an English one, it means putting on board a ship, and evidence of usage to the contrary cannot be given to contradict the express terms of the contract. However, the seller may normally perform his contract by purchasing goods afloat which have been shipped during the contract period. (41 Halsbury’s Law (4th edn) para 915)


“Shipped” means put on something which answers the description of a ship or vessel, no matter what its shape or form may be, for the purpose of being conveyed therein to some destination.’ Clyde Navigation Trustees v Laird (1883) 8 Applicant Cas 658 at 676, per Lord Fitzgerald.


‘Now, if I give the word “shipment” the widest meaning of which it is capable, it cannot mean more than bringing the goods to the shipping port and then loading them on board a ship prepared to carry them to their contractual destination.’ Re Comptoir Commercial Anversois and Power, Son & Co [1920] 1 KB 868 at 878, per Bailache J.


‘There cannot be the slightest doubt that the words “shipment to be made not later than the end of November next” standing by themselves, mean shipment on the ship which is to carry the goods across the Atlantic. But the plaintiffs say that in the trade [the timber trade], by custom – it is not exactly a custom of the trade, but of the way they use words in this trade – “shipment” means shipment on to the car or loading on to the car at the saw-mills from which the lumber comes . . . This custom was not admissible to interpret “shipping” as meaning loading on board the cars at the mills.’ Mowbray, Robinson & Co v Rosser (1922) 91 LJKB 524 at 525, 526, CA, per Lord Sterndale MR.


‘The matter depends on the proper construction of Clause 5 of the contract. I will read that again. “Each shipment under this contract shall be deemed as a separate contract.” It is plain that the seller had the option to ship the goods in separate shipments. The appellants rely on there being two sets of documents, receipts, certificates, bills of lading and insurance contacts. But this does not, in my opinion, decide the matter. The provisions of two sets of documents may be purely a matter of convenience, and a simple explanation of this may be that the cloth was exported from Hong Kong under two separate quotas, one belonging to the plaintiffs and one belonging to South Textiles Ltd. It has, in my view, no real significance. The real point is the meaning of “shipment”. The meaning of “shipment”, in my opinion, is putting into a ship, and all the cloth was put into the same ship and on the same day. Accordingly, it was all one single shipment, in my view.’ Esmail v Rosenthal J & Sons Ltd [1964] 2 Lloyd’s Rep 447 at 462, CA, per Dankwerts LJ, affd, [1965] 2 Lloyd’s Rep 171, HL’

25    The decisions referred to in the extract support my finding that ‘shipment’ does include the loading of the goods onto the ship. They support that definition of the word given its natural and ordinary meaning.

26    For all of those reasons, I am satisfied that the plaintiff’s claim must succeed.

27    The amount of the claim is apparently US$27,300. The evidence indicates that the defendant has already paid the plaintiff US$579,285 for the purchase and supply of the goods, including the shipping charges. In those circumstances it is sad that the matter was not capable of a commercial settlement.

28    I make the following orders:

1. There will be judgment for the plaintiff in the sum of $36,158.94.


2. The defendant is to pay interest on the sum of $36,158.94 from 1 November 2005 to be calculated by the registry.

29    I would propose the following order in relation to costs:

1. Costs follow the event. The defendant is to pay the plaintiff’s costs and disbursements of the proceedings as agreed. In default of agreement within 28 days, the costs and disbursements are to be assessed under the Legal Profession Act.

I shall hear from the parties in relation to the proposed order for costs.

B.A. LULHAM