Challenge Charter Pty Ltd v Curtain Bros

Challenge Charter Pty Ltd v Curtain Bros - [2004] VSC 1 - VSC 2004 case summary — Zoe

[52]

32 Before stating the facts, it is necessary to say something about some of the witnesses. Mr Goldschlager is an active, busy, educated person with a keen eye for a good commercial deal. He leads a family business and from time to time was pressured by its members concerning some of the business ventures. He purchased The Xanadu and later the MV Kayuen, each of which presented challenging financial headaches to the Goldschlager interests in the year 2000. In 1999 he was under considerable pressure to sell The Xanadu. There were very few interested potential purchasers. He was anxious to sell The Xanadu and was prepared to use a number of selling techniques to achieve that end. He worked closely with Mr Herman and I have no doubt that they discussed tactics on how they might achieve a sale. His anxiety was such that in my view it clouded his memory and appreciation of discussions and one must approach his testimony with a degree of care. The solicitor, Mr Herman, as I have already stated, performed services which were outside the usual solicitor/client relationship. He did a lot of work for Mr Goldschlager's interests and was a close personal friend and confidante of Mr Goldschlager. He and Mr Goldschlager discussed tactics concerning the sale of The Xanadu and Mr Herman played a part in the selling process which was outside what one would expect a solicitor to do. For example, he negotiated various arrangements for works to be carried out in respect to The Xanadu, negotiated a contract with the towing company, and travelled to Port Moresby to meet Mr Curtain and to see the Curtain Bros Group facilities and organisation in Port Moresby. He was part of The Xanadu selling team and had discussions with Mr Curtain and Mrs MacCarthy in that regard. During Mrs MacCarthy's visit to Melbourne in September 2000, he played a vital role in seeking to get her into a position of getting her to admit that the Curtain Bros Group had purchased The Xanadu. I have already criticised him in relation to misleading others if he thought it was appropriate. On 5 September 2000 Mr Herman sent a facsimile to Mr Goldschlager in which he stated that he had had a telephone conversation with the Australian Bureau of Statistics which was concerned to find out whether there had been a sale of The Xanadu. He wrote to Mr Goldschlager the following -

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52 On 23 March 2000, Mr Curtain met Mr Goldschlager in Sydney to inspect the MV Kayuen. Mr Curtain was interested in getting the MV Kayuen to the PNG Dockyard to provide work for the dockyard. The sand in the hold was contaminated and could not be unloaded in Sydney. Mr Goldschlager and Mr Curtain inspected the MV Kayuen and discussed what should be done. There is a dispute between the two men as to what was represented by Mr Curtain as to the future of the vessel. In Mr Curtain's witness statement dated November 2002, he goes into some detail as to what was said. In a pleading filed in February 2003, Timor Star alleged that Mr Curtain had made certain representations which were false and sought damages for an alleged breach of ss.52 and 51AC of the Trade Practices Act. In a supplementary witness statement dated 10 October 2003, Mr Goldschlager asserted that Mr Curtain told him certain matters which he set out. By then he had had the opportunity of considering Mr Curtain's version. I have carefully considered the versions given. I prefer Mr Curtain's version. He frankly conceded that he was keen to get the MV Kayuen to PNG Dockyard for the work. The men talked at some length about the work which would be needed to bring the vessel up to a standard suitable for operational use. Mr Goldschlager stated that he was hopeful that the MV Kayuen could be put back into a condition to be used as the first vessel in the East Timorese merchant shipping fleet. Mr Curtain stated that he doubted whether the MV Kayuen could ever be put back into a condition where she could be actively traded, whether in East Timor or anywhere else. He said it would be necessary to have a proper look at the hull. He stated that he had observed the ship had no gearing and since most ports in the Pacific did not have crane facilities, it would be necessary for her to be fitted with cranes and gear. Mr Curtain said that for that reason he did think that the MV Kayuen could be used as a trading vessel. Nevertheless, he did tell Mr Goldschlager that perhaps the MV Kayuen could be brought up to a sufficient standard so that she could be sold off for some other use. During the discussions, Mr Goldschlager spoke at length about his plans to establish coffee, timber and limestone/marble exporting businesses out of East Timor and was suggesting to Mr Curtain that he join him in those ventures. Mr Curtain, who had had considerable experience in these areas, counselled Mr Goldschlager to approach any ventures with caution. Mr Curtain stated that the best thing that he could do in relation to the MV Kayuen was to get the vessel out of Sydney as it was costing too much money. The men both agreed that the best option was to take her to PNG Dockyard, to slip the vessel and have her inspected. I do not accept the evidence of Mr Goldschlager that Mr Curtain said he would get Timor Star out of its difficulties with MV Kayuen, that he would be able to dispose of the MV Kayuen, that the hull would be okay because the work had been done to the vessel in China, and that the Kayuen looked sturdy and good. Mr Goldschlager told Mr Curtain about his plans for The Xanadu and his expectation that she would proceed to East Timor and be used as a floating hotel. He stated The Xanadu was to be moved from Hastings to a dock in Melbourne to have work done, to enable her to sail from Australia to Timor.

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66 Mr Jurgen Ruh operates a tug boat company, Islands Shipping Limited, in Papua New Guinea. His tug boat towed the MV Kayuen to Port Moresby. He acquired another tug boat in Australia at the beginning of July 2000. He was anxious to obtain a tow back to Papua New Guinea. This came to the notice of the Goldschlager interests. Mr Herman asked Mr Ruh to give a quote for the tow of The Xanadu to Port Moresby and then on to Dili. On 12 July 2000, Mr Ruh quoted the sum of US$50,000 to tow The Xanadu to Port Moresby. In his e-mail he made it clear he was intending leaving Sydney on the following Sunday, 16 July, thereby putting pressure on the Goldschlager interests. Meanwhile, Mr Herman was putting pressure on the lawyer acting for the East Timorese, pointing out that The Xanadu, which at that point was in West Melbourne, was attracting "endless holding costs and these are hurting my client terribly". Costs were being run up. The Goldschlager interests were in a difficult position because there were no purchasers for The Xanadu in Australia. There was, however, a window of opportunity, because the Curtain Group was showing interest in acquiring The Xanadu. The following day, 13 July, the East Timor venture was terminated. On 14 July Mr Goldschlager told Mr Curtain that he was now in a position to make new plans in relation to The Xanadu, that the Dili venture looked like it was not going to proceed, and that The Xanadu may be available for Mr Curtain. Mr Goldschlager agreed to go to Papua New Guinea via Townsville. Mr Herman sought help from Mr Marques on Sunday 16 July. By this time the East Timorese had pulled out of the project and the Goldschlager interests were now looking for the best means of disposing of her. In his e-mail Mr Herman noted the following - "Curtain Bros are interested but it is still early days". He stated that it was believed that it would be best to tow The Xanadu to Port Moresby as soon as possible, where any required works could be carried out cheaply and "with minimal outside interference". He also noted that the vessel would be in the part of the world where they might be able to do business. He also wrote -

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79 On 27 July 2000, The Xanadu sprang a leak and this was a cause of real concern to the Goldschlager interests. It appears that during the process of removing rust and scale from the ship's side plating within the aft ballast tank No. 3 starboard, an area of approximately 50mm diameter of plating broke away, opening the tank to the sea. The parent metal had become so thin due to wastage/corrosion that once the rust and scale was removed the area was punctured. Mr Robert Selby prepared a report in which he opined the view - "This must be considered representative of the condition of the complete area of shell plating contained within the tank." He also noted that the shell frames within the tank were so corroded by rust and black iron oxide that the remaining material could be pulled away by hand. He noted that the condition of the steel work in the aft section of the vessel was critical and placed the vessel in a hazardous position of serious ingress of sea water. He also noted a sewage tank next to the ballast tank was heavily pitted and holed and he stated that it must be "assumed that the shell plating contained within this tank is in a similar condition to that found in the ballast tank". He stated that repairs to the subject areas were not possible, even of a temporary nature, while the vessel was afloat. He said the nature of the parent metal was such that any attempt to weld it would cause loss of further material. Mr Newall, who was advising Mr Herman and the insurance broker, recommended certain works be carried out immediately to "minimise the risk of serious water ingress into the subject vessel". Mr Newall required that the wasted plates, frames and bulkheads were to be repaired to the satisfaction of the surveyor and the underwriters. His report and Mr Bob Selby's report were forwarded to Mr Curtain. Contact was made with Mr Flint in the latter part of July in relation to this problem and various discussions took place. Mr Curtain was informed of the problem and he instructed Mr Flint to go to Melbourne to provide assistance with respect to the repairs and preparation for the tow. The reports showed The Xanadu's overall condition was generally poor. Mr Flint arrived in Melbourne on 31 July 2000, visited the vessel, met Mr Preville and spent the morning inspecting the vessel. He was concerned about the level of corrosion, degradation and wastage to the frames in the main structure of the vessel's hull and the integrity of the bulkheads. On the 31st he met with Mr Selby, and the marine surveyor retained by the vessel's underwriters, Mr Newall. Mr Flint suggested certain repairs be carried out. Mr Flint formed the view, based upon his inspection, that the vessel could not be repaired to a standard required of an operating vessel and he had real concerns about the vessel being brought into a state of adequate seaworthiness. The following day he had another inspection and telephoned Mr Curtain and informed him that he could feel the deck giving way under his feet as he walked across the carpeted surface. He informed Mr Curtain that the vessel was in very poor structural condition and required substantial repair before she could be brought into a seaworthy state. On 1 August, Mr Flint returned to Townsville.

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108 On 16 October 2000, Mrs MacCarthy sent a facsimile to Mr Herman in which she made it very clear that the Curtain Bros Group had not purchased The Xanadu. Challenge alleges that between 16 August and that date the Group had by conduct, in effect by omission to deny a contract and other conduct, agreed to purchase the vessel or alternatively were estopped from denying that the Group had purchased the ship. The conduct of the Goldschlager party and the Curtain Bros Group in this period is, to say the least, unusual and surprising. The parties were not discussing the sale of a secondhand motor vehicle worth $5,000, but a ship said to be worth US$1.2M. Mr Goldschlager was being advised and assisted by his solicitor, Mr Herman. One may have thought that the negotiations would follow the familiar path of offer, negotiations, agreement in principle, draft written agreement, further discussion and negotiation, and eventual agreement of the terms with the execution of a formal document. This in fact was the course followed by the Goldschlager interests using Mr Herman when The Xanadu was purchased in 1994 and in relation to the proposed joint venture with East Timor. But that is not what occurred. After the 6 August conversation, Mr Herman prepared a number of drafts of the alleged agreement, for Mr Goldschlager's consideration, one of which provided for signature by the parties. However some ten days later Mr Herman sent off Heads of Agreement without any execution clause. The accompanying letter sought to bind the parties to the Heads of Agreement but identified a term not agreed to in the 6 August conversation. Furthermore, the Heads of Agreement contained a number of other clauses which were never the subject of discussion on 6 August, were not identified in the covering letter and amounted to an offer based on additional terms. The letter made the points that the agreement had been finalised over the telephone on 6 August and that the Heads of Agreement were intended to serve as the final document unless the parties elected to have a more detailed document brought into existence. A surprising aspect was that in the period between 16 August and 16 October 2000, and despite the fact that there were many discussions had between Messrs Goldschlager and Herman of the one part and Mr Curtain of the other part, neither party expressly queried the other whether they had a binding agreement, or sought to discuss or negotiate the additional terms. Mr Curtain for his part did not expressly inform the Goldschlager interests that there was no contract and on the other hand the Goldschlager interests did not expressly raise with Mr Curtain the question, "do we have an agreement?" Mr Herman did discuss some matters with Mr Curtain which related to the obligations by the Curtain Bros Group to do something or pay an account. But he never, prior to 18 October 2000, wrote a letter to Mr Curtain saying there was an agreement. In considering the evidence, one has the image of two heavyweights in a boxing ring, evenly matched, circling each other, sizing up the opposition but not landing a punch. Each man had his own agenda. Mr Curtain was interested, but was loathe to make any decision until he had seen the vessel. On the other hand, he was anxious to have the vessel brought to Port Moresby because it represented work for the dockyard. Mr Goldschlager was very anxious to sell The Xanadu. He and Mr Herman discussed tactics designed to put the Curtain Bros Group into a position where it could not deny it had agreed to purchase the vessel. Mr Goldschlager was not prepared to go down the conventional path of negotiating an agreement. He was not that confident that he would get an agreement. Hence, the strategy of sending a document and alleging there had been an agreement even though it was clear to both Mr Goldschlager and Mr Herman that the document contained terms which had not been discussed on 6 August 2000.

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113 In my opinion, each had his own agenda in relation to his dealings with the other man. By July 2000, Mr Goldschlager was desperate to do something with The Xanadu and was facing financial disaster with the vessel. He had since late 1998 attempted to sell the vessel and was told in February 1999 by a South Australian company that the ship was a "complete lemon". His attempt to enter into a joint venture with the Timorese representatives in the first six months of 2000 had failed. In anticipation of finalising the joint venture, he moved the vessel on 18 June 2000 from Hastings to a dock in West Melbourne with the purpose of slipping the vessel, carrying out any necessary repairs and sailing the vessel to East Timor. Unfortunately, his plans struck a snag very early in the piece. The dock in West Melbourne was not big enough to slip the vessel. No practical alternative was available, and whilst it was tied up at West Melbourne there were considerable charges. The vessel was not in good condition. Red tape involved in obtaining the necessary clearances was a concern, and in July the vessel sprung a leak. Reports prepared in late July revealed that the vessel was in poor condition. Mr Ruh had a tug in the vicinity, was anxious to return to Papua New Guinea, and was prepared to provide a tow at a very competitive price. The pressure was on Mr Goldschlager. He had been unable to find any person who was prepared to purchase the vessel. She could not be used as a sailing ship. His objective was to get her out of Melbourne to cut back on the expenses. He knew he could not sail the vessel under her own steam, and there was a golden opportunity to get a reasonably priced tow to Port Moresby. His only other fall-back position was to leave her in Melbourne or take her back to Hastings, and these were not economically viable propositions. He knew that the Curtain Bros Group was interested in purchasing the vessel and he knew that Mrs MacCarthy, the financial director in Port Moresby, was very impressed with the vessel and keen to acquire her. He had visited Port Moresby in late July where he extolled the virtues of the Curtain Bros Group purchasing the vessel. By late July it was his intention to have the vessel towed to Port Moresby. Indeed, he made that very clear in his letter of 27 July to Mr Curtain in which he referred to the "vessel joining your family". His agenda was driven by necessity and I have little doubt that Mr Curtain was aware of the pressures that were on Mr Goldschlager to sell the ship. The reality was unless a sale could be achieved, The Xanadu would be a financial disaster.

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118 Mr Goldschlager gave evidence that at the beginning of the conversation Mr Curtain appeared to be in a good mood, was talkative and talked about various things including how Mrs MacCarthy was getting on after her heart attack. The conversation then came around to The Xanadu. Mr Curtain told Mr Goldschlager that Colleen liked The Xanadu, that she had been impressed when she saw it, that she thought it made good commercial sense to purchase and that Greg Flint told him that the ship had a few holes but nothing was very major that had to be done. He also said that Mr Flint said it would be quite easy to get her fixed. Mr Curtain stated that he was interested in going ahead with the purchase of The Xanadu and then discussed value. Mr Goldschlager said that Carlos Marques had advised she was worth between US$1.2M and US$1.5M and Mr Curtain could purchase her at US$1.2M. Mr Curtain stated that the proposition had come too early and it would have been better if the offer was made six to 12 months later because he was involved in a lot of projects and that cash was tight. He stated that he hoped to have more cash after Christmas. He was at that stage having a dispute with an insurance company. Mr Curtain was told that the price was US$1.2M and he stated he was prepared to consider that price. Discussion then turned to the engineer of The Xanadu, Lawrence Preville, and Mr Curtain indicated that if he came up with the vessel he would employ him. Reference was made to the Kayuen and what was involved. Mr Goldschlager said that if there were problems with the money they were not in a hurry to obtain money but they wanted some certainty of outcome. There was a discussion about Greg Flint coming down but I do not accept that this was on the basis that he would take responsibility for The Xanadu immediately as if the Curtain Bros owned the vessel. In my opinion, the discussion was along the lines which had been discussed earlier, that Mr Flint would be sent down to assist with preparing The Xanadu for the tow back to Port Moresby. There was some discussion about the cost of the removal of the sand from the Kayuen and that if the sale was to occur the amount owing could be used as a deposit. There was a discussion about the tow of The Xanadu but I am satisfied that at that stage it was generally agreed that Mr Ruh would tow the vessel and that Mr Curtain would facilitate the tow by agreeing to pay any excess over the charge of US$45,000. There was some discussion about the works that were done to the vessel to enable her to be towed but I do not accept that Mr Curtain agreed that he would look after anything over $20,000.

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141 During the telephone conversation between Mr Goldschlager and Mr Herman, on the Sunday evening, Mr Goldschlager detailed what he considered was agreed between the parties. On the following morning, Mr Herman prepared his first draft of what became the Heads of Agreement. Later that day he prepared another draft. He discussed the contents of the drafts with Mr Goldschlager. The first draft contained 17 clauses over a page and a half. The second draft was far more detailed, contained 19 clauses over three pages. Mr Herman concluded the second draft by inserting signature clauses. The contents of the second draft were discussed with Mr Goldschlager and amendments were made to the final form. In addition, the signature clauses were deleted. Mr Herman prepared a letter which was to accompany the Heads of Agreement and the terms of this letter were discussed with Mr Goldschlager. The second draft was prepared late on 7 August and discussed with Mr Goldschlager resulting in revised Heads of Agreement. Further discussions took place on 8 August, resulting in settling the letter and the Heads of Agreement. Surprisingly, the Heads of Agreement were not sent off until 16 August. It was suggested in evidence that Messrs Goldschlager and Herman were busy doing a variety of matters and that Mr Goldschlager was difficult to get hold of and to tie down. Nevertheless, it is clear from Mr Herman's bill to Mr Goldschlager that the Heads of Agreement were in an acceptable form by 8 August. The other surprising thing during this period is that Mr Herman was in contact with Mr Curtain. Mr Herman gave evidence that he engaged in telephone discussions from time to time with both Greg Flint and Michael Curtain in relation to firming up arrangements with Mr Ruh concerning the tow. Mr Herman did have a conversation with Mr Curtain some time during the afternoon of 7 August 2000 concerning Mr Ruh, the towing job and the cost. Surprisingly, nothing was said by Mr Herman about the alleged agreement made on 6 August. Mr Goldschlager told Mr Curtain on 6 August that he would be engaging Mr Herman to prepare Heads of Agreement. The alleged agreement concerned a vessel which according to the Goldschlager interests was valued at US$1.2M and Mr Goldschlager had believed that he had a concluded agreement. One might think that the reasonable solicitor, in the process of drafting Heads of Agreement, would alert the other party to that fact and indicate that the agreement would be forwarded. Mr Herman did not mention the topic at all. Mr Herman had discussions with Mr Ruh and the towing agreement was concluded and executed on or about 9 August 2000. The towing agreement provided for a tow of The Xanadu from Melbourne to Port Moresby for US$45,000. The tow agreement was subject to the "Towcon" International Ocean Towage Agreement Terms and it contained a cancellation clause. (See clause 16(a)). The clause gave Challenge the right to cancel the agreement upon payment of the cancellation fee set out in the agreement at any time prior to departure. The cancellation fee was to be inserted in "Box 38". A reference to that box indicates that it was not applicable. Whether or not this nullified the cancellation clause is a moot point. Nevertheless, the agreement contained a cancellation clause. Mr Curtain agreed on 6 August that he would send Greg Flint down to assist with the preparation of The Xanadu for the tow. Discussions took place on 7 August between Mr Herman and Mr Flint and the latter arrived in Melbourne on 9 August to assist with the preparation. At that stage works had to be performed on the vessel to satisfy the requirements of the Authorities and to make the vessel seaworthy. Mr Flint assisted with those tasks, arranged for works to be done and provisions to be supplied. He reported to Mr Herman and the accounts were sent to Mr Herman for payment. Mr Flint was not told by either Mr Herman or Mr Goldschlager that the vessel had been purchased by the Curtain Bros Group. Mr Flint flew back to Townsville on 22 August 2000.

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168 Before considering this discussion it is necessary to go back to 8 September. Mr Herman's office sent an e-mail to Mr Ruh on that date stating that all arrangements concerning the arrival of The Xanadu were the responsibility of Curtain Bros and that he should liaise with them directly. A copy of the e-mail was sent to Mr Flint on 8 September. It is quite clear that Mr Herman was expecting Curtain Bros to make all arrangements for the arrival into Papua New Guinea. I accept Mr Curtain's evidence that as a matter of general practice the dockyard looks after entry arrangements. Mr Curtain telephoned Mr Herman on Sunday morning, 10 September. This was an opportunity for Mr Herman to directly confront Mr Curtain about the Heads of Agreement and whether the Curtain Bros Group accepted the Heads. It was a fairly long conversation, discussing a number of topics. But surprisingly, Mr Herman did not directly raise the issue. It is clear from the opening words of the conversation that Mr Curtain was phoning about the entry of The Xanadu into Papua New Guinea. This is not surprising bearing in mind the Herman e-mail to Mr Ruh with a copy to Mr Flint. Mr Herman stated there was a discussion about foreign contractors tax, the possible use of a Gibraltar company, a concern about the vessel being liable for VAT on entry and that Mr Curtain stated that Mrs MacCarthy would have to deal with the entry formalities. Mr Curtain said that Mrs MacCarthy would be returning to Townsville the following Monday week which was 18 September. Mr Curtain made it clear that they would take responsibility for entry formalities. There was a question as to whether the insurance had been paid, and Mr Curtain said he would have to check with Greg. There was a discussion about the employment of Mr Preville, who wanted certainty and security. However, at no stage was any reference made by Mr Herman to the written Heads of Agreement and whether Curtain Bros Group accepted the terms. Whilst Mr Curtain has no direct memory of the conversation he is adamant that he did not at any time agree to purchase the vessel. I find it strange that Mr Herman was not prepared to raise the topic directly with Mr Curtain. In the light of his correspondence to others at this time, Mr Herman had doubts whether there was any contract to purchase. He must have realised the Heads of Agreement were an offer and all the evidence to that point was that Curtain Bros had not committed to purchase. Mr Herman gave evidence that Mr Curtain did not state in the conversation that he disagreed with anything contained in the Heads of Agreement. But more to the point he did not say he agreed with the Heads of Agreement or accepted them. On the other hand, I have little doubt that Mr Curtain was still interested and was exploring ways and means of purchasing her. But equally, I am satisfied that he had not committed at that point. In my view, the Goldschlager interests could not have come to any other conclusion at that time. This is further supported by correspondence between Mr Herman and the Australian Maritime Safety Authority at the end of September/early October. The Authority sought information as to the registration of The Xanadu and Mr Herman, in a letter dated 3 October, responded by stating that the vessel was presently at the shipyard operated by Curtain Bros in Port Moresby and that he anticipated she would be shortly removed from Australian registration. He said nothing of a sale. Mr Herman said that he was stalling the Authority. But his conduct is consistent with other evidence that there was no sale and the Curtain Bros Group had not agreed to purchase The Xanadu.

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175 Mrs MacCarthy gave evidence that she received the documents but did not read them before she took the folder back to Brisbane and forwarded it on to Mr Curtain in Townsville. It is necessary to consider the meetings between the three persons in the context of what the parties had done to that stage. There is ample evidence to show that the Goldschlager interests were uncertain as to whether or not there was an agreement. Mr Goldschlager stated as much in his evidence that they were getting "mixed signals". In my view, they were getting more than "mixed signals. There was a very strong indication through Mr Flint that there was no agreement, there had not been any suggestion from Mr Curtain that his Group had accepted the Heads of Agreement, and the documents within the Goldschlager camp to others, written by Mr Herman, showed real doubts within their camp as to whether they had an agreement. Surprisingly, neither Mr Herman or Mr Goldschlager made contact with Mr Curtain to seek a direct response. Instead they devised a strategy of providing Mrs MacCarthy with documents totalling some 22 pages, hoping that they could obtain some indication from her confirming a sale. Yet neither one sought to directly raise the topic with her by discussing the documents. The documents covered a number of topics, including correspondence that passed between Mr Herman and Mr Flint which is contrary to any agreement. Mrs MacCarthy stated she did not read them and I believe her. She was convalescing from a serious illness, her mind was not on work, and I do not accept the evidence of Messrs Herman and Goldschlager to the effect that she said that she had read the documents and they were fine. Mrs MacCarthy was cross-examined at some length by Mr Sifris and it was suggested to her that she was not telling the truth. She replied that she was. Mrs MacCarthy's evidence was to the effect that she has no real recollection of discussing The Xanadu with either Mr Goldschlager or Mr Herman, that she was in a state of convalescence but does remember that she did not read the documents.

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191 The claim that the Curtain Bros Group was estopped from denying a contract fails because in my opinion the Group did not induce Challenge to assume as at 27 August 2000 that there was a final concluded contract between the parties. The argument proceeds on the basis that Challenge believed as at 27 August 2000 it did have a contract. The reality was that it could not have come to that conclusion. The Heads of Agreement forwarded on 16 August 2000 constituted an offer. By then Challenge had entered into a contract to tow the vessel. It delivered the vessel into the hands of the master on 26 August. It could not have assumed that it had a binding contract. Between 16 August and 26 August there had been no response at all from the Curtain Bros Group. The silence did not create an assumption that there was a binding contract. Further, Challenge did not rely upon the silence or conduct of Curtain Bros Group up to 27 August 2000 to decide to send the vessel to Papua New Guinea. This decision had been made prior to 16 August 2000 and was implemented in the days from early August to 26 August 2000. Mr Sifris submitted that although the contract to tow had been entered into on 9 August 2000, it was open to Challenge to cancel the tow. This is unrealistic. It is contrary to the clear thrust of the evidence. There was no question at any stage between 9 August and 27 August of cancelling the tow. The vessel was sent out of Australian waters as a result of the considered decision by the Goldschlager interests and was not influenced by an alleged sale of the vessel. The fact was that on 6 August 2000 Mr Herman expressed the view that there was no contract unless he agreed, further and additional terms were added to any arrangement reached on 6 August 2000, and the Heads of Agreement sent on 16 August were an offer to sell on the terms stated. There was no response from the Curtain Bros Group during the period to 27 August and more importantly, no effort was made by the Goldschlager interests to make contact with Mr Curtain before 27 August to ascertain whether there was a binding contract in place. In my opinion, the Curtain Bros Group did not induce Challenge to assume there was a final contract by 27 August and further, the decision to send the vessel to Port Moresby was in no way influenced by the belief that there was a contract of sale.

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204 Paragraphs 13 - 18E (inclusive) of the further amended statement of claim alleged two causes of action based upon an alleged breach of s.52 of the Trade Practices Act. Challenge claimed the fourth defendant, Mr Curtain, had aided, abetted counselled or procured the contravention of s.52 of the Act. Mr Sifris, in final address, frankly conceded that the first claim was based upon the Court finding that there was a contract of sale of the The Xanadu and that the real purpose of the claim was to obtain relief from Mr Curtain personally. As I have found that there was no contract, this claim fails. The pleading discloses what might be called a classic s.52 claim, namely, representations made which induced a course of conduct by the respresentee, that the representations were false and misleading and that as a result Challenge suffered loss and damage. The representations pleaded are the terms of the Heads of Agreement. It is asserted that they were representations relating to future matters and Challenge relied upon s.51A of the Act. By pleading s.51A, Challenge Charter sought to place the burden on the alleged representors. It is said that the representors were the first three defendants.[34] Section 51A facilitates proof in misrepresentation cases where the representations concern future matters. There may be some dispute in the present case whether the Heads of Agreement terms are representations as to future matters. Nevertheless, it is alleged that the representations were made, that they were false and that Challenge Charter was induced to contribute the sum of A$20,000 to the cost of preparing and arranging for the tow of The Xanadu, entered into an agreement with the towing company and permitted The Xanadu to be towed to the Curtain Bros dockyard in Papua New Guinea. In my opinion, even if any of the representations could be made out Challenge has not proven that any of those alleged acts were done as a result of the representations. The first two events occurred well prior to 16 August and the third event was already in place as at 16 August and was the subject of a contract. Further, it is alleged that the representations were false and misleading and that the basis upon which this was put was that Curtain Bros has refused to make certain payments. In the context of the case, in my view it could not be said that if the representations were made, the mere fact that they were not complied with does not prove that they were false and misleading when made. I am not surprised that Mr Sifris did not press that claim under s.52.

[295]

209 The Court has found that there was no purchase agreement. The vessel was sent to the dockyard for slipping inspection and appraisal as to its condition. She was sent by Challenge for a number of reasons, the prime one being economic and in the hope that a sale of the vessel would occur. The Curtain Bros Group obtained possession of the vessel when she arrived in the Port Moresby Harbour on 13 September 2000 and she has remained in the possession of the Group ever since. In my opinion, the ship was and has remained in the possession of the second defendant, PNG Dockyard. Its employees have been dealing with the vessel, performed works on her and the company has made a claim for work done, materials supplied and wharfage. PNG Dockyard received possession of The Xanadu on 13 September 2000 pursuant to an agreement that the vessel would be slipped, inspected and a report prepared. Whilst the vessel was in the possession of PNG Dockyard pursuant to that agreement it would be an implied term that the Dockyard would take reasonable care of the vessel. It is important to note at the outset, that the vessel has not been damaged by any particular event but has continued to deteriorate as ships tend to do as a result of the elements, with the passage of time, unless steps are taken to arrest the deterioration. By mid-January 2001 the vessel had been slipped, inspected and a report prepared as to her condition. Mr Curtain informed Mr Herman on 22 January 2001 that the hull was in a bad state and it was possible to pierce the hull in several places, that the vessel had no anodes and he described the vessel as "essentially a write-off". He observed that she suffered from corrosion from the inside. Mr Curtain stated that it was possible the hull could be patched through the use of doublers, that is, steel plates being welded to the hull around the weak sections. He requested Mr Goldschlager to go to Port Moresby to discuss the future of The Xanadu. On 29 January he informed Mr Herman that an independent expert, namely, a marine surveyor and master, Captain Bruce Copland, had concluded that The Xanadu was a write-off. By 21 January 2001, in my opinion the PNG Dockyard had performed the services pursuant to the agreement and thereafter held possession of the vessel, as a bailee. Whether the claim is in contract or in bailment may not be of any moment as the obligation upon the party in possession appears to be the same.[36]

[296]

210 In my opinion, the claim in bailment is an audacious one and when the nature of the damage is analysed, has no merit. The ship at 13 September 2000 had a value, if any, as a permanently moored floating accommodation or as scrap (which included any value of equipment, fittings and fixtures which could be removed and sold). The vessel had no value as floating accommodation if there was no purchaser. She was by then a vessel aged 38 years. The ship was showing the wear and tear of a vessel which had during that period been used at various times as a roll-on/roll-off cargo vessel, a refurbished cruise ship, a diving excursion ship and finally, a permanently moored accommodation centre. As at August 2000 she was costing Challenge a substantial sum of money, a point made a number of times by Mr Goldschlager in his evidence. The ship was sent to Port Moresby for slipping, inspection and report. The Goldschlager interests were hopeful that a sale could be effected to the Curtain Bros Group. It is Challenge's case that the vessel had a value in September 2000 between US$900,000 and US$1.3M. By trial she had no value other than for scrap and removal and sale of equipment, fittings and the like. The evidence revealed that the cost of towing the vessel to a suitable scrap centre would have outweighed the value as scrap. The defendants contend she had no value in September 2000 unless there was a purchaser and it is accepted by the defendants she has no value today. In my opinion, today she has a value, namely, what can be removed and sold. According to a chartered ship broker, Peter Cookson, the value is A$50,000. Today she would also have a value if there was a purchaser. There is none. In late 2000/early 2001, discussions took place between the Goldschlager interests and a person interested in acquiring The Xanadu as a floating accommodation at Thursday Island. However, these negotiations were unsuccessful. The reality is that the vessel has been on the market since 1998 and there is no purchaser.

At a glance

Court

Decision date

Before

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Judgment (443 paragraphs)

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Cases Cited (13)