Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc [2000] FCA 660

FEDERAL COURT OF AUSTRALIA

Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc [2000] FCA 660 HI-FERT PTY LTD v KIUKIANG MARITIME CARRIERS INC NG 778 OF 1996 TAMBERLIN J SYDNEY 18 MAY 2000

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 778 OF 1996

IN ADMIRALTY

BETWEEN: HI-FERT PTY LIMITED

FIRST PLAINTIFF

CARGILL FERTILIZER INC

SECOND PLAINTIFF

AND: KIUKIANG MARITIME CARRIERS INC

FIRST DEFENDANT

WESTERN BULK CARRIERS (AUSTRALIA) LTD

SECOND DEFENDANT

JUDGE: TAMBERLIN

DATE: 18 MAY 2000

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The first plaintiff ("Hi-Fert") bought a cargo of fertilizer of 40,196 metric tons ("the cargo") from Cargill Fertilizer Inc ("Cargill"), a United States Corporation. The cargo was loaded in bulk form at Tampa, Florida, on the vessel "Kiukiang Career" ("the ship") which was owned by the first defendant ("KMC"). During the relevant period, between March and June 1996, the ship was time-chartered by KMC to the second defendant ("WBC") under a charterparty dated 19 August 1995 ("the Time Charter"). WBC had earlier entered into a Contract of Affreightment ("the COA") with Hi-Fert in the form of a Gencon Charter in respect of the carriage of cargo from Tampa to Newcastle, New South Wales and other ports in Australia. The COA was dated 11 November 1993. 2 KMC employed the Master and crew of the ship. At the Tampa port on 24 March 1996 the Master issued three Bills of Lading in the Congen Bill edition 1978 Form in respect of the cargo. The cargo was made up of three different types of fertilizer comprising 21,600 metric tons of what I will describe as DAP, 9,299 tons of what is referred to as GMAP and 9,297 tons of what is referred to as GTSP. Nothing turns on the precise chemical differences between the three products. The cargo was expressed to be destined for carriage to Australian ports. The shipper was named as Cargill. The consignee nominated was Hi-Fert which was also named as the party to be notified. 3 Prior to loading inspections were carried out by a Tampa firm of surveyors known as Commercial Testing & Engineering Co ("CTE"). The CTE inspection found the holds to be clean and ready to receive the cargo. However, when the ship entered the Port of Newcastle in New South Wales on 26 April 1996 it was prevented from discharging the cargo as the fertilizer was immediately quarantined by the Australian Quarantine Inspection Service ("AQIS"). AQIS found wheat residues in the holds and quarantined the cargo on the basis that it was contaminated with a quarantineable disease known as "Karnal Bunt", a disease associated with wheat. 4 Hi-Fert and Cargill claim that as a consequence of the contamination of the cargo they suffered loss. They have sued KMC on a number of causes of action including negligence, bailment, breach of contract, and breach of duty as a carrier. The plaintiffs also allege improper or negligent stowage and a failure to exercise due diligence on the part of KMC to make the ship "seaworthy" within the meaning of the US Carriage of Goods by Sea Act 1936 (US) ("COGSA") and the Hague Rules. 5 WBC is sued by Hi-Fert for misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) ("the TPA") arising from alleged misrepresentations made by WBC to Hi-Fert concerning inspections in relation to cleanliness of the vessel prior to loading. WBC is also sued on the alternative basis that the misrepresentations were negligent, or amounted to collateral warranties to the COA of 11 November 1993. In addition WBC is sued on the ground that it was the carrier under the COA and breached its obligations as carrier. The COA contains a London Arbitration clause and this latter part of the proceeding has been stayed for arbitration in London. It is not the subject of this judgment. 6 The amount of damages claimed is in the order of $9 million dollars plus interest and costs. 7 Apart from denials KMC's first line of defence is that the Bills of Lading were not evidence of any contract of carriage and did not attract the obligations in COGSA but were merely receipts for cargo received on board the ship. KMC also says that despite the absence of a COA binding it, the duty of care in negligence and bailment would reflect the terms of the COA particularly clauses 16 and 20 which relate to inspection of the ship prior to and on loading. Accordingly, KMC submits that because the CTE inspection found the holds to be clean and ready they had not met the required standard of cleanliness and therefore no liability arose on KMC. 8 KMC however does concede that if the Bills of Lading were contracts of carriage then COGSA would apply. KMC says however that if the Bills of Lading amounted to a contract of carriage then the contract was subject to the COA particularly cll 16 and 20 which were not be rendered inapplicable by COGSA. This is said to arise from notations on the face of the bills. 9 A defence of estoppel is also raised against Hi-Fert to the effect that it is estopped from alleging a breach of contract by reason of the condition of the holds because of the certification by CTE. KMC alleges CTE performed the inspection as agent for Hi-Fert. 10 KMC also says that it exercised due diligence to make the ship seaworthy and that the holds were fit and safe for reception of the cargo as required by s 3(1) of the COGSA. It also says that it is relieved from liability by s 4(2) of US COGSA. Finally, as to damages, there is an allegation of failure by Hi-Fert to mitigate its loss. 11 The defence of WBC consists of a denial that there were any misrepresentations. Alternatively assuming there was a breach of the TPA it denies that there was any reliance by Hi-Fert or that there was any loss flowing therefrom. Both defendants challenge the quantum of damages and allege a failure to mitigate damages. They also dispute the legal basis for the award of certain of the damages claims.