New South Wales Supreme Court CITATION : Jantom International v Ross Fehlberg Pty Ltd [2006] NSWSC 412 HEARING DATE(S) : 3 May 2006 JUDGMENT DATE : 12 May 2006 JURISDICTION : Common Law JUDGMENT OF : Associate Justice Harrison DECISION : (1) The appeal is dismissed; (2) The judgment of her Honour G Knight LCM dated 5 August 2005 is affirmed; (3) The amended summons filed 5 December 2005 is dismissed; (4) The plaintiff is to pay the defendant's costs as agreed or assessed. CATCHWORDS : Appeal decision of Local Court Magistrate - unpaid invoices LEGISLATION CITED : Local Courts Act 1982 - ss 73, 75 Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 CASES CITED : Carr v Neill [1999] NSWSC 1263 Devries v Australian National Railways Commission (1993) 177 CLR 472 R L & D Investments Pty Ltd v Bisby (2002) 37 MVT 479 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1990) 160 ALR 588 Jantom International Import & Export Pty Limited (Plaintiff) PARTIES : Ross Fehlberg Pty Ltd (Defendant) FILE NUMBER(S) : SC 14012/2005 Mr Killalea (Plaintiff) COUNSEL : Mr McDowell (Defendant) City Law Solicitors (Plaintiff) SOLICITORS : Peter Winter & Co (Defendant) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 17718/2004 LOWER COURT JUDICIAL OFFICER : G Knight LCM LOWER COURT DATE OF DECISION : 08/05/2005 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE HARRISON FRIDAY, 12 MAY 2006 14012/2005 JANTOM INTERNATIONAL IMPORT & EXPORT PTY LTD v ROSS FEHLBERG PTY LTD JUDGMENT (Appeal decision of Local Court Magistrate - unpaid invoices) 1 HER HONOUR: By amended summons filed 5 December 2005 the plaintiff seeks firstly, to appeal the decision of her Honour G Knight LCM dated 5 August 2005 in Penrith Local Court proceedings 17718/04; secondly, an order that the appeal be allowed; thirdly, an order that the judgment be set aside; fourthly, a declaration that the respondent is not entitled to an "uplift" (on foreign currency transactions) in respect of ocean freight and bunker adjustment factor (BAF) charges in respect of the respondent's subject invoices; and fifthly, an order that judgment for Fehlberg be given in the sum of the total sum claimed less $150.60. 2 The plaintiff (defendant in the Local Court) is Jantom International Import & Export Pty Limited (Jantom). The defendant (plaintiff in the Local Court) is Ross Fehlberg Pty Ltd (Fehlberg). Jantom relied on three affidavits of Bruce Bain sworn 5 December 2005, 16 December 2005 and 5 April 2006. 3 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by Jantom. Section 73 of the Local Courts Act 1982 (the Act) permits a party who is dissatisfied with a judgment as being erroneous in point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby (2002) 37 MVR 479. It cannot be said that the judicial officer acted on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. 4 Section 75 of the Act provides that the Court may determine an appeal by either (a) by varying the terms of the judgment or order or (b) setting the judgment or order aside or (c) by setting the judgment or order aside and remitting the matter for determination in accordance with the Court's directions or (d) by dismissing the appeal. 5 On 5 August 2005 the Magistrate entered judgment for Fehlberg in the sum of $8,346.83 and costs. The costs up to 17 November 2004 are to paid on a party and party basis and from 18 November 2004 on an indemnity basis. Grounds of appeal 6 The grounds of appeal are firstly that the Magistrate erred in that there was no evidence to support the Court's finding that "the second (foreign currency exchange) is performed by Fehlberg on the quoted figure at a rate determined by it, which is bases on the shipping line rate." (J 5.58); and secondly the Magistrate erred in law in holding that "the amounts invoiced for freight and BAF were calculated within the broad ambit of the contract between the parties" (J 6.7) as the contract between the parties did not apply to the second foreign currency exchange (if such exchange did exist). Local Court proceedings 7 Jantom imports furniture from China. It engaged Fehlberg as its shipping agent. The central issue in the Local Court proceedings was whether, with respect to invoice 94968 dated 29 November 2003 and invoice number 535027 dated 3 November 2003, Fehlberg without contractual authority, added a three percent uplift or additional fee on the ocean freight and bunker adjustment factor known as BAF, components of its invoices to Jantom. These items are quoted in $US. Jantom submitted that the three percent uplift on those two invoice constituted overcharging in the sum of $159.60. There are 80 invoices outstanding where the 3% uplift component is included. 8 The agreed facts (J 1.27-2.2) are: "(1) Fehlberg is and was engaged in the provision of customs and international freight forwarding, custom clearance, brokerage services; (2) Jantom is – well was – engaged, inter alia, in importing and sale of furniture and other items from China; (3) in about December 2002, Jantom completed an application for credit account with Fehlberg which was approved by Fehlberg on 27 December 2002; (4) by letter dated 20 December 2002, Fehlberg provided to Jantom a list of its export freight rates which were updated on or about 17 October 2003; (5) from December 2002 until January 2004 approximately, Fehlberg arranged for the shipment of a number of container loads of Jantom's goods from China to Australia; (6) Fehlberg custom cleared and delivered Jantom's goods to Jantom's nominated premises and Fehlberg raised invoices for that period of December 2002 to about January 2004; (7) those invoices were for services that included, inter alia, overseas handling charges, ocean freights, fuel surcharge, local port fees, import duties and taxes, custom clearance, Asian fees, quarantine import fees, as applied, and cartage costs; (8) Fehlberg quoted freights costs to clients in US dollars. The exchange rate used by Fehlberg to calculate the freight in Australian dollars was the shipping line rate plus a three percent mark up, or referred in these proceedings as an uplift; (9) Fehlberg, prior to release of cargo, paid shipping line invoices; (10) during December 2002 to July 2003, Jantom made its payments to Fehlberg by reference to identifiable invoices, apart from a lump sum of twenty thousand dollars in April 2003. From September 2003 to February 2004, Jantom made lump sum payments on its accounts; (11) Fehlberg claims outstanding invoices totalling eight thousand three hundred and forty six dollars eighty three." 9 Fehlberg relied upon a term in its quotes to Jantom as being authority for applying the 3% uplift. The term stated: "Rates Current as at 20 December 2002. Rates CAF/BAF may be subject to alteration in line with carrier variations. Import, port and terminal fees charged as per shipping line schedule which are subject to charge upon vessel's arrival. Overseas currencies exchanges based on day of ship's arrival, including fluctuation. …" 10 Mr Michael Carrafa, State Manager (Vic) for Fehlberg gave evidence (J 2.50- 3.9) that: "Prior to vessels arriving in Australia at the first Australian port, shipping lines in Australia allocate their own exchange rate to enable conversion of US dollars freight charges to Australian dollars. This is a standard procedure in the freight forwarding/shipping industry. Freight costs are quoted to clients in US dollars and the exchange rate used to calculate the freight in Australian dollars is the shipping company rate referred to above plus a three per cent mark up to allow for any fluctuations. The forwarder, prior to release of cargo, pays shipping line invoices." 11 The Magistrate found (J 5.54-6.9): "On the evidence, I am satisfied that in relation to the shipping line charges, two conversions occurred. Namely, the initial conversion by the shipping line in its invoice to Fehlberg at an exchange rate determined by the shipping line. The second is performed by Fehlberg on the quoted figure at a rate determined by it, which it bases on the shipping line rate. This is at odds with the factual construction assumed by the defence in its cross-examination of the plaintiff's witnesses. I do not accept the defence argument. I am satisfied that Fehlberg provided the services referred to in the three relevant invoices and the amounts invoiced for freight and BAF were calculated within the broad ambit of the contract between the parties." 12 The Magistrate identified the "initial conversion" as the currency exchange that occurred when the shipping line converted its freight rate in $US to $AUD and then invoiced Fehlberg in $AUD (J 5.4-7). Jantom accepts that initial conversion is correct. This initial conversion occurs to enable the agent to pay the shipper in accordance with its agreement with the shipper. It does not form part of the contract with the customer, Jantom. 13 It is a "second conversion" that is in issue. The second conversion was identified by the Magistrate as being (J 5.7-15): "Fehlberg then invoices its consignees, including Jantom, the quoted rate it has provided in its list of freight charges in US dollars, but converted into Australian dollars at the shipping line rate plus three per cent, so the base amount Fehlberg pays the shipping line in US dollars before conversion will normally be at variance with the base amount it charges Jantom before conversion and addition of the three per cent uplift." 14 Jantom submitted that the second conversion was not in fact a conversion at all it was no more than Fehlberg applying a 3% uplift to the $AUD figure provided by the shipping line and converted to $AUD by the shipping line. Jantom also submitted that the evidence given by Mr Carrafa on re-examination (t 74.8-79.33) did not support a finding of there being a second conversion within the context of the contract between the parties. 15 The contract in issue in these proceedings between the agent and the customer (consignee). There was an agreed term of the contract between the parties namely that "the overseas currencies exchange is based on day of ship's arrival including fluctuation." During re-examination Mr Carrafa agreed that by quoting in $US it was necessary at some point in time that there be a conversion of the figures into $AUS (t 74.49-53). The amount paid to the shipping company for ocean freight and BAF are not the amounts billed by the agent to the customer The amount that the agent actually pays to the shipping company for ocean freight and BAF is less. As Mr Carrafa explained (t 78.58-79.5): "We know the market price, the average freight rate could be thirteen hundred US the people are buying for so we might go in the market place and say 'Well okay, we'll sell it to these customers at eleven hundred and fifty or twelve hundred US'. That's where we get out business from." The agent has to come up with an exchange rate to convert the amounts quoted from $US for ocean freight and BAF to $AUS to enable the agent to render an invoice to the customer in $AUS (t 75.15-26). The conversion rate used by the agent is the shipping rate plus 3%. This higher rate is to cover fluctuation in currency from the time of rendering the invoice to the time the agent pays the overseas agents. This additional 3% covers the risks in the future (t 76.15-50). 16 From the evidence given it is my view that it was open to the Magistrate to come to the conclusion she did. There is no error of law. The appeal is dismissed. The judgment of her Honour G Knight LCM dated 5 August 2005 is affirmed. The amended summons filed 5 December 2005 is dismissed. 17 Costs are discretionary. Costs usually follows the events. The plaintiff is to pay the defendant's costs as agreed or assessed. The court orders: (1) The appeal is dismissed. (2) The judgment of her Honour G Knight LCM dated 5 August 2005 is affirmed. (3) The amended summons filed 5 December 2005 is dismissed. (4) The plaintiff is to pay the defendant's costs as agreed or assessed. ********** 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.