Interference with contractual relations
83 The crucial question here is one of fact. The evidence as to the role played by Ms Chen within Nanyuan, and as to the relationship between Ms Chen and Captain Hu, is distinctly exiguous. Importantly, there was no evidentiary basis for a conclusion that Ms Chen, and not Captain Hu, was the decision-maker within Nanyuan who was influenced by the warnings issued on behalf of the owners by Mr Pantelias in deciding to terminate the sub-charter with Daebo. In our respectful opinion, the primary judge's finding on this issue is not sustainable.
84 Critically, his Honour found that the communications between Mr Pantelias and Captain Hu had little weight because Ms Chen was the person on Nanyuan's side in charge in relation to the Nanyuan sub-charter However, that conclusion is not consistent with Ms Chen's initial email to the master of 1 January 2009. That made clear that she was acting for Nanyuan and that it had a principal into whose time charter fleet she was welcoming the master. More importantly, the intervention of Captain Hu, came immediately after the owners' initial email on 2 January 2009, sent by Mr Pantelias to Ms Chen. Nanyuan's response to the email was that Ms Chen appears to have passed the matter to Captain Hu to represent Nanyuan's (or its principal's) interests in communications with the owners.
85 Given the seriousness of Mr Pantelias' email of 2 January 2009, it is highly likely that Captain Hu was Ms Chen's superior or a person to whom she reported. He was the person by whom Nanyuan or its principal wished to be represented in relation to a serious issue under its charterparty. Captain Hu's email to Mr Pantelias of 3 January 2009 asked for the name of the person in charge on the owners' side. Mr Pantelias had to explain to Captain Hu, in Singapore, not Ms Chen, the owners' position and repeat to him its request that Nanyuan not pay hire to Daebo. Mr Pantelias followed this up with an email to Captain Hu reiterating the points he had made in his discussion. On 7 January 2009, Mr Pantelias emailed Captain Hu and Ms Chen at Nanyuan's China address. Similarly, on 9 January 2009 Mr Pantelias and Captain Hu had another phone discussion and Mr Pantelias once again emailed Captain Hu at Nanyuan's China address confirming that the head charterers had not paid hire and were seriously in arrears.
86 In those circumstances the evidence did not support the inference drawn by his Honour that Ms Chen, rather than Captain Hu, was in charge or played a relevant role in the contractual (as opposed to operational) relationship between Daebo and Nanyuan. Ms Chen had made it clear that she was acting for a principal. She asked for the master to copy emails to Captain Hu's address (albeit she gave the Singapore email address without using his name) and Captain Hu dealt directly with Mr Pantelias by telephone. Ms Chen's email of 1 January 2009 stated that she was the person in charge in the context of the preliminary statement welcoming the master "into our principal's time charter fleet. This voyage will be controlled and operated by …" Nanyuan. That made clear that her role was operational as opposed to contractual.
87 The evidence of the conduct of Mr Pantelias and Captain Hu was entirely consistent with Captain Hu being the person in charge on Nanyuan's side in respect of its contractual relations. Indeed, the fact that Mr Pantelias' discussions about contractual matters were conducted solely with Captain Hu supports the conclusion that the latter position is more likely to be correct.
88 The tort of inducing a breach of contract consists of the following elements:
(1) there must be a contract between the plaintiff (or applicant) and a third party;
(2) the defendant (or respondent) must know that such a contract exists;
(3) the defendant must know that if the third party does, or fails to do, a particular act, that conduct of the third party would be a breach of the contract;
(4) the defendant must intend to induce or procure the third party to breach the contract by doing or failing to do that particular act;
(5) the breach must cause loss or damage to the plaintiff.
89 The gravamen of the tort is the defendant's intention to induce or procure the breach in the knowledge that such a breach will interfere with the plaintiff's contractual rights: Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1995) 58 FCR 26 at 43A-C per Lindgren J with whom Lockhart and Tamberlin JJ agreed; Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 at 509-512 [159]-[171] per Sheller, Stein and Giles JJA; LED Technologies Pty Ltd v Roadvision Pty Ltd (2012) 199 FCR 204 at 212-216 [40]-[54] per Besanko J with whom Mansfield and Flick JJ agreed. As Lindgren J explained, the defendant must have "a fairly good idea" that the contract benefits another person in the relevant respect. He said that knowledge of the contract may be sufficient for the purpose of grounding the necessary intention to interfere with contractual rights, even though the defendant does not know the precise term that will be breached. Reckless indifference or wilful blindness can amount to knowledge for this purpose: Allstate 58 FCR at 43C-44F; Fightvision 47 NSWLR at 512 [171]; LED 199 FCR at 216 [54].
90 Here, Mr Pantelias on behalf of the owners, knew of the Nanyuan sub-charter and of its requirements that Nanyuan pay charter hire and other moneys to Daebo. He also knew that if Nanyuan did not pay money to Daebo as and when due Nanyuan would breach the charterparty and Daebo would suffer financial loss. Mr Pantelias on four occasions urged Nanyuan by email and twice by conversations with Captain Hu, not to pay charter hire and any other money due to Daebo under the Nanyuan sub-charter.
91 The owners' conduct in urging Nanyuan not to pay hire in performance of its sub-charterparty with Daebo was not justifiable as the lawful assertion of a claim to a lien. The claim asserted by the owners through Mr Pantelias exceeded any lien that might legitimately have been asserted by them. This is because the owners had no claim to a lien over money due to Daebo by Nanyuan for the bunkers. The bunkers were initially owned by the charterers and then sequentially transferred to the next charterer under each charterparty in the string of charterparties. Thus, money payable for the bunkers was not in the nature of freight or hire but a debt due on a sale of property.
92 Moreover, the owners did not assert any lien directly by requiring Nanyuan to pay hire to them. Rather, the owners informed Nanyuan that they, at some unspecified time in the future, might require payment of money due by Nanyuan to Daebo and, for that reason, the owners urged Nanyuan not to pay "any sums under your charter as you may be called upon to pay twice over such sums".
93 That urging sought to persuade Nanyuan not to pay what was then due to Daebo under the Nanyuan sub-charter. It was coupled with an assertion that the owners could make Nanyuan pay them a second time any sums Nanyuan might pay Daebo under the Nanyuan sub-charter. Both of those bases on which the owners sought Nanyuan to act had no legal justification. Both bases were calculated to, and did, induce Nanyuan to breach its obligations to pay hire and for the value of the bunkers on delivery of Go Star due under the Nanyuan sub-charter.
94 Although the parties referred to the owners as having asserted a lien over money payable by Nanyuan, the evidence falls short of supporting that characterisation. All the owners did was to repeat requests that Nanyuan not pay money due to under the Nanyuan sub-charter because the owners might at some time in the future decide to assert that that money be paid to them. That statement was not a notice of exercise of any lien that the owners had. At no time did the owners make a demand on Nanyuan to Daebo. Moreover, it was conceptually flawed. The lien created by cl 18 is effective only as security for a shipowner over any sum, being "subfreight", to which it might attach that is currently due but unpaid by the person against whom the lien is asserted.
95 The jurisprudential nature of an owner's lien of the kind contained in cl 18 of the 1981 NYPE form is a matter of some controversy not merely between academics but also judges. However, two features appear to be reasonably clear. First, a lien over sub-freights gives a shipowner the right to step in and claim payment of any unpaid and presently due sub-freights to himself where his time charterer has defaulted: The "Spiros C" [2000] 2 Lloyd's Rep 319 at 323 [11] per Rix LJ with whom Brooke and Henry LJJ agreed. Secondly, the lien covers freights and sub-freights that, in the event, come to be payable and which are in fact payable under any charterparty or bill of lading, but does not catch any such freights or sub-freights that have been paid before the shipowner gives the payer notice of his lien over that sum: Federal Commerce & Navigation Co Ltd v Molena Alpha Inc (the "Nanfri") [1979] AC 757 at 777F-G per Lord Wilberforce with whom Viscount Dilhorne and Lord Scarman agreed, 782A-B, E-F per Lord Fraser of Tullybelton and 784F-785B per Lord Russell of Killowen; The "Spiros C" [2000] 2 Lloyd's Rep at 323 [11].
96 Here, the owners may in one sense have given Nanyuan notice of their lien because they asserted its existence. But the owners did not claim to be presently entitled to, and certainly did not request or require, payment of any sub-freight (however wide that term may be) then due by Nanyuan to Daebo under their charter. Rather, the owners urged Nanyuan not to make any payment to anyone of any moneys it owed Daebo. That did not amount to the owners giving notice to Nanyuan of a claim that they had a lien over any sum due by Daebo to Nanyuan. However, it had the effect of interfering with Nanyuan's performance of its obligation to pay its then presently due debt to Daebo for the first hire and the value of bunkers on delivery.
97 As we have mentioned, the nature of a shipowner's lien under a time charter containing a clause like cl 18 of 1981 NYPE form is unsettled. It is not necessary to resolve that issue given that the owners here did not assert what lien or right they had over moneys due by Nanyuan.
98 In Federal Commerce [1979] AC at 784F-G Lord Russell had suggested that the shipowner's lien on sub-freights operated as an equitable charge upon what was due from the shipper (under a bill of lading) to the charterer and, in order to be effective, required an ability to intercept the sub-freight (by notice of claim) before it was paid to the charterer by the shipper (or consignee or holder of the bill of lading). In England the lien had been held to be a registrable charge either on book debts or at least of a floating nature: Agnew v Commissioner for Inland Revenue [2001] 2 AC 710 at 727 [39] (but that position has since been reversed by statute). There Lord Millett, giving the advice of a strong Judicial Committee (Lords Bingham of Cornhill, Nicholls of Birkenhead, Hoffmann and Hobhouse of Woodborough), observed that the lien was not the creation of common law or equity but had originated in maritime law based on the shipowner's lien on cargo. He said that it is a contractual non-possessory right of a kind which is sui generis. The Privy Council said that Lord Russell's observation that the lien was an equitable charge was a passing remark not necessary for the decision "and if the lien is a charge it is a charge of a kind unknown to equity" ([2001] 2 AC at 728 [41]). Their Lordships continued:
An equitable charge confers a proprietary interest by way of security. It is of the essence of a proprietary right that it is capable of binding third parties into whose hands the property may come. But the lien on subfreights does not bind third parties. It is merely a personal right to intercept freight before it is paid analogous to a right of stoppage in transitu. It is defeasible on payment irrespective of the identity of the recipient. In this respect it is similar to a floating charge while it floats, but it differs in that it is incapable of crystallisation. The ship owner is unable to enforce the lien against the recipient of the subfreights but, as Oditah observes, this is not because payment is the event which defeats it (as Nourse J stated in In re Welsh Irish Ferries Ltd [1986] Ch 471; it is because the right to enforce the lien against third parties depends on an underlying property right, and this the lien does not give. Apart from the obiter dictum of Lord Russell in the Federal Commerce case, the cases in which the lien has been characterised as an equitable charge are all decisions at first instance and none of them contains any analysis of the requirements of a proprietary interest. Quite apart from the conceptual difficulties in characterising the lien as a charge, the adverse commercial consequences of doing so are sufficiently serious to cast grave doubt on its correctness.
99 One commentator, Simon Baughen, sought to explain Lord Millett's analysis as a mere restatement of what he had put unsuccessfully as counsel to Nourse J in the course of argument in Re Welsh Irish Ferries Ltd [1986] Ch 471 (which held that the lien was a registrable charge): The Evolving Law and Practice of Voyage Charterparties: Edited by Prof D Rhidian Thomas (informa, London 2009) at [11.21]-[11.22]. However, that critique is specious. First, Lord Millett sat with Lords Bingham and Hobhouse, both of whom had extensive Admiralty experience and would have been unlikely to have joined in the opinion delivered by Lord Millett if they disagreed. Secondly, their Lordships were correct in describing the origins of the lien as stemming from maritime law and not from the common law or equity.
100 The early cases dealt with the consequences in various factual situations of a shipowner demanding payment of freight due by a shipper under a bill of lading that had been signed by the master under a time charterer's instructions in differing circumstances as explained by Greer J in Molthes Rederi Aktieselskabet v Ellerman's Wilson Line Ltd [1927] 1 KB 710. Ordinarily, when a time charterer instructs the master to issue bills of lading, the bills will be contracts between the shipowner and the shipper (of the cargo) for the carriage of goods on the ship. The charterer, as between himself and the shipowner, will be entitled to receive payment from the shipper as an incident of his right to employ the ship under the charter. But, as Greer J pointed out, strictly speaking, the shipowner's lien on sub-freight is not a lien at all, since under an owner's bill of lading the money is due to the shipowner by the shipper ([1927] 1 KB at 716-717). Rather, he held that the lien clause in the charterparty was needed to give the owner a lien where the sub-freight was due to the charterer and not to the owner, such as when goods were carried on a sub-charter without any bill of lading: [1927] 1 KB at 717 and see too The "Spiros C" [2000] 2 Lloyd's Rep at 323 [11]; Legal Issues Relating to Time Charterparties: Edited by Prof D Rhidian Thomas (informa, London 2008) at [16.20]-[16.39], a chapter contributed by Prof Richard W Williams.
101 The dispute between the two decisions of Lloyd J and Steyn J in the Cebu cases [1983] QB 1005 and [1993] QB 1 concerned the characterisation of the expression of "subfreights" in the lien clauses and whether by the late twentieth century it had ceased to comprehend "subhire" payable under a charterparty. Lloyd J held that for over a century the expression "subfreights" as used in cl 18 of the NYPE form had included sub-hire and "any remuneration earned by the charterers from their employment of the vessel, whether by way of voyage freight or time chartered hire". He found that this included all sub-freights due under a chain of time charter parties ([1983] QB at 1011C-D, 1012F-G, 1013A-C).
102 Steyn J held that a change in usage of the word "subfreights" had occurred "in modern times" and before publication of the 1946 amendment of the NYPE form. He relied on a statement by Lord Denning MR in the Court of Appeal in Federal Commerce & Navigation Co Ltd v Molena Alpha Inc (The "Nanfri") [1978] QB 927 at 973 that suggested a change in modern times so that payments due under a time charter "are usually now described as 'hire' and those under a voyage charter as 'freight'". (Emphasis added.) Steyn J concluded that the ordinary meaning of "freight" at all material times included only bill of lading freight payable under a voyage charterparty, including when used in the NYPE form of time charter ([1993] QB at 12C-D, 13A, 14-14A). Accordingly, he confined the meaning of "freight" and "all subfreights" as used in cl 18 of the 1946 NYPE form (which is relevantly the same as the 1981 version) to bill of lading freight and freight under voyage charterparties and did not include sub-time charter hire ([1993] QB at 14G-15C). Scrutton on Charterparties (22nd ed) (Sweet & Maxwell; Thomson Reuters, London 2011) at [16-014] suggests that Steyn J's seems the better view as does Time Charters (6th ed) op. cit at [30.20] while DC Jackson: Enforcement of Maritime Claims (3rd ed) (LLP, London 2000) at [22.28]-[22.29] expresses no preference.
103 What is, however, curious about Steyn J's reasoning is its omission to consider the meaning in the United States, where, after all, the NYPE forms were written, of the expression "subfreights". Obviously, there are substantive differences between English and United States maritime law, not least over the ambit of what a lien is. Nonetheless, one recent leading United States text, Thomas J Schoenbaum: Admiralty and Maritime Law (3rd ed) (West Group, St Paul, Minnesota, 2001) Vol 2 at s11-17, p 236 dealt with the issue of the shipowner's lien against sub-freights in charterparties in a footnote stating:
Subfreights are the hire under a subcharter as well as bill of lading freight payable by shippers and consignees.
104 In addition, because cl 18 expressly recognises that, as between owner and charterer, the owner can exercise a lien over the cargo (as would ordinarily be the case with any bill of lading signed by the master), the reference to "sub-freight" must apply to money due to, or able to be demanded by, the charterer from a sub-charterer. Last, Lord Denning MR's qualification of "usually" to the descriptions of "hire" and "freight" does not suggest that a complete change in usage had occurred in recent times even in English law. However, these matters were not explored in argument and it is not necessary to decide them.
105 It is not necessary for this Court to resolve the conflict between Cebu No 1 and Cebu No 2. That is because, even on the broader view of the expression "sub-freight", it does not comprehend the debt owed by Nanyuan to Daebo in respect of the sale of the bunkers.
106 Accordingly, the owners' assertion that they had a lien that they might exercise in the future (but had not asserted) over the money payable by Nanyuan to Daebo under the charterparty as a reason why Nanyuan should not pay its debts to Daebo as and when they were due was not justified by cl 18 of the head charter. Their interference with the relationship between Nanyuan and Daebo was tortious if Australian law was applicable to the owners' conduct in dealings with Captain Hu in Singapore, as we think it was: see [52] above. The owners, through Mr Pantelias' conduct, intended to procure or induce Nanyuan to withhold payment of money to Daebo in breach of Nanyuan sub-charter. The owners succeeded in inducing such a breach.
107 It follows that we consider that the appeal must be allowed in relation to Daebo's claim for damages for interference with its contract with Nanyuan.
108 It falls to this Court to assess the damages payable to Daebo. We would assess those damages on the footing that Daebo is entitled to recover for the value of the bunkers at the rates prescribed in the sub-charterparty. That is a different rate from that sought by Daebo.
109 Daebo seeks damages at the rate of USD285 per tonne of fuel oil and USD500 per tonne of diesel oil, being market rates. Under the provisions of the sub-charterparty, Daebo was entitled to be paid USD230 per tonne of fuel oil and USD450 per tonne of diesel oil. Daebo hypothesises that the contract with Nanyuan remained on foot until consensually terminated and it is on this basis that its damages are to be assessed. On this hypothesis, the latter figures represent the value per metric ton of what Daebo would have received for the bunkers had the Nanyuan sub-charter been performed in accordance with its terms.
110 In summary, Daebo is entitled to damages calculated as follows:
Value of bunkers on delivery
882.62 MT fuel oil @ USD230 203,002.60
79.52 MT diesel oil @ USD450 35,784.00
Loss of 12 days hire @ USD4,250 51,000.00
USD289,786.60
In addition, Daebo is entitled to interest on its damages at a rate appropriate to US dollars.