Australian Tallow v Malaysia International [2000] NSWSC 818

New South Wales Supreme Court

CITATION : Australian Tallow v Malaysia International [2000] NSWSC 818 FILE NUMBER(S) : SC 7/2000 HEARING DATE(S) : 02/08/00, 03/08/00, 07/08/00, 08/08/00 JUDGMENT DATE : 17 August 2000

PARTIES : Australian Tallow & Agri-Commodities Pty Limited - Plaintiff Malaysia International Shipping Corporation - Defendant JUDGMENT OF : Brownie AJ

COUNSEL : Mr A.S. Bell/Mr N.J. Beaumont - Plaintiff Mr G.J. Nell - Defendant SOLICITORS : James Neill - Plaintiff Middletons Moore & Bevins - Defendant CATCHWORDS : A decision of fact. DECISION : Summons dismissed, with costs.

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION ADMIRALTY LIST

BROWNIE AJ

THURSDAY, 17 AUGUST 2000

7/2000 - AUSTRALIAN TALLOW & AGRI-COMMODITIES PTY LIMITED v MALAYSIA INTERNATIONAL SHIPPING CORPORATION

JUDGMENT

HIS HONOUR: 1 The defendant carried certain cargoes from various Australian ports to various Asian ports, pursuant to Bills of Lading naming as the shipper either Concordia Agritrading Pte Limited ("Concordia") or Australian Tallow & Commodities Pty Limited ("ATC"), but the freight in respect of those cargoes remains unpaid. The defendant claims to have the benefit of a lien, not only over those cargoes, but over other cargoes, carried pursuant to Bills of Lading naming either ATC or the plaintiff as the shipper. There are four cargoes presently detained in Pakistan, the immediate subject of this litigation. 2 All of the cargoes were carried pursuant to the defendant's standard form of Bill of Lading, which contained these provisions: "1. DEFINITIONS …. 'Merchant' includes the Shipper, Holder Consignee, Receiver of the Goods, any person owning or entitled to the possession of the Goods or of this Bill of Lading and anyone acting on behalf of such person. 'Holder' means any person for the time being in possession of this Bill of Lading to whom the property in the Goods has passed on or by reason of the consignment of the Goods or the endorsement of the Bill of Lading or otherwise. … 14. FREIGHT (1) Freight shall be deemed fully earned on receipt of the Goods by the Carrier and shall be paid and non-returnable in any event. ……. (5) The persons falling within the definition of Merchant in Clause 1 shall be jointly and severally liable for the payment of Freight and liquidated damages as provided in this Clause. (6) Any person, firm or corporation, engaged by any party to perform forwarding services with respect to the Goods shall be considered to be the exclusive agent of the Merchant for all purposes and any payment of Freight to such person, firm or corporation shall not be considered payment to the Carrier in any event. Failure of such person, firm or corporations shall not be considered payments to the Carriers in any event. Failure of such person, firm or corporation to pay any part of the Freight to the Carrier shall be considered a default by the Merchant in the payment of Freight. 15. LIEN The Carrier shall have a lien on the Goods and any document relating thereto for all sums payable to the Carrier under this or any other contract by any of the persons defined as Merchant in Clause 1 …." 3 Concordia is a Singapore company, part of an international group of companies trading in commodities. It retained ATC as its freight forwarder and ATC in turn retained Australian Grouping Services Pty Limited ("AGS") to act for it. AGS dealt with the defendant on various occasions, arranging for the defendant to carry various cargoes from Australia to other countries. A dispute arose, the detail of which is not in evidence, and which is not material, but the effect of which was that Concordia refused to make certain payments in respect of cargoes carried, and ATC, unable itself to pay the defendant, and unable to recover from Concordia the freight claimed by the defendant, became insolvent. 4 ATC had two businesses: acting as a freight forwarder for customers such as Concordia, and dealing in commodities in its own right. In the latter capacity, it had built up a reputation in the sub-continent, using the name "Australian Tallow", and at the time of its insolvency early this year, it was a party to a number of contracts, then unfulfilled, generally to the effect that it acquire goods in Australia and re-sell them in either Pakistan or Bangladesh. In respect of each of those contracts, the end buyer had opened a Letter of Credit, naming ATC as the seller of the relevant goods. 5 ATC was effectively controlled by Mr Alam, who had a friend, Mr van Vlymen. Facing ATC's insolvency, Mr Alam offered Mr van Vlymen the opportunity, in effect, to take over both ATC's business as a commodities trader, and ATC's then existing but unfulfilled contracts, and Mr van Vlymen accepted that proposal. The plaintiff company was incorporated, and it employed the three people who had previously been employed by ATC, namely Mr Alam, Mr Ali, and the latter's wife. During a transition period of about two weeks, the plaintiff occupied ATC's office, and used its telephone, fax and e-mail services, before establishing its own office and facilities. 6 More significantly the plaintiff took over the existing commodoties contracts of ATC. The general structure by which this was effected was that the plaintiff rather than ATC purchased the relevant goods from the Australian suppliers; the plaintiff then re-sold the goods to ATC; ATC caused the defendant to ship the goods to Pakistan; ATC sold the goods to a buyer there; and when the buyer had paid ATC, ATC passed the proceeds of sale on to the plaintiff. There is no suggestion that there was any impropriety in any of these matters. It was done, fundamentally, because of the perception of Messrs Alam and van Vlymen that, on the sub-continent, it was difficult to arrange for a Letter of Credit to be varied or substituted, so as to name the seller as the plaintiff rather than ATC; and they wished to avoid the possibility that, if a particular Letter of Credit had to be re-negotiated, one of the parties might wish to seize the opportunity to avoid the contract altogether, for example, if the market price for the relevant goods had changed 7 However, nobody told the defendant of any of these matters, and, for a time, all shipments were made in the name of ATC. This was seen by Messrs Alam and van Vlymen as necessary, in order that the details on the relevant Bills of Lading coincide with the requirements of the relevant Letters of Credit that ATC be named as the shipper in the Bills. 8 More recently, contracts for the shipment of goods from Australia to other countries have been made in the name of the plaintiff. Earlier, some were made in the name of Concordia, and others in the name of ATC. 9 On the hearing, the defendant asserted that there was owing to it freight in respect of twelve Bills of Lading, the details of which appear in the following Table. All of the defendant's Bills are identified by the letters MISC followed by eleven digits. The hearing proceeded on the convention that it was sufficient to identify the last five digits only. The twelve Bills in respect of which the defendant claimed there was freight outstanding are as follows: