Cargo Co-ordinators International NZ Limited v Cubic Transport Services Limited

[2012] NZHC 322

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV2011-404-004547 [2012] NZHC 322

BETWEEN  CARGO CO-ORDINATORS INTERNATIONAL NZ LIMITED Applicant

ANDCUBIC TRANSPORT SERVICES LIMITED

Respondent

Hearing:         9 September 2011

Counsel:         E J Werry for applicant

C J Priest for respondent

Judgment:      1 March 2012

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

In accordance with r 11.5 High Court Rules

I direct the Registrar to endorse this judgment with a delivery time of 4.45pm on 1 March 2012.

Solicitors:   Wright Wiseman Law, PO Box 26 031, Auckland 1344

C M Priest, Lowndes Jordan, PO Box 5966, Auckland 1141

Counsel:    E J Werry, Barrister, PO Box 105270, Auckland 1143

CARGO CO-ORDINATORS INTERNATIONAL NZ LIMITED V CUBIC TRANSPORT SERVICES LIMITED HC AK CIV 2011-404-004547 [1 March 2012]

[1]      This application to set aside a statutory demand arises out of charges rendered by the  respondent,  Cubic Transport  Services  Limited  (Cubic),  to  the  applicant, Cargo Co-Ordinators International NZ Limited (Cargo), for the delayed return of 14 shipping  containers.  Cubic  had  sourced  these  containers  from  two  shipping companies and then hired out the containers to Cargo for use by Cargo’s customer, Filtration International Limited (Filtration).

[2]      There  is  no  dispute  that  the  containers  were  returned  late  and  that  the shipping companies rendered invoices to Cubic for the extended time that the containers were held, or that Cubic paid those invoices and, in turn, invoiced Cargo. There is no suggestion that Cargo was directly responsible for the delays in returning the containers; that responsibility lay with Filtration.

[3]      The principal point of contention is Cargo’s argument that Cubic failed to give it an opportunity to negotiate with the shipping companies for a reduction in the charges.   Cargo also disputes the interest that Cubic has charged on the overdue invoices, as calculated under its standard terms of trade.  Cargo further argues that the detention  charges  are penalties  and  are therefore unenforceable.    Cargo  has commenced a proceeding in the District Court and says that these disputes should be determined in that forum.

Background

[4]      The  parties  are  both  in  the  business  of  transporting  goods  within  New Zealand.   This includes arranging the shipment of goods by sea and, to that end, procuring shipping containers from shipping companies for use by their customers.

[5]      One of Cargo’s customers, Filtration, needed to transport containers from Auckland to a site in Christchurch between late 2008 and early 2009.  Cargo could not itself secure all the required shipping space.  It entered into an agreement with Cubic  for  the  latter  to  provide  14  empty shipping  containers,  sourced  from  its shipping contacts.

[6]      There is an industry practice for shipping lines to allow customers to retain containers for a short period of time after delivery (there appears to be a standard period of between seven and 10 days) but to impose a charge for containers returned after that period.   These charges are referred to in the industry as “late return” or “detention” charges.

[7]      Filtration was late in returning the containers. The total delay, spread over all

14 containers, was 1,054 days (an average delay of 75 days per container).  As the containers were returned (which occurred in a series of deliveries between December

2008 and April 2009), the shipping companies invoiced Cubic for detention charges, which totalled $54,686.25.The invoices were issued in the following manner:

(a)      The first shipping company, which had provided 11 of the containers, started invoicing charges at the end of December 2008 (in respect of a container shipped in November 2008) and continued to issue invoices from then until about March 2009 for containers shipped on various dates in November and December 2008 (the last of its invoices was not produced in evidence and may have been rendered in late March or early April 2009).   All of these invoices stipulated that payment was to be made within seven days of receipt.  In each case, with the possible exception of the missing invoice, Cubic invoiced Cargo for the respective charge within a week of the date of the shipping company’s invoices.

(b)      The second shipping company issued only one invoice, on 27 April

2009.  The invoice indicates that the containers were shipped between

14 November and 2 December 2008, and were returned in late February or early March 2009.   The invoice is consistent with the evidence of Cargo’s managing director, Mr Thompson, that it did not receive the last container back from Filtration until March 2009.

[8]      Cubic  in  turn  invoiced  Cargo  for  those  charges,  passing  the  shipping companies’ charges on, without mark-up, as they were received from the shipping companies.  Cargo in turn passed them on to its customer, Filtration.

[9]      At some point (not identified in the evidence but said to be “by March”), Filtration disputed the charges.     Mr Thompson, says that he contacted Cubic’s general manager, Mr Anderson, and sought and obtained Mr Anderson’s agreement to contact the shipping companies with a view to negotiating a reduction in the charges.

[10]     Cargo contends, and I did not understand Cubic to dispute this, that it is an industry practice for customers to negotiate with shipping companies over detention charges if there is a substantial period of delay in their return (and hence a significant charge), particularly if the delay is due to circumstances outside of the customer’s control.  Mr Thompson referred to one case in which he had been able to negotiate a reduction of charges of $40 per day for the first 10 days and $80 per day thereafter down to an overall sum of approximately $6 per day.

[11]     Cargo’s primary ground for complaint arises out of the fact that when Mr Thompson contacted the shipping companies, which he said was on 18 March 2009, he was told that the shipping companies were unable to negotiate the detention amounts as Cubic had already paid the accounts in full.

[12]     Mr  Anderson  acknowledges  that  he  had  had  a  conversation  with  Mr Thompson  about  Cargo  approaching  the  shipping  companies  to  negotiate  the charges, and that he had told Mr Thompson that he was free to do so, but says that he did not agree to grant Cargo any particular period of time for that negotiation.   It appears that someone in Cubic’s office paid the invoices without reference to Mr Anderson.  Mr Anderson says that it was always Cubic’s view that the charges were payable by it and recoverable in full from Cargo and that he did not believe that Cargo would be successful in negotiating any decrease because of the very extensive delays.  He justified Cubic’s payment of the accounts (which were apparently well overdue)  on  the  basis  that  the  shipping  companies  were  becoming  increasingly

frustrated with Cubic over these accounts and that the absence of payment was putting Cubic at risk in its dealings with them.

[13]     It appears that Cargo accepted its inability to negotiate any reductions and turned its attention to recovering the charges from Filtration.  Cubic initially allowed Cargo time to do this, but when it had still not received payment by November 2009, Cubic issued the first of two statutory demands (the first was void, having been incorrectly addressed).   Upon the issuance of each of these demands, the parties discussed the debt and Cubic agreed to allow Cargo more time to pursue recovery from Filtration.  However, on the second demand, Cubic said that its agreement was conditional upon Cargo making immediate payment of half of the outstanding charges.  Cargo says that it agreed to make a payment “as a measure of good faith”. It paid $27,000 to Cubic on 12 January 2010, leaving a balance of $27,686.25.

[14]     Cargo issued legal proceedings against Filtration and in mid 2010 advised Cubic that it had agreed to terms of settlement with Filtration.   No money was forthcoming under that settlement before Filtration went into voluntary liquidation in April 2011.

[15]     Cubic issued the demand that is the subject of this proceeding on 5 July 2011. In that demand Cubic sought payment of the balance due in respect of the detention charges ($27,686.25) together with interest of $7,890.64, calculated at a rate set out in Cubic’s terms of trade from the date that the various charges fell due (the payment made in January 2010 having been credited against the earlier invoices).

Legal principles for setting aside

[16]     The application is made under s 290 of the Companies Act 1993 (the Act). The relevant part of that section for the purpose of this application is:

290 Court may set aside statutory demand

...

(4)      The Court may grant an application to set aside a statutory demand if it is satisfied that –

(a)       There is a substantial dispute whether or not the debt is owing or is due; or

(b)       The company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or

(c)      The demand ought to be set aside on other grounds.

...

[17]     The general principles that the Court applies in determining an application to set aside a statutory demand are well established[1] and can be summarised briefly:

[1] Bell Gully (ed) Brookers Company and Securities Law (online looseleaf ed, Brookers) at [CA

290.02].

(a)      The  applicant  must  show  that  there  is  arguably  a  genuine  and substantial dispute as to the existence of the debt, though the Court does not need to resolve that dispute;

(b)An applicant relying on any counterclaim or cross-demand must show that it is reasonably arguable in all the circumstances; again, the Court does not need to determine the counterclaim or cross-demand;

(c)      Evidential material, short of proof, is required to support the alleged dispute,    counterclaim  or  cross-demand;  a  mere  assertion  that  a dispute, counterclaim or cross-demand exists is not sufficient;

(d)It is not usually possible, and the Court will not normally attempt, to resolve disputed questions of fact on affidavit evidence alone, particularly if there are issues of credibility.

(e)       Where  the  Court  is  considering  an  application  brought  under  s

290(4)(c) of the Act it must be satisfied that the factor relied upon

would make it “plainly unjust” for liquidation to ensue.[2]

Grounds for application and opposition

[2] Commissioner of Inland Revenue v Chester Trustees Services Ltd [2003] 1 NZLR 395 (CA) at 398.

[18]     At the start of the hearing, counsel for Cargo advised that it abandoned the first ground in its application - namely that Cubic was acting as Cargo’s agent when engaging the shipping companies and had breached duties owed to Cargo as its principal in relation to the negotiation of detention charges.  The remaining grounds advanced in support of the application (either as set out in the application or as developed separately in the hearing) were:

(a)       That there is a substantial dispute over the sum claimed in that:

(i)Cubic  has  charged  interest  on  the  overdue  invoices  in accordance with Cubic’s standard terms of trade, but those terms did not form part of the contract between the parties;

(ii)Cubic failed to afford Cargo the opportunity to negotiate a reduction in the detention charges in breach of an implied term that it would do so in accordance with an industry practice;

(b)It is unconscionable for Cubic to seek reimbursement for the detention charges because, by paying the detention charges without informing Cargo, Cubic denied Cargo the opportunity to negotiate a reduction in the charges either in accordance with industry practice or on the grounds that the charges were penalties and are therefore unenforceable;

(c)      Cargo has a set-off against part of the sum demanded, arising out of an agreement to share the legal costs of pursuing the real party in default – Filtration.

(d)Cargo has commenced proceedings in the District Court seeking a declaration that it is not liable to Cubic for these reasons, and that is the appropriate forum to resolve the disputes.

[19]     Cubic opposes the application on the grounds that:

(a)       Cargo has a clear contractual obligation to pay the detention charges.

This obligation was not affected by the alleged agreement to allow Cargo an opportunity to negotiate with the shipping companies: the industry practice  of  negotiating  reductions  in  detention  charges  is consistent  with  the  express  terms  of  the  contract  and  cannot  be elevated to an implied term;

(b)It is clear from contemporary documentation that Cubic’s standard terms of trade are part of the contract, thus giving Cubic the right to charge interest on overdue accounts;

(c)      The  detention  charges  are  not  penalties;  they  are  within  a  range acceptable within the industry and have been accepted in other cases. Cubic had no obligation to allow Cargo the opportunity to negotiate a reduction in the charges with the shipping companies;

(d)The evidence does not support the alleged claim to set-off for legal costs; and

(e)      The proceeding filed by Cargo in the District Court does not disclose any reasonable cause of action nor provide any basis for setting aside the statutory demand.

Is there an arguable dispute over the debt claimed?

[20]     The starting point is to consider whether it is possible, on this application, to

determine the terms of the parties’ contract. Three aspects need to be addressed:

(a)       The express terms in relation to the detention charges;

(b)The alleged  implied  term  in  respect  of  the industry practice over negotiation of detention charges; and

(c)       Whether there is an entitlement to charge interest.

[21]     There is no dispute as to the way in which the contract came into being. Cargo approached Cubic enquiring as to its ability to provide shipping for 14 40-foot containers from Auckland to Christchurch.   Cubic sent a quote headed “Rate and service confirmation” for the supply of containers through its shipping company contacts on 3 November 2008.

[22]     Cubic’s quote gave a rate per 40-foot container ($2,030); below that quote was a box of information which included the following:

Terms and Conditions (standard terms available at Payment Terms  7 days

...

Detention/Demurrage             Unauthorised  detention/demurrage  charges

are to the client’s account

[23]     The same morning, Mr Anderson sent an email to the person at Cargo who had approached Cubic, Mr Dmitry Mayorov. That email informed Mr Mayorov that Cargo had been added to Cubic’s email database (to which shipping schedules were sent), and attached its latest schedule, its contact details, a credit application and other information.  A copy of Cubic’s standard conditions of contract was included. It is unclear whether Cargo returned a duly completed account application.  Cubic has not produced a copy but it has produced evidence that it opened an account for Cargo later that same day.

[24]     Cargo proceeded to place orders, and containers were shipped in accordance with  those  orders.    Cubic  invoiced  Cargo  for  shipping  as  the  containers  were shipped; the first shipment was on 11 November 2008.  Cargo paid those shipping charges.

[25]     The central issue over the terms of the contract is whether they include Cubic’s standard terms.  The standard terms have relevance to Cubic’s entitlement to recover detention charges, to the availability of the alleged implied term over negotiation of those charges, and to Cubic’s entitlement to charge interest.

[26]     Counsel for Cargo submitted that it was arguable that the contract did not

incorporate Cubic’s standard terms, relying on Nalder & Biddle (Nelson) Limited v C

& F Fishing Limited.[3]

[3] Nalder & Biddle (Nelson) Limited v C & F Fishing Limited [2007] 1 NZLR 721 (CA)at [35], [42]

and [44].

[27]     What documents are incorporated into a contract is determined objectively, either on a conventional assessment of offer and acceptance[4]  or by considering whether the parties’ conduct, viewed as a whole, shows a concluded agreement.[5]

[4] Wilmott v Johnson [2003] 1 NZLR 649 (CA) at [37].

[5] Boulder Consolidated Limited v Tangaere [1980] 1 NZLR 560 (CA) at 563.

[28]     On either analysis there can be no question that Cubic’s quote was part of the contract.  It was clearly the basis on which Cargo placed its specific orders and paid for the shipping.  Given that Cargo is in the same business as Cubic, has very similar standard conditions, and undoubtedly operated on the same basis, it would have understood the reference in the quote to standard terms being available through Cubic’s website to mean that Cubic would provide the requested services on those standard terms.   If there could be any doubt on that point (due to the rather abbreviated wording of the quote), any such doubt was removed by Cubic promptly sending Cargo a copy of its conditions in its subsequent email, which also provided contact and scheduling information, and its credit account application.  All of this occurred before Cargo started placing its orders.  The placement of the orders can be taken to be acceptance of both the quote and Cubic’s standard terms.

[29]     Nalder & Biddle does not help Cargo.  In that case the issue was whether an exclusion clause in an initial tender proposal document could be relied upon to defeat a counter-claim.  The Court of Appeal upheld the findings of the High Court that the proposal was not part of the contract subsequently entered into by the parties and that, on an objective assessment of the evidence, the parties had not shown an intention to incorporate the exclusion clause from that earlier tender into their contract.   In the present case, Cubic clearly indicated, both in its quote and by

promptly forwarding  a  copy of its  conditions,  that  its  standard conditions  were

intended  to  be  an  essential  part  of  the  contract.  Cargo  had  the  opportunity  to challenge and reject their inclusion before it placed its first order.

[30]     Cargo was familiar with such conditions (as I have said, its own conditions were similar) and  there  was  nothing unusual  or onerous in  any of them  which warranted special attention being drawn to them.[6] The evidence is that the provision for payment of detention charges and the levying of interest on unpaid accounts was relatively standard in the industry and, indeed, Cargo’s standard terms have similar provisions.

[6] Harvey v Ascot Dry Cleaning Company Ltd [1953] NZLR 549 (SC); J Spurling v Bradshaw [1956]

1 WLR 461 (CA).

[31]     In his affidavit in support of the application, Mr Thompson contends that he had  not  sighted the standard conditions  and  had  not  accepted  them.    However, leaving aside the fact that the conditions were sent to Mr Mayorov, there is no evidence that Mr Thompson queried their application or disputed their contents after he became involved in the transaction (and before the statutory demand was issued) even  though  all  of  Cubic’s  invoices  contained  a  statement  that  business  was transacted under its standard trading conditions, obtainable on application.

[32]     Counsel  for  Cargo  argued  that  the  terms  were  not  incorporated  into  the contract because Cargo had not signed them (there is a provision for signature at the foot of the printed conditions), and because there was no evidence that Cargo had signed and returned the credit account application (which contained reference to the standard conditions) although Cubic had asked Cargo to have someone complete and return the form.  These are matters to be weighed in the objective assessment but they do not change the outcome.   Cargo clearly placed its orders promptly on the basis of Cubic’s quote and, hence, its stipulation that it would provide its services on its standard conditions in accordance with the industry norm.   This case can be distinguished from Nalder & Biddle, where there was a gap of nearly a year between the time that Nalder & Biddle submitted its initial tender and when the parties subsequently reached an agreement, in which time the parties actively re-negotiated

the commercial terms.

[33]     I am satisfied from an objective assessment of the documents that Cubic sent to Cargo, the evidence that Cubic’s terms are similar to those under which Cargo transacts its business and are consistent with terms applied within the industry, and Cargo’s placement of orders without demur as to the terms, that the parties intended that Cubic’s standard conditions would be part of their contract.

[34]     I  now  consider  the  alleged  disputes  in  light  of  my  findings  on  the

incorporation of Cubic’s standard terms.

i)        Detention charges

[35]     It is clear, without needing to rely on the standard terms, that it was part of the contract that Cargo  would be liable for unauthorised detention  charges  (see Cubic’s quote above).  Indeed, Mr Thompson acknowledges that this is standard in the industry.   However, the point is reinforced by the standard conditions which make specific provision for payment of such charges in clause 7.1:

7.1      The Customer agrees to pay all freight and charges levied by the company  in  terms  of  any  separate  agreement  relating  to  the  services provided or, if there is no such agreement, the Company’s standard charges, and any other costs reasonably incurred by the Company in connection with the Goods or the services provided by the Company.

[36]     There is no question that Cubic was liable to the shipping companies for the charges and that it was entitled to pass them on to Cargo under the specific terms of their contract.

[37]     Counsel  for  Cargo  argued  that  even  if  Cubic’s  standard  terms  were incorporated into the agreement, there is an issue over the reasonableness of the detention charges, which cannot be resolved in this  application.   He based this submission  on  the  language  of  clause  7.1  and  argued  that,  in  the  absence  of agreement between Cubic and Cargo as to the charges to be applied, Cargo had agreed merely to meet costs “reasonably incurred” in providing the services.

[38]     I do not accept this argument.  By clause 7.1, Cargo agreed to pay all charges levied by Cubic in terms of any separate agreement relating to the services.  There

was a separate agreement, which provided expressly for detention charges to be passed on.   The stipulation in clause 7.1 for payment of other costs reasonably incurred applied if there was no specific agreement.  If Cubic had put a mark-up on the shipping companies’ charges (for which there was no express provision), clause

7.1 would have applied to that aspect.  However, Cubic did no more than pass the charge on.

ii)       The alleged implied term

[39]     Cubic accepted that there is an industry practice of negotiating detention charges,  and  did  not  contest  Cargo’s  evidence  that  Mr  Thompson  had  been successful in negotiating substantial reductions in the past.  However, it says that this does not in any way detract from Cargo’s obligation to pay the charges in the absence of an express written agreement between Cargo and Cubic to pay only the resultant sum (relying on clause 12 of its standard conditions which requires any variation or waiver of the conditions to be in writing and signed by a representative of Cubic).

[40]     Counsel for Cargo sought to circumvent the absence of an express written agreement by arguing that this was a separate term, that Cubic would allow Cargo a reasonable opportunity to undertake the negotiations before paying the charges.

[41]     The principles relating to the implication of terms by custom or usage are well established. They include:

(a)      The  custom  or  usage  can  only be  implied  in  the  absence  of  a  contrary intention[7].

[7] Laws of New Zealand Contract at [110].

(b)The rationale for importing usage lies in the assumption that it represents the wishes of the parties.  It must therefore be excluded if the express language of the contract discloses  a contrary intention.   Hence,  the custom must  not

contradict the express terms of the contract[8].

[8] John Burrows, Jeremy Finn and Stephen Todd, Law of Contract in New Zealand (4th ed, LexisNexis, Wellington, 2012) at [6.3.1].

(c)       The proposition can be put in both a negative and a positive way:[9]

[A]n alleged custom can be incorporated into a contract only if there is nothing in the express or necessarily implied terms of the contract to prevent such inclusion and, further, that a custom will only be imported into a contract where it can be so imported consistently with the tenor of the document as a whole.

[9] London Export Corporation Ltd v Jubilee Coffee Roasting Co [1958] 1WLR 271 (QB) at 420; cited in Burrows, Finn and Todd, op cit.

[42]     Cargo’s argument conflates two propositions.   The first is that there is an industry practice in relation to negotiation of detention charges.  As I understand it, the practice applies between shipping company and freight forwarder (in this case, Cubic), and recognises that the delay in return of the containers (which gives rise to the imposition of the detention charges) may be for reasons beyond the control of the freight forwarder.   My further understanding is that the industry practice goes no further than saying that the shipping company will listen to any case that the freight forwarder puts forward.  I do not understand there to be any contractual obligation to adjust the charges.

[43]     The second proposition is that it was an implied term of the contract between Cubic and Cargo that Cubic would give Cargo a reasonable opportunity to negotiate with the shipping companies (because Cargo was not a direct contracting party). There is no evidence before me of an industry practice whereby a party further down the contractual chain can approach the shipping company independently.  Indeed, Mr Thompson’s evidence suggests that the practice does not  go this far, in that he approached Cubic for its agreement.   In other words, the term that Cargo seeks to have implied is not simply to import the acknowledged industry practice.

[44]     There are two further difficulties with Cargo’s argument:

(a)       The term that Cargo seeks to have implied has not been stated in precise terms.

(b)In terms of the test for implication of terms by custom, any extension of the custom to the contract between Cubic and Cargo requires consideration of the express terms of that contract.

[45]     I consider that the express language of the contract does  not permit  the implication of such a general term.  Cubic’s quotation stipulated that all payments were to be made within seven days.  It can be inferred that this stipulation mirrors Cubic’s obligations under its contracts with the shipping companies (the invoices from one of the shipping companies contain this stipulation).   Furthermore, under clause 7.2 of the standard terms, Cargo was required to pay without deduction, whether  by  way  of  set-off  or  counter-claim  or  otherwise,  by  the  seventh  day following receipt of invoice.  The strictness of that obligation is reinforced by the provision that then follows: that interest is payable if payment is not made on time. Cargo’s own terms of trade indicate that it operates on a similar basis.

[46]     I regard it as inconsistent with these clear terms as to payment to impute a term under which Cubic would have no certainty as to the time of payment.

[47]     Counsel for Cargo argued that it would not be inconsistent with the general terms for payment for Cargo to be able to test whether the charges were reasonable (relying on his argument that the contract did not specify detention rates so clause

7.2 applied, and the detention rates are penalties).   I have already addressed the argument on clause 7.2: Cubic is merely passing on charges it has  incurred, in accordance with the express terms of the contract.  I will address the argument over penalties further, but do not see that there is any inconsistency.  Even if there is an argument that detention charges are penalties (and the evidence before the Court that the charges are well-accepted within the industry suggests otherwise), clause 7.2 provides that the charges are to be paid without deduction by way of set-off or counter-claim or otherwise.  In other words, Cargo cannot raise that argument as the basis for a dispute.

[48]     It follows from the above findings that there can be no dispute over Cubic’s

claim to interest, based on clause 7.2 of the standard terms.

Set-off – is there an argument for an agreement to share costs?

[49]     Cargo contends that nothing further is payable.  This is because Cargo has a set-off as  a consequence of an  agreement  to  share the costs  that  it  incurred  in effecting recovery from its customer, Filtration, made at the time that Cubic’s Mr Anderson agreed that Mr Thompson could negotiate the detention charges with the shipping companies (in March 2009).

[50]     The evidence does not support this contention.  There is no written record of any agreement.  Its existence is emphatically denied by Mr Anderson.  It is difficult to see what commercial rationale there could have been for Cubic to have made such an agreement.  The contention has never been put squarely to Cubic, before the issue of this application.

[51]     Mr Thompson contends that he referred to the agreement in an email that he sent to Mr Anderson on 9 December 2010 in response to a demand for payment.  In this email, Mr Thompson justified failure to pay on the basis  that he was still receiving legal costs in relation to the demand Cargo was making on Filtration.   I regard Mr Thompson’s email of 9 December 2010 as equivocal.  Cargo subsequently made a payment of $27,000 (it contends that it was on a “good faith” basis), but when  Mr  Thompson  advised  Mr Anderson  in  an  email  on  28 April  2011  that Filtration had gone into voluntary liquidation, and suggested that Cubic write off the outstanding balance due to it, he did not set out his reasons for taking that position and in particular, did not refer to any agreement.

[52]     Counsel for Cargo submitted that this was not a point that could be resolved on the present application.  I accept this submission.  Although I am sceptical about the alleged agreement (for the reasons given), I do not feel it appropriate to make a

determination on the evidence available on this application.  However, I do not have to to dispose of the point.   Clause 7.2 precludes any set-off.   If Cargo wishes to pursue this argument, it will have to do so separately in the proceeding it has issued in the District Court.

Are there any other grounds to set aside?

[53]     The last ground advanced by Cargo was that it would be unconscionable to allow Cubic to pursue its demand in the circumstances of the case, and particularly the failure to afford it the opportunity to negotiate a reduction of the charges with the shipping company.

[54]   To rely on this ground (s 290(4)(c)), Cargo needs to show something exceptional.  In the absence of some factor which gives reason to invoke the Court’s equitable  jurisdiction  it  cannot  be  unconscionable  for  a  party  to  enforce  its contractual rights.  If the detention charges were clearly imposed as penalties rather than a pre-estimate of loss for the shipping companies’ inability to use the containers for their business, I would have been prepared to consider an argument that Cubic should not be able to pursue its demand until the enforceability of the charges was determined.

[55]     However,  the  evidence  before  the  Court  is  that  detention  charges  are  a standard  feature  of  these  shipping  contracts  (Cargo  also  imposes  them).    The amounts levied by the shipping companies in this case ($40 per day for an initial period and thereafter $80 per day) are inside a range routinely applied within the shipping industry.   Counsel for Cubic referred me to a decision of the Consumer,

Trader and Tenancy Tribunal of New South Wales[10]  where the initial rate was $80

per day and the increased rate $160 per day. After considering the contractual terms, and the law in relation to penalties, the Tribunal came to the view that the initial rate of $80 (which was the only amount in issue before it) was a daily charge for use of

the container rather than a penalty.

[10] Ichiban Imports Pty Ltd v China Shipping Australia Agency Pty Ltd [2011] NSWCTTT 153.

[56]     Although there is no evidence before the Court as to the basis on which the detention rates apply in this case ($40 per day in respect of one of the shipping companies and an overall figure of approximately $67 per day for the other – both GST exclusive) I can compare those rates with the agreed rate for shipping the containers ($2,030).  Without knowing the expected profit margins for the shipping companies and for Cubic, I cannot be certain as to the potential loss of profit as a result of the detention.  However, as the shipping was expected to take place over only  few  days,  I  can  infer  (after  allowing  for  the  unload  period,  which  is  not charged)  that  the  container  could  generate  a  profit  per  day in  the  order  of  the detention charges.

[57]     I do not need to determine the point on this application (and cannot, given that there are also a range of other variables that would affect the figure).   It is sufficient that I find, on the facts of this case, that there is nothing exceptional arising out of the alleged lack of opportunity to argue the reduction, that justifies setting the demand aside on this ground.

[58]     In coming to this view, I also take into account that Cargo did not strongly protest the lack of opportunity after it had found that the charges were paid, but instead went about trying to recover those charges from its own customer, Filtration. If it had genuinely believed that the charges were a penalty, and therefore unenforceable, I would have expected it to raise the issue squarely, before seeking payment from Filtration.  Instead, Cargo focused on securing time to try to recover from Filtration, and did not raise the penalty issue until this application.

[59]     Doubt must also be cast on Cargo’s present contention that the denial of opportunity was significant to the overall outcome by the fact that there was a gap of about six weeks between finding out that Cubic had paid charges in respect of the first  shipping  company,  and  the  date  on  which  the  second  shipping  company invoiced its charges.   By that time, it appears Cargo was already pursuing its customer.   There is no suggestion in the evidence that it approached the second shipping company over  its  detention  charges,  or even  asked  Cubic to  delay its payment to allow it time to negotiate these charges.

[60]     I also take into account Cubic’s evidence that the length of the delay in returning the containers was causing it difficulty with the shipping companies, and it felt it needed to pay the charges promptly to retain its good relationships with these companies.

Decision

[61]     I am not persuaded that Cargo has an arguable claim to a dispute over the terms of its agreement with Cubic, or for a set-off over costs, which requires that the demand be set aside.  Nor am I satisfied that the circumstances surrounding the loss of an opportunity to negotiate a reduction on those charges amount to a ground to set aside.

[62]     The application to set aside is dismissed.  I extend time for compliance with the statutory demand to 14 March 2012.

[63]     As the successful party, Cubic is entitled to its costs on a scale 2B basis, together with disbursements as fixed by the Registrar.

Associate Judge Abbott