Tritton Resources Pty Ltd v Ever Rock Navigation S.A
[2019] FCA 276
•6 March 2019
FEDERAL COURT OF AUSTRALIA
Tritton Resources Pty Ltd v Ever Rock Navigation S.A. [2019] FCA 276
File number(s): NSD 1190 of 2017 Judge(s): DERRINGTON J Date of judgment: 6 March 2019 Catchwords: ADMIRALTY – bills of lading and carriage of goods by sea – actions for loss or injury in transit – who may bring action – rights as between successive holders of bills of lading – effect of transfer of bill of lading
ADMIRALTY – whether prior holder of bill of lading retains right to bring an action in negligence against ship owner – whether action one for pure economic loss
Legislation: Carriage of Goods by Sea Act 1991 (Cth), Sch 1A, Amended Hague Visby Rules
Sea-Carriage Documents Act 1997 (NSW)
Carriage of Goods by Sea Act 1992 (UK)
Federal Court Rules 2011 (Cth)
Cases cited: Aegean Sea Traders Corporation v Repsol Petroleo SA (The “Aegean Sea”) [1998] 2 Lloyds Rep 39
Air Tahiti Nui Pty Ltd v McKenzie (2009) 77 NSWLR 299
Amaya v Everest Property Holdings Pty Ltd [2010] NSWCA 315
Anglo Irish Beef Processors International v Federated Stevedores Geelong [1997] 2 VR 676
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Castle Insurance Co Ltd v Hong Kong Islands Shipping Co Ltd [1984] 1 AC 226
China Ocean Shipping Co Ltd v P S Chellaram & Co Ltd (1990) 28 NSWLR 354
CIA Continental Hispanica SA v Westgate Shipping Co Ltd [1978] AMC 1560
Colgate-Palmolive Co v Cussons Pty Ltd (1933) 46 FCR 225
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
Craine v Colonial Mutual Fire Insurance Company Ltd (1920) 28 CLR 305
Cro Travel Pty Ltd v Australian Capital Financial Management Pty Ltd [2018] NSWCA 153
Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641
Lederberger v Mediterranean Olives Financial Pty Ltd (2012) 38 VR 509
Leigh & Sillavan Ltd v Aliakmon Shipping Co Ltd [1986] 1 AC 785
Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500
MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39
Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141
Onley v Caitlin Syndicate Ltd as the Underwriting Member of Lloyd’s Syndicate 2003 (2018) 360 ALR 92
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Qenos Pty Ltd v Ship “APL Sydney” (2009) 187 FCR 282
Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66
Sarat Chunder Dey v Gopal Chunder Laha (1892) LR 19 Ind App 203
Standard Chartered Bank v Dorchester LNG (2) Ltd (The “Erin Schulte”) [2013] 2 Lloyds Rep 338
The “Breydon Merchant” [1992] 1 Lloyds Rep 373
The “Stolt Loyalty” [1995] 1 Lloyds Rep 598 (CA)
The Henrik Sif [1982] 1 Lloyds Rep 456
The Sanix Ace [1987] 1 Lloyds Rep 465
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Trident General Insurance Co Ltd v McNiece Brothers Pty Ltd (1988) 165 CLR 107
Date of hearing: 6 and 7 September 2018 Date of last submissions: 21 September 2018 Registry: New South Wales Division: General Division National Practice Area: Admiralty and Maritime Category: Catchwords Number of paragraphs: 177 Counsel for the First, Second and Third Plaintiffs: Mr E Cox and Mr M Swanson Solicitor for the First, Second and Third Plaintiffs: Hicksons Lawyers Counsel for the Defendant: Mr AM Stewart SC, with Ms CO Gleeson Solicitor for the Defendant: Holman Fenwick Willan ORDERS
NSD 1190 of 2017 BETWEEN: TRITTON RESOURCES PTY LIMITED
First Plaintiff
STERLITE INDUSTRIES (INDIA) LIMITED
Second Plaintiff
FREEPOINT METALS & CONCENTRATES LLC
Third Plaintiff
AND: EVER ROCK NAVIGATION S.A.
Defendant
JUDGE:
DERRINGTON J
DATE OF ORDER:
6 MARCH 2019
THE COURT ORDERS THAT:
1.The separate questions be answered as follows:
(a)Question 1: “Has the defendant granted an extension of the limitation period under Art III r 6 of the Amended Hague Visby Rules to the plaintiffs to commence these proceedings?”
Answer: “Yes.”
(b)Question 2: “Does the limitation period provided for in Art III r 6 of the Amended Hague Visby Rules apply by extension of time to these proceedings?”
Answer:“The time bar in Art III r 6 of the Amended Hague Visby Rules does not afford the defendant any defence to the plaintiffs’ claims in this action. The time bar was extended by the defendant in favour of all plaintiffs and the action was commenced within that extended period.”
(c)Question 3: “If any limitation applies to these proceedings, is the defendant estopped from relying on that defence?”
Answer:“It is not necessary to answer question 3, but if an answer was required an estoppel would exist to prevent the defendant from relying on a defence under Art III r 6 of the Amended Hague Visby Rules.”
(d)Question 4: “What are each of the plaintiffs’ interests in the cargo and do any of the plaintiffs have title to sue?”
Answer: “(i) Sterlite has title to sue under the BOL.
(ii)JP Morgan is entitled to pursue its independent claim in tort, if any, where such cause of action arose when it had title to the cargo.
(iii)Tritton has no identifiable cause of action against Ever Rock in relation to the cargo.”
(e)Question 5: “Are the plaintiffs entitled to claim a loss in respect of the salvage agreement with Fukada?”
Answer:“Yes, to the extent that Sterlite and JP Morgan are entitled to sue in respect of any such loss. Tritton has no entitlement to make a claim in respect of it.”
2.The plaintiffs’ application that the defendant pay the costs of its application for service out on an indemnity basis is refused.
3.The costs of the application for service out be each parties’ costs in the cause.
4.The plaintiffs have leave to amend the statement of claim to include a cause of action in negligence against the defendant in terms substantially in accordance with the terms of Exhibit 1.
5.The parties will be heard on the question of the appropriate costs order to make on the hearing of the separate questions.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DERRINGTON J:
Introduction
This a determination under r 30.01 of the Federal Court Rules 2011 (Cth) of a number of separate questions isolated from the remaining issues in the litigation. Generally, the questions concern the entitlement of the plaintiffs, or one of them, as consecutive owners of cargo under a bill of lading, to claim against the owner of the ship which carried their goods. Any such claim would serve to diminish or extinguish the cargo owners’ obligations to contribute to salvage and general average arising from the ship’s grounding in December 2011. The ship owner asserts that the cargo owner who has title to sue is time barred and that the extension of time which it granted was only made to benefit a prior holder of the bill of lading who does not have title to sue.
The cargo owners’ insurer has paid the salvage contributions but remains responsible, via its insured, for payment of the adjusted general average contribution. In this respect the insurer, in the name of its insured, intends to recover from the ship’s owner the amount of the salvage contribution paid as well as relief from the obligation to contribute to general average.
Whilst it must always be kept steadily in mind that the potential causes of action in respect of which the ship owner may be liable are vested in the insured cargo owner, this matter concerned negotiations and agreements between the cargo owners’ insurer and the ship owner’s insurer (or P&I Club) through their respective solicitors. That is an important contextual matter in the circumstances of this case where the very experienced shipping lawyers and insurers on each side would have been well aware of the nature of the other parties’ respective interests in the issues which were the subject of negotiation.
The applicable time limitation for recovery against the ship owner arose under Art III r 6 of the Amended Hague Visby Rules. That provided a limitation period for the commencement of claims in relation to loss of or damage to the cargo of 12 months from the date of delivery or putative delivery of the cargo. The defendant ship owner and the cargo owners’ insurer have negotiated over some years in relation to the claims and, during that time, various extensions of the time bar were granted although the terms and scope of the extensions are in dispute. In 2017 proceedings were commenced in response to which the ship owner has asserted the limitation period was not extended in favour of the plaintiff who actually suffered the loss, being the second plaintiff, Sterlite Industries (India) Ltd.
It is a notable feature of this matter that, despite the fact it involves hard-fought litigation, the legal representatives for all parties worked co-operatively and appropriately in adducing only the necessary and relevant evidence and narrowed the factual and legal matters to only those which are truly in issue. They are to be commended for that and it is axiomatic that they have saved their clients substantial amounts of money.
The questions
The questions which the Court ordered to be tried separately are as follows:
(a)whether the defendant granted an extension of the limitation period under Art III r 6 of the Amended Hague Visby Rules to the plaintiffs to commence these proceedings;
(b)whether the limitation period provided for in Art III r 6 of the Amended Hague Visby Rules applies by extension of time to these proceedings;
(c)if any limitation applies to these proceedings, whether the defendant is estopped from relying on that defence;
(d)what are each of the plaintiffs’ interests in the cargo and whether any of the plaintiffs has title to sue;
(e)whether the plaintiffs are entitled to claim a loss in respect of the salvage agreement with Fukada; and
(f)the costs reserved pursuant to order 2 made on 21 November 2017.
The fourth and fifth questions affect whether the plaintiffs ought to be given leave to further amend their statement of claim to add a cause of action in negligence based on an alleged duty of care owed by the ship owners to the second plaintiff, JP Morgan Metals & Concentrates LLC. The parties argued the entitlement of the plaintiffs to amend their pleading on the basis that leave was required and a proposed form of amended pleading was marked as Exhibit 1 in the leave application. The plaintiffs say that amendment was necessitated by the defendant raising in its written submissions for the hearing of the separate questions, the operation of ss 8 and 9 of the Sea-Carriage Documents Act 1997 (NSW), to the effect that all causes of action which the second plaintiff held became vested in the third plaintiff. They also asserted that the proposed new cause of action was substantially a replication of the particulars of unseaworthiness which already appear in the extant statement of claim. In this way the proposed amendment is said to be merely a different legal characterisation of the existing allegations. The defendant argued that the proposed new cause of action could not succeed and that leave should be refused. In general terms the parties agreed that if the proposed amendment was futile it ought not be allowed and, conversely, if it was found not to be futile, leave would be given: Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66, 69-70 [21]-[22].
The facts
The evidence, albeit somewhat complex, was not overly contentious and can be stated with relative ease. That said, the facts to be drawn from the evidence are disputed. In particular, the question of the construction of the agreement to extend time was the central issue and keenly fought.
The claims advanced by the plaintiffs arise out of the grounding of the vessel MV Ikan Jahan (the ship) on 18 December 2011. The vessel was en route from Newcastle, Australia, to Tuticorin, India, carrying, amongst other shipments, a cargo of copper concentrate (the cargo).
The plaintiffs
There are three corporate plaintiffs in the action, each of which claim to have been interested in the cargo at different points in time, it having been the subject of successive contracts of sale between them. An important issue for the purposes of the separate questions is the identity of the plaintiff who is entitled to pursue the claimed damages and declarations.
The plaintiffs are:
(a)Tritton Resources Pty Ltd (Tritton);
(b)Sterlite Industries (India) Limited (Sterlite); and
(c)Freepoint Metals & Concentrates LLC (Freepoint). During the period of time relevant to this action, Freepoint changed its name and was variously named Sempra Metals & Concentrates Corp (Sempra) and JP Morgan Metals & Concentrates LLC (JP Morgan). It is convenient to refer to the company in these reasons as “JP Morgan”.
The substance of the plaintiffs’ claims is for indemnity for sums paid for their contribution towards the cost of the ship’s salvage as well as a negative declaration in respect of their contribution to general average. The underlying foundation of those claims is that the ship’s owners breached the non-delegable duty under Art III r 1 of the Amended Hague Visby Rules to exercise due diligence to render the ship seaworthy. At present there is no need to consider the veracity of that claim.
The identity of the relevant defendant
The defendant, Ever Rock Navigation SA (Ever Rock), is the owner of the ship. At the time of the grounding it was subject to a timecharter to an entity called PCL (Shipping) Pte Ltd of Singapore (PCL). It was also subject to a voyage charter dated 24 October 2011 from PCL as “disponent owner” to Tritton.
Despite Tritton being the voyage charterer at the time, it is common ground that there was no bareboat charter and the signature provisions of the relevant bill of lading indicated it was issued “for and on behalf of Ever Rock” as the head owner. As such, Ever Rock is to be regarded as the carrier for the purposes of the plaintiffs’ claims.
The bill of lading, insurance and sales of the cargo
It is not in issue that the cargo was shipped under a bill of lading numbered N-1 on the Congenbill 1994 form which incorporated the charterparty terms in clause (1) (the BOL). No charterparty was identified in the BOL although nothing turns on that. Some of its more relevant particulars were:
(a)the shipper was identified as Tritton;
(b)the BOL was “to order” and expressed to be “To order of JP Morgan Metals and Concentrates LLC”;
(c)the “notify address” was identified as being the second plaintiff, Sterlite;
(d)it was signed as “clean on board” and “shipped” by Monson Agencies Australia Pty Ltd “as agents only for and on behalf of the Master” at Newcastle on 11 November 2011.
(e)it also had stamped endorsements on the reverse by “JP Morgan Metals & Concentrates LLC” and Sterlite.
The relevant sales of the cargo
The first relevant sale of the cargo occurred by an agreement dated 24 January 2007, between Tritton as seller and JP Morgan (Sempra) as purchaser. The terms included CIF FO (cost insurance and freight, free out) to an Indian port nominated by the buyer. The agreement required payment of 90% of the seller’s provisional invoice within two business days of the BOL date. The final payment was to be made within 14 days of determination of the final weights, assays and prices. Title and risk of loss or damage passed from the seller to the buyer when the cargo passed the ship’s rails at the port of loading.
The second relevant sale occurred by an agreement dated 12 October 2011, between JP Morgan as seller and Sterlite as purchaser. The terms included CIF FO Tuticorin, India and payment of 90% of the seller’s provisional invoice upon the ship’s arrival at the port of discharge against presentation of the shipping documents. The final 10% was payable by letter of credit in stepped payments. Importantly the seller was obliged to purchase insurance for the buyer from the passing of risk at the port of loading although the buyer was obliged to make any insurance claim. The parties agreed by cl 16 of their agreement that title would pass to the buyer when the first provisional payment was received but that risk of loss and damage would pass when the cargo was on board the ship at the port of loading. This last term assumes some importance in this matter because, as at the date of the grounding, risk had passed to Sterlite but title had not.
On 17 November 2011, JP Morgan sent an invoice to Sterlite noting that under the terms of their agreement payment was due “upon arrival of vessel at port of discharge”. Sterlite made payment to JP Morgan of 90% of the invoice value (being US$17,902,234.25) on 14 February 2012, being the day after the ship arrived in India, and the balance was paid on 22 March 2012.
The insurance of the cargo
It is not in dispute that JP Morgan insured the cargo through a Cargo Open Cover policy issued by Lloyds. There were several underwriters of the policy though the lead insurer was AEGIS Electric & Gas International Services Ltd (AEGIS) and that company conducted the negotiations and dealings following the ship’s grounding on behalf of all underwriters. This particular policy insured 69.54% of the value of the cargo. Other insurance was obtained for the remaining 30.46% and AEGIS had an interest in that policy as well. For present purposes, AEGIS represented all the insurers of the cargo.
The AEGIS policy identified the Assured as being a number of named companies in the JP Morgan group as well as:
all affiliated, associated and subsidiary companies or corporations, Joint ventures, partnerships or individuals, and/or any other party in interest that is required by contract to be named, now existing or hereafter constituted or acquired, hereinafter referred to “the Insured”.
There is no dispute that JP Morgan was an insured with respect to the cargo, as was Sterlite when it assumed risk under the CIF contract of sale. Cargo policies which cover the obligation of a seller under a CIF contract to obtain insurance in respect of the cargo when sold and which include the purchaser an insured are common in trade of this nature. The effect of the policy is that it insures the successive owners of the cargo for the whole of the voyage or, at least, where insured holders of the relevant bill of lading are obliged to obtain insurance for the successive purchaser’s interests.
The policy provided cover in respect of general average and salvage liabilities:
GENERAL AVERAGE CLAUSE
This Insurance covers general average and salvage charges, adjusted or determined according to the contract of affreightment and/or the governing law and practice (or, if there is no contract of affreightment, according to Foreign Statement or to York-Antwerp Rules) incurred to avoid or in connection with the avoidance of loss from any cause except those specifically excluded herefrom.
For the purposes of claims for general average contribution and salvage charges recoverable hereunder, the subject-matter insured shall be deemed to insured for its full contributory value.
General average deposits shall be payable on production of general average deposit receipts.
Transfer of the BOL
JP Morgan received the BOL on or about 17 November 2011, having paid the purchase price to Tritton on 14 November 2011. It endorsed the BOL in blank and provided it to Sterlite on or about 8 February 2012. There is no dispute between the parties that Sterlite then became the lawful holder of the BOL.
On or about 10 February 2012, Sterlite surrendered the original BOL to the time-charterer, PCL, for the purposes of obtaining delivery of the cargo. PCL passed that request to Ever Rock’s agent, which was Orient Marine Co Ltd. It is common ground that Sterlite received delivery of the cargo from Ever Rock against presentation of the original BOL.
The grounding of the ship
The ship departed Newcastle on 11 November 2011 for India, stopping at Townsville to take on board a cargo of zinc. On 18 December 2011, when the sea conditions were said to be poor, there being rain and fog, it grounded on Manuk Island during passage through the Banda Sea, Indonesia. It is not in dispute that it was en route to its port of discharge, Tuticorin.
The ship remained grounded for about four weeks, until 11 January 2012, after which she proceeded to Singapore for repairs before resuming her voyage to India. She arrived in India on 13 February 2012 and discharged her cargo.
Salvage charges claim and general average declaration
Salvage charges claim
On 19 December 2011, Ever Rock entered into a salvage agreement with Fukada Salvage and Marine Works Co Ltd (Fukada) (the Salvage Agreement) for the salvage of the ship and its cargo. Relevantly, the agreement provided:
This Salvage Agreement is made and entered into between the Master of the Vessel in Box 2 above (“the Vessel”) for and on behalf of the Owners of the Property in Box 2 above (hereinafter referred to together as “the Property Owners”) and the salvor in Box 1 above (“the Salvor”) in accordance with the Provisions of Part I, and if the parties have chosen to incorporate the Special Remuneration Clause in Box 5 above, Part II of this Agreement.
For reasons which are not apparent, nor probably relevant, the amount of the salvage remuneration was not agreed upon until about 16 October 2014. On that date, a tripartite “settlement agreement” was entered into between Ever Rock, “SAH & Co” which represented “the owners and underwriters of the cargo” laden on board the ship, and Fukada. By it the amount of salvage remuneration to be paid to Fukada was agreed as was the portion of that sum which was to be paid by the cargo interests. Of the amount to be paid by the cargo owners, US$2,718,675.24 was paid to Fukada in respect of the copper cargo by AEGIS on behalf of the cargo’s owner. That amount now forms part of the plaintiffs’ claim in this action against Ever Rock.
Insurers’ guarantees for cost of salvage and general average
On the grounding of the ship, Sterlite was anxious to ensure that the cargo insurers would provide any general average bond (GA Bond) and any salvage security on their behalf and, on 22 December 2011, it sent an email to Marsh Ltd, who were acting as the brokers of the policy, seeking confirmation that the bonds would be provided. This was relied upon by Ever Rock as an early indication that AEGIS was aware of the interest of Sterlite under the insurance policy. Shortly thereafter Xchanging Claims Services, instructed by the underwriters of both the zinc and copper cargoes, became involved in the matter for the purposes of obtaining and placing the necessary securities. They sought to identify the relevant interests in the cargo. At this point in time title remained with JP Morgan even though risk had passed to Sterlite as the purchaser, with the result that if a GA Bond was then provided by the underwriters it would have to be on behalf of JP Morgan. That, however, was not the view adopted by all concerned and in an email of 3 January 2012, Mr Bartholomew of Marsh suggested that risk and title had passed to Sterlite such that the GA Bond should be provided on its behalf. Although he was in error in that respect, understandable as it was in the circumstances, his email demonstrates that there existed some confusion by the underwriters as to whose interests were to be protected under the extant insurance.
Subsequently, on 1 February 2012, a GA Bond was provided by JP Morgan to the ship owners in relation to the copper concentrate. It was in the following terms:
In consideration of the delivery to us or to our order, on payment of the freight due, of the goods noted above we agree to pay the proper proportion of any salvage and/or general average and/or special charges which may hereafter be ascertained to be [properly and legally] due from the goods or the shippers or owners thereof under an adjustment prepared in accordance with the provisions of the contract of affreightment governing the carriage of the goods or, failing any such provision, in accordance with the law and practice of the place where the common maritime adventure ended and which is payable in respect of the goods by the shippers or owners thereof.
We also agree to:
(i)furnish particulars of the value of the goods, supported by a copy of the commercial invoice rendered to us or, if there is no such invoice, details of the shipped value and
(ii)make payment on account [provided same is properly and legally due] of such sum as is duly certified by the average adjusters to be due from the goods and which is payable in respect of the goods by the shippers or owners thereof.
That bond was provided on the basis that it was governed by and construed in accordance with English law. It was supported by average guarantees from the underwriters in similar terms, Lloyds as to 69.54%, Allianz as to 22.96% and Axis as to 7.5%.
In accordance with the usual practice, the several insurers of the cargoes aboard the ship provided guarantees to Fukada for the salvage costs of the ship and cargoes. Relevantly, for present purposes, AEGIS executed a guarantee in relation to 69.54% of the value of any award, settlement, cost, expense and interest attaching to the salvage operation. The other interested insurers provided identical guarantees in respect of the interests they insured.
As mentioned the cost of the salvage and the salvors’ entitlements were agreed upon by the salvors, ship owners and the owners and underwriters of the cargo in an agreement dated 16 October 2014. It was agreed that the salvors would be entitled to payment of US$6,850,000 of which amount the cargo interests were responsible for US$4,690,606. That amount was paid by the insurers in the period between 28 and 30 October 2014 in exchange for which Fukada provided a release and indemnity to the cargo interests although the specific identity of those interests was not identified.
The ship owners’ counter security
On 21 February 2013, The Japan P&I Club, being the Club to which Ever Rock and the ship belonged, provided a Letter of Undertaking or counter security in respect of claims which might be brought by those interested in the cargo against the owners. The terms of the guarantee were as follows:
To: Cargo owners / cargo underwriters / lawful Bill of Lading holders / cargo insures c/o Reclaim Consulting Services
…
Claim: In respect of all claims for indemnity against any liability to Salvors arising our (sic) of under Salvage Agreement dated 19th December 2011 and/or any claims arising from the above stated voyage and above stated Bills of Lading
In consideration of your refraining from arresting or otherwise detaining any vessel or property under Ever Rock Navigation, S.A.’s ownership, associated ownership, management or control for the purpose of obtaining security in respect of your claims under the captioned Bills of Lading, we hereby undertake to pay you on demand such sum or sums as may be due to you from Ever Rock Navigation S.A. in respect of said claims either by a judgement of a competent court or tribunal or any judgement at appeal therefrom or by agreement between the parties provided always that our liability hereunder shall not exceed US$5,037,000.00 inclusive of interest and costs.
We further undertake that we will, within 14 days of the receipt from you of a request so to do, instruct solicitors to accept on behalf of Ever Rock Navigation S.A. service of proceedings brought by you in a competent court or tribunal and file acknowledgement of service thereof. We confirm that our registered or principal office is situated at the above address as we undertake to inform you of any change thereto.
General average claim and declaration
It is admitted on the pleadings that Ever Rock declared General Average following the grounding. On 30 November 2015 the general average adjusters, Asai & Ichikawa of Japan, adjudged the plaintiffs liable to pay to Ever Rock and the adjusters the sum of US$719,817.88 with respect to the copper cargo. Demand has been made for the payment of that sum, however, the plaintiffs have refused to pay it. They seek a declaration in these proceedings that none of them are liable to pay that amount. They also seek an order that Ever Rock indemnify them for any amount they are obliged to pay towards general average. The foundation of these claims is the entitlement of the plaintiffs, or one of them, to pursue Ever Rock for loss and damage arising from alleged breach of the contract of carriage.
The insurer’s agents and the P&I Club discuss title to the cargo
Whilst Xchanging Claims Services were first engaged in relation to the placement of security, on 28 February 2012, AEGIS appointed Reclaim as its recovery agent to pursue all recovery claims which it might have as a consequence of its issuing the salvage bond and the GA Bond. A relevant letter of authority was issued. The ship owners’ insurers were not satisfied with this authority and, consequently on 6 March 2012, JP Morgan similarly issued a similar letter of authority appointing Reclaim in respect of its entitlements derived from the copper concentrate cargo. Mr Jenkins of Reclaim sent both of those authorities to The Japan P&I Club as evidence of his authority to act in the matter.
On 2 April 2012, The Japan P&I Club sent an email to Mr Jenkins querying why the letter of authority had been issued by JP Morgan when Sterlite had taken delivery of the cargo and would then have had title to it. On that basis the Club was hesitant to provide a Letter of Undertaking or Counter Security in respect of claims against the ship. Mr Jenkins did not agree with that position and so informed the underwriters by an email of 11 June 2012.
On 5 December 2012, Mr Jenkins of Reclaim informed The Japan P&I Club that the underwriters had instructed the firm of Waltons & Morse to handle the matter into the future.
The first and second questions: Was the limitation period extended in favour of Sterlite?
The extensions of the limitation period
The BOL is a contract to which the provisions of the Carriage of Goods by Sea Act 1991 (Cth) (COGSA) and the Amended Hague-Visby Rules set out in Schedule 1A to that Act (Amended HVR) apply. By s 11(1) of COGSA the parties are taken to have intended that the laws of the place of shipment are to apply to the contract. The place of shipment was New South Wales so the Sea-Carriage Documents Act 1997 (NSW) applies to the BOL.
Article III r 6 of the Amended HVR provides:
Subject to paragraph 6bis the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered.
This period, may, however, be extended if the parties so agree after the cause of action has arisen.
It does not appear to be in issue that, absent any extension of the limitation period, the time in which the plaintiffs might have made a claim would have expired on 18 December 2012.
The extensions
It is also not in doubt that a number of extensions of time were granted by Ever Rock via its insurers at the request of cargo insurers. It is significant in this case that whilst, as a matter of law, the extensions were given by Ever Rock as the ship owner to cargo owners, the negotiation and granting of the extensions was effected by the parties’ insurers and the insurers’ lawyers. The Japan P&I Club, which indemnified the ship and its owner, negotiated on their behalf and AEGIS negotiated on behalf of cargo owners whose interests they had indemnified.
Ever Rock asserts there were two tranches of extensions sought and granted. Whether the extensions should be so categorised need not be considered but it is not in dispute that the last extension expired on 18 July 2017. The issue, however, is as stated by Ever Rock, “whether the extensions granted from time to time were for the benefit of one or more of the plaintiffs and if so which one/s”? In particular, the question is whether the extension was granted only to JP Morgan or to whoever was the relevant insured in respect of the copper cargo. The expression “relevant insured” means that cargo owner with title to sue in respect of the losses arising from the grounding.
The extensions from 6 December 2012
As the facts set out above show, until about 6 December 2012, Reclaim had acted for AEGIS with respect to the matters arising from the ship’s grounding, particularly in relation to the provision of the GA Bond and salvage security. However, from around that time the firm of Waltons & Morse commenced acting.
On 6 December 2012, Waltons & Morse wrote to The Japan P&I Club seeking a time extension beyond 18 December 2012 in relation to claims which might be made against the ship by the cargo owners. The email made the request by reference to the BOL and another two in respect of the zinc cargo. The terms of the request were as follows:
As we understand you are aware, we are instructed by underwriters in respect of the copper and zinc concentrate cargoes. We understand that you have been corresponding with Mr Paul Jenkins of Reclaim in respect of the LOU [Letter of Undertaking] wording.
As this matter is ongoing, and we are fast approaching the 1 year anniversary of the casualty, we should be grateful if you would kindly provide on behalf of the registered vessel owners, Ever Rock Navigation, an extension of time beyond 18 December 2012 up to and including 18 December 2013.
The time extension is requested in respect of Bill of Lading No: N-1 dated 11 November 2011 (copper concentrate) and Bills of Lading Nos: TSVCOC-1 dated 29 November 2011 and TSVMTP-1 dated 13 December 2011 (zinc concentrate).
In order to avoid the hopefully unnecessary expense of commencing legal proceedings under the above mentioned Bills of Lading, we look forward to your earliest response.
It was accepted by the parties that it was implicit in the request for an extension that, if it was not granted, the insurers would be required to commence proceedings on behalf of the cargo owners. It was also accepted that the forbearance to immediately commence proceedings was the consideration offered for this and the following extensions. The issue of whether Art III r 6 requires an agreement supported by consideration was not argued in this case.
In response The Japan P&I Club emailed Waltons & Morse on 11 December 2012 noting that they claimed to act for the cargo insurers and asking for any power of attorney held by the firm to so act. Some attempt was made to obtain the same, however as a substitute, the lead insurer AEGIS sent to The Japan P&I Club a confirmation of authority to act which seemed to satisfy the request. In the context of this matter the terms of that confirmation are significant. They were:
Re: The Japan Ship Owner’s Mutual Protection & Indemnity Association / Ever Rock Navigation S.A.
Bill of Lading No. N-1, dated Newcastle, Australia 11/11/11 – Copper Concentrates
We AEGIS Electric & Gas International Services Ltd hereby confirm that we authorise Waltons & Morse LLP of 77 Gracechurch Street, London, EC3V 0DL, England to act for and on behalf of insurers / interested Underwriters / their insured in respect of all matters incidental to and arising out of the grounding of the MV “IKAN JAHAN” on or around 18 December 2011, including but not limited to requesting and obtaining time extensions, commencing legal proceedings to protect time and engaging in negotiations with other interested parties.
A similarly worded Letter of Authority was provided on behalf of the insurers of the zinc cargo.
On 14 December 2012, The Japan P&I Club granted a one-year extension of time in response to the request. It was in the following terms:
We refer to your messages and thank you for sending us the letter of authority for each B/L.
Entirely without prejudice to the rights, defences, exemptions and/or limitations of liability, our owner member, Ever Rock Navigation S.A. hereby consents to the one (1) year exemption (sic) of time by which a suit is to be filed up to and including 18th Dec, 2013.
The claims were not resolved in the next 12 months and, on 21 November 2013, Waltons & Morse requested a further time extension from The Japan P&I Club. It did so in the following terms:
As you will recall, we contacted you last year and you kindly agreed to provide an extension of time in this matter up to and including 18 December 2013.
The time extension provided was in respect of Bill of Lading No: N-1 dated 11 November 2011 (copper concentrate) and Bills of Lading Nos: TSVCOC-1 dated 29 November 2011 and TSVNTP-1 dated 13 December 2011 (zinc concentrate).
As this matter is ongoing and in order to hopefully avoid the unnecessary costs involved in commencing legal proceedings under the material Bills of Lading, we should be grateful if you would kindly agree to a further extension of time up to and including 18 December 2014.
On 4 December 2013, The Japan P&I Club granted a further time extension up to and including 18 December 2014 in the following terms:
Entirely without prejudice to the rights, defences, exemptions and/or limitations of liability, our owner member, Ever Rock Navigation S.A. hereby consents to the one (1) year exemption (sic) of time by which a suit is to be filed up to and including 18th Dec, 2014.
As mentioned above, it appears that the claim with the salvor was resolved in October 2014. However, other issues arising out of the grounding remained outstanding as at November 2014. On 18 November 2014 Waltons & Morse sought yet a further time extension. The terms of that request were:
As you are aware, the salvage aspect of the above captioned matter has been finalised. However, the PA element of the claim is not yet resolved, although we hope to be able to progress matters in this regard shortly.
Accordingly, we should be grateful if you would kindly agree to a further extension of time beyond 18 December 2014, up to and including 18 December 2015 in respect of Bill of Lading No: N-1 dated 11 November 2011 (copper concentrate) and Bills of Lading Nos: TSVCOC-1 dated 29 November 2011 and TSVNTP-1 dated 13 December 2011 (zinc concentrate), as per the previous extension.
A further extension was granted by The Japan P&I Club on 16 December 2014 up to and including 18 December 2015. The terms of the extension were similar to the extensions granted previously:
We confirm the Owners grant the requested time extension up to and including 18th December 2015 in respect of Bill of Lading No: N-1 dated 11 November 2011 (copper concentrate) and Bills of Lading Nos: TSVCOC-1 dated 29 November 2011 and TSVNTP-1 dated 13 December 2011 (zinc concentrate), as per the previous extension.
The plaintiffs identify as being significant that the extensions to this point in time were sought and granted by reference to the bills of lading rather than by and to specific interests. Similarly, the salvor’s claim was settled by reference to the generic nomenclature of “Cargo Interests”. They submit that it was not considered important to ascertain which entities were directly interested in the payments made as it is apparent that the parties accepted that the insurers were the ultimately responsible for all of them. In any event, it was common ground that the extensions granted to 18 December 2015 were granted to all three plaintiffs.
It ought to be observed that the acknowledgement by Ever Rock that the extensions until 18 December 2015 were for the benefit of all three plaintiffs is somewhat at odds with the argument it advances in relation to the issue of estoppel which is discussed below. In that respect, it asserts that the existence of the query from The Japan P&I Club in April 2012 to Reclaim Consulting Services as to which of the plaintiff companies had the title to sue would show to a reasonable person that Ever Rock would not grant an extension of time without precise identification of the parties to whom the extension was given. Although that submission is made in relation to the estoppel claim and the issue of whether any unambiguous representation was made, it is not consistent with Ever Rock’s acknowledgement that the extensions till 18 December 2015 were made in favour of all plaintiffs and that had occurred by general and imprecise language.
The extensions from December 2015
The matter did not settle in 2015 and, absent any further extension, the limitation period would lapse in December of that year. On 23 November 2015, Waltons & Morse wrote to The Japan P&I Club seeking a further extension. The request was in the following terms:
… I should be grateful if you would please request Owners’ agreement to a further extension of time up to and including 18th December 2016 in respect of Bill of Lading number N-1 dated 11th November 2011 (copper concentrate) and Bills of Lading numbers – TSVCOC-1 dated 29th November 2011 and TSVNTP-1 dated 13th December 2011 (zinc concentrate), as per the previous extension.
Around this time a flurry of correspondence ensued concerning the documentation required for the general average adjustment. Further, Holman Fenwick Willan LLP (Holman Fenwick) commenced to act in the matter on behalf of Ever Rock and The Japan P&I Club and, on 1 December 2015, that firm sent an email to Waltons & Morse in which it was indicated that the Owners were “minded to agree” to the requested further extension of time, however, they added, “but before they do so, please can you confirm the precise identity of your clients for whom the extension of time is sought.”
In response to this request by an email of 1 December 2015, Waltons & Morse advised:
With regard to the requested time extension, please note that our instructions are received from insurers of the zinc concentrate cargo carried under Bills of Lading numbered TSVCOC-1 dated 29th November 2011 and TSVMTP-1 dated 13th December 2011. We are also instructed by insurers of the copper concentrate cargo carried under Bill of Lading number N-1 dated 11/11/11. I have attached, for your file, a copy of the Letters of Authority from interested insurers in respect of both cargos, as previously provided to the Japan P&I Club.
It does not appear to be in doubt that the letters of authority which were attached to the email included that from AEGIS dated 13 December 2012 which had previously been provided to The Japan P&I Club. In the circumstances, it is relevant to note the advice from Waltons & Morse that it was acting on behalf of, inter alia, the insurers of the copper concentrate cargo.
By an email on 2 December 2015, Holman Fenwick sought additional information from Waltons & Morse in the following terms:
We note your instructions from the insurers as stated in their letters of authority. However it is not evident from the letters who their insured(s) are. Can you kindly confirm?
Waltons & Morse responded on 8 December 2013 stating amongst other things:
…please note that our clients’ insureds are Xstrata PLC and Mount Isa Mines (zinc) and J.P. Morgan Metals & Concentrates LLC (copper).
I look forward to receiving your clients’ response to our request for a time extension beyond 18 December at your earliest convenience, please.
It now seems to be accepted by all parties that the identification of JP Morgan as being the insured or the only insured at that point in time was incorrect. Risk in the cargo had passed to Sterlite when it was loaded and title passed when 90% was paid on the arrival of the ship in India. The liability to contribute to general average was that of Sterlite and it was entitled to indemnity in respect of that liability under the AEGIS policy. It is also likely that it was entitled to claim against Ever Rock in respect of the salvage charges paid, assuming a basis for that claim existed.
On 11 December 2015, Holman Fenwick sent an email to Waltons & Morse indicating that the owners granted a further extensions of time to 18 December 2016 as follows:
Thank you for confirming the identity of your clients’ assureds. We hereby confirm, on behalf of Owners, to grant your clients (as per the letters of Authority attached to your email of 1 December 2015) a time extension for commencement of claims under B/Ls TSVCOC-1 dated 29th November 2011, TSVMTP-1 dated 13th December 2011 and Bill of Lading number N-1 dated 11/11/11 up to and including 18 December 2016, on the basis that the claims are not already time-barred.
The reference to the letters of authority is important. It will be recalled that one was the letter sent by AEGIS to The Japan P&I Club indicating that Waltons & Morse had authority “to act for and on behalf of insurers / interested Underwriters / their insured in respect of all matters incidental to and arising out of the grounding of the MV “IKAN JAHAN” on or around 18 December 2011, including but not limited to requesting and obtaining time extensions”. That authority was given in relation to the goods carried under the BOL in the widest terms and identified the interests of the underwriters in the claims arising out of the grounding of the ship. The stated interest of the insurers extended to all the interests of their insureds.
In April and May 2016 further email correspondence occurred in which clarification of the identity of the insureds was discussed. In an email of 5 May 2016, Waltons & Morse specifically identified that they were instructed by Allianz Global Corporate Speciality which represented Straits Resources Pty Ltd in respect of the BOL. That said, that firm also indicated that they acted on behalf of JP Morgan.
By an email of 27 September 2016, Holman Fenwick sought to confirm that Waltons & Morse acted on behalf of and was authorised to accept service on behalf of, inter alia, Allianz Global Corporate Speciality in relation to the claims of Ever Rock under the BOL.
By email on 18 November 2016, Kennedys Marine (which was the new name of Waltons & Morse) requested that Holman Fenwick obtain instructions for a further time extension. The terms of the request were:
As you may recall, on 11 December 2015 you provided, on behalf of Owners, a further extension in respect of all claims under B/Ls TSVCOC-1 dated 29 November 2011, TSVMTP-1 dated 13 December 2011 and Bill of Lading number N-1 dated 11/11/11 up to and including 18 December 2016.
…
As negotiations are ongoing, I should be grateful if you would please seek instructions for a further extension of time in respect of all claims under B/Ls TSVCOC-1 dated 29 November 2011, TSVMTP-1 dated 13 December 2011 and Bill of Lading number N-1 dated 11/11/11 up to and including 18 December 2017.
Holman Fenwick responded to that request by an email of 12 December 2016 in which it advised that its client had not seen much evidence of the continuing negotiations which might settle the matter. It advised Kennedys Marine, “our clients will grant a one month extension up to and including 18 January 2017, on the same terms as the previous extension (copy attached). If negotiations are really ongoing and more time is required, we can discuss further extensions.”
By a further email of 11 January 2017, Kennedys Marine sought a further extension. On this occasion the extension sought was up to and including 18 July 2017. Holman Fenwick responded by an email on 17 January 2017, and advised that their client granted a two-month extension up to and including 18 March 2017. It was expressed to be “on the same terms as the previous extensions (copies attached).”
It is apparent from the material that, at this time, negotiations of a sort were being held between the parties although the exact nature of those negotiations is not clear. Nevertheless, further extensions were given by Ever Rock via Holman Fenwick as follows:
(a)By an email of 16 March 2017, Holman Fenwick confirmed that their client granted an extension up to and including 18 April 2017 on the same terms as the previous extensions.
(b)By an email of 12 April 2017, the grant of a further extension up to and including 18 May 2017 was advised.
(c)By an email of 9 May 2017, the grant of a further extension up to and including 18 June 2017 was advised.
(d)By an email of 13 June 2017, Holman Fenwick advised Kennedys Marine that their clients had granted a further extension up to and including 18 July 2017.
Whilst the extensions in 2017 were being granted, other correspondence passed between the solicitors concerning the entitlement of Kennedys Marine’s clients that were interested in the zinc cargo to make claims against the ship owner consequent upon the grounding. Not all of the correspondence concerning this issue appears to have been adduced. Nevertheless, from that which is available it can be discerned that Holman Fenwick were asserting that the ultimate holders of the bills of lading in respect of the zinc had provided the GA Bonds and took delivery of the cargo. On that basis it was asserted that those entities had the title to sue in respect cargo owners’ claims and not other cargo owners who were prior holders of the relevant bill. Ever Rock asserted that this correspondence is important as it should have made it apparent to Kennedys Marine that it considered the extension granted in relation to the zinc bills of lading were limited to the identified insured and that it would take the same view in relation to the BOL.
At the same time the parties continued to negotiate as to the liability to pay and the quantum of the general average adjustment.
Despite both sets of solicitors acting in the matter being aware by the beginning of 2017 that that they held opposing views as to the identity of the parties in whose favour the extensions had been granted, when the extensions in the first half of that year were granted nothing was specified by either party as to their scope. Holman Fenwick did not express the extension to be in favour of the previously identified insureds and Kennedys Marine did not expressly state that the extension was to be for all of the insurers’ interests. The parties seemed to proceed on the basis that the extension granted on 11 December 2015, whatever its scope might be, would be extended. That seems to be the manner in which the litigation has been conducted.
The present proceedings
Prior to the expiration of the last extension, the plaintiffs commenced the present proceedings in which they allege that Ever Rock breached the contract of carriage evidenced by the BOL and, in particular, its obligation to exercise due diligence to make the ship seaworthy before and at the beginning of the voyage pursuant to the obligation in Art III r 1 of the Amended HVR. An alternative, somewhat vaguely worded, claim is made in negligence for damages in respect of losses which followed the grounding of the ship.
The plaintiffs advance no claim of damage caused to the cargo which was physically unaffected by the grounding. The claims relate solely to the financial losses which they sustained or might sustain. First, they claim that they became liable for the salvage charges charged by Fukada and which have been paid. Secondly, they claim that, absent a finding in relation to the lack of seaworthiness of the ship, they will be liable to Ever Rock for general average contribution. They seek relief in the nature of a declaration that they are not liable to so contribute.
The parties to the extensions from 11 December 2015
The main issue on the hearing was the identity of the entity or entities granted extensions of time on and from 11 December 2015. The plaintiffs submit that the extension was granted for the benefit of all of them such that Sterlite is entitled to take advantage of it in the present proceedings. Ever Rock submits it was only granted to JP Morgan as the insured identified by Waltons & Morse in the correspondence immediately prior to the 11 December 2015 extension. The distinction is important because it appears to be generally accepted that it is Sterlite which has the title to sue under the BOL in respect of the losses pursued in these proceedings. Although this will be considered in greater detail below, its significance is that if the post 11 December 2015 time extensions were not granted to Sterlite its claims against Ever Rock will be the subject of a time bar.
The intention of the parties
As the matter was argued, the parties appropriately focused on the putative intention of the protagonists derived from the objective facts in order to ascertain the identity of the parties to the relevant contract, varied contracts or extensions. The plaintiffs did not seek to formulate the case as being one in which a contract was entered into for the benefit of a third party: Trident General Insurance Co Ltd v McNiece Brothers Pty Ltd (1988) 165 CLR 107: although it is likely that the same result would probably enure if that analysis were applied.
Necessarily, the identity of the parties to the contract is to be ascertained by reference to the intention of the relevant participants. That is not the subjective intention but, in accordance with the objective theory of contract, the putative intention of a reasonable person in the circumstances. In Lederberger v Mediterranean Olives Financial Pty Ltd (2012) 38 VR 509, 516-517, the Victorian Court of Appeal identified the proposition in the following terms:
[19] Identification of the parties to a contract must be in accordance with the objective theory of contract. That is the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had. The process of construction requires consideration of not only the text of the documents, but also the surrounding circumstances known to the parties and the purpose and object of the transaction. This, in turn, presupposes knowledge of the genesis of the transaction, the background, and the context in which the parties are operating.
…
[22] … In identifying the parties to the contract, his Honour was entitled to consider the objective and purpose of the transactions, the communications and actions that took place between [the members of the Partnership] and the knowledge that these parties had of the surrounding circumstances to the agreement in order to ascertain the objective intention that these parties had in entering the contract. In our opinion, his Honour was right to find that a reasonable person, with the knowledge that the parties had of the surrounding circumstances, would conclude that it was the partners in the Partnership that entered into the transaction agreements with the respondents in relation to the Blue Gum and Mediterranean Olives schemes. (footnotes omitted)
See also Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 and most recently Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141, [70]-[83]. It must also be kept steadily in mind that, although some doubt justifiably persists, for the purposes of determining whether a contract was formed and between whom, it is permissible to take into account post-contractual conduct: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, 163-4. It is not necessary to consider the post-contractual conduct in this case as the objective putative intention sufficiently appears from the pre-contractual conduct.
It might also be added that, in ascertaining the putative and reasonable intention of transacting parties, the parties ought ordinarily be assumed to be acting in a sensible and honest businesslike manner. As was recently said by the Full Court in Onley v Caitlin Syndicate Ltd as the Underwriting Member of Lloyd’s Syndicate 2003 (2018) 360 ALR 92, at [61]:
Honest common sense is and should be taken by the courts to be a foundation of commercial and business activity.
The concomitant of that may be that, in considering the actions and correspondence of parties in business transactions, the courts can assume that, although parties will naturally be motivated by self-interest, they do not act in a sharp or underhanded manner towards each other.
The parties acknowledge the existence of an agreement.
It was acknowledged by Ever Rock (and presumably its insurers) in the first instance that, at the request of the lawyers for AEGIS, it granted an extension of the time limit in which any relevant action might be brought under the BOL in relation to the goods carried. Ever Rock and its insurers accepted that, at least until 18 December 2015, that extension was granted in favour of all the plaintiffs. However, it denies that the extension given on 11 December 2015 was granted in favour of the party who had title to sue, Sterlite, and asserts that it was only granted in favour of JP Morgan, who did not have title to sue. Ever Rock submits that came about because the extension granted on 11 December 2015, and those which followed, were given in respect of the claims of the insured which had been identified by AEGIS, being JP Morgan. It follows that one way in which the relevant question might be posed is whether the extension was negotiated by AEGIS only on behalf of JP Morgan or on behalf of any relevant insured which had an interest in the cargo, including Sterlite.
The parties involved in negotiations
Part of the context in which the issues are to be decided is the identity and capacity of the parties involved in the negotiations for the extensions. In this respect there is some artificiality in seeking to ascertain whether Sterlite was a party to the agreement. Whilst there is no doubt that the legal causes of action against the ship owner under the BOL was vested in Sterlite, AEGIS had paid the cargo owners’ share of the salvage costs and had provided average guarantees in support of the GA Bond which had been given by JP Morgan in relation to the copper concentrate. That being so, it is apparent that AEGIS would be entitled to subrogate itself to any claim against the ship owner in respect of any unseaworthiness claim. Although the cause of action remained vested in Sterlite, for all relevant purposes it was AEGIS who would agitate and enforce it. That would have been obvious to The Japan P&I Club given that it was negotiating with AEGIS directly.
The negotiations in relation to the extension were expressly conducted by Waltons & Morse (subsequently Kennedys Marine) as the solicitors for AEGIS as the insurers of the copper and zinc cargoes and the extensions were sought in relation to the several bills of lading. That such was the case was even more pellucid by the letter of authority given by AEGIS to The Japan P&I Club on 13 December 2012 and obviously in the exercise of its powers and rights as the insurer of the cargo.
Similarly, by the Letter of Undertaking, being counter security in respect of claims which might be brought against the ship, The Japan P&I Club agreed to pay on demand such sums as may be due from Ever Rock. The undertaking was directed to the “Cargo owners / cargo underwriters / lawful Bill of Lading holders / cargo insurers”. In this respect, it is apparent that The Japan P&I Club was aware that the claims which might be made included subrogated claims by a cargo insurer and the undertaking was directed to such. Whilst the intent of that undertaking is clear enough, it pays little attention to the legality of the ownership of the causes of action against the ship owner.
Hence, a significant contextual element is that the parties who were engaged in the negotiations were the ship and cargo insurers who were interested in the rights and liabilities of their respective insureds inter se arising from the ship’s grounding. A reasonable person considering the correspondence between these insurers would recognise that, although the legal rights of action vested in the insureds, the direct and immediate interests in those causes of action vested in the insurers themselves whose concerns were to advance their own interests concomitantly with their insureds’. In a general sense, therefore, the purpose of the agreement sought to be struck by the extension was to effectively protect the interests of the respective insurers while attempts were made to negotiate a settlement. The Japan P&I Club was interested to avoid the costs of litigation, were that to be commenced, and AEGIS was interested to preserve its subrogated claims pending the completion of negotiations.
The scope of the original extensions
The extensions granted fell into two tranches. The first group of extensions to 18 December 2015 were granted to all those interested in the cargo such that Sterlite would have had the benefit of them. The dispute lies in the extensions granted from 11 December 2015 onwards.
Ever Rock submits that each successive extension was, of itself, a new agreement which, after 18 December 2015, became new agreements between different parties. The plaintiffs submit that each request and extension granted was a variation of the contract of carriage evidenced by the BOL. Ultimately, whether the several extensions were novations of the BOL or separate discreet agreements is not, itself, determinative.
As a matter of practicality, as opposed to legal onus, in order for Ever Rock to succeed on this issue it must establish that the extension granted on 11 December 2015 made a substantial and material alteration to the arrangement which had existed previously. In this respect there is much force in the plaintiffs’ submissions that the language used in the emails by which the extension was granted on 11 December 2015 does not disclose the making of such dramatic changes and, in particular, to the identity of the parties to the agreement or series of agreements.
Beginning with the pre-2015 extensions, the plaintiffs rely upon the proposition that it was only the parties to the contract of carriage evidenced by the BOL who were potentially subject to the 12 month limitation period and that all involved in the negotiations would have known that the benefit of the extension was directed to the claim of the lawful holder of the BOL at the time that the relevant causes of action accrued. They submitted that:
… a reasonable commercial construction of the emails granting extensions is that all insureds of Waltons & Morses’ [sic] insurer clients were the subject of an extension, all those insureds were interested in the cargo of copper concentrate and had been lawful holders of the bill of lading at some time.
There is force in that submission for the following reasons:
(a)First, the original request on 6 December 2012 for an extension was sought by Waltons & Morse on behalf of the underwriters of the zinc and copper cargo. That was indicative of the cargo insurers seeking to protect their interest in the right to recover against the ship owner regardless of the identity of the holder of the BOL at the relevant time.
(b)Secondly, the initial extension was sought in general terms by reference to the two bills of lading and that discloses that the extension was sought in relation to all claims which arose in relation to those cargoes. As Mr Lloyd, who was the solicitor at Waltons & Morse handling the matter, testified, extensions of this nature are always sought by “cargo lawyers” on behalf of all persons interested in the cargo being the several lawful holders of the bills of lading and the underwriters. He said that was done by seeking extensions in relation to the bills of lading and those interested in them. The obvious purpose of doing that is to protect all interests pending the identification of the cargo owner, within a group of successive owners, whose interests were adversely affected at the relevant time. As evidence of industry practice, Mr Lloyd’s testimony in this respect can be accepted and the correspondence in this matter certainly supports it.
(c)Thirdly, the authority provided by AEGIS to The Japan P&I Club on 13 December 2012 disclosed that it had instructed Waltons & Morse to obtain the extension and it was granting the authority for that firm to act on its behalf and on behalf of the cargo owners under the BOL.
(d)Fourthly, the initial extension of 12 months, given on 14 December 2012, was granted was in general terms in response to the request. The email requesting the extension said:
The time extension is requested in respect of Bill of Lading No: N-1 dated 11 November 2011 (copper concentrate) …
So there is little doubt that the extension was given to all parties interested in the BOL.
(e)Fifthly, the second extension was also sought and given simply in respect of the BOL. Again, that indicates the parties accepted that the extension was in general terms in respect of the several interests in the cargo which was the subject of the BOL.
(f)Sixthly, the same can be said of the third extension which was given on 18 November 2014. On this occasion The Japan P&I Club indicated that:
… the Owners grant the requested time extension up to and including 18th December 2015 in respect of Bill of Lading No: N-1 dated 11 November 2011 (copper concentrate) and Bills of Lading Nos: TSVCOC-1 dated 29 November 2011 and TSVNTP-1 dated 13 December 2011 (zinc concentrate), as per the previous extension.
It is apparent that the agreements or variations to this point in time extended the time limited for commencing proceedings against the ship owner in favour of those interested under, inter alia, the BOL. It was also apparent to all that AEGIS was the insurer of the cargo and was seeking extensions in relation to its interests in the subrogated claims. It would also have been apparent to a reasonable person in the circumstances that the extensions sought and granted to 18 December 2015 were in wide terms and appropriate to protect the interests of AEGIS as the insurer of the cargo regardless of the identity of the cargo owner at any relevant time. It was also probably apparent that AEGIS was entitled to be subrogated to its insureds’ claims against the ship owner given that it had met the salvage claim and provided security in relation general average.
The scope of the extensions from December 2015
It is in the above context that the extension given on 11 December 2015 must be considered.
The request for an extension on 23 November 2015 was in similar terms to previous requests. Waltons & Morse sought the ship owner’s agreement to an extension in respect of the BOL. An extension in those terms would have been identical to the extensions which had previously been granted, there being an identity of the wording used. In those circumstances the response from Holman Fenwick on behalf of The Japan P&I Club on 1 December 2015 is important. In relation to the requested extension it was first said that the insurers were “minded to agree” to the extension, but before they did so they wished to know “the precise identity of your clients for whom the extension of time is sought.” The effect of that statement is plain enough. The Japan P&I Club was prepared, or at least minded, to grant the extension requested, being in the same terms as that which had previously been granted, if certain information was provided. There was no subsequent disavowal of that position when the extension was granted on 11 December 2015.
The response of that day from Waltons & Morse identified that the clients for whom they acted, and in respect of whom the extension was sought, were the insurers of the zinc concentrate cargo and the insurers of the copper concentrate cargo carried under the BOL. Letters of authority from those “interested insurers in respect of both cargoes” were attached. Given the history of the matter, to any reasonable person that identification would have indicated that the extension was being sought in relation to the insurers’ interests in the cargoes in respect of which they had already indemnified the cargo owners.
Holman Fenwick then sought further information on 2 December 2015 and, in particular, sought to ascertain the identity of AEGIS’s insureds. The response of Waltons & Morse on 8 December 2013 was to the effect that their clients’ insureds were, inter alia, in respect of the copper cargo, JP Morgan Metals & Concentrates LLC.
It was after receipt of that information that Holman Fenwick sent its email of 11 December 2015 which confirmed that the owners granted to Waltons & Morse’s clients a time extension up to and including 18 December 2016 for commencement of claims under, inter alia, the BOL. The terms in which the extension was granted are worth repeating:
Thank you for confirming the identity of your clients’ assureds. We hereby confirm, on behalf of Owners, to grant your clients (as per the letters of Authority attached to your email of 1 December 2015) a time extension for commencement of claims under B/Ls TSVCOC-1 dated 29th November 2011, TSVMTP-1 dated 13th December 2011 and Bill of Lading number N-1 dated 11/11/11 up to and including 18 December 2016, on the basis that the claims are not already time barred.
No party suggested that the grant of the extension in the above terms did not contain an element of ambiguity. It does. However, in the circumstances of the prior dealings, a reasonable person would interpret the extension as applying to any of the claims in which the cargo insurers were interested and which arose under the identified bills of lading. The plaintiffs made the following argument as supporting that proposition and these arguments ought to be accepted:
(a)First, the extensions granted to that point in time were in general terms with respect to all claims in which the insurers had an interest and which arose out of the bills of lading. The initial extensions were granted to cargo interests and the correspondence indicates that was intended to continue: CIA Continental Hispanica SA v Westgate Shipping Co Ltd [1978] AMC 1560, 1566. In relation to this particular extension the request was in a similar form to previous requests and the terms of the extension mirrored that. There was no express indication in Holman Fenwick’s email that the extension would have been more restrictive than that which had previously been given.
(b)Secondly, the extension was given in response to a request for a further extension “as per the previous extension” and after Holman Fenwick had indicated that their client was “minded to agree” to the request but, before they did, they wished to know the precise identity of Waltons & Morse’s clients for whom the extension was sought. That information was provided and the extension granted. A reasonable person would perceive the extension granted was, as per the request, of the same nature and scope of the previous extensions and in accordance with that to which The Japan P&I Club and Ever Rock said they were “minded to agree”.
(c)Thirdly, although Ever Rock submitted the express reference to the “identity of your clients’ assureds” indicated that the extension was limited to those entities, that ought not to be accepted. The Japan P&I Club had been advised of the identity of Waltons & Morse’s “clients” and of the “insureds” of those clients. Despite that, the extension was provided to the “clients” rather than to the identified insureds. That is significant where it must have been in the reasonable contemplation of the parties that AEGIS was seeking to protect their interests in the claims arising from their insurance of the cargo.
(d)Fourthly, Waltons & Morse identified their clients as being the insurers of the zinc and copper cargoes. That ought to have indicated to any reasonable person in the position of Holman Fenwick, The Japan P&I Club and Ever Rock that the insurers had an interest or would have an interest in cargo owners’ claims arising from the grounding, regardless of the actual identity of the holder of the bills of lading at the relevant time. The insurer would be unlikely to be acting as it did had it not indemnified or agreed to indemnify the relevant cargo owner. It cannot be seriously said that Ever Rock and The Japan P&I Club were not aware of the liability to which the holders of the bills of lading for the cargo had been subject in respect of the salvage claims and the general average declaration. The first had been paid by AEGIS which had also provided the general average guarantee. Given the extensive correspondence it is difficult to accept that Ever Rock would have been unaware that AEGIS had indemnified or agreed to indemnify the holder of the BOL in respect of the cargo. At the very least, that would have been its clear expectation. All of this would indicate to a reasonable person that the insurers were seeking to protect their subrogated claims arising from the grounding, however they might arise.
(e)Fifthly, the express identification in the extension of the “clients” by reference to the letters of authority reinforces that the parties contemplated that it was granted in favour of all interested underwriters and their insured in respect of all matters incidental to and arising out of the grounding of the ship. The letter of authority disclosed that the intent of AEGIS was to protect, inter alia, the insurers’ interests arising from the grounding. The claims of the insurers would be either subrogated claims or claims which they were entitled to conduct on behalf of their insureds.
(f)Sixthly, there was no express restriction on the scope of the extension save the proviso that it only applied to claims which were not otherwise time barred. In circumstances where the insurers had asked for an extension “as per the previous extension”, the solicitors for the P&I Club had indicated that it was minded to give that extension but, as a precondition, wished to know the identity of the clients, and that information had been provided, a reasonable person would perceive the broad extension granted to coincide with that which had been requested. The indication of a preparedness to grant the extension subject to the provision of information created circumstances where, if the extension actually granted was more restrictive than previously given, a reasonable person would have expected the party giving the extension to specifically identify the limits.
(g)Seventhly, although Ever Rock submitted that its request for information about the insureds, and its reference to that fact in the extension, limited the extension to those named insureds, that is insufficient in the circumstances of the correspondence to outweigh the factors indicating the extension was to protect the insurers’ interests. It if were intended to limit the extension to the identified insureds, the reference in Holman Fenwick’s email is oblique at best. Although it is apparent that the identity of the insureds was sought and provided, the extension was not limited to claims by those parties. In the circumstances, the plaintiffs’ submission that the seeking of the identity of the insureds was the act of newly instructed solicitors seeking to ascertain the facts of the matter they were now handling has significant force.
(h)Eighthly, had it been the intention of Ever Rock to reduce the scope of the extension from that which had been previously granted, it would have been easy for it to expressly so provide. Whilst arguments of this nature are not usually determinative, in the circumstances assayed above, the absence of an express restriction on the scope of the extension would indicate to a reasonable person that the extension was intended to be in the same terms as previously granted.
A central plank in Ever Rock’s submissions was that the exchange of emails whereby its lawyers sought the identification of the insureds of Waltons & Morse’s clients had the consequence that the ensuing extension applied only to the claims of those insureds. Whilst there is some force in that submission, for the reasons identified it is of limited weight in the present case. Here, on the assumption that the parties were acting with honest common sense and in a businesslike way, there being no express indication of a limit on the extension, the correct interpretation of the email exchange is that the extension granted by Ever Rock was in respect of claims under, inter alia, the BOL which might be pursued by Waltons & Morse’s clients. It might even be said that the inquiry about the identity of the insureds weakens Ever Rock’s case. The correspondence had identified the insurers of the cargo on the one hand and the identified insureds on the other and the former were identified as the “clients” of Waltons & Morse. Rather than granting the extension for the benefit of the insureds, Ever Rock granted it in favour the “clients” and in general terms which were referable to the claims under the BOL. Given the distinction drawn between the “clients” and the “insureds”, if the scope of the extension were intended to be limited to the rights of the insureds, it would be expected the extension would have been expressly given to them.
Would acceptance of Ever Rock’s proposed construction lead to a nullity?
The plaintiffs sought to obtain some support for their argument by reference to the judgment of Lord Justice Hoffmann (as his Lordship then was) in The “Stolt Loyalty” [1995] 1 Lloyds Rep 598 (CA) at 601-602. There, a grant of an extension had been granted by the vessel’s owners, however the reference to “owner” was taken to include the bareboat charterer as well. It is obvious from the reasons of his Lordship that the commercial context, being the discussion of carriage claims between solicitors for cargo owners and ship owners, had the effect that the words of the lexicon used by the parties had a broader meaning than that which might otherwise be the case. Additionally, the commercial reality of what the parties were doing, namely granting an extension of the limitation under Art III r 6 of the Hague Rules, was taken into account. Were the ship owner’s construction to be preferred, the consequence would be that the proffered extension would have had no effect at all in respect of the claim for which the extension was sought. That was found to be a relevant circumstance negating the owners’ proffered construction.
Here, the plaintiffs argued that if the extension was limited to claims made by JP Morgan, the extension would have had no relevant effect at the time it was granted or thereafter because only Sterlite had the title to sue. As the plaintiffs argued, it can be expected that the parties to the extension would not have intended it to have no effect such that they must have intended the extension to apply to all causes of action relating to the BOL and arising because of the grounding regardless of the precise identity of the relevant cargo owner. Whilst there is some force in the plaintiffs’ submission in this respect, it must be kept in mind that the decision in The “Stolt Loyalty” is one which merely ascertains the meaning of words used by the parties to the agreement by considering them in a businesslike manner in the context in which they were used. However, in that decision it is apparent that “everyone knew” the true position as regards the registered owner and the bareboat charterer and, therefore, an objective observer could not conclude they were agreeing to an arrangement which made no legal or commercial sense.
The position in the present case is somewhat different. Here, it is apparent that Waltons & Morse erroneously believed that JP Morgan was the relevant insured and informed Holman Fenwick of the same. If it were the case that JP Morgan was the insured at the relevant time and had title to sue, the agreement as construed by Ever Rock would have made commercial and legal sense. It follows that this is not a case where the words used by the parties are to be construed in a manner which would avoid the agreement being nugatory. Whilst the agreement would not make commercial or legal sense if the extension was limited to JP Morgan, the fact that would produce that result was not known to the parties at the time. In this way the circumstances are quite different to those which presented themselves in The “Stolt Loyalty” and it cannot be said that Ever Rock’s construction would lead to a nullity in the sense referred to in that case.
The plaintiffs submit that nothing in those sections affects or impedes the right of JP Morgan to pursue Ever Rock in negligence for the losses which were caused as a result of it becoming liable for salvage charges consequent upon the grounding. In support of that proposition they relied upon the decision of the House of Lords in Leigh & Sillavan Ltd v Aliakmon Shipping Co Ltd [1986] 1 AC 785, 808-809. That decision confirmed that the holder of a bill of lading might pursue claims in contract and tort where, at the time of the occasioning of damage, the holder held legal ownership of or a possessory title to the goods. For present purposes it can be accepted that when the grounding occurred and the salvage services were provided, JP Morgan had title to the goods, even if risk in them had passed, such that an action in tort might have then been pursued. However, that says nothing of the effect of the operation of the Sea-Carriage Documents Act where, after the damage has occurred, the bill of lading has been transferred.
The plaintiffs also relied upon The Sanix Ace [1987] 1 Lloyds Rep 465, 470 to the effect that even where the risk had passed to the purchaser, the seller (and holder of a bill of lading) who retains title in the goods can recover for damage sustained to them even though they have received payment of the purchase price. Again, whilst so much may be accepted, it does not impact upon the operation of the Sea-Carriage Documents Act.
Each of the above authorities preceded the passing of the Carriage of Goods by Sea Act 1992 (UK) (COGSA (UK)), which was the progenitor of the Sea-Carriage Documents Act, where the rights of holders of bills of lading were modified. In this respect the parties referred to the Report of the UK Law Commissioners, Rights of Suit in Respect of Carriage of Goods by Sea, which preceded the UK Act. The draft bill attached to the Report was enacted in substantially the same form and COGSA (UK). Each of the parties referred to the Report as providing assistance in the interpretation of COGSA (UK) and, indirectly, the New South Wales legislation. Mr Cox for the plaintiffs submitted that the recommendations of the Law Commissioners at paragraphs 2.40-2.41 and 2.45 were that intermediate holders of bills of lading who were on risk after they had parted with the bill should be able to sue in respect of a loss regardless of the transfer of rights of action to the subsequent holder which is effected by the cognate provisions of ss 8 and 9. At paragraph 2.45 the Law Commissioners said:
2.45 The question was raised in the Working Paper whether it might be necessary to exclude or limit rights of suit in tort since our reform might expose the shipowner to double liability. If property in the goods had not passed before they were damaged but in circumstances where a bill of lading had already been transferred, the seller might have a claim in tort as owner of the goods in addition to the claim in contract by the holder of the bill of lading, although there may well be cases where the seller does not have an immediate right to claim possession of the goods on which to found a claim in tort. It is inconceivable that a court would permit double recovery of damages under our proposals any more than it would now. Moreover, to exclude the rights of suit of the owner could produce the anomaly that P, qua owner, was unable to sue where as qua charterer he could. We do not recommend that rights of action in tort should be explicitly excluded from implementing legislation. (footnotes omitted)
It follows, so the plaintiffs submit, that the COGSA (UK), which was enacted in accordance with the Law Commissioners’ recommendations, should be taken as preserving the right of a former holder of a bill of sale to pursue a claim in tort in respect of damage caused to them by the carrier. They sought to support their submission by reference to Cro Travel Pty Ltd v Australian Capital Financial Management Pty Ltd [2018] NSWCA 153, [232] and [251], which suggests that, whilst all contractual rights under a bill of lading are transferred by delivery and endorsement, causes of action which might derive from possessory claims such as a pledgee or bailor of goods remain. In Cro Travel Ward J held:
[251] CRO contended that the rights of a pledgee of a bill of lading might have been affected by the Sea‐Carriage Documents Act. That submission should be rejected. That Act is concerned only with the contract of carriage to which the bill relates. It was intended to remedy a defect which precluded a lawful holder of a bill of lading from taking rights under the contract of carriage. It would be a perverse outcome if the Act reduced the property rights of a pledgee of the goods referred to in the bill. Mance LJ considered at some length the question whether the equivalent Act in the United Kingdom had reduced the rights of a bailee of the goods in East West Corpn at 1537–1538, saying (emphasis added):
[T]he 1992 Act does not expressly modify any rights other than contractual rights … The mischief at which the 1992 Act was aimed was that rights under the bill of lading contract could remain vested in persons other than those having the property or risk in the goods. This might occur either because the general property did not pass at all, or because it did not pass upon or by reason of the indorsement of the bill, so that the 1855 Act was of no assistance. The remedy adopted by the 1992 Act was to transfer contractual rights to any holder of the bill, as defined in section 5(2). The result is, however, to create a new class of cases in which the bill of lading contract may be vested in a person other than the person at risk.
[252] Mance LJ concluded (at 1538):
If it were necessary, however, I would conclude that the sole effect of the 1992 Act is on contractual rights, and, where there is no intention to pass any possessory right, possessory rights sounding in bailment remain unaffected. But in my view it is unnecessary even to reach any such conclusion. Whatever the position in that regard, I do not consider that the 1992 Act can be treated as working an automatic transfer of any rights in bailment, so that they enure exclusively to the person entitled under its provisions to exercise the contractual rights.
In the course of final addresses Mr Cox of counsel submitted that it was common ground between the parties that rights in tort sit outside of COGSA and the Sea-Carriage Documents Act. That would appear to be correct from a theoretical perspective, however, Mr Stewart SC’s post hearing written submissions suggest that, even if such a cause of action were available, it would be futile to allow JP Morgan leave to amend the Statement of Claim so as to pursue it. He submitted that the effect of the operation of the Sea-Carriage Documents Act in the circumstances of the present case is that on or about 8 February 2012, when Sterlite came into possession of the BOL as a result of its endorsement and delivery, it became the lawful holder within the definition in s 5 and was the only party with any interest in the cargo and with any rights under the BOL who might bring an action on it. The plaintiffs did not appear to dispute this submission to the extent to which it was limited to the bringing of actions under the BOL.
The difficulty which arises is that the grounding occurred on 19 December 2011, at which time JP Morgan was the holder of the BOL and had title to the goods even though risk had passed to Sterlite. It would also appear not to be in contention that the salvage services were provided before the transfer of the BOL to Sterlite and the costs and expenses which are now part of the general average contribution were also incurred. In these circumstances JP Morgan claims that it is entitled to pursue an action in negligence against Ever Rock founded upon its title to the goods and Ever Rock exposing it to liability for salvage charges by its mismanagement of the ship. In other words, it claims to be entitled to pursue an action which is not based on its rights under the contract of carriage. It is noted that JP Morgan does not appear to claim any loss by reason of the general average contribution which it accepts is a liability of Sterlite by reason of s 10 of the Sea-Carriage Documents Act.
In response Ever Rock submitted that the Sea-Carriage Documents Act and the COGSA (UK) do not condition the rights of the lawful holders upon the acquisition of title to the property in the cargo. It relied upon the observations of Thomas J in Aegean Sea Traders Corporation v Repsol Petroleo SA (The “Aegean Sea”) [1998] 2 Lloyds Rep 39 at 60 and Teare J in Standard Chartered Bank v Dorchester LNG (2) Ltd (The “Erin Schulte”) [2013] 2 Lloyds Rep 338, [41] and [52]. However, neither of those cases address the specific issue which arises in the present case. They were concerned with the operation of the COGSA (UK) and the effect of the complete delivery of the bill of lading which was effective to pass title to sue regardless of the passing of property under the contract of sale. Under COGSA (UK) and the Sea-Carriage Documents Act, for an action on the bill there is no need to undertake any inquiry as to whom and when property in the goods passed or what was the contractual position between the transferor and the transferee of the bill. These two cases were concerned with the title to sue of the deliveree and were not concerned with what, if any, remnant rights remained with the temporal owner of goods who suffered loss as a result of the ship owner’s conduct.
The plaintiffs submit, in this alternative case, that JP Morgan, as owner of the goods at the time the salvage services were provided, was required to pay the salvage charges to Fukada and it is entitled to pursue Ever Rock in an action in negligence in respect of that loss. There is sufficient support in the authorities identified for the proposition. That action does not arise under the bill of lading and is not transferred by force of the Sea-Carriage Documents Act.
Ever Rock submitted that no such claim could arise because, as between JP Morgan and Sterlite, the risk passed to the latter once the cargo passed the ship’s rails. However, the contractual apportioning of risk as between an owner and purchaser did not affect JP Morgan’s title to the goods which was sufficient to ground a claim in tort against Ever Rock.
Ever Rock also submitted that JP Morgan suffered no loss as a result of the grounding because it had passed the benefit of the AEGIS insurance policy to Sterlite which had subsequently been paid the full purchase price and obtained title to the goods. It also submits that JP Morgan was paid in full for the cargo on its sale to Sterlite and there was no discount or adjustment consequent upon the liability to meet a proportion of the salvage costs. These submissions cannot be accepted. Whether a plaintiff carries insurance in respect of the loss or damage inflicted by a third party does not affect the third party’s liability or the quantum of the damages for which they are liable. Additionally, once the grounding had occurred, JP Morgan, as owner, became liable for the charges which would be incurred in the salvage of the ship: Castle Insurance Co Ltd v Hong Kong Islands Shipping Co Ltd [1984] 1 AC 226 at 234; Kennedy & Rose Law of Salvage (Sweet & Maxwell 7th ed) [17.016], [17.040]-[17.041]. Consequently, its cargo became subject to the imposition of a lien in respect of its portion of the charges. Had it not, through AEGIS, provided security for the cost of salvage the salvor’s lien would have taken effect over the cargo and diminished it in value. That security had the consequence of the salvage charges being subsequently paid by AEGIS on behalf of its insured, JP Morgan, when the amount of the charge was ascertained. Without the security being provided in substitute for the salvors’ lien, the rights in the cargo would have diminished to the extent that the lien arose. It is axiomatic the provision of the security had the consequence the salvors would not and did not exercise their lien.
The above conclusion that JP Morgan might pursue a claim in negligence is supported by the view adopted in some authorities that the imposition of the salvor’s lien on a cargo constitutes damage to the property: The “Breydon Merchant” [1992] 1 Lloyds Rep 373, 376 which was followed in Qenos Pty Ltd v Ship “APL Sydney” (2009) 187 FCR 282, 290 [27]. The effect of the imposition of the lien on the cargo is that its value is reduced as are the proprietary rights of cargo owners which are diminished to the extent to which the lien attaches. The lien and accompanying rights of the salvors causes a loss of property to the cargo owners. To this extent the loss is not merely a diminution in the value of the goods, but it includes a loss of property or property rights in the goods. In this respect the cause of action in tort as sought to be formulated in the proposed amended statement of claim is one for property damage to the cargo and consequential loss. Mr Stewart SC submitted that all that occurred was that the fiscal value of the cargo was diminished and its physical integrity remained unchanged. This led to the submission that the tortious claim was for pure economic loss with the consequence that additional requirements would need to be established before liability could be imposed. As this submission went to the question of whether leave ought to be given to amend the pleading, it is not a question that needs to be definitively answered. That said, the consequence of the conduct of which JP Morgan complains is not merely a diminution in the value of the cargo. It is the loss of proprietary rights over and with respect to it by the crystallisation of the salvors’ lien. Whilst the consequence of that might be that a sum of money needs to be paid to remove the lien and restore full ownership rights, it is more than arguable that the loss is property damage rather than pure economic loss. For the purposes of an application to amend the statement of claim, the proposed amendment is not legally futile on the basis that it is a claim for pure economic loss only.
Even if the claim for damages for negligence which JP Morgan sought to advance was one for pure economic loss, it cannot be said that it would be obviously futile. Ever Rock advanced a number of submissions why it claimed the cause of action was one for pure economic loss and would not be one recognised by the Courts. However, either taken alone or in combination, they cannot be said to make it clear to the necessary degree that the claim is hopeless. Importantly, in terms of the seaworthiness of the ship, it is arguable that the cargo owners were vulnerable to loss. In this respect the plaintiffs submitted that they have no way of checking or ensuring the seaworthiness or safe navigation of the vessel and they are also subject to the agency of the master in relation to the securing of salvage services. In addition, intermediate holders of the bill of lading have no ability to negotiate or alter the contractual terms of shipping which have been put in place by the shipper and the ship owner. Conversely, it is not beyond argument that the ship owner can be taken as assuming responsibility for loss caused to the cargo owners, albeit within the scope of the area of responsibility as defined by the bill of lading. Whilst Ever Rock submitted that liability should not be imposed on the ship owner beyond that which is levied by the terms of the BOL and the international shipping agreements which are adopted in COGSA and other relevant legislation, as the discussion concerning the Sea-Carriage Documents Act disclosed, the availability of a cause of action in tort for a prior holder of a bill of lading was unaffected and remains extant. That being so, there is no reason not to accord a party in the position of JP Morgan the full panoply of rights which the common law might provide. It must also be kept in mind that the liability of Ever Rock to JP Morgan on its negligence claim will be no greater than or more onerous than the contractual duty which existed under the BOL. The vessel owner’s duty to exercise due diligence to render the vessel seaworthy is the same in tort and contract and is subject to the defences in Articles III and IV.
The above is sufficient to reach the conclusion that the proposed tortious cause of action is not necessarily futile or has no reasonable prospects of success on the basis that it is a claim is one for pure economic loss and, as such, could not succeed. Those issues can be more properly ventilated at trial when the matter is fully argued.
It might also be added that no prejudice in the litigation would seem to arise by allowing JP Morgan’s proposed amendment. If, as Ever Rock submits, the cause of action under the BOL for loss arising from the obligation to pay the salvors’ charges vested in Sterlite, that entity is entitled to pursue it in these proceedings and no additional evidence will be incurred by JP Morgan’s concurrent claim.
The submission that JP Morgan would have suffered no loss because risk passed to Sterlite under the BOL once the cargo passed the ship’s rails also cannot be sustained. As JP Morgan retained title to the goods when the salvage services were provided, it became subject to the liability to contribute to the salvage charges and the liability has been discharged. That liability was unaffected by the transfer of the BOL to Sterlite. Even if it were the case that each of Sterlite and JP Morgan may have a cause of action against Ever Rock in respect of that liability; JP Morgan in tort and Sterlite under the BOL; it is plain that double recovery would not be permitted.
Ever Rock also submitted that any claim which might be pursued by JP Morgan in negligence would necessarily rely upon the terms of the BOL and the Amended HVR which would circumscribe or limit the scope of any duty of care: The Aliakmon [1986] 1 AC 785 at 814G, 818CF. Whilst that may be accepted, it does not follow that the cause of action should not be permitted and that is particularly so because the proposed negligence plea relies upon the existing allegations of unseaworthiness and, as such, it is not fundamentally in conflict with any contractual claim: cf Carver on Bills of Lading (4th ed), Sweet & Maxwell, 2017, [5-134]. It might also be observed that, in the circumstances of the case, JP Morgan is not entitled to pursue concurrent causes of action in contract and tort.
Ever Rock also relied upon the operation of the time bar in Art III r 6 of the Amended HVR which, it submits, applies to claims against the ship owner, whether arising in tort or contract. It relies upon Art 4bis r 1 which provides:
1. The defences and limits of liability provided for in these Rules shall apply in any action against the carrier in respect of loss or damage to goods covered by a contract of carriage whether the action be founded in contract or in tort.
This provision would prevent the holder of a bill of lading from pursuing an action in tort in an attempt to avoid the time bar and, similarly, an action brought in tort against the ship owner in respect of goods carried is a “suit” within Art III r 6, and if brought within time negates the operation of the time bar: Anglo Irish Beef Processors International v Federated Stevedores Geelong [1997] 2 VR 676, 691 [35]-[45]. Again, assuming all of the above, the suit by JP Morgan in tort is not to avoid the operation of the time bar. Ever Rock admits that it extended time in favour of JP Morgan and the proceeding commenced is within time.
It follows that the proposed cause of action in negligence has not been shown to be without sufficient merit that leave to amend the statement of claim to allow its inclusion should be refused. Leave shall be granted to include a cause of action in negligence at the suit of JP Morgan in substantially the same form as that which was admitted into evidence as Exhibit 1.
Conclusion in relation to questions 4 and 5
It follows that Sterlite, and it alone, is entitled to pursue all actions against Ever Rock arising under the BOL regardless of when the causes of action arose. JP Morgan is entitled to pursue a cause of action in tort, if any, for loss or damage done to the goods whilst it had title to them. That includes tortious claims in relation to the loss or damage arising from the obligation to pay the portion of salvage charges applicable to the cargo. From the facts as advanced at the hearing, Tritton has no cause of action against Ever Rock arising from the carriage of goods under the BOL or consequent upon the grounding.
Answers to questions 4 and 5
The answer to question 4 which is “what are each of the plaintiffs’ interests in the cargo and whether any of the plaintiffs has title to sue” is as follows:
(a)Sterlite has title to sue under the BOL.
(b)JP Morgan is entitled to pursue its independent claim in tort, if any, where such cause of action arose when it had title to the cargo.
(c)Tritton has no identifiable cause of action against Ever Rock.
The answer to question 5 which is whether the plaintiffs are entitled to claim a loss in respect of the salvage agreement with Fukada is “Yes, to the extent that Sterlite and JP Morgan are entitled to sue in respect of any such loss. Tritton has no entitlement to make a claim in respect of it.”
Costs of serving out of the jurisdiction
The plaintiffs sought an order that the defendant pay their costs of the service out proceedings on an indemnity basis. The foundation of that submission is that The Japan P&I Club had, in its letter of guarantee and indemnity dated 21 February 2013, agreed that a solicitor would be appointed on behalf of the defendant and the defendant would accept service of the proceedings within 14 days of a request to do so. That letter warranted that the P&I Club was authorised by the defendant. The plaintiffs submit that, despite that undertaking, on being requested to appoint an Australian solicitor to accept service, the defendant failed to do. Substantial correspondence followed although the defendant and its insurer remained unperturbed and refused to nominate a solicitor to accept service on its behalf. The defendant was warned that the plaintiffs would seek an order for service out and would ask for an order that the defendant pay the costs on an indemnity basis. Still, they did not relent.
The plaintiffs submit that the defendant’s conduct by itself and its insurers was of sufficient obliquity in the context of the litigation and the obligations on parties under s 37N of the Federal Court of Australia Act as to warrant the making of an order for indemnity costs. They accepted that the mere failure to comply with the contractual obligation to appoint solicitors to accept service is, of itself, insufficient to warrant an order for costs but it is a significant factor in the circumstance of this case.
The defendant resists the making of an order for indemnity costs against it. It submitted with some force that the provisions of s 37N did not apply to it prior to it becoming a party to the proceedings. By its terms the section refers to “parties to a civil proceeding” and, prima facie, that would suggest persons who have actually been served. Were it otherwise the statutory injunction to conduct the proceedings in a particular manner may apply to a person who does not know they are a party and, indeed, may never be served.
However, that conclusion does not mean that an order for the costs of service on a party which are incurred before the party is actually served cannot be visited on that party. The contrary is true. A successful plaintiff will usually be entitled to an order for the costs of the action which will include the costs of service. If an order is made that the defendant pay the plaintiff’s costs on an indemnity basis that would include the actual costs of serving the defendant and of any prior application in respect of it. It follows that there is no reason why an order that the defendant pay the costs of service on it which are incurred by the plaintiff before service takes place cannot be made and, for that matter, on an indemnity basis. Where a party avoids service by keeping house or such other means may be a circumstance where a particular order in relation to the costs of service might be appropriate.
However, where the costs are in respect of the service out of the jurisdiction different considerations will apply. As the defendant submits, in those circumstances a proposed defendant is not usually subject to the Court’s jurisdiction and is not amenable to it unless and until an order in what is said to be the “exorbitant jurisdiction” of the Court is made. Further, it is often the case that following service jurisdictional disputes occur at which time the original order is set aside. In that context the defendant argues that a party is not required to submit to the jurisdiction of the court and that is particularly so where disagreement exists as to whether they should ever be amenable to that jurisdiction. In this case, the defendant had an arguable case that there was no party with title to sue on the bill of lading such that it ought not be subject to the Court’s jurisdiction. Whilst that argument did not ultimately prevail, it cannot be said the defendant adopted an unreasonable stance in taking the position which it did.
Whilst the defendant submitted that it was The Japan P&I Club which gave the undertaking and that entity was not asked to nominate a solicitor, that argument is, altogether, rather too technical. The P&I Club is defending the action on behalf of Ever Rock and the undertaking was given in that capacity. That aside, in the circumstances there was nothing unreasonable in the defendant’s refusal to require the plaintiff to seek and obtain an order for service on it outside of Australia.
In the course of argument some reference was made to comments of another judge of this Court concerning the conduct of the defendant in refusing to acknowledge service. In the circumstances where it has been concluded that the defendant has not acted unreasonably and that an order for indemnity costs should not be made, there is no need to consider that issue. It might simply be observed that no decision or considered conclusion had been reached by any judge of this Court on the issue of the costs of serving out of the country and anything which might have been taken as an indication to the contrary was obviously a tentative observation based on the material available at the time and was not intended to express any final view.
Although the plaintiffs might rightly feel aggrieved that The Japan P&I Club did not make good on its contractual promise to nominate solicitors in Australia, there are no circumstances within the principle found in Colgate-Palmolive Co v Cussons Pty Ltd (1933) 46 FCR 225 which would justify the making of an order for indemnity costs. The defendant’s actions did not unreasonably put the plaintiffs to the expenditure of unnecessary costs.
It follows that the costs of the application for leave to serve out of the jurisdiction should be each parties’ costs in the cause.
I certify that the preceding one hundred and seventy-seven (177) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Derrington. Associate:
Dated: 6 March 2019
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