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: Bill Number Shipper Named Dollars Claimed 36370 Concordia 17,625 36650 Concordia 1,110 37760 Concordia 14,759 38820 Concordia 18,185 79740 Concordia 1,445 81860 Concordia 46,075 82010 Concordia 32,211 85080 ATC 10,070 85100 ATC 5,765 86400 Plaintiff 1,435 87390 ATC 5,765 90070 Plaintiff 1,243 10 By its Summons, the plaintiff sought relief in relation to the cargoes carried pursuant to five Bills. However, on the hearing, it restricted its claim to the cargoes carried in respect of four Bills. The position as to these five Bills is, briefly, as follows: (a) Bill 87390: ATC was the named shipper; the plaintiff claims to be the true owner of the goods, and that ownership is disputed. It is common ground that the freight has not been paid. (b) Bill 85100: ATC was the named shipper; the plaintiff is admitted to be the true owner of the goods; the freight has not been paid. (c) Bill 85080: ATC was the named shipper; the plaintiff was the true owner of the goods, but has since sold them. For this reason, the plaintiff did not press its claim in respect of these goods. However, the defendant claims that the freight in respect of this shipment remains unpaid. (d) Bill 83090: ATC was the named shipper; the plaintiff is the true owner of the goods; the freight has been paid. (e) Bill 90070: the plaintiff was the named shipper and is the true owner of the goods. The freight has not been paid. The plaintiff has offered to pay it, but the defendant has said that it will not release the goods until the whole of the debts payable to it, protected by its lien, have been paid. 11 The defendant questions whether the plaintiff was the owner of the goods the subject of Bill 87390. The documentary evidence put forward by the plaintiff in support of its contention that it was the true owner of these goods, considered by itself, is not very convincing, but Mr van Vlymen, whose evidence I accept as truthful and generally reliable, swore that the plaintiff had paid for the goods, and when this evidence is taken into account, the position is quite different: the documents provide a measure of corroboration, and there is nothing to contradict his evidence. I find that the plaintiff was the owner of these goods. 12 The question whether the freight has been paid in respect of Bill 85080 is part of a much larger dispute, concerning the proper appropriation of payments made to the defendant. That dispute is made more difficult to resolve by reason of the apparently inconsistent statements made by the defendant from time to time, so that its claims need to be scrutinised with care. 13 I need to start with the dispute between the parties concerning the liability to the defendant for unpaid freight in respect of cargoes shipped in the name of Concordia. In about August 1999 Mr Zarodoukas (whose name is sometimes shortened to Zaras) of AGS contacted Mr Torquato of the defendant's Australian agent, MISC Agencies (Australia) Pty Limited ("MISCA") and, in general terms, arranged to ship goods on the defendant's vessels; and shipping commenced in about September 1999. 14 AGS was a wholesaler of freight space. That is, it grouped together requests for freight space and containers from people wanting these things, and then, on behalf of these customers it dealt with ocean carriers, such as the defendant. This meant that AGS could achieve economies of scale, and procure better freight rates from ocean carriers such as the defendant. Mr Torquato said, and in his affidavit filed on behalf of the plaintiff, Mr Zarodoukas agreed that AGS was acting as ATC's forwarding agent in requesting that the defendant provide shipping services, and that AGS was acting for and on behalf of ATC. 15 As between the defendant and the other parties involved in these events, the initial bookings of cargo on behalf of either Concordia or ATC were made by AGS, but after a time they were sometimes made directly by ATC. The procedure was that a request would be made for a booking for a given number of containers on a nominated voyage; MISCA sent a fax to either AGS or ATC, depending upon which of those companies had made the booking, confirming various details; MISCA provided to either AGS, ATC or nominated packing or transport companies details of the location of empty containers, available for the transport of the cargo in question; ATC sent to MISCA forwarding instructions, so as to enable MISCA to prepare the relevant Ocean Bill of Lading; MISCA prepared a draft Bill, and sent it to either AGS or ATC for the details to be checked (so as to ensure that there was no discrepancy between the details on the Bill and the details on the relevant Letter of Credit); and once these details had been checked and either confirmed or corrected, MISCA prepared and signed the Bill, but retained it pending payment of the freight. Once the freight had been paid MISCA either delivered the Bill to AGS or ATC, or "surrendered" it, that is physically retained it, whilst issuing a "telex release", or more accurately, e-mails confirming that the freight had been paid, so as to authorise delivery of the cargo as if upon production of the original Bill. 16 As a matter of practice, until some time in February 2000, AGS paid the freight, together with various incidental expenses claimed by the defendant, and then rendered an account to ATC, adding its own charges. In the case of shipments arranged by ATC on behalf of Concordia, ATC invoiced Concordia. When the dispute arose, in about February 2000, and Concordia stopped paying ATC, both ATC and the defendant took the stance that ATC was liable to pay the freight. During the period September 1999 to early 2000, some shipments were made in the name of Concordia and others in the name of ATC. This was done, depending upon the instructions given by Mr Alam, apparently sometimes direct to MISCA, and sometimes to AGS, which passed those instructions on to MISCA. That is, on each occasion when ATC wished to arrange a shipment on behalf of Concordia, rather than in its own right, Mr Alam nominated Concordia as the party to be named as the shipper, and this was done. 17 When the dispute arose there was a considerable sum outstanding in respect of cargoes where Concordia had been named as the shipper. There seems to have been a fairly general state of imprecision and/or confusion as to the detail of this indebtedness, and the appropriation of payments that were made on account of this indebtedness, but I focus first on the question of who was liable to pay for these shipments, and who might be affected by the lien that the defendant had, over both the cargoes and the Bills of Lading, in respect of the unpaid Concordia freight. 18 The defendant submitted that AGS acted only as a booking agent. Were it not for the fact that AGS paid the defendant freight, before being put in funds, I think that this conclusion would follow from the evidence, fairly plainly. In particular, the affidavits of Messrs Torquato and Zarodoukas summarised at [14] above say as much; and there was no contact between AGS and Concordia relating to these shipments. 19 Whilst it was perfectly commonplace for AGS to deal with MISCA in relation to many of the details necessarily involved, it was also a commonplace for ATC to deal directly with MISCA about these matters, and in this context the reality seems to be that ATC used the services of AGS to obtain cheaper freight rates, and that MISCA was content to deal with either ATC or AGS, either in relation to the original booking of any given cargo, or in relation to any of the subsequent matters of detail that commonly arose, or even as to whether, when the freight had been paid, to deliver the original Bill to either AGS or ATC. 20 The troublesome aspect is the fact that AGS itself paid the freight claimed by the defendant, before being put in funds. This is certainly consistent with the submission advanced by the plaintiff, that AGS regarded itself as being liable as if a principal, but there is no direct evidence that AGS did regard itself as so liable, whilst the evidence of Messrs Torquato and Zarodoukas is to the contrary. It also seems odd that AGS would accept such a large liability, when its charges for any one shipment were so small. 21 In my view the correct analysis of the position is that these shipments were arranged in the name of and on behalf of Concordia, as principal, and that both ATC and AGS acted as agent for that named as principal; and there is no suggestion that they acted otherwise than upon the authority of Concordia. On general principles therefore Concordia alone would be liable to the defendant for the freight, and the question arises whether the terms of the various Bills changed this prima facie position, so that ATC is now affected by the lien of the defendant in respect of the unpaid freight. 22 ATC invoiced Concordia for sums which included all the amounts it had been charged by AGS, as well as ATC's own charges. Concordia made payments to ATC from time to time. These were lump sum payments, and it seems that ATC's practice was to appropriate these lump sum payments towards various outstanding invoices. ATC did not pass all these payments on, either to AGS or to the defendant. After the dispute arose, ATC and AGS came to an arrangement pursuant to which ATC assigned, or at least purported to assign to AGS the debt said to be owing by Concordia to ATC; AGS withdrew its claim against ATC; and those parties agreed in effect that if AGS recovered from Concordia more than was necessary to pay off the debt due to AGS, AGS would refund to ATC any surplus which then existed. 23 I do not see any clear pattern in all this, except perhaps that the parties have (commendably) acted in the interests of perceived commercial sense rather than legalities, even in the heat of battle in recent weeks, but in the end I accept the submission of the defendant that the effect of the terms of the Bills, and particularly clauses 14(5) and 15, is that ATC became bound by the terms of the Bills, when it acted as the agent of Concordia, in relation to the formation of each of the relevant contracts of carriage, which contracts embraced those terms. 24 This reasoning leads to the conclusion that the defendant has a lien, exercisable as against the plaintiff, not only in relation to cargoes shipped in the name of ATC, but also in relation to cargoes shipped in the name of the plaintiff. In relation to some of these cargoes, ATC acted, with the authority of the plaintiff, as the agent of the plaintiff in arranging contracts of carriage of cargoes for the plaintiff. As between the plaintiff and the defendant, and in relation to these cargoes, the plaintiff agreed with the defendant that the defendant would have a lien in respect of goods carried under other contractors, in respect of sums payable to the defendant by others who fell within the definition of Merchant, including ATC. That leads on to the further conclusion that, even in respect of contracts arranged by the plaintiff directly and in its own name, and in its own right, the defendant has a lien protecting the defendant, in respect of the debts of ATC to the defendant. This is not a conclusion that I happily embrace, but I conclude that it is correct. 25 A good deal of time and effort was taken up debating the measure of the debts now outstanding in respect of both Concordia shipments, and ATC shipments. It seems better that I deliver judgment now, rather than take the time to analyse all this detail, but I think that, in respect of the two payments of $28,925 and $28,725 made by ATC to the defendant, the position is that, on the above findings, ATC should be treated as a debtor who made the payments without attempting at the time to appropriate the sums paid towards particular debts or accounts; and the defendant, as creditor, then made appropriations, so that ATC was bound by those appropriations, and therefore, the plaintiff is now bound by them. 26 There were other questions, which seemed to turn upon perceived discrepancies in amounts, but when one has regard to the document fee of $25 per Bill charged by the defendant, most if not all of these discrepancies are adequately explained. In any event, these questions do not affect the result of the litigation. 27 There was a separate dispute about the sum claimed in relation to Bill 86400, that alleged debt not having been mentioned in certain lists of outstanding sums, prepared by the defendant. In this Bill, the plaintiff was the shipper named, and the cargo was shipped in a container identified as MIS1183239. It formed part of a larger intended shipment of five containers. At the time of the intended shipment, the defendant's service to Karachi, the intended destination, had been suspended due to port congestion, and Mr Torquato suggested that the plaintiff use another ocean carrier. However, the one container in question was shipped to Karachi, by or on behalf of the defendant. When Mr Alam first gave evidence, he seemed to have only an imperfect recollection of the details relating to this container, but he later agreed that the defendant had in fact shipped the container. Additionally, the defendant put forward a good deal of documentary evidence confirming these circumstances, and there is really no evidence to the contrary. I find that the defendant did ship this cargo, for the plaintiff. 28 I dismiss the Summons, with costs. ******** Last Modified: 09/27/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.