REMATH INVESTMENTS NO 6 PTY LTD vy CHANEL (AUSTRALIA) PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KirBY P, HANDLEY and Cripps JJA 20 August 1992, 24 December 1992 [1992] NSWCA 208 CONTRACT — contractual terms — warehouse and bond store — deposited goods stolen by burglars — claim for recovery of loss resisted on basis of (a) displayed notices of storage conditions; (b) conditions referred to but not incorporated in delivery and deposit documents; and (c) course of dealings between parties — displayed conditions not observed — no steps taken to alert depositor as to contractual conditions — HELD (By the Court) — (1) As to the defence based upon the course of dealings between the parties (which was suggested to have incorporated the conditions of contract) the test to be applied was whether the bailee had done "what was reasonably sufficient to give the plaintiff notice of the condition" limiting liability. Liaweena (NSW) Pty Ltd v McWilliams Wines Pty Ltd [1991] ASC 56-616 (NSW CA) applied; Hood v Anchor Line (Henderson Brothers) Ltd [1918] AC 837 (HL); Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 (CA); MacRobertson Miller Airline Services v Commissioner of State Taxation (Western Australia) (1975) 133 CLR 125 and Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 considered; (2) By that test, the bailee had not done what was reasonably sufficient to incorporate its alleged storage conditions into the relevant contracts of deposit; (3) Accordingly the bailee was liable as found. CONTRACT — ticket cases — incorporation of terms — consideration of principles. Kirby P, Handley and Cripps JJA On 22 September 1988 a burglary occurred at the bond store at 19-35 Crystal Street, Rozelle conducted by Remath trading as John Fletcher International. Remath was the bailee of a substantial quantity of Chanel perfumes and cosmetics recently imported into Australia. The burglars entered the building without activating the alarm system and were able to remain undetected while they removed approximately two tonnes of Chanel's goods. Chanel sued Remath and also Wormald who had installed the security system. Remath cross claimed against that company seeking to be indemnified against any judgment recovered by Chanel. This Court is not concerned with the claims against Wormald. On 12 December 1990 Rogers CJ Comm D found in favour of Chanel against Remath and directed judgment for $490,041.69 being the value of the goods and interest. He also made a declaration that Remath was bound to indemnify Chanel against any sales tax in respect of the stolen goods. The judgment took into account the customs duty and some sales tax which had become payable because of the loss. Remath has appealed to this Court seeking judgment in its favour. The circumstances surrounding the burglary are not in dispute. The building in which the bond store was located had three levels. Chanel's goods were located in the middle or ground floor. The burglars gained entry by chipping out a glass tile window set in the concrete wall on this floor which was approximately three metres above the floor level. The glass bricks were made of hard glass and it would have taken a long time to chip through them. The burglars had undisturbed 2 UNREPORTED JUDGMENTS access to the goods for a number of hours. There was only one security sensor covering the area. The Judge found that this safeguarded the usual points of ingress and egress but did not fully cover movement within the store. The burglars were able to remove the goods without detection because they left the front row of cartons in position close against the sensor. The issues for trial were whether Remath had been guilty of negligence and whether the contracts incorporated Remath's "storage conditions" which relieved it from liability. The Judge found both issues in favour of Chanel. The sole issue before this Court is whether the trial Judge was correct in holding that the "storage conditions" had not been incorporated into the relevant contracts. The goods arrived on the vessels "Act 8" and "Tolaga Bay" in July and September 1988 and were received into Renath's bond on 24 and 27 July and 15 September. Remath also acted as Chanel's customs and forwarding agents in the port of Sydney and transported its goods from the wharf to warehouse or bond. The first contract in relation to the goods ex the "Act 8" was made orally by Mr Valentine, Chanel's manager, on 4 July, presumably with Mr David Street of Remath who normally handled Chanel's business. There was probably a second contract in relation to further goods from this vessel which were transferred from Chanel's bond to Remath's bond on 27 July. Mr Valentine's evidence was that he instructed Remath to transfer the goods to its own bond. He was never asked about the terms of the conversations, and Remath called no evidence on this matter. The contract in relation to the goods delivered ex "Tolaga Bay" resulted from a letter of 12 August from Mr Borwick of Chanel to Mr Street. The letter instructed Remath to deliver some of the goods to Chanel's warehouse and others into bond either with Chanel or Remath. There was no evidence of any telephone conversations between Mr Borwick and Mr Street in relation to the movement or warehousing of these goods. On the evidence the contract was made when Remath proceeded to accept and act on Chanel's written instructions. Mr Valentine said that he was not aware of the storage conditions relied upon by Remath and he was not cross examined to suggest otherwise. Mr Borwick was also not aware of the storage conditions. When Chanel's goods were transferred into Remath's bond either from the wharf or from Chanel's bond Remath's practice was to send a "final" invoice for the cartage and associated charges within a short time afterwards but it did not then invoice Chanel for any storage charges. Later either when the goods were delivered to Chanel from Remath's bond or after three months storage it invoiced Chanel for the accrued bond rent. Chanel received no other documents from Remath in relation to goods received into Remath's bond. In particular no document was sent to Chanel acknowledging receipt of the goods and evidencing the terms on which they were held. The form of invoice used by Remath in 1987 and 1988 and for some years before that included a statement at the bottom in small print: "All services performed are subject to our conditions of contract, copies of which are available on request. " Mr Borwick was aware of this statement. However the "final invoices" in relation to the two consignments ex "Act 8" and the consignment ex "Tolaga Bay" delivered into Remath's bond were sent to Chanel weeks after the contracts were made and after performance had substantially commenced. Invoices for the bond rent were not sent until after the loss. UFEMATH INVESTMENTS NO 6 PTY LTD v CHANEL (AUSTRALIA) PTY LTD (Kirby B Handley and Cripps JJA) On this evidence alone the inevitable conclusion would be that the storage conditions were not incorporated into the contracts covering the stolen goods. The contracts did not expressly incorporate those conditions and the invoices were sent too late to have any contractual effect. In an endeavour to escape this result Remath relied upon the course of dealing between the parties. On the evidence this covered the whole period between 1954 and the burglary and included Remath's services as a customs and forwarding agent, carrier, and bonded warehouseman. However in our opinion it can derive no advantage from the course of dealing prior to late June 1987. Chanel ceased making use of Remath's bond about March 1976 when it commenced to use its own facilities for bonded storage. The trial Judge found that prior to 1979 Remath's conditions of contract covering the warehousing of goods did not exclude liability for negligence. Between March 1976 and July 1987 Chanel only used Remath's services as a customs and forwarding agent and carrier. Accordingly the steps taken by Remath in 1979 to inform its customers of the altered terms on which it was willing to warehouse their goods were ineffective so far as Chanel was concerned. Moreover express notice of the change was not given to Mr Borwick at that time. In late June or early July 1987 Chanel's bond was substantially full and a further shipment was due shortly on the "Gdansk 2". Chanel decided to use Remath's bond again for the first time since 1976 and Mr Borwick instructed Mr Street to arrange for some stock ex the "Wroclaw" to be transferred from Chanel's bond to Remath's. This was done on or about 7 July. Contracts for bond storage with Remath were also initiated by Mr Borwick's letters to Mr Street of 3 July (ex "Gdansk 2) 20 July (ex "Ellen Hudig") 8 September (ex Poznan') and 24 February 1988 (ex "Poznan"). There then followed the contracts relating to the shipments on the 'Act 8" and "Tolaga Bay". From time to time until the burglary Chanel instructed Remath to transfer goods from its bond to Chanel's bond or warehouse. These instructions were generally conveyed by letter from Mr Borwick to Mr Street. The Court therefore is only concerned with the course of dealing involving the use of Remath's bond between late June 1987 and August 1988. Remath relied upon notices in the office at its bond store and in the waiting room at its head office which displayed the storage conditions. These notices had been there since about 1979. Remath also relied on the statement at the foot of its invoices. It did not rely upon any other communication between the parties before or at the time the contracts were made, or afterwards. The relevant officers of Chanel, Mr Valentine, Mr Borwick, and its finance director and company secretary Mr Hewett gave evidence that they had never been to the bond store and there was no cross examination or evidence to suggest otherwise. These witnesses had visited Remath's head office but said that they had not seen the notice there or read it. There was no evidence that it had ever been brought to their attention during any of their visits. Mr Garner a director of Remath said that the notice at the head office was on the wall about five feet from the front of the inquiry counter. He added: "We nearly always have a glamorous lady on the counter - perhaps they were distracted". In the light of this evidence Remath is left only with the statement on the foot of its invoices. It was not suggested that either Mr Hewett or Mr Valentine were aware or should have been aware of this statement prior to the burglary. Mr Borwick who initiated all but two of the bond storage contracts between July 1987 and August 1988 was aware at the time of the presence of this statement. 4 UNREPORTED JUDGMENTS He processed all incoming invoices from Remath, not only for bond rent, but also for customs and forwarding agents' services and cartage. All contained the statement relied upon by Remath. These invoices were received well after the contracts had been made and after performance had commenced and in some cases after they had been completed. However Mr Borwick was not aware of the existence or content of "the conditions of contract" relating to storage in Remath's bond. He was never given them, never told about them, didn't see them, and never asked for them. Remath was also using conditions of contract in relation to its services as a carrier. Its standard form of delivery docket was more than a simple receipt. At the top the form provided spaces to be filled in with details of its cartage services. Provision was then made for a signature on behalf of the customer acknowledging receipt of the goods in good order and condition and for a date. Below that the form stated in small print that John Fletcher International were not common carriers and that "all work (whether involving the carrying or handling of goods or not...) is undertaken by us subject to the conditions of contract printed below." Those comprised thirteen clauses in small type which took up over half the document. Remath did not suggest that any were relevant to the storage of goods. Copies of these delivery dockets were received by Mr Borwick for processing in connection with other paper work received from Remath. He was aware of the cartage conditions on these delivery dockets. He had received and handled them regularly since 1975. He said in cross examination that he had noticed the words on the bottom of Remath's invoices. When asked whether he assumed that the conditions referred to were those on Remath's delivery dockets he said that he was not sure. "I didn't really think about it". He then gave this evidence: "Q. But you knew by the form of the invoice that they were saying to you that the services that they performed and for which they sent invoices out, were performed subject to their conditions of contract? A. Yes. " The delivery dockets contained what were there referred to as "conditions of contract". The conditions relied upon to exclude liability as a bailee for negligence were headed "Storage Conditions". There is therefore a question whether the invoices refer to the "Storage Conditions" at all. The statement on the invoices was that "All services are performed subject to our conditions of contract". Remath performed customs agent's and other agency services for Chanel but it had no conditions of contract for those services. Senior counsel for Remath submitted that its invoices were "contractual" documents and their acceptance by Chanel without protest after July 1987 operated to incorporate Remath's storage conditions into the contracts at least by the time the critical contracts were made in July and August 1988. In support of the first step we were referred to Associated Midland v Bank of New South Wales (1984) 51 ALR 641 (HC) at 643-4. There the dealer's invoice to the finance company was either evidence that an oral contract of sale had previously been concluded or was an offer to sell the goods which was accepted when the price was paid. However Remath's invoices were not sent in the course of making its contracts nor were they similar to the sale notes in Hardwick Game Farm v SAPPA (1969) 2 AC 31 which were sent to customers within a day or two to UFEMATH INVESTMENTS NO 6 PTY LTD v CHANEL (AUSTRALIA) PTY LTD (Kirby B Handley and Cripps JJA) evidence the terms of oral contracts. Remath's invoices were mere accounting documents. See Salcombe Investments v Cement Aids (Q) Pty Ltd (1987) ASC 57292 at 57298 per Connolly J. The appellant submitted that Mr Borwick's knowledge of the statement on the invoices was sufficient by itself to incorporate its storage conditions into the contracts. This submission encounters difficulties. The statement on the invoices, if interpreted literally, was false because Remath did not have conditions of contract which covered all its services. On the other hand if the statement was interpreted strictly it only applied to the "conditions of contract" on Remath's delivery dockets. The principles of law which this Court must apply in the present case were considered in Liaweena (NSW) Pty Ltd v McWilliams Wines (1991) ASC 56 616. Both parties accepted that the test was whether the appellant "did what was reasonably sufficient to give the plaintiff notice of the condition". See at 56 622. As we understand the principle this obligation applies not merely to the existence but also to the content of the condition. Remath made no attempt to introduce the storage conditions into any contract with Chanel at or about the time the contract was made. Mr Borwick's letters and phone calls and the phone calls from Mr Valentine never once elicited a reference by Remath to the existence of its storage conditions. The invoices for bond rent which Remath relies upon arrived at Chanel after the storage contracts had been made and wholly or partly performed. Why should Mr Borwick at that stage be expected or required to do anything to find out more about Remath's conditions of contract? Why should he do what Remath itself could not be bothered doing? In particular why should the law allow Remath to introduce restrictive conditions by stealth when it had made no attempt to introduce them openly and directly at the time the contracts were made. In our opinion in the circumstances of this case there was no onus whatever on Mr Borwick to make any inquiry of Remath simply because he had received and read invoices in this form. In our opinion Rogers CJ CommD was correct in holding that Remath did not do what was "reasonably sufficient" to give notice of the exclusion clause by stating in its invoices that copies of its conditions of contract would be made available on request. It was not reasonable for Remath to attempt to impose uncommunicated conditions in this way, leaving to Chanel the task of finding out what the conditions were. In Thompson v LMS Railway (1930) 1 KB 41 it was held that the company could rely upon a railway ticket, the front of which stated "For conditions see back". The back of the ticket stated that it was issued subject to the conditions and regulations of the company's timetables. These cost six pence each and the exclusion clause relied upon was to be found on page 552. The Court of Appeal upheld judgment for the company holding that the jury's finding that it had not brought the clause sufficiently to the notice of the plaintiff was perverse. However it is a question of fact in each case whether a party relying on an exclusion clause has done what was reasonably sufficient to give the plaintiff notice of the clause. This was made clear by Viscount Haldane in Hood v Anchor Line (1918) AC 837 at 844, 845 where he said: ".,. the appellant here was entitled to ask that all that was reasonably necessary as a matter of ordinary practice should have been done to bring to his notice the fact that the contract tendered to him excluded the right which the general law would give him... Whether all that was reasonably necessary to give him this notice was done is, however, a question of fact, in answering which the tribunal 6 UNREPORTED JUDGMENTS must look at all the circumstances and the situation of the parties... No doubt the burden of proof lies on the respondents... Have they shown that they did all that could be required reasonably under the usages of proper conduct in such circumstances?" Recent cases have taken a more realistic view of what is "reasonably sufficient" than that taken in Thompson's case. In Thornton v Shoe Lane Parking (1971) 2 QB 163 the car parking ticket issued by an automatic machine stated "This ticket is issued subject to the conditions of issue as displayed on the premises". The conditions were displayed at several places within the car park. The Court held that the statement on the ticket was not sufficient. Lord Denning MR said at 170: "Tt is no use telling the customer that the ticket is issued subject to some 'conditions' or other without more: for he may reasonably regard 'conditions' in general as merely regulatory, and not as taking away his rights, unless the exempting condition is drawn specifically to his attention." Megaw LJ at 173-174 said: ... it would be fiction, if not farce, to treat those customers as persons who have been given a fair opportunity, before the contracts are made, of discovering the conditions by which they are to be bound. " This case was considered by Stephen J in MacRobertson Miller v Commissioner of State Taxation (1975) 133 CLR 125 at 138-139 where he said of the customer of the car park: "Such a customer, who by the issue of a ticket, becomes the recipient of an offer, must be afforded an opportunity of learning, from the ticket, what are the terms of that offer before he can be said to have accepted it... What (was) referred to as a fair opportunity of reading the tendered ticket will provide the test, recourse being had, for this purpose to familiar standards of reasonableness". (emphasis supplied) In The"Eagle" (1977) 2 LI Rep 70 the defendant relied upon a travel brochure which the plaintiff's agent had previously read. CLS on 17 of this brochure stated: "Conditions of carriage. Your attention is drawn to our conditions of carriage which may be seen in the offices of Southern Ferries (in Southhampton) and are printed on the inside of the ticket covers. " At 78 the judge said: "T do not consider that mere reference to conditions of carriage in a brochure and being a mention of the kind that one finds in this case is sufficient to bring home fairly to an intending passenger that his common law... rights... are going to be removed from him if he travels with the ship owners in question. " See also The "Dragon" (1979) 1 Ll Rep 257 at 262. Thornton's case and these later cases were considered and approved in Oceanic Sun Line v Fay (1988) 165 CLR 197. The defendant in that case also relied upon a brochure to incorporate its exclusion clauses into the contract of carriage. The inside of the back page of the brochure contained the statement: "The attention of passengers is drawn to the general conditions of transportation set out in the passage contract" and lower down there was a statement that "The transportation of passengers and baggage... is governed by the terms and conditions printed on the Passenger Ticket Contract which may be inspected at any Sun Line office." Tickets were not available in Sydney and the plaintiff did not receive his until he arrived in Greece. It was also not clear whether there was a Sun Line office in Australia. The Court held that the exclusion clause was not incorporated in the contract. See Wilson and Toohey JJ at 208 and Deane J at 256. UFEMATH INVESTMENTS NO 6 PTY LTD v CHANEL (AUSTRALIA) PTY LTD (Kirby F Handley and Cripps JJA) At 228-229 Brennan J said: "In differing circumstances, different steps may be needed to bring an exemption clause to a passenger's notice, especially if the clause is an unusual one. In the present case the only step which the defendant took... was the note in the brochure that the conditions of carriage were printed in the (unavailable) Passenger Ticket Contract. In... The 'Eagle' it was held that a mere statement in a carrier's brochure that the carrier contracted on its conditions of carriage was not enough to make those conditions terms of a contract subsequently made with an intending passenger who had read the brochure." See also Livingstone v Roskilly (1992) 3 NZLR 230. In the light of these authorities we do not accept the appellant's submission that the mere statement on the bottom of its invoices was, in the circumstances, reasonably sufficient to incorporate the storage conditions into the relevant contracts. The question of reasonableness may be tested in this way. If in late June 1987 when Mr Borwick first spoke or wrote to Mr Street about the possibility of Chanel making use of Remath's bond storage facilities, or at any time thereafter before the burglary, Mr Street had told Mr Borwick of the storage conditions and their effect, or sent him a copy by mail or by facsimile several courses of action would have been open to Chanel. It might have inspected Remath's bond store, or at least inquired as to the security arrangements. It might have accepted Remath's storage conditions and arranged insurance. It might have shopped around the other bond stores for better terms or better security. It could have delayed its shipments from Britain and if there was space in its own warehouse it may have elected to pay the duty and tax and cleared sufficient goods from its bond store into its warehouse. In our opinion it cannot be said that Chanel was ever given "a fair opportunity" of considering these alternatives. This is only another way of saying that it was never given a fair opportunity of considering Remath's storage conditions before the contracts were made. In our opinion the appeal should be dismissed with costs. Appeal dismissed with costs. Counsel for the Appellant: R McDOUGALL QC Instructed by: AITKEN and MAGNEY Counsel for the Respondent: M SKINNER Instructed by: SLY and WEIGALL