Stoppage in Transitu and the Carriers' Liens
13The law is clear. The exercise by an unpaid vendor of rights of stoppage in transitu is to facilitate the vendor asserting its lien for unpaid purchase money; and, that a carrier's lien for money due for the carriage of and other charges upon the goods in question would take precedence, apart from any agreement, over any vendor's lien: United States Steel Products Company v Great Western Railway [1916] AC 189. The reason for this precedence derives from the origins of the right of stoppage in transitu in the law merchant. The recognition of the right of stoppage in transitu in English law was first that taking actual possession of the goods was necessary to constitute a valid stoppage in transitu. But later it was held that taking actual possession by the vendor was not necessary and that a claim was sufficient. This relaxation occurred as the Courts leaned in favour of the power of the consignor to stop goods in transitu. The method of effecting the right of stoppage by taking actual possession of the goods, or by giving notice of the claim to the carrier on other bailee in whose possession the goods are now preserved in Sale of Goods Act 1923, s 48. Lord Reading CJ explained in Booth Steamship Co Limited v Cargo Fleet Iron Co Ltd [1916] 2 KB 570 at 583 the rationale for the requirement that an unpaid vendor must recognise a carrier's lien as a condition of exercising a right of stoppage in transitu:-
"The statute thus gives two ways of effecting stoppage. The first is by taking actual possession, and the second by notice of claim, the latter, as Lord Kenyon observed, being a relaxation of the old rule that required actual possession to be taken. To get actual possession of goods carried the vendor must discharge the shipowner's lien (if any) for freight. Therefore satisfaction of the lien for freight must have been and still is an integral part of the stoppage of goods in transitu by the method of taking actual possession. Actual possession can only be taken of goods in transit when the goods arrive; by s. 45, sub-s. 1, they are deemed to be in transit until the buyer takes delivery - until that time there is a right in the unpaid vendor to resume the possession on arrival if he can. If the stoppage is by means of notice given, the vendor, upon arrival of the goods, is in the same position as if he had taken actual possession of the goods - that is to say, he is the sole person entitled, and, as I think, obliged, to take or order delivery of the goods. He cannot get actual possession unless he is ready and willing to discharge the lien for freight. I am therefore of opinion that a notice of stoppage given during the transit, and persisted in upon arrival of the goods, involves an obligation upon the vendor to discharge the shipowner's lien for freight, that is, to pay the freight due in respect of the goods carried. To get the goods he must free them from the lien."
14Lord Reading CJ and Warrington LJ in Booth Steamship Co Limited v Cargo Fleet Iron Co Ltd [1916] 2 KB 570 also dealt with the issue of the carrier's claim for freight charges. But Scrutton J in that case went further and explained the rationale for the recovery of demurrage charges incurred by the carrier in addition to the freight charges. He did so in the following lengthy and at times colourful passage:-
"The goods then arrive at the contract place of delivery where, if there had been no stop, they would have been delivered to the consignee, subject to the shipowner's lien for freight. If the shipowner exercises that lien against a demand by the consignee, he will have to bear the cost of exercising the lien - Somes v. British Empire Shipping Co.(1860) 8 HL Cas 338 - and provide for the safe custody of the goods while he keeps his hand on them; and he cannot sell the goods. But supposing he is told not to deliver to the consignee by an unpaid vendor who has the right to order delivery to himself and does not, on what principle can he be compelled to retain and provide for the custody of the goods after he has arrived at the contract place of destination, or is ready to go there, if any one will take delivery? What is he to do with the goods? Is his ship to go sailing round the world, like the "Flying Dutchman," on an endless, hopeless voyage for ever carrying goods that no one will take? Is his ship to stay at the port of destination till it is convenient to some one to take the goods from her? Why, if he discharges the goods, must he pay duties which by the contract should be paid by the person taking delivery, and provide for the custody of the goods, as here, for an uncertain time, on the chance that some one will some day recoup him? And does it make any difference, when he is stopped by the unpaid vendor from tendering the goods to the consignee, that, if he had been permitted to tender them, he might have been in similar difficulties if he chose to assert his lien for freight? He is prevented from having the chance of offering the goods to the consignee.
It is said that both the shipowner for his freight and the unpaid vendor for his price have to look to the goods and must take their chance. This is not quite exact, as the unpaid vendor can sell the goods, and the shipowner cannot; but, further, the unpaid vendor is claiming to exercise his lien through the shipowner, and, if he must bear the expense of exercising his own lien, cannot make the shipowner bear the expense of exercising the vendor's lien for the benefit of the vendor. It is also suggested that the shipowner makes his contract subject to the possibility of an unpaid vendor stopping in transitu, and must put up with the consequences. But, if I am right that the unpaid vendor cannot stop the transit, but only the delivery to the vendee, it follows that he cannot prolong the transit or the shipowner's obligation to hold the goods after the shipowner is ready to make delivery at the end of the transit. This question must be considered, not only from the point of view of the shipowner's claim for freight for the transit, but from the point of view of his claim for demurrage or damages for detention at the end of the transit. Freight is now frequently paid in advance; but when the shipowner arrives at the end of the transit, and is forbidden by the unpaid vendor to deliver to the consignee, what is his position as to custody of the goods if the unpaid vendor refuses to give positive instructions as to their delivery? What is the shipowner to do? If he keeps the goods in his ship, ought not the person who compels him to do so to pay the demurrage? If he lands the goods in a warehouse to keep the unpaid vendor's lien, ought not the person for whom the lien is exercised to bear the expense of using the lien? And why is the shipowner to be compelled to take any responsibility for the goods after his contract voyage is over? Surely it is for the person who stops the transit and desires to exercise his lien to take the goods and exercise his lien for himself. And must he not, before he does so, satisfy any liens already existing?
Further, in my view, the shipowner has fulfilled his contract when he has reached a point where the consignee or person taking delivery is bound to do something, and is not bound himself to incur further expense when no one will take delivery. He is not bound to go into a dock and incur dock dues if he is told that the consignee will not take delivery even if he goes in. He was not in this case bound to send the goods up from Tutoya, when no one would pay the duties without which the goods could not be landed, and he was not allowed by the vendor to deliver the goods to the contractual consignees.
On these events happening the shipowners had, in my view, no further obligation to provide for the goods. The unpaid vendors had the right to stop delivery to the consignees and the right to require delivery at the port of destination to themselves. In my view this imposed on them a corresponding duty to take delivery from the shipowners, if they continued to prevent them from delivering to the consignees. The vendors are not obliged to perform this duty, for they may release the goods and withdraw the stop before the end of the transit, but if they do not withdraw the stop, but insist on it, in my opinion they substitute themselves for the original consignees and must take delivery. They can only do so on the terms of discharging the shipowners' lien for freight, and, as these vendors are quite solvent, the damages for their failing to take delivery will be at least the amount of freight the shipowners would have received if the vendors had fulfilled their obligation and taken delivery."
15There is a basis for the carriers to claim demurrage charges here. In my opinion based on the reasoning of Scrutton J, there is merit in the carriers' argument that its lien for freight and demurrage, if established, would take precedence over the vendor's lien, which is re-established by Gilgandra's exercise of its right of stoppage in transitu. Of course when the cross-claim was served it will still be necessary for the carriers to establish the basis of their claimed liens. But their carriage of the subject goods from Sydney to Chittagong is not in dispute nor is the carriers' present requirement to store the goods in Chittagong.
16Upon final hearing of the cross-claim though, three aspects of the claim will be debatable even if a prima facie entitlement to a lien is established: the claim for demurrage; the claim for costs; and, the quantum claim. I understand from submissions put on behalf of Gilgandra that all these issues are in dispute.
17The claim for the liens on account of demurrage is more contentious than the claim for a lien on account of freight. Neither of the judgments of Lord Reading CJ nor Warrington LJ go quite so far as that as Scutton J in Booth Steamship Co Limited v Cargo Fleet Iron Co Ltd [1916] 2 KB 570 to justify the priority of the carriers' claims for demurrage over the vendor's lien, in addition to the carriers' claims for freight. The principles discussed in United States Steel Products Company v Great Western Railway [1916] AC 189 and the Booth Steamship Co Limited v Cargo Fleet Iron Co Ltd [1916] 2 KB 570 have received very little analysis in the cases since 1916. United States Steel Products Company v Great Western Railway [1916] AC 189 was considered in Wiatomo Wools (NZ) Ltd v Nelsons (NZ) Ltd [1974] 1 NZLR 484 but in a way that does not address the present issue before the Court. In the general law of liens the principle is clear that a person having a lien on a chattel who keeps it for the purpose of enforcing his lien cannot make any claim against the owner for the cost of so keeping it: Somes v British Empire Shipping Co Ltd (1860) 8 HL Cas 338. On my limited review of the available authority in the time that I have had to consider this matter I regard the issue of full recovery of demurrage charges as one ripe for debate at final hearing of the cross claim. Even if the lien is established, scope exists for debate about whether it will extend to demurrage charges.
18None of the authorities referred to seem to justify the lien extending to provide security for the carriers' legal costs in the event they were also successful in the proceedings. In the circumstances I will decline to now act on the basis that the carriers' liens extended to cover such costs.
19Gilgandra also submits that the charges claimed are excessive. The carriers have served evidence as to the charges but a full contest on this issue has not taken place. Whether or not the charges are excessive is a matter relevant to the next issue for consideration.