C V Sheepvaartonderneming Ankergracht v Stemcor [2007] FCAFC 117 | Case summary

3 On 24 September 2004 the statements of claim were amended to allege failure to install dehumidifiers, and that the appellants had ventilated the holds contrary to accepted industry practice. Emmett J found that each appellant had, contrary to Art 3 r 1, failed to exercise due diligence to make its vessel seaworthy. This conclusion was based upon his Honour's findings that water had probably entered the holds during loading, and that the vessels were not fitted with dehumidifiers which would have removed such water. Emmett J also found that, contrary to Art 3 r 2, each appellant had failed properly to care for the cargo in that ventilation had occurred during each voyage when the evidence indicated that the practice in the industry was not to ventilate steel cargoes on such voyages. On appeal the majority differed from Emmett J only in concluding that there was insufficient evidence that the circumstances of each voyage justified the inference that dehumidifiers ought to have been installed, given that there was no evidence of any such industry practice. 4 The appellants correctly assert that the respondents succeeded on grounds which were different from those originally pleaded. However the statements of claim always alleged failure by each appellant to protect the coils from contact with moisture. Each statement of claim made it clear that further particulars might be added. It seems that the amendments may have been in part prompted by ventilation records discovered by the appellants. Events which occurred on the voyages are more likely to have been known to the appellants than to the respondents. 5 Emmett J accepted that a change in the basis of a case might justify a party's rejection of an offer. However he concluded that the claims upon which the respondents eventually succeeded were substantially those which had been originally pleaded. His Honour also took into account the absence of any evidence from the appellants as to why they had not accepted the offers. 6 Although the appellants seek to upset the orders for costs made by Emmett J, they do not, in their notices of appeal or elsewhere, suggest that his Honour's discretion miscarried, having regard to his findings. The challenges to the costs orders in the notices of appeal assume success in each appeal on the substantive issues. Given the absence of any challenge to his Honour's approach, it is appropriate that we consider only whether the majority view on appeal as to the issue of dehumidifiers should result in different orders for costs at first instance. We understand the parties to have adopted that approach in their submissions. 7 Where a plaintiff succeeds on one basis but fails on another, it is frequently necessary to consider whether that mixed result should be reflected in any order for costs. In many, perhaps most, cases the different bases will merely reflect different legal mechanisms by which the same result might follow from the same facts. In such a case the extent of the costs solely attributable to the unsuccessful ground will frequently be very limited. Generally, that situation does not lead to separate orders for costs in connection with separate issues or to reduction in the successful party's costs. In other cases, the alternative bases for the case may be quite discrete, and the unsuccessful basis may take up substantially more time, and account for substantially more of the costs, than does the successful basis. In those circumstances justice may require that the unsuccessful defendant not be compelled to pay the costs of the issue upon which it has succeeded. 8 In the present case, the respondents shipped steel coils in vessels owned by the appellants. Water or water vapour entered the hold of each vessel and subsequently came into contact with the surface of the steel coils, thereby causing corrosion. Major issues included the source of the water, the availability of means for removing moisture, adequacy of wrapping and the mechanism by which moisture penetrated the wrapping. 9 It seems that water entered the holds during loading and/or as the result of ventilation of the holds during the voyages. Means for removing water from the holds included: · mopping and wiping; · use of dehumidifiers; and · ventilation in appropriate climatic conditions. 10 The respondents alleged inadequate wrapping as a possible defence to the claim pursuant to Art 3 r 2 but failed on that issue. The dispute as to how moisture penetrated the wrapping arose in the course of considering adequacy of the wrapping. It was also relevant to proof of the sequence of events which caused the corrosion. The question was whether liquid water penetrated the wrapping or whether water vapour did so, and then condensed on the surface of steel coils. The defendants asserted the former mechanism, but Emmett J found that the latter was more probable. 11 At first instance it was virtually inevitable that, in connection with the claims pursuant to Art 3 r 1 and those pursuant to Art 3 r 2, the Court would consider all possible means by which water might have entered the holds. That matter was relevant to the issues of liability and causation in connection with both claims. It was also inevitable that the parties would address the circumstances in which ventilation might properly occur, if at all. The issue of methods for removing water from the holds was closely related to the ventilation issue. The only substantial issue which seems to have been virtually irrelevant to the Art 3 r 2 claim, upon which the respondents have ultimately succeeded, is the question of dehumidifiers. It seems to have been at the heart of the Art 3 r 1 case. Save for that issue, we see no clear distinction between that part of the trial which concerned the Art 3 r 1 claim and that which concerned the Art 3 r 2 claim. The claims were closely connected factually. As to the issue of dehumidifiers, we note that at one stage, the trial was adjourned to allow the parties to call further evidence on that question. We infer that significant costs probably attended that adjournment and the issue in question. As to the appeal we do not accept the appellants' claim that at least half of the time in submissions and oral argument was spent in addressing the Art 3 r 1 claim. We consider that only a relatively small amount of time clearly related only to that claim rather than to both. 12 The appellants submit that the respondents, in the end, have succeeded only on the claim which alleged ventilation contrary to industry practice, and that it was raised by the amendment made on 24 September 2004, after the relevant offer. However that argument focuses on appearances rather than substance. The respondents' case was always that the steel coils had been damaged as the result of contact with water. It is not surprising that the precise mechanism by which water entered the hold may have been unclear in the earlier stages of the proceedings. As we have said, the appellants probably knew more about such matters than did the respondents. We agree with Emmett J that a change in direction of the case may be relevant to the question of costs where there has been an offer pursuant to O 23 r 11(4). We also agree that it should not have led to different orders on his Honour's view of these matters. However, on the view of the majority on appeal, we consider that the appellants, as unsuccessful parties below, ought not to have been ordered to pay the costs of the discrete, and apparently substantial, issue concerning dehumidifiers on which, ultimately, the respondents have failed. 13 We will vary the order made on 10 March 2006 in each action. Order 2 should be amended to read: 'The defendant pay the plaintiffs' costs incurred thereafter on an indemnity basis, save for those costs relating solely to the issue raised by the particular "Failing to install dehumidifiers" in the further amended statement of claim'. 14 There will also be an Order 3 as follows: 'That the plaintiffs pay the defendant's costs of and incidental to the issue referred to in paragraph 2 of this Order.' 15 The appellants submit that the respondents should have the costs of only one appeal. We see no justification for that course. There were two separate actions and two defendants. The claims involved damage to two different cargoes, on two different voyages and on two different vessels. There may have been some economies as a result of the two trials and appeals being conducted together. If so, then the taxation process will presumably identify them. To the extent that the appellants are ordered to pay the respondents' costs, they will no doubt receive such benefit. However we see no justification for the proposal that we should allow the costs of only one appeal. 16 To upset the judgments on appeal, the appellants had to succeed on both issues raised pursuant to Art 3 rr 1 and 2. There was always an appreciable risk of the appellants' not succeeding in relation to Art 3 r 2 in which event their success on the Art 3 r 1 ground would be available only to support a claim for partial relief from the award of costs at first instance. We accept that the costs involved in the preparation and hearing of the appeals were, to some extent, increased by the appeals in connection with the Art 3 r 1 claim. However it is difficult to imagine how the appeals could have been conducted other than by reference to all of the issues ventilated at first instance. As we have demonstrated the facts are not easily identifiable as relevant solely to either of the two causes of action pursuant to Art 3. However we consider that a moderate allowance should be made in the costs orders to reflect the appellants' partial success. Taking into account the costs of all parties to the extent that they were increased by argument on appeal on the Art 3 r 1 issue, each appellant should pay four-fifths of the respondents' costs of the relevant appeal. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Ryan, Dowsett and Rares.

C V Sheepvaartonderneming Ankergracht v Stemcor

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Judgment (16 paragraphs)

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