Alianza Logistika TDGE SA v Good Apples Pty Ltd

Freight forwarding

1. The plaintiff is part of an international logistics and freight forwarding group and is based in Quito, Ecuador. It is a member of the International Air Transport Association ("IATA"), which has accredited it to use IATA's Cargo Account Settlement System ("CASS") to remit transaction details and make payments to airlines. Logiztik Alliance Group SAS is a related company that provides similar services based in Bogota, Colombia. The plaintiff has access to several airlines to provide customers with transport options. They include Emirates Sky Cargo ("ESC") and Qatar Airways Cargo ("QAC").
2. The service the plaintiff provides to customers is, at its most basic level, to place cargo with airlines. Airlines relevantly set a charge per kilogram for the transport of cargo. The plaintiff books the transport of its customers' goods and invoices its customers, each invoice reflects both the sum charged to it by the airline and a margin. The airway bill ("AWB") issued to the customer evidences the final agreement for the receipt of the cargo and the conditions of carriage. An AWB is required before cargo is loaded. A shipment is also required to be paid for by the freight forwarder to the airline under CASS.
3. Where the AWB specifies that the shipment is "prepaid", the charges are payable by the freight forwarder to the airline and are not conditional upon payment by the consignor or consignee to the freight forwarder. Thus, a freight forwarder is at risk of paying the airline for shipment of cargo and being unable to recover that payment from the consignor or consignee. Each of the invoices the subject of the plaintiff's claim was prepaid.
4. Where a claim is made by a consignee (or consignor) for damage to goods in transit, the procedure for such a claim is governed by the AWB. Each relevant AWB had the following provision: 10. Receipt by the person entitled to delivery of the cargo without complaint shall be prima facie evidence that the cargo has been delivered in good condition and in accordance with the contract of carriage. 10.1 In the case of loos [sic, loss] of, damage or delay to cargo a written complaint must be made to Carrier by the person entitled to delivery. Such complaint must be made: 10.1.1 in the case of damage to cargo, immediately after discovery of the damage and at the latest within 14 days from the date of receipt of the cargo; …
5. Mr Villacreses, the General Manager of the plaintiff, gave evidence that the plaintiff generally manages the claims process for its customers. This was corroborated by Mr Kashany, who described his initial attempts to deal directly with the carrier, who directed him to deal with the plaintiff as freight forwarder. Subsequent correspondence showed the parties participating in pursuing claims against the carrier.

The Credit Agreement

1. The arrangement between the parties for the provision of freight forwarding services predated the Credit Agreement, which is the particular contract the subject of these proceedings.
2. The defendant commenced dealing with Logiztik Alliance Group SAS, the Colombian company associated with the plaintiff, in about May 2020, contact having been initiated in October 2019. On 6 September 2020 the defendant submitted a request for credit to the "Credit and collections department" of the Colombian entity. Although described in the evidence as a branch of the plaintiff, the Colombian operation was, in fact, a separate legal entity which conformed to the local companies' and regulatory regime. Both entities are members of the Logiztik Alliance Group.
3. The 6 September 2020 request included the following: In the event there is displeasure with the service provided, I will pay the total amount of the invoice and will file a formal complaint with the respective support, so that Logiztik Alliance Group SAS, can move forward and file the claim with the cargo transporter. In the event that I don't fulfil my obligations, I authorize Logiztik Alliance Group SAS, to charge the corresponding interest on the amounts past due. [Emphasis in original].
4. On 17 November 2020 the defendant submitted a credit application form to the plaintiff, marked to the attention of its "Credit and Treasury department". The application relevantly provided: I hereby request a line of credit of USD 50,000, payable within 15 days of the date of departure of the respective Air Waybill (CASS terms) for the amounts payable by the company I represent GOOD APPLES PTY LTD. I agree to pay the total amount owed for all the shipments invoiced to me or to the company I represent within the agreed upon timeline stipulated in this document. In the event of a claim for the service provided, I will pay the total amount of the invoice and will present the formal claim together with the supporting documents in order for Alianza Logistika TDGE S.A. to proceed with filing the claim to the carrier in question. In the event of failure to comply with my obligations, I hereby authorize Alianza Logistika TDGE S.A. to charge late fees for the amount past due. [Emphasis added].
5. On 2 December 2020 the plaintiff notified the defendant that it had approved a line of credit to the defendant in the amount of USD10,000.00. I find that the terms of the Credit Application were accepted (other than as to the amount) on 2 December 2020 and comprised a contract (the "Credit Agreement" already defined above). The fact that the amount specified in the acceptance differed from the amount in the application does not derogate from a contract being so formed. If this, as a matter of strict contractual formation analysis, is properly characterised as a counter-offer, it was nevertheless accepted by conduct given that the parties continued dealing with each other on credit terms.
6. In its notification email of 2 December 2020, the plaintiff also set out the following payment terms: • Shipments from 1-15 of the month have to be in our bank account by the 27th of the same month (so please make your payments until latest the 25th so that we receive the money in our bank account on time) • Shipments from 16-31 of the month have to be in our bank account by the 12th of the next month (so please make your payments until latest the 10th so that we receive the money in our bank account on time)
7. Over the period 12 November 2020 to 7 June 2021, the plaintiff provided freight forwarding services to the defendant. The plaintiff entered into cargo contracts with carriers in respect of the defendant's cargo over this period and paid the sums due to the carrier in each case.
8. The defendant made use of the credit facilities extended by the plaintiff. From 27 November 2020 to 4 June 2021, the plaintiff provided credit for each shipment of cargo for the defendant. The defendant was obliged under the terms of the Credit Agreement to pay the total amount of any invoice notwithstanding any claim it may have had in respect of the service provided.
9. However, the defendant fell behind in its payments. Over the period November 2020 to June 2021, the plaintiff invoiced the defendant for USD546,220.50. Although the approved line of credit was only for USD10,000, by 4 June 2021 the amount due and owing to the plaintiff reached USD190,694.38. A credit from ESC on 7 June 2021 of USD13,887.50 reduced the amount claimed to USD176,806.88. A further credit of USD11,965.00 received from ESC on 16 August 2022 reduced the amount outstanding to USD164,841.88. The plaintiff's principal debt claim in these proceedings is for that sum.
10. Subject to the affirmative defences raised by the defendant, the plaintiff's claim in debt is clearly made out: freight forwarding services were provided on terms where the defendant was afforded time to pay. Those services included making payments to carriers for which the plaintiff is entitled to be reimbursed. The defendant did not pay for those services within the time stipulated in the Credit Agreement, or at all in respect of the sums claimed in these proceedings. The plaintiff has made out its case in chief to recover a debt due to it in the sum of USD164,841.88.

Defences

1. The defence, which was filed while the defendant was legally represented, raises three claims by way of set-off. Those claims also form the basis of the cross-claim, which remains extant even though it was stayed on 7 February 2023 for failure to provide security for costs. They are incorporated into the defence of the principal proceedings by paragraph 22 of the defence.
2. Much of the defence is directed to the allegation that the plaintiff had a duty, either pursuant to an express term in the contract or at law, to ensure that the cargo was not damaged in transit or, in effect, to guarantee that the cargo would arrive in saleable or merchantable condition (the "merchantable condition term"). Further, in its pleaded case, the defendant alleges that the plaintiff was under an express duty not to overcharge for its services (the "no overcharge term"). The defendant says these terms were breached and the plaintiff is therefore liable to it in damages in a sum that exceeds the plaintiff's claim. Relevant to the defence, it says the amount of damages can be set-off against any liability the defendant may have to the plaintiff.

Contract

1. The defendant says that on four occasions the plaintiff breached the merchantable condition term and on two occasions it breached the no overcharge term.
2. The first question is whether such terms were expressly incorporated into the agreement. The only evidence brought by the defendant in support of the existence of an express term is a conversation Mr Kashany says occurred in 2019. Mr Kashany deposed that, in a conversation with "Daniella", she said words to the effect that "The products would be provided to you in good and saleable quality once landed in Australia" and "We do all the quality control here. It will be perfectly packed and will arrive in Australia in good condition." She is further alleged to have said "We have been doing this for a long time and we know what we are doing. The product will get to you in perfect condition" and "The roses are delivered to us in boxes, and we place them as quickly as possible in our cool room".
3. The only known employee of the plaintiff named "Daniela" or "Daniella" is Ms Plasencia. She denied ever making those statements. In cross-examination, Mr Kashany accepted that any conversation he had was with a representative of Logiztik Alliance Group SAS and not with the plaintiff. Mr Kashany further accepted that he had not spoken with Ms Plasencia, with whom he did not commence dealing until December 2020. He could not subsequently identify whom he alleges he spoke to. There was no evidence to suggest that anyone, still less an unidentified representative, at Logiztik Alliance Group SAS had actual or ostensible authority to bind the plaintiff or that she purported to do so.
4. Accordingly, the defendant's allegation as to the merchantable condition term must fail. Even if some conversation were established to have been with a representative of the plaintiff, I would not be satisfied that it occurred in those terms. It was not the plaintiff's practice to hold the flowers in its own warehouse: it used a contractor in Quito. More significantly, for most of the time the flowers were in transit, they were in the possession of the carrier, usually ESC or sometimes QAC. It would make no sense for the plaintiff to make a promise or representation as to how the flowers would be handled and kept by others over whom it could have no control. Further, the parties contemplated deploying the procedure for submitting claims to the carrier pursuant to the AWB, which suggests it is less likely that there would be a further promise approaching a guarantee on the part of the freight forwarder. Finally, there was no contemporaneous written document corroborating the alleged conversation. In Watson v Foxman (1995) 49 NSWLR 315 at 319, McLelland CJ in Eq stated: …human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
5. His Honour went on to find that, in the absence of some reliable contemporaneous record or other satisfactory corroboration, a party relying on spoken words as the foundation of a cause of action based on misleading or deceptive conduct is faced with serious difficulties of proof. Causes of action based, inter alia, on contract face the same problem: at 319.
6. As the defendant makes the affirmative allegation of conversations in those terms, it bears the onus of establishing that they took place as alleged. I am not satisfied they did. Accordingly, I find on this further basis that the defendant has not established an express merchantable condition term.
7. There was no evidence in support of an express term that the plaintiff would not overcharge the defendant. However, such a term might readily be implied in law. The difficulty for the defendant in this regard is that, in the course of the hearing, Mr Kashany conceded that the defendant did not press an allegation that it had been overcharged. He accepted that the plaintiff had incurred charges from the carriers and that it was entitled to charge a margin.
8. Rather, the defendant's true complaint was that the plaintiff was aware that on two occasions, in late January and early February 2021, the defendant had been required to book a set amount of capacity with QAC and was further aware that the defendant had not arranged for sufficient stock to be transported to make use of all the capacity for which it was paying. This is, in reality, a claim for the lost opportunity to make a profit as a result of an act or omission by the plaintiff.
9. No such term was pleaded and the plaintiff did not come to Court prepared to meet such an allegation. It would have been unfair to the plaintiff to allow a late amendment to plead such a term. It would, in any event, have been futile because the defendant did not establish the existence of either an express or implied term to support the allegation. There was no evidence of any discussion or correspondence to this effect. Indeed, WhatsApp communications between Mr Kashany and Ms Plasencia, in about late January and early February 2021, demonstrate the contrary.
10. At that time, the plaintiff had arranged transport of cargo on QAC. The plaintiff notified the defendant that QAC had a policy that, if 1800kg had been booked, the defendant would be charged for that capacity irrespective of how much cargo was actually transported. Mr Kashany acknowledged and accepted this at the time. Further, the difference between gross weight and chargeable weight, being the difference between the actual weight of the cargo and the weight for which the carrier would charge, was well-known and was identified in each AWB. There were no communications about any undertaking by the plaintiff to notify the defendant if there was unused capacity so the defendant could arrange for more cargo to be delivered to the carrier. There was no evidence of any expectation on the defendant's part, at the time, that it would ever receive such notification from the plaintiff.
11. The high point of the defendant's allegation is that other freight forwarders it deals with provide such a service, although it was not established that the defendant was aware of this at the relevant time. That may be so, and it may be a useful service to provide. It does not establish an express contractual obligation to do so in this case, or that the failure to do so is a breach.
12. Further, the defendant did not establish that it suffered any loss because of any such failure. It was not established that, even if notified, the defendant could have obtained further cut flowers from the Ecuadorean growers quickly enough to join the flights in question.

Other claims made in the cross-claim and incorporated into the Defence

1. In paragraph 22 of the amended defence, the defendant refers to and indicates that it relies upon the allegations in the cross-claim. Those claims must therefore be considered as forming a basis for a set-off against the plaintiff's claim, although the present stay of the cross-claim means that they cannot form the basis for the recovery of any damages unless the security sum is paid into court or the stay is otherwise lifted and the cross-claim is heard and determined.
2. The additional claims are based on s 18 of the ACL and negligence. The s 18 claim essentially is a claim for misleading or deceptive representations as to the condition of the flowers on delivery and the amounts that would be charged. On the evidence, I have not found any representations as to the condition of the cargo on delivery. I have not found any representations as to the amounts that would be charged, other than the invoices themselves.
3. Representations as to a future matter will be misleading if the person making the representation does not have reasonable grounds for making them: s 4(1) ACL. A person will be taken not to have had reasonable grounds for making a proved representation unless evidence is adduced to the contrary: s 4(2) ACL. While there has been considerable judicial debate as to whether and how s 4 must be pleaded in order to enliven the shift of the evidentiary burden to the alleged representor, those issues do not properly arise for determination in this matter, given my findings with respect to the alleged representations. Section 4 is not, in any event, pleaded at all.
4. The claims in negligence also fail. The defendant has not established any duty of care in the terms alleged. Both at law and under the CLA, a duty of care exists as an obligation to take reasonable steps to avoid harm. The duty alleged by the defendant, as particularised in the Amended Statement of Cross-Claim alleges duties to be competent, diligent and to ensure certain outcomes with respect to the delivery of the flowers. The highly generalised allegations of a duty to be competent and diligent are of no assistance. There is no relevant common law duty in this case to ensure particular outcomes with respect to the delivery of the flowers.
5. The defendant has accepted that the plaintiff has not overcharged it. It has neither pleaded nor established the existence of a duty to inform a customer of the existence of unutilised capacity in a shipment. The fact that other freight forwarders may have such a practice does not establish a duty of care to do so.

Allegations of breach

1. The defendant alleges breaches of the merchantable condition term with respect to the ESC shipments of 27 November 2020 (AWB 176-2352865), 22 January 2021 (AWB 176-23044195), 28 January 2021 (AWB 176-29468423) and 4 June 2021 (AWB 176-60614573). The losses claimed comprise a combination of reimbursement for the amounts paid to the plaintiff, indemnity for the amounts paid to the suppliers for the flowers and damages for loss of profits as calculated by Mr Kashany.
2. The defendant also alleges breaches of the no overcharge term with respect to the QAC shipments on 31 January 2021 (AWB 157-1540045) and 3 February 2021 (AWB157-15740056). The claim in respect of these claims is for reimbursement for the amounts paid to the plaintiff, together with damages for loss of profits as calculated by Mr Kashany.
3. In light of my findings as to the existence of the alleged duties and representations, the allegations of breach do not properly arise for determination on the plaintiff's claim.

Set-off

1. As the defendant was not legally represented at trial, the juridical basis for the defence and the claim for set-off was not articulated. The defendant's claims raised by way of affirmative defence and cross-claim are in part for liquidated damages (to the extent that it seeks recovery of freight costs and expenses thrown away by purchasing flowers which were unsaleable) and for unliquidated damages (being the loss of profit claim).
2. A statutory right of set-off is established under s 21 of the Civil Procedure Act 2005 (NSW), however, that right only permits a set-off in respect of liquidated claims for mutual debts and has only limited application here. The balance of the claim must depend on a right of set-off in equity, which may be raised where contrary liabilities are sufficiently closely connected that it would be inequitable for the plaintiff to be permitted to proceed with its claim without making allowance for the defendant's claim against it: Roadshow Entertainment Pty Ltd v ACN 053 006 269 Pty Ltd (recs & mgr apptd) (1997) 42 NSWLR 462. Relevantly, this requires an examination of the nature of the claims, the nature of the connection between them and the conduct of the parties: CSR Investments Pty Ltd v Alcan Northern Territory Alumina Pty Ltd [2003] NSWSC 1137 at [41].
3. Section 21(3) of the CPA provides that "This section does not apply to the extent to which the plaintiff and defendant have agreed that debts (whether generally or as to specific debts) may not be set off against each other". Similarly, an equitable right to set-off may be excluded by contract, either expressly or by necessary implication: Grant v NZMC Ltd [1989] 1 NZLR 8.
4. I find that the Credit Agreement, properly construed, specifically excludes any right of set-off by the words: In the event of a claim for the service provided, I will pay the total amount of the invoice and will present the formal claim together with the supporting documents in order for Alianza Logistika TDGE S.A. to proceed with filing the claim to the carrier in question.
5. It contemplates payment without deduction, and any adjustment due to any claim for the provision of services would be determined separately. This term obviously cannot, of itself, exclude any cross-claim for damages, but the cross-claim in these proceedings is presently stayed in any event.
6. In any event, on the basis of the findings I have already made as to the existence of the alleged terms of contract, representations in contravention of the ACL and duty of care, I do not find that the defendant has not made good any of the claims it raises by way of set-off.

Currency and orders

1. A local judgment may be expressed in a foreign currency: Mitsui OSK Lines Ltd v The Ship Minseal Transporter [1983] 2 NSWLR 564 at 569; Miliangos v George Frank (Textiles) Ltd [1976] AC 443; Norsemeter Holdings AS v Pieter Boele [No 3] [2002] NSWSC 390. The governing principle is that a judgment should be expressed in a foreign currency if such an order is sought by the claimant and that currency is the currency in which the claimant's loss was felt or which most truly expresses its loss. The present claim was expressed in US dollars, being the currency in which business was transacted, and which most truly expresses the plaintiff's loss.
2. The plaintiff further claims interest under s 100 of the Civil Procedure Act 2005 (NSW). The plaintiff has provided calculations of its interest claim in the sum of USD12,887.79 to 22 February 2023 and further interest at a daily rate of USD32.0651 to judgment. Those calculations have not been challenged and I accept them.
3. As the plaintiff has succeeded, it is entitled to its costs. The plaintiff has foreshadowed an application for indemnity costs. If it presses that claim, it may notify my associate within 14 days of any variation it seeks of the costs order. If that variation is opposed, I will hear the parties on costs.
4. Subject to finalisation of the calculation of interest, the orders of the Court will be: 1. Judgment for the plaintiff in the sum of USD164,841.88 and AUD2,392.20. 2. The defendant to pay the plaintiff interest under s 100 of the Civil Procedure Act 2005 (NSW) to date calculated at USD13,112.25. 3. The defendant pay the plaintiff's costs of the proceedings. 4. Any party seeking to vary the costs order has liberty to apply within 14 days.

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: 02 March 2023