District Court New South Wales Medium Neutral Citation: Cosco Container Lines Limited & Five Star Shipping & Agency Company P/L v Palsonic Corporation Limited & VB Distributors P/L [2014] NSWDC 4 Hearing dates: 13, 14, 15, 29 November 2013 Decision date: 31 January 2014 Before: Judge MJ Finnane QC Decision: See paragraph [33] Catchwords: CONTRACT - agreement - terms - express - implied - agency agreement - estoppel OTHER - shipping - freight charges - detention charges - fees Cases Cited: Con-Stan Industries of Australia Pty Ltd v Winterhur Insurance (Australia) Ltd (1986) 160 CLR 226 Category: Principal judgment Parties: Cosco Container Lines Limited (Frist Plaintiff) Five Star Shipping & Agency Company P/L (Second Plaintiff) Palsonic Corporation Limited (First Defendant) VB Distributors P/L (Second Defendant) Representation: Mr MG McHugh SC/ Mr A McGrath (First and Second Plaintiffs) Mr A Bowen (First and Second Defendants) Norton White (First and Second Plaintiffs) Shaw Reynolds Lawyers (First and Second Defendants) File Number(s): 2010/208522 Judgment Introduction 1The plaintiffs sue the defendants claiming judgment in the sum of $108,999.55. The claim is brought in contract. 2The first plaintiff was at all material times the shipper of goods from China by sea. The second plaintiff was its agent in Australia. The first and second defendants import and distribute electrical and electronic products that are mainly manufactured in China. For about 15 years, the defendants used the plaintiffs exclusively for the shipment of such goods from China to Australia. The shipping of these goods involves the supply by the plaintiffs to the defendants of 20 foot and 40 foot shipping containers. All goods are shipped in containers. 3The plaintiffs have standard terms for shipping goods and for detention of containers. It is commonplace in the shipping industry for the customers of the shipper to hold onto the container for a period of time (the detention period) after it arrives in Australia. 4The plaintiff imposed terms on its customers that allowed them to have the containers free of charge for 10 days and thereafter to be liable to charges levied on a daily basis for each day that the container was kept. Because the defendants were such good customers of the plaintiffs, they were given special arrangements that allowed them to detain the containers for 30 days free of charge and thereafter at quite a small daily charge. 5The substance of this case depends upon my deciding what precise arrangements were in place at relevant times. 6The plaintiff's claim was based on its standard charges as set out in a document called "July 2008 COSCON container detention policy" varied to allow of 30 free days in lieu of 10 free days. If this claim is correct, and the defendants were bound by this document as varied, then the plaintiff succeeds in its case, subject to a claim by the defendants that an estoppel by convention operated to preclude any change in the previous agreed position. At a later point I will give consideration to the question whether the facts would allow such an estoppel to arise. Facts 7The first plaintiff is a Chinese shipping company and the second plaintiff is its wholly owned subsidiary and agent. Evidence discloses that the first plaintiff determines all policy questions and the second plaintiff implements them. The second plaintiff did not at any point itself determine any contractual or other arrangement with the defendants. The defendants are linked. According to Mr Gupta, the second defendant does the actual trading. 8The commercial arrangements that led to the current dispute commenced in 2003 when the plaintiff commenced to offer shipping from the Chinese port of Xiamen. This port is located close to the manufacturing base of the first defendant. First Concessional Agreement 9In April 2003 there was a meeting in Sydney between Mr Gupta, the managing director of the defendants, accompanied by Mr Hughes, an employee of the defendants, with Mr Wang Ning and Miss Lisa Brown for the plaintiffs. The purpose of the meeting was to discuss detention charges. I am satisfied that Mr Gupta, during this meeting said words to indicate that he wanted free time extended to 30 days, with detention fees fixed by the payment of three dollars per day per 20 foot container for the next 20 days and then five dollars per day thereafter and he wanted to leave arrangements on a long-term basis (See Lisa Brown Affidavit 19 June 2013 para 20 - 23) 10Mr Wang Ning indicated that approval would have to be given, if at all, from the head office of the first plaintiff in Shanghai. Following this discussion there were further discussions within the first plaintiff and on 24 April 2003 Miss Brown sent an email to Mr Hughes which dealt with discounted freight rates and an offer for container detention of 30 free days for a 40 foot container and thereafter at $30 per day. This led to further emails being sent. It is not necessary that I repeat the substance of each of those emails other than to say that Mr Gupta was involved in the various offers and counter offers (see EXH LB 1 p.3). 11On 22 May 2003, an agreement was reached by email for detention fees being 30 free days, 3 dollars per day for the next 20 days and $5 per day after 50 days (see LB1 p.5). In its terms the duration of this agreement is from 7 May 2003 to 30 April 2004. In his subsequent evidence, Mr Gupta claimed that although he was aware of the email of 22 May that evidenced this agreement, he regarded the duration as meaning only the duration of freight charges. However, in my opinion, there is nothing in this document about freight charges and in my opinion, it is clear that this agreement was to fix detention charges for the period 22 May 2003 to 30 April 2004. In the statement of claim, this is called the first concessional agreement. 12On 18 April 2006 Mr Tony McCue, an employee of the plaintiffs, by email, extended special arrangements up to the end of April 2006 and specifically mentioned what those arrangements were (see EXH LB1 p.10): 1 to 30 calendar days free 31 to 50 calendar days, $3 per day per unit. 51 days and over $5 per day per unit 13Thereafter, the email specified a different free period of 15 days and substantially greater charges for each day thereafter. As well as this, the email enclosed notice to all consignees specifying rates applicable from 1 May 2006. The email indicated that the rates granted specially to the defendants would be subject to confirmation of duration and then they would revert (see EXH LB1 p.10). Second and Third Concesional Agreements 14By an email of 12 October 2006 from Mr McCue to Mr Hughes, there was agreement that the special rates would continue between 1 April 2006 and 30 September 2006. This agreement clearly related only to detention arrangements and Mr Hughes clearly acknowledged this new agreement. Clearly, in my opinion, the defendants were on notice that this arrangement was only offered for the period 1 April 2006 to 30 September 2006. This was referred to in the further amended statement of claim as the second concessional agreement (see EXH LB1 p.13). 15There was then a third concessional agreement. Following a request by Mr Gupta on behalf of the defendants by email of 15 March 2007, the first plaintiff by emails of the same date, extended the agreement for detention charges until 31 December 2007 (see EXH LB1 p.15). 16Mr Gupta, when he gave evidence orally before me, claimed that this was in fact a permanent extension of this agreement. His words, in his email to Tang Hao, the decision maker at the first plaintiff, were: " According to your advice below the detention agreement expires again on 2007/03/31. We need you to confirm that our detention terms remain in place for the duration of our trading partnership. We do not wish to have to deal with this issue every three months as is the case now. It is extremely frustrating and takes so much time." 17The reply, by email of the same date was in these terms: "Ok, no problem. Will extend SCHE05648 till the end of Dec. 2007". 18There was then an internal email seeking this extension and on the same day, another email confirmed the extension (see Lisa Brown Affidavit 19 June 2013 p.15). Which Concessional Agreement was in Effect? 19Whilst Mr Gupta might well have been seeking to get an agreement that while ever the arrangement between the companies continued pursuant to which the first plaintiff shipped containers laden with electronic goods from China to Australia for the defendants, it is clear in my opinion, that the plaintiffs agreed to nothing more than an extension of the detention agreement until 31 December 2007 (see Joseph Francis Affidavit 19 April 2014 para 23). 20Thereafter, no further detention agreement was entered into, but the plaintiffs without extending that agreement, from 1 January 2008 allowed the defendants standard free time of 30 days instead of 10 days. That concession ceased to apply on 1 July 2008 with the sending to the defendants by Mr Francis on 23 June 2008 a document setting out the new container detention policy. 21There is also evidence that the policy document was available in a prominent position in the office of the second plaintiff, which acted at all times as the agent of the first plaintiff. 22On 30 March 2006, the first defendant by letter to the second plaintiff authorised BR INTERNATIONAL ("BRI") to act as its customs clearing agents and to collect future delivery orders. Cosco and BRI signed an agreement about 11 March 2008, which included a term that the defendants were bound by Cosco's standard Bill of Lading and an Equipment Handover Agreement. 23The representatives of BRI attended the offices of the second plaintiff from time to time to take delivery of orders on behalf of the defendants and must have seen the standard terms of the plaintiffs concerning detention of containers. The knowledge of BRI was the knowledge of the defendants. 24As no detention agreement was entered into after 31 December 2007 to vary the standard agreement, in my opinion, the standard agreement must have been the operative agreement. I am of that opinion because: (1)There is no evidence at any time after 31 December 2007 of any negotiations for a fresh agreement about detention. (2)The plaintiffs, on numerous occasions in 2008 and 2009 put the defendants on notice that the concessional agreements had expired. They did this by sending Delivery Orders for specific containers with delivery instructions and claims for detention charges on: 16 January 2008 15 October 2008 22 December 2008 Letter of demand addressed to VB Distributors from the solicitors for the plaintiff pointing out the applicability of the standard terms of the plaintiff Further emails and invoices issued in 2010 and 2011. 25The defendant's case essentially is that when he, that is Mr Gupta, negotiated on behalf of the defendants with Wang Ning on behalf of the first plaintiff, in May 2003, his understanding was that freight charges would be valid only until the end of June 2003, but detention charges would remain fixed until they were renegotiated (see Behari Gupta Affidavit 21 August 2013 at para 23). 26However, it is clear that he engaged in further negotiations. I have set out the details above. Furthermore, in my opinion, the fact of the further negotiations shows that he accepted: (1)The first plaintiff had standard terms for detention of containers. (2)The defendants were from time to time given very considerable concessions on these terms. (3)These terms, when negotiated, had a definite period of time fixed for their operation. (4)When the terms expired, the standard terms applied. 27What happened that Mr Gupta could not foresee in 2003 was that Wang Ning left the employ of the first plaintiff and he could no longer negotiate with someone he knew. 28However, there is simply no evidence that the defendants at any time entered into an arrangement that notwithstanding variations in freight charges from time to time, special concessional detention arrangements first entered into in May 2003 would continue to apply permanently. Estoppel by Convention 29The defendants also argue that an estoppel by convention arises that precludes the plaintiffs from acting otherwise than on the basis that both parties were bound by their adoption of common assumptions in conducting their affairs. It was said that this estopped the plaintiffs from denying that they were bound by the common assumptions. 30In Con-Stan Industries of Australia Pty Ltd v Winterhur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244, the High Court said this: "The final question is whether the parties are bound by an estoppel by convention because their business relationships were conducted on the footing that the broker alone was liable to the insurer. If so, Norwich cannot maintain the present action. Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying. The existence of an estoppel based on a convention between the parties has often been recognized: Thompson v. Palmer [1933] HCA 61; (1933) 49 CLR 507, at p 547; Grundt v. Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641, at pp 657, 675-677; Legione v. Hateley (1983) [1983] HCA 11; 152 CLR 406, at pp 430-431; Amalgamated Investment & Property Co. Ltd (in liq.) v. Texas Commerce International Bank Ltd (1982) QB 84, at pp 121, 126, 130-131; Spencer Bower and Turner, Estoppel by Representation (1977) 3rd ed., at pp.157-177. But in our opinion the doctrine has no application to the present case for two reasons. First, there is no estoppel unless it can be shown that the alleged assumption has in fact been adopted by the parties as the conventional basis of their relationship: Dabbs v. Seaman [1925] HCA 26; (1925) 36 CLR 538, at p 549. In the absence of proof of custom, there is no evidence that the parties adopted the alleged assumption. Secondly, just as estoppel by representation requires a representation of fact, so too estoppel by convention requires the assumed state of affairs to be an assumed state of fact: Greer v. Kettle (1938) AC 156, at p 170; Spencer Bower and Turner, Estoppel by Representation (1977) 3rd ed., at pp 167-168. The state of affairs relied on by Con-Stan is that the parties conducted their business relationship on the basis that the broker was alone liable to the insurer for the premiums. That is clearly an assumption as to the legal effect of their conduct, and not an assumption of fact. The submission with respect to estoppel accordingly fails." Conclusion 31In my opinion, the parties did not act on common assumptions at all. The plaintiffs had a very clear position of standard charges for detention that were varied from time to time. The defendants had a wish for a permanent arrangement, but that wish was never accepted by the plaintiffs. 32It is agreed between the parties that if the plaintiff is entitled to a verdict, the amount claimed is the correct amount. 33There will be a verdict for the plaintiffs in the amount claimed. The defendants must pay the costs as agreed or assessed, on the ordinary basis. ********** 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. Decision last updated: 26 February 2014