Westrac Equipment Pty Ltd v “Assets Venture”
[2002] FCA 440
•12 APRIL 2002
FEDERAL COURT OF AUSTRALIA
Westrac Equipment Pty Ltd v “Assets Venture” [2002] FCA 440
ADMIRALTY – loss of cargo – whether carrier took reasonable care in stowage of cargo – whether breach of implied term of contract – appropriate measure of damages
BAILMENT – sub-(or quasi) bailment – duties of bailee and sub-bailee – liability of bailee for breach of duty by sub-bailee
Evidence Act 1995 (Cth) s 63
The Pioneer Container [1994] 2 AC 324 cited
Morris v CW Martin & Son Ltd [1966] 1 QB 716 cited
Philip Morris (Aust) Ltd v Transport Commission [1975] Tas SR 128 cited“Captain Gregos” [1990] 2 Lloyds Rep 395 cited
Wespac Bank Corp v Royal Tongan Airlines [1996] Aust Torts Reports 81 cited
Nugent v Smith (1876) 1 CPD 423 cited
Shipping Corporation of India Ltd v Gamlen Chemical Co A/Asia Pty Ltd (1980) 147 CLR 142 applied
Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220 applied
Salsi v Jetspeed Air Services Ltd [1977] 2 Lloyd’s Rep 57 cited
Aqualon (UK) Ltd v Vallana Shipping Corp [1994] 1 Lloyd’s Rep 669 cited
Elektronska v Transped [1986] 1 Lloyd’s Rep 49 cited
Metaalhandel v Ardfields [1988] 1 Lloyd’s Rep 197 cited
British Road Services Ltd v Arthur V Crutchley & Co Ltd [1968] 1 All ER 811 cited
Gilchrist Watt & Sanderson P/L v York Products [1970] 3 All ER 825 cited
E A Marr (Contracting) Pty Ltd v Broken Hill Pty Ltd [1970] 3 NSWR 306 cited
Radferry Pty Ltd v Starborne Holdings Pty Ltd [1998] FCA 1689 cited
York Products Pty Ltd v Gilchrist Watt & Sanderson Pty Ltd [1968] 3 NSWR 551 followed
Palmer Bailment 2nd ed. 1991
Davies, Dickie Shipping Law 2nd ed. 1995WESTRAC EQUIPMENT PTY LTD (ACN 009 342 572) v THE OWNERS OF THE SHIP “ASSETS VENTURE”, ZENTNER CONSOLIDATED PTY LTD
(ACN 009 108 678) and ERNEST HENRY ZENTNER
W32 OF 2000LEE J
12 APRIL 2002
PERTH
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
IN ADMIRALTY
W32 OF 2000
BETWEEN:
WESTRAC EQUIPMENT PTY LTD
(ACN 009 342 572)
PLAINTIFFAND:
THE OWNERS OF THE SHIP “ASSETS VENTURE”
FIRST DEFENDANTZENTNER CONSOLIDATED PTY LTD
(ACN 009 108 678)
SECOND DEFENDANTERNEST HENRY ZENTNER
THIRD DEFENDANTJUDGE:
LEE J
DATE OF ORDER:
12 APRIL 2002
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1. There be judgment for the plaintiff against the first defendant and against the second defendant in the sum of $377,052.18.
2. The plaintiff’s claims against the third defendant be dismissed with no order as to costs.
3. The first defendant and the second defendant pay the plaintiff’s costs of the action, including reserved costs, to be taxed if not agreed, the first defendant to indemnify the second defendant in respect of any costs the second respondent may be required to pay by the plaintiff.
4. On the cross-claim there be judgment for the cross-claimant against the cross-respondent in the sum of $377,052.18 such judgment to be discharged to the extent that the cross- respondent (as first defendant) has paid any part of that sum to the plaintiff under Item 1 of these Orders.
5. The cross-respondent pay the cross-claimant’s costs of the cross-claim.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
IN ADMIRALTY
W32 OF 2000
BETWEEN:
WESTRAC EQUIPMENT PTY LTD
(ACN 009 342 572)
PLAINTIFFAND:
THE OWNERS OF THE SHIP “ASSETS VENTURE”
FIRST DEFENDANTZENTNER CONSOLIDATED PTY LTD
(ACN 009 108 678)
SECOND DEFENDANTERNEST HENRY ZENTNER
THIRD DEFENDANT
JUDGE:
LEE J
DATE:
12 APRIL 2002
PLACE:
PERTH
REASONS FOR JUDGMENT
This is an action in Admiralty, commenced by the plaintiff by a writ in rem against the ship “Assets Venture” (“the vessel”) for damages for loss of a Caterpillar D6M bulldozer (“the machine”) from the vessel in the course of a voyage between Christmas Island and the Cocos (Keeling) Islands (“Cocos”). In the writ the “Relevant Person”, described as owner of the vessel, was Assets Venture Pte Ltd. The pleading of ownership of the vessel was admitted although various documents admitted into evidence recorded, or suggested, that the owner of the vessel was Assets Energy Pte Ltd. Both companies appear to be related companies registered in Singapore.
The plaintiff also seeks damages from the second defendant in respect of the same loss. A third defendant was joined in the proceeding but by consent it is agreed that the plaintiff’s case against that defendant be dismissed with no orders as to costs.
The plaintiff carries on business as an importer and distributor of heavy earthmoving equipment and machinery. In May 1999 it made a contract with the Commonwealth Department of Transport (“the Department”) to supply a Caterpillar bulldozer, the machine to be delivered to the Department at West Island in Cocos. Title to the machine was not to pass until the machine had been delivered to the Department. The plaintiff imported the particular machine required by the Department, after which substantial work was carried out on it to meet the specifications of the contract made between the plaintiff and the Department. That work involved stripping the machine down and applying protective coating to all parts and adding various parts to the machine.
The plaintiff had the machine ready for delivery by about October 1999. In August 1999 Mr Quayle, a manager of the plaintiff, visited Cocos to ascertain how the machine would be transported to West Island. Representatives from Cocos Island Cooperative Society Limited, the operator of the port and stevedoring facilities on Cocos, stated that the delivery of the machine to West Island would require the vessel carrying the machine to anchor off Home Island where the machine would be transferred onto a floating dumb barge and towed to the jetty on Home Island where the bulldozer would be reloaded onto a self propelled barge owned by the stevedore for transport to West Island. The machine would be discharged directly onto the beach at West Island, there being no jetty or berth available for that purpose.
In October 1999 the plaintiff and the second defendant entered into a contract under which the second defendant agreed to arrange for the transport of the machine from the plaintiff’s premises to West Island. The second defendant was familiar with the circumstances at Cocos. It conducted a business of arranging for the carriage of freight between Cocos and Western Australia.
In about November 1999 the second defendant supplied to the plaintiff a 20 foot bolster and chains for the plaintiff to attach the machine to the bolster by the chains and make the machine ready for transportation. Later that month, the second defendant arranged for the machine to be transported from the plaintiff’s premises to the port of Fremantle, using a truck supplied to the second defendant by a sub-contractor. The second defendant entered a contract with a shipping company for the carriage of the machine on the vessel “Libra Australia” to the Malaysian port, Port Kelang, and made a further contract with the first defendant for the machine to be transhipped at Port Kelang from the “Libra Australia” to the vessel for carriage to Cocos.
At Port Kelang the bolster and machine were loaded into the No 1 hold of the vessel on 26 November 1999. The vessel departed Port Kelang for Singapore, where it took on fuel, before sailing for Cocos. In the course of that voyage a decision was made to discharge, and load, cargo at Christmas Island on route to Cocos instead of doing so on the return voyage to Port Kelang as intended. On 1 December containers were unloaded at Christmas Island and bulk superphosphate was taken on board. The superphosphate was loaded into the two holds of the vessel. That required the bolster and machine to be removed from the No 1 hold and placed on deck. Upon completion of loading, the bolster and machine were stowed on the No 1 hatch cover for the remainder of the voyage to Cocos. The vessel left Christmas Island late on 1 December.
Early on 3 December the crew of the vessel noticed that the bolster and machine were not on board.
The plaintiff claims against the first defendant in bailment, and in negligence, for damages for the loss suffered by the plaintiff by reason of the loss of the machine. The plaintiff claims against the second defendant damages for breach of contract and damages in bailment, and in negligence, for the amount of the loss sustained. The first defendant gave notice to the second defendant of intention to seek an order for contribution, or indemnity, against the second defendant in the event that the first defendant was held liable to the plaintiff. The second defendant, by cross-claim, sought damages from the first defendant, or indemnity or contribution, in the event that the second defendant was held liable to the plaintiff.
A major part of the plaintiff’s case consisted of documents and the inferences available therefrom. In addition the plaintiff adduced evidence from Mr Quayle and two expert witnesses, the first a consultant marine surveyor, Captain Ollivier, and the other a marine engineer and surveyor, Mr Marsh.
At the conclusion of the plaintiff’s case the first defendant sought adjournment of the trial to allow it to make further efforts to arrange for the Master of the vessel, who now resides in Burma, to travel to Australia. Having regard to the time that had passed since the matter had been set down for trial, and other relevant circumstances, I was not satisfied that the first defendant had shown sufficient cause for the trial to be adjourned. The application was refused. The first defendant declined to apply under s 63 of the Evidence Act1995 (Cth) for a statement signed by the Master to be received in evidence. The first defendant adduced no evidence other than documents relating to the quantum of loss.
The second defendant called its principal, Mr Zentner; the manager of the shipping company which carried the bolster and machine from Fremantle to Port Kelang; and a marine surveyor, Captain Tandon.
Plaintiff’s claims against the first defendant
1. Bailment
It was not in issue that the first defendant took possession of the plaintiff’s machine by arrangements made between the first and second defendants. It is not necessary at this point to determine if the second respondent was a bailee or mere agent of the plaintiff in that arrangement.
On the foregoing facts the first defendant was a sub-bailee, or quasi-bailee, of the plaintiff’s machine for reward (See: Palmer Bailment 2nd ed. 1991 at p.34; The Pioneer Container [1994] 2 AC 324 at 338, 341-342; Gilchrist Watt & Sanderson P/L v York Products [1970] 3 All ER 825).
The first defendant submitted that bailment could arise only if the first defendant had knowledge of the plaintiff’s interest in the machine. Support for that submission is to be found in The Pioneer Container at 342 and in Morris v CW Martin & Son Ltd [1966] 1 QB 716 at 731-737. However, the principle is by no means entrenched and may be thought to be inconsistent with principles of tort, if bailment is regarded as being a relationship more aligned with tort than contract. (See: Palmer at pp. 1315-1320; Philip Morris (Aust) Ltd v Transport Commission [1975] Tas SR 128 per Nettlefold J at 136-139.)
In the present matter it is unnecessary to resolve the issue because the relevant facts establish that the first defendant had notice that the second defendant was arranging carriage of the machine for a third party and was not the owner of the machine. The first defendant was one of two carriers providing a service to Cocos. The second defendant shipped cargo with the first defendant to Cocos regularly. On this voyage the second defendant shipped 10 containers including the bolster and machine. It was not necessary that the first defendant know the identity of the owner of the machine; it was enough that the first defendant was aware that the second defendant’s business involved arranging the carriage of goods by sea for consignors and consignees.
Furthermore, the first defendant would have been aware that it was likely that the plaintiff as consignor, or as bailor to the second defendant, retained an interest in the machine until delivery. It was, of course, sufficient for a quasi-(or sub-) bailment to arise if the first defendant was aware that title in the machine, or right to possession, was in a third party, consignor or consignee, who had authorised the second respondent to have possession of the goods to arrange for the carriage of them. The second defendant had informed the first defendant that the plaintiff had instructed the second defendant to arrange carriage of the machine to Cocos and that the plaintiff had obtained from the first defendant’s competitor a quotation for the cost of that carriage. It follows that the first defendant had knowledge of the plaintiff’s interest in the machine when it took possession.
It was not the first defendant’s defence to the plaintiff’s case that the quasi-(or sub-) bailment between the plaintiff and the first defendant was qualified by terms to which the plaintiff had consented, by actually (expressly or impliedly), or ostensibly, authorising the second defendant to accept such terms on the plaintiff’s behalf. (See: The Pioneer Container at 342; The “Captain Gregos” [1990] 2 Lloyds Rep 395.)
The second defendant did not receive a bill of lading from the first defendant in respect of the carriage of the machine. The first defendant did not allege that it had taken possession of the machine on terms the second defendant had accepted on the plaintiff’s behalf, for example, “usual” “normal”, or “expected ” terms of lading.
In the circumstances the duty owed by the first defendant to the plaintiff arose under a “bare” bailment and the first defendant was liable to the plaintiff for the loss of the plaintiff’s machine if that occurred whilst the machine was in the first defendant’s possession, unless the first defendant established that it had taken reasonable care of the machine, or that its failure to do so was not a cause of the loss. (See: Palmer at pp.49, 779-787.)
The first defendant as quasi-(or sub-)bailee was under the same duty as a direct bailee. (See: Palmer at 1308; Wespac Bank Corp v Royal Tongan Airlines [1996] Aust Torts Reports 81‑403.)
The first defendant did not adduce any evidence and did not establish on the documents admitted into evidence, or on cross-examination of witnesses called by other parties, that it had exercised reasonable care in respect of the carriage of the machine on the vessel. It may be assumed that the first defendant had available to it a number of witnesses involved in the stowing of the machine at Christmas Island who could have been called if able to support the first defendant’s case.
I accept the evidence of each of the marine surveyors called, who stated that the first defendant had not taken necessary care in securing the bolster to the hatch cover before the vessel began the voyage from Christmas Island to Cocos. It was necessary that adequate lashing points be welded to the hatch cover to permit appropriate lashings to be affixed to the bolster, machine and hatch cover and that blocks be welded to the hatch cover to stop lateral movement of the bolster. There was no observable residue of any relevant welding sites on the hatch cover, other than several slight tack-welds, and the log of the vessel made no record of any welding work being carried out at Christmas Island. It was estimated by Captain Ollivier, and Mr Marsh, that approximately two to three hours would have been required to carry out the full welds that were required, not tack-welds. Captain Tandon agreed that the 20 minutes between the recorded times for the closing of the hatch cover and the sailing of the vessel was wholly insufficient to allow adequate welding to have been carried out by the crew. Indeed, so much appeared to be conceded in the following record of cross-examination of Captain Tandon by counsel for the first defendant:
“Mr Tandon, is it your experience that master and crew have the skills to secure cargo like bulldozers on the deck of a vessel?---That’s correct. Yes, they should.
Is it also your opinion in this case that had the master and crew properly secured the bulldozer on the vessel, then it should not have been lost?---They should not have gone off, no.
So if they had latched it correctly or welded whatever they welded on the deck to hold the lashings, then it should not have gone off. That is your opinion?---That’s correct.
Thank you.”
I conclude that the first defendant has not discharged the onus of showing that the bolster and machine were secured to the vessel according to accepted practice or requirements for the stowage of such cargo or according to the principles of good seamanship.
In its defence the first defendant pleaded that if it had breached its duty as a bailee or had been negligent, then neither circumstance had caused the loss of the machine. The first defendant alleged that the loss of the machine had been caused by “an Act of God and/or unforeseen fortuitous events, including perils of the sea”.
Counsel for the first defendant did not address on this issue in his closing submissions and the first defendant adduced no evidence on the point. In substance the pleading of that circumstance was an aspect of the principal issue, namely, had the defendant established that it had taken proper care in stowing the machine on the vessel.
Insofar as the vessel’s log recorded that conditions late on 2 December caused the vessel to roll and pitch heavily in the ocean swells, that was an ordinary event to be expected in navigation in a major ocean and to be provided against by adequate stowage of cargo by use of reasonable skill and diligence. There was no evidence that revealed that an “Act of God”, or “unforeseen fortuitous events” constituting a peril of the sea, had occurred to occasion the loss of the machine as an event unable to be guarded against by ordinary exercise of human skill and prudence. (See: Nugent v Smith (1876) 1 CPD 423 per Cockburn CJ at 437.) Strong winds and heavy seas, may constitute a peril of the sea but if failure to exercise a carrier’s skill and prudence in taking care of the goods is a concurrent cause of loss of the goods, liability to the carrier continues. (See: Shipping Corporation of India Ltd v Gamlen Chemical Co A/Asia Pty Ltd (1980) 147 CLR 142 per Stephen J at 154-156, Mason, Wilson JJ at 166‑167).
The first defendant also pleaded that if the plaintiff suffered loss it had been caused by the negligence of the second defendant by failing to instruct the first defendant not to carry the machine on deck and by consenting to the manner of lashing of the cargo. Counsel for the first defendant did not make any submissions on this pleading, which, in any event, could not constitute a defence to the plaintiff’s pleading in bailment.
It follows that the first defendant is liable to the plaintiff in bailment for the loss of the plaintiff’s machine.
2. Negligence
It was not disputed that the first defendant owed a duty of care to the plaintiff. The only submission made by counsel for the first defendant on this issue was that the onus was on the plaintiff to prove its case. The evidence adduced by the plaintiff, and second defendant shows that the duty of care owed by the first defendant was breached and it is clear that the breach occasioned loss to the plaintiff.
The evidence of the experts set out their opinions on the standard of stowage required to constitute the exercise of reasonable prudence and to meet reasonable expectations of seamanship, such as those set out in the vessel’s Cargo Securing Manual. The evidence of examination of the vessel carried out after the event by Captain Ollivier, and the inferences to be drawn from the vessel’s log, which showed no record of welding work and also that no more than 20 minutes had been available for that work to be effected between the closing of the hatch cover and the sailing of the vessel, all point to the conclusion that stowage of the machine was wholly inadequate. The Court had before it as part of the record of inspection made by Captain Ollivier, assertions by members of the crew as to the manner of stowage of the machine, but, for the reasons set out by Captain Ollivier, I was not persuaded that I should accept those assertions as either an accurate account of events or as a description of adequate stowage. It follows that the claim in negligence must also succeed.
The plaintiff also pleaded as particulars of the breach of duty of care owed by the first defendant, the failure of the first defendant to carry the bolster and machine below deck, and unnecessary deviation of the vessel from the voyage to Cocos by anchoring at Christmas Island to discharge and load cargo. Counsel for the plaintiff did not address on these particulars. The relevant evidence suggested that the machine could have been carried and delivered without loss if stowed on deck. Furthermore, it was not alleged that carrying the machine on deck was an unauthorised act. (See: Davies, Dickie Shipping Law 2nd ed. 1995 at pp. 274-277). “Unnecessary deviation” has relevance to whether there has been a breach of a term of a voyage charterparty or, perhaps, a term of a bill of lading, but, in itself, does not bespeak breach of a duty of care. If “unnecessary deviation” was able to constitute a breach of the duty of care owed to the plaintiff by the first defendant in this matter, then although the machine, being stowed in the No 1 hold, would not have been lost if the vessel had proceeded directly to Cocos from Port Kelang, the deviation in journey was, in the circumstances and on the information available to the Master, a reasonable decision by the Master having regard to the efficient use of the vessel and safety in its operation. The Master had reason to believe that weather conditions anticipated on the return journey, and absence of a harbour berth at Christmas Island, would have made it unsafe to anchor at Christmas Island to load and unload cargo at that time. In any event, it may be said that the voyage description was Port Kelang to Cocos and return, via Christmas Island, and that heading to Christmas Island on the outward journey did not constitute a “deviation” in the totality of the voyage.
Plaintiff’s claims against the second defendant.
1.Contract
The plaintiff claimed that the plaintiff and second defendant had made a contract, the essential terms of which were that the second defendant, for reward, would carry the machine from the plaintiff’s premises to West Island. The essence of the arrangements between the parties is to be found in the quotation document forwarded by the second defendant by facsimile to the plaintiff on 29 October 1999. It reads as follows:
“SEAFREIGHT DOZER TO COCOS ISLAND
We are pleased to submit our price of $17400.00 to ship Westrac dozer to Cocos Island.
Our price is based upon my site visit to Westrac facilities on Wednesday 27 Oct 99.
We have assumed:
Length - 8500 mm Width - 3250 mm Height - 3100 mm Weight - 18000 kgs the dozer will be shipped to Cocos Island as one piece. I have discussed this with Waren Dedian on Cocos Island and explained all lifting requirements.
We will provide:
* Deliver flat rack to Westrac
* Supply 4 sets chains & binders*Westrac to load/secure dozer to flat rack & lift flat rack onto our transport
*All stevedoring
*Seafreight to Cocos Island
*All customs & AQIS clearances.
*Delivery of unit to West Island.
*Insurance to be covered by Westrac.
Because of the capacity of cranage on our ship (25 tonne SWL) we can ship the dozer as one unit saving the need for assembly on Cocos Island.
The lifting from the ship to the Jasa Cocos barge on Cocos Island can be done safely without the need of performing dual crane lift.
We hope the above proves to your satisfaction and should you have any queries please do not hesitate to contact me.”
In a telephone conversation conducted after that document was received, the plaintiff accepted the second defendant’s quotation. It was not contended by either party that the terms of the quotation were varied in any significant respect by oral terms agreed in that conversation, and it follows from the plain reading of the terms of the quotation that the second defendant undertook to deliver the machine to West Island. The machine was not delivered as promised and the second defendant thereby breached the contract. (See: Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220.)
The second defendant’s defence to the pleading of breach of contract was that the contract between the parties included a term that the second defendant “would arrange with independent contractors transport of the [machine] from [the plaintiff’s premises] to [West Island]”. The contract did not contain such a term. The second defendant may have made it known to the plaintiff, and the plaintiff may have been well aware, that the second defendant would arrange for independent contractors to carry out segments of the carriage of the machine from Western Australia to West Island, but it was not the case that the second defendant contracted with the plaintiff for appointment as an agent of the plaintiff authorised to enter contracts with sub-contractors on the plaintiff’s behalf. The second defendant made its agreement with the plaintiff as a principal and was able to make its own arrangements with other parties to perform part of its obligation to effect carriage of the machine from Western Australia to West Island. There was no purpose including in the contract a term as pleaded by the second defendant and it did not occur.
The second defendant operated a business it described as the “Lifeline to the Islands”. The business offered more than the service of a freight-forwarder. It delivered goods between Western Australia and Cocos. Even if the second defendant did act as freight-forwarding agent from time to time, in the instant case it contracted personally to effect delivery of the machine, not to use its skills as an agent to obtain a carrier or carriers for the plaintiff. (See: Salsi v Jetspeed Air Services Ltd [1977] 2 Lloyd’s Rep 57; Aqualon (UK) Ltd v Vallana Shipping Corp [1994] 1 Lloyd’s Rep 669; Elektronska v Transped [1986] 1 Lloyd’s Rep 49.)
The plaintiff sought a price for the carriage of the machine to West Island, and the second defendant provided a price for which it would do the work, providing assurances to the plaintiff that it was experienced and competent to do the work, including possessing knowledge of the services it would have to obtain and provide to complete delivery of the machine from the vessel at anchorage at Cocos to West Island. The whole of the organisation of the manner of carriage was left to the second defendant and no part of it was referred to the plaintiff for approval. Similarly, no part of the cost of any part of the carriage of the machine was at the cost of the plaintiff nor required to be referred to the plaintiff for approval. The second defendant quoted a single fee for which it would carry and deliver the machine, and it calculated the fee as one that would provide a profit on the costs it thought it would incur.
The contract did not include a term that the second defendant, as principal, would not be in breach of contract by failing to deliver the machine if an act, or omission, of a sub-contractor engaged by the second defendant caused that default, and the second defendant had made due enquiry as to the competence of the sub-contractor before contracting with it.
Therefore, the contract between the plaintiff and the second defendant by necessary implication and in the absence of any agreed exemption, included the term that the second defendant would use reasonable care in carrying the plaintiff’s goods in performance of the contract to carry and deliver. Even if the second defendant employed an independent contractor to perform part of that contract, the second defendant would remain liable to the plaintiff for any breach of that implied term committed by acts or defaults of the independent contractor. (See: Hobbs v Petersham per Windeyer J at 242-243.)
It follows that the second defendant is liable to the plaintiff for the breach of contract involved in the non-delivery and loss of the machine.
2.Bailment
Counsel for the second defendant submitted, and counsel for the plaintiff conceded, that the second defendant was a quasi-bailee rather than bailee of the plaintiff’s goods, in that the second defendant did not take actual possession of the machine. Given the acceptance of that position by the plaintiff it is unnecessary to consider whether in fact the second defendant obtained actual possession of the machine and became a bailee thereof when it attended to the loading of the machine at the plaintiff’s premises onto a vehicle provided for the second defendant by a sub-contractor.
The plaintiff submits that, as quasi-bailee, the second defendant was liable for any loss of, or damage to, goods resulting from a breach of its duty as bailee, notwithstanding that the loss or damage may have been caused by a third party to whom the second defendant had authorised the delivery of the goods by a further sub-bailment. (See: Metaalhandel v Ardfields [1988] 1 Lloyd’s Rep 197; British Road Services Ltd v Arthur V Crutchley & Co Ltd [1968] 1 All ER 811.)
Whether that is so may be unnecessary to decide in the instant case where I have found there was an implied term of the contract between the plaintiff and the second defendant that the second defendant would exercise reasonable care of the plaintiff’s goods in carrying out the contract to deliver the goods to West Island, and that the negligence of a sub-contractor to the second defendant would constitute a breach of that term. However, in the event that it were thought that the measure of damages may differ in tort or contract, I will proceed to a finding on that issue.
As quasi-bailee the second defendant was under the same duty to the plaintiff in bailment as the first defendant, and failure to deliver the machine as directed by the plaintiff breached that duty. If there is a relationship in contract that is concurrent with a bailment relationship and the quasi-bailee as intermediate bailor has sub-bailed the goods to an independent contractor, the quasi-bailee cannot avoid breach of an implied term of a contract with the bailor to take reasonable care of the goods, by asserting that the failure to take such care was the act or omission of the independent contractor.
It would seem that, by analogy, the same principle should apply in bailment and that the failure of the independent contractor, as sub-bailee, to exercise reasonable care in respect of the goods would constitute default by the sub-bailor in the bailment (or quasi-bailment) relationship between the bailor and sub-bailor, unless, of course, those parties have varied that position by the terms of a concurrent contract. The independent contractor/sub-bailee will owe a duty to the sub-bailor, and the same duty as the sub-bailor to the bailor. Therefore, the sub-bailor should not be able to say that default by the sub-bailee excuses the sub-bailor’s duty to the bailor. (See: York Products Pty Ltd v Gilchrist Watt & Sanderson Pty Ltd [1968] 3 NSWR 551 (Court of Appeal.))
If, however, the circumstances show that the act of sub-bailment is contemplated by the parties to the bailment to be a termination of the bailment and the sub-bailee becomes the bailee directly of the original bailor, the liability of the intermediate bailee to the bailor may not depend on the conduct of the sub-bailee. (See: York ProductsvGilchrist; E A Marr (Contracting) Pty Ltd v Broken Hill Pty Ltd [1970] 3 NSWR 306.)
Whether such a variation in a bailment relationship has occurred will depend on the nature of the transaction undertaken and relevant facts, including the participation in and acceptance of the transaction by the original bailor. In the instant case that position did not arise. Although the second defendant was authorised by the plaintiff to put the machine in the possession of subcontractors, the arrangement between the plaintiff and the second defendant was that the second defendant would retain overriding responsibility for effecting delivery of the machine to West Island and, in particular, to take delivery of the machine from the vessel and transport it to West Island. It cannot be said that the quasi-bailment with the second defendant ceased when the second defendant authorised the first defendant to take possession of the machine on the vessel.
It follows that the second defendant would also be liable to the plaintiff for breach of its duty in bailment.
3. Negligence
On the completion of its case the plaintiff did not make any submissions as to its claim in negligence against the second defendant, and it is unnecessary to make any finding thereon.
First defendant’s notice to the second defendant
The first defendant has not established any basis on which it can be said to be entitled to contribution from the second defendant, or to be indemnified by the second defendant, in respect of the first defendant’s liability in damages to the plaintiff.
Second defendant’s cross-claim against the first defendant
As set out above, the liability of the second defendant to the plaintiff in contract arises out of a breach of contract occasioned by the negligence of the first defendant. As sub-bailee of the second defendant and quasi-(or sub-)bailee of the plaintiff, the first defendant owed a similar duty to each in respect of the obligation to deliver the machine and exercise reasonable care of the machine whilst in its possession. (See: York Products v Gilchrist).
It follows that the first defendant, having breached its duty in bailment to the plaintiff, also breached a like duty to the second defendant, and the second defendant is entitled to recover from the first defendant damages in the sum that it is required to pay to discharge its liability to the plaintiff.
The second defendant also sought damages against the first defendant for breach of contract. The liability of the first defendant in bailment provides an indemnity for the second defendant in respect of the claim against it by the plaintiff and also provides the second defendant with a right to recover damages for the loss of the bolster if such loss occasioned the second defendant further loss. Determination of any claim in contract, therefore, may be unnecessary.
However, the second defendant has adduced sufficient evidence to show that a relationship in contract existed between the first and second defendants although the terms thereto may be uncertain. On the material presented, a term would be implied that in taking possession of the machine for carriage to, and delivery at, Cocos at the direction of the second defendant, the first defendant undertook to exercise reasonable care to keep those goods safe from damage or loss whilst in the possession of the first defendant.
For the reasons adverted to above, the first defendant breached such a term. The first defendant did not present a case that the terms of the contract made with the second defendant included a term which provided the first defendant with an exemption from liability in that regard.
Damages
The appropriate measure of damages in this case is that applicable in tort arising out of the breach of duty in bailment, the measure being the amount required to restore the plaintiff to the position it would have been in but for the breach of duty by the first and second defendants. It was not submitted that it was of advantage to the plaintiff to calculate the damages according to the measure appropriate for the breach of contract.
It was not in issue that the machine was imported and modified to meet particular specifications of the contract for sale made between the plaintiff and the Department. That sale was a singular sale, not a sale in a market consisting of repetitive sales of like products. Therefore, the loss of the machine did not mean the loss of an opportunity to effect another sale of that machine and obtain profit therefrom.
It was not in issue that the machine was sold as a singular sale and that the market available to the plaintiff did not consist of repetitive sales where the loss of the machine may have meant the loss of an opportunity to effect a further sale and obtain profit therefrom.
In importing a machine for the purpose of its contract with the Department and modifying it to meet the requirements of the specifications of the contract, the plaintiff incurred the cost of parts and labour to put the machine in the condition and configuration required by the Department. Upon the loss of the machine at sea, the plaintiff imported a replacement and incurred further expense in preparing the second machine to meet the specifications of the Department. In due course the replacement machine was delivered to the Department and in July 2000 the plaintiff was paid $422,541.85, the amount of the invoice rendered to the Department.
The plaintiff’s loss could be said to be an amount expended by the plaintiff on the machine which, upon loss of the machine, the plaintiff was unable to recover, to which the plaintiff sought to add a further amount for the loss of opportunity to receive a profit from the sale of the machine. For the reasons set out above, it is not appropriate to include such a provision in the sum recoverable in the particular circumstances of this case. The plaintiff had only one sale to make of the machine imported and modified. It completed that sale and received its profit. The amount expended on the lost machine was expenditure wasted by reason of the breaches of the first and second defendants. Under that measure, the compensible sum would be the cost of the lost machine, including the cost of modification, and costs expended on the transport of the machine and insurance of it whilst in transit. I accept the plaintiff’s evidence the amount so expended was $318,818.30.
Counsel for the first defendant submitted that the measure should be the replacement cost of the machine and the further costs incurred in meeting the specifications of the contract made with the Department. Upon consideration of the respective arguments I am satisfied that the submission of the first defendant should be accepted. It provides for the true measure of loss incurred in the circumstances of this case where the sale has been completed by the purchase and delivery of a replacement machine and the consequences of the loss of the machine have crystallised. Under that measure, the plaintiff recovers the advantage it would have received from performance of its contract with the Department, whatever movement there may have been in the exchange rate when the plaintiff incurred the cost of importing the replacement machine. A similar position would have been reached if the damages had been assessed for breach of contract. (cf.. Radferry Pty Ltd v Starborne Holdings Pty Ltd [1998] FCA 1689.)
The compensatory sum calculated by the counsel for the first defendant pursuant to that submission was $313,326.69. It is not clear whether that calculation included a component for the cost of freight and insurance. If not, that amount must be added, otherwise the plaintiff will incur double expenditure. Counsel for the first defendant submitted that not all components of the sum calculated were explained by invoices put into evidence by the plaintiff, but as noted above, I am satisfied by the plaintiff’s evidence that the sums expended were duly recorded in conduct of its business. No cross-examination by the first defendant was directed to Mr Quayle on this issue.
There is a further consequence of the loss of the machine that does not appear to be included in the sum calculated by the first defendant, namely, the loss occasioned to the plaintiff by incurring the cost of the lost machine in addition to the cost of the replacement machine and further expenditure on modifications thereto. The latter costs were incurred over a period of two months, five to seven months after the loss of the machine. That loss of use of money and any further loss involved in the loss of use of any profit arising out of the delay in completion of the contract with the Department, a period of approximately seven months, may be remedied, in round terms, by an order that the sum payable to the plaintiff include interest from a date five months after the date of the loss of the machine.
It will be necessary for the parties to calculate the sum for which judgment is to be entered according to the foregoing reasons. I will direct that a minute of the terms of the judgment be presented by the parties.
Costs
The first and second defendants must pay the plaintiff’s costs and the first defendant must indemnify the second defendant in respect of the liability of the second defendant in costs. The first defendant must also pay the second defendant’s costs of the cross-claim.
I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.
Associate:
Dated: 12 April 2002
Counsel for the Plaintiff:
G J Nell
Solicitor for the Plaintiff:
Pynt McKay
Counsel for the First Defendant:
G R Hancy
Solicitor for the First Defendant:
Cocks Macnish & Co
Counsel for the Second and Third Defendants:
D C Leask
Solicitor for the Second and Third Defendants:
Leask & Co
Date of Hearing:
8, 9, 10 October 2001
Date of Judgment:
12 April 2002
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