UPS Pty Ltd v Gountounas & Anor No. Scciv-01-765

UPS PTY LTD v GOUNTOUNAS & ANOR
[2001] SASC 324
Magistrates Appeal
Nyland J

This appeal is against a decision of a magistrate sitting in the civil jurisdiction of the Adelaide Magistrates Court. The appellant was the defendant in the original proceedings and the respondents were the plaintiffs. For convenience I will continue to refer to the parties as plaintiffs and defendant.
The plaintiffs are husband and wife. They have carried on business in partnership as opal dealers since 1987. The defendant is a carrier of goods. On 23 May 2000, the plaintiffs entrusted a parcel of opal to the defendant for delivery to Mr Thane Deleon of 3946 N Buckboard Trail, Scottsdale AZ 85251 United States. The opal in question was purchased by the plaintiffs from R S Billings Mining for $A10,000 on 15 April 2000 (Exhibit P3). The plaintiffs had previously sold opals to Mr Deleon through a broker. On this occasion, however, they dealt with Mr Deleon personally. The sale price negotiated with Mr Deleon was $US16,000. The transport costs quoted by the defendant were $160.
On 23 May 2000, the plaintiffs delivered the package containing the opal to a driver of the defendant. At the time of the delivery of the goods, the female plaintiff filled out a waybill (Exhibit P1) and a customs declaration (Exhibit P2). She said she showed the driver the waybill and he said it appeared okay. She said, however, that she did not read the small print on the front of the waybill or the back of the document. The value of the goods was shown on P1 as $US10,000 although it appeared to have been altered. The plaintiff said that she originally wrote $5,000 by mistake.
The plaintiffs were subsequently informed that the parcel had not been delivered to Mr Deleon, nor was it ever returned to the plaintiffs. The last known location of the parcel according to the package tracking system (Exhibit P6) was Tempe USA.
The magistrate found that in breach of the agreement to deliver the opal to Mr Deleon and in the absence of any evidence from the defendant, the defendant did not ensure that the opal was safe and secure until it reached its destination. He found that, if delivered, the purchaser would have accepted the opal based on past dealings between the plaintiffs and the purchaser. He found that the plaintiffs had to supply further opal of similar quantity and quality to their customer and had therefore suffered a loss.
In its defence, the defendant (inter alia) pleaded the Warsaw Convention 1929, as amended at the Hague in 1955, and further amended by the Montreal Protocol Number 4 1975 (the Convention) which is enacted pursuant to s 11 of the Civil Aviation (Carriers Liability) Act 1959 (Cth) which governs the carriage by the defendant of any cargo consigned to it by the plaintiffs in accordance with the contract between the parties.
The defendant further pleaded that the plaintiffs did not declare a value of shipment for insurance on the waybill attached to the cargo allegedly consigned to the defendant by them and did not pay any sum to the defendant with respect to the insurance of that cargo. The defendant pleaded that, in accordance with the terms of the contract between the parties, by failing to declare a value of shipment for insurance, the plaintiffs had failed to make a special declaration of interest in delivery at destination in accordance with Article 22(2)(b) of the Convention.
On that basis, the defendant maintained that in the event of a finding of liability against it, damages were limited to 17 special drawing rights per kilogram calculated on the basis of the actual weight of the cargo allegedly consigned to the defendant.
A significant issue at trial was the legibility of the print on the reverse side of the waybill. The magistrate described it as “practically unreadable” and considered that “to be binding upon the plaintiff, the terms and conditions must be readable either with the naked eye or if a person wears reading glasses or some other aid such as contact lenses which enables the person to read them”. As he considered that the printing was unreadable, the magistrate concluded that the terms and conditions on the back of P1 were not part of the terms and conditions for transportation of the opal by the defendant.
The magistrate went on to find that the plaintiffs were entitled to claim the cost of the opal in the sum of $A10,000 on the basis that the plaintiffs had been required to purchase similar opal, both as to quality and quantity, twice, to satisfy their agreement with Mr Deleon. In addition, the plaintiffs had made a claim for the loss of profit they would have obtained on the sale of opal which was said to be the difference between the $A10,000 which they paid for the opal and the $US16,000 being the sale price to the customer. The magistrate, however, rejected this part of the claim. He found that the loss of profit would not be in the reasonable contemplation of the carrier. In any event, if he was wrong about that, the plaintiffs had been able to sell the equivalent amount of opal, perhaps at a reduced profit to the customer by the male plaintiff travelling to America to satisfy the order and other customers.
The plaintiffs also sought interest on the damages award. The magistrate was only prepared to allow this claim from 30 May 2000 to the date of the commencement of the proceedings, namely 7 August 2000, at a rate to be determined.
The defendant subsequently appealed against the magistrate’s award of damages in the sum of $10,000 together with the award of interest. The grounds of appeal as set out in the notice are as follows:
“The learned magistrate erred in law in that:
1.He failed to find that the Warsaw Convention 1929 as amended at the Hague in 1955, and as further amended by the Montreal Protocol Number 4 (“the Convention”) applied to the carriage of goods in question pursuant to the provisions of section 25K of the Civil Aviation (Carriers Liability) Act, 1959 (Cth) (“the Act”).
2.Further, or in the alternative, he failed to apply the Convention correctly in that he failed to find that the liability of the defendant was limited to 17 special drawing rights per kilogram of cargo, at the rate of exchange as at the date of his judgment, pursuant to Article 22 (2)(b) of the Convention and section 9 of the Act.”
The plaintiffs subsequently filed a notice of cross-appeal on 12 July 2001. The grounds set out in the cross-appeal are as follows:
“That the learned Magistrate erred in that:-
1.He failed to find that the market value of the opal was US $16,000.00 which should have been awarded to the Respondents (Plaintiffs) by way of damages.
2.The learned Magistrate should have awarded the Respondents (Plaintiffs) interest under Section 34 of the Magistrates Court Act from the period one month after the loss of the opal until judgment.”
On 17 July 2001, the plaintiffs filed a notice of contention. They contended that the decision of the magistrate should be affirmed on the grounds that the Convention did not apply when the goods were lost as the carriage of the goods by air had been concluded prior to the goods having been lost by the defendant.
The cross-appeal was not filed within the time prescribed by the Rules. The plaintiff therefore sought an extension of time which was opposed by the defendant. The principal basis for objection was, however, the lack of merit in the cross-appeal. I therefore decided, as a matter of convenience, to hear argument as to all matters prior to making my ruling as to an extension of time.
On the hearing of the appeal, Mr Soulio appeared for the defendant (appellant) and Mr Proud appeared for the plaintiffs (respondents). The argument presented by Mr Soulio was relatively straightforward. It was not disputed that the Convention applied to the international carriage of goods by air. It was therefore applicable to the international carriage of goods between Australia and the United States of America as both parties were signatories to the Protocol.
The Convention is reproduced in Schedule 5 of the Civil Aviation (Carriers Liability) Act 1959. It is divided into chapters, articles and sections. Section 3 of Chapter 2 sets out the documentation to be provided with respect to cargo. Articles 5, 6, 7 and 8 of that section include such matters as the requirement of the delivery of a waybill and the matters to be incorporated into the documentation. Article 9 of that section, however, provides that:
“Non-compliance with the provisions of Articles 5 to 8 shall not affect the existence or the validity of the contract of carriage, which shall, none the less, be subject to the rules of this Convention including those relating to limitation of liability.”
Mr Soulio relied on this provision to submit that there was no requirement that the Convention be drawn to the attention of a consignor. On that basis, the magistrate had erred in finding that the application of the Convention was dependent upon the legibility of the terms and conditions printed upon the back of the waybill. Accordingly, the plaintiffs’ entitlement to damages was limited to the amount described by Article 22(2)(b) of Chapter III of the Convention.
Mr Proud did not dispute the applicability of the Convention to the carriage of goods by air. However, he relied on the matter raised in the notice of contention, ie that the Convention did not apply in this case as the carriage of the goods by air had concluded prior to the goods having been lost by the defendant.
Article 18 of Chapter III provides as follows:
“1.The carrier is liable for damage sustained in the event of the destruction or loss of, or damage to, any registered baggage, if the occurrence which caused the damage so sustained took place during the carriage by air.
2.The carrier is liable for damage sustained in the event of the destruction or loss of, or damage to, cargo upon condition only that the occurrence which caused the damage so sustained took place during the carriage by air.
3.However, the carrier is not liable if he proves that the destruction, loss of, or damage to, the cargo resulted solely from one or more of the following:
(a)    inherent defect, quality or vice of that cargo;
(b)    defective packing of that cargo performed by a person other than the carrier or his servants or agents;
(c)    an act of war or an armed conflict;
(d)    an act of public authority carried out in connexion with the entry, exit or transit of the cargo.
4.The carriage by air within the meaning of the preceding paragraphs of this Article comprises the period during which the baggage or cargo is in the charge of the carrier, whether in an airport or on board an aircraft, or, in the case of a landing outside an airport, in any place whatsoever.
5.The period of the carriage by air does not extend to any carriage by land, by sea or by river performed outside an airport. If, however, such carriage takes place in the performance of a contract for carriage by air, for the purpose of loading, delivery or transhipment, any damage is presumed, subject to proof to the contrary, to have been the result of an event which took place during the carriage by air.”
In this case, there is a paucity of evidence available as to how the goods were lost. Exhibit P6, which is the package tracking system describes the route of the package in the following terms:
“DEST       US8529     TEMPE  AZ    05/26/00 06:56       D
ARRV      US8529    TEMPE  AZ    05/26/00 04:47       L
DPTD       PHX         PHOENIX                  AZ    05/26/00 04:20       L
BYPS       PHX         PHOENIX                  AZ    05/26/00 03:01       L
ARRV      PHX         PHOENIX                  AZ    05/26/00 02: 59      L
DPTD       ONT         ONTARIO INTL        CA 05/26/00 02:02       L
LOC         US9169N ONTARIO HUB         CA 05/25/00 23:11       P”
Mr Deleon in an affidavit sworn on 9 March 2001 said that the male plaintiff undertook to forward by airfreight the parcel of opal to him for inspection. He deposed to a phone call from the defendant from Ontario, California in which the value of the package was discussed but nothing more. The departure times shown in P6 suggest that the parcel was carried by air from Ontario through Phoenix to Tempe which is the last location at which the goods were identified. There was no evidence as to whether Tempe is or is not an airport.
Section 5 of Article 18 set out above provides that where carriage takes place in performance of a contract for carriage by air, the damage is presumed, subject to proof to the contrary, to have been the result of an event which took place during the carriage by air. The plaintiffs were therefore required to rebut the presumption contained in s 5. Mr Deleon’s affidavit indicates that the goods were consigned for freight by air. There is no evidence to indicate that the passage by air had concluded at the time the parcel was lost. I therefore find that the Convention applies to the carriage of these goods. The method of assessment of loss is therefore governed by Article 22 of s 5 which limits the liability of the defendant to 17 special drawing rights per kilogram. That finding effectively disposes of the issues raised on the appeal and also on the cross-appeal. Nevertheless, I consider it appropriate to make some comment as to the matters raised by the cross-appeal.
In claiming damages by way of loss of profit, Mr Proud relied upon the rule in Hadley v Baxendale (1854) 9 Ex 341 which provides:
“(T)he damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated.” (emphasis added)
Mr Proud referred to the evidence of the male plaintiff that he purchased the opal for the sum of $A10,000 from Mr Billings and his further evidence that he had contracted with Mr Deleon to forward the parcel to him for approval and that if approved, Mr Deleon was to pay the sum of US$16,000. The male plaintiff and Mr Deleon deposed to the fact that on previous occasions when the plaintiff had forwarded opal to Mr Deleon for approval, it had met the description and the agreed price had been paid. On that basis, Mr Proud submitted that $US16,000 represented the market value of the opal which should have been the sum awarded to the plaintiffs.
Mr Proud also submitted that in view of the evidence of the plaintiffs that they carried on business as opal dealers, it was open to the magistrate to have found that the monies which the plaintiffs should have received from Mr Deleon in respect of the parcel would have been used to purchase further opal for trading. The learned magistrate had therefore wrongly held that because the plaintiffs purchased a further parcel of opal which they were able to sell to Mr Deleon, the award of damages would be limited to the original cost of the opal.
Mr Proud submitted that the learned magistrate should have found that the plaintiffs could have sold the further parcel of opal to Mr Deleon or another customer and thereby derive a further profit on that sale. That would have been a normal consequence of the plaintiffs’ trading. He argued that the defendant was aware that the plaintiffs were seeking to have a parcel of “gemmological samples” weighing 6 kg freighted by air to a person in the United States. Accordingly by reason of the weight of the goods and their description it should have been reasonably foreseeable to the defendant that the goods could have been used for the purposes of trading.
In my opinion, however, the magistrate was correct in his approach to this aspect of the matter. There was nothing in the evidence to suggest that the defendant should or could have been aware that the plaintiff was a trader. As the magistrate found, samples are not usually for sale. There was nothing to indicate that this was a transaction for profit.
The plaintiffs also relied upon Hungerford v Walker [1988] 171 CLR 125 in claiming that the monies paid by Mr Deleon to the plaintiffs would have been used by them for further trading in opal. There was, however, no evidence to support an award for consequential losses in accordance with the principles in Hungerford v Walker. In this case, there was no evidence to suggest that the loss of monies deprived the plaintiffs of the opportunity to purchase and deal with opals and return a profit. The fact of the matter was that the plaintiffs were in a position to purchase a further parcel of opals which they were able to sell to other purchasers, including Mr Deleon.
In my opinion, there is nothing raised in the cross-appeal which would merit the grant of leave to extend time. That application is therefore refused. For the reasons which I have already expressed, the Convention applies to the assessment of damages. The appeal will therefore be allowed and the judgment of the magistrate set aside. In lieu thereof there will be judgment for the plaintiff against the defendant for damages in a sum to be calculated in accordance with the provisions of Article 22 of s 5 of the Convention.

[2001] SASC 324

21 September 2001