HINES EXPORTS PTY LTD v MEDITERRANEAN SHIPPING COMPANY SA No. SCCIV-00-776 [2001] SASC 311

Supreme Court of SA|2001-08-29|Before: Doyle CJ, Bleby JJ, Perry J

Judgment No. [2001] SASC 311

DOYLE CJ I agree that the appeal should be allowed, and that the orders proposed by Bleby J should be made. I agree with his reasons for the making of those orders.

PERRY J. I have had the benefit of an opportunity to consider the reasons for judgment of Bleby J in draft. I am indebted to him for his exposition of the facts.

I agree with him that the learned trial judge erred in failing properly to deal with the appellant's application to re-open the case. But given the course of events since then, there is no entirely satisfactory solution to the present situation.

In my view, from the practical point of view, there are only two choices: either to leave matters where they stand, or to allow both parties to call such further evidence as they may be advised.

In the interests of justice, while I appreciate the strength of the contention that there must be an end to litigation, I favour the latter course.

I agree with the making of the orders proposed by Bleby J.

The appellant, the plaintiff in the action, is a meat exporter. The respondent, the defendant in the action, is a shipping company. The parties had done business together for a number of years. Their representatives met once or twice a year to agree freight rates. Freight rates included all costs from the supply of the container by the respondent to the delivery of the goods to the port of ultimate destination.

In March 1995, the appellant bought 614 frozen crumbed mutton carcasses from a company known as Alliance Meat Packers (Alliance). The appellant had a contract to on-sell the meat to Capital Meats, in South Africa, who in turn had on-sold it to Lucky Star Meat Wholesalers. The contract with Alliance was an FOB contract which required Alliance to deliver this meat to a ship in the Port of Melbourne arranged by the appellant. Property in the meat only passed to the appellant upon delivery on board the ship.

The appellant had contracted with the respondent to transport the mutton from the Port of Melbourne to Cape Town in South Africa. On 22 March 1995, the respondent delivered three refrigerated containers, owned or hired by the respondent, to Alliance to be loaded with the meat in question. This case is concerned with defects in one of those containers. The loaded containers were then transported to the Port of Melbourne and were themselves loaded onto the "Annamaria." Because of its FOB contract, the appellant was not a party to any contract to transport the containers to the ship. On 4 April 1995, after the containers had been loaded, the respondent issued a Bill of Lading which was sent to the appellant.

On 15 May 1995, the containers were delivered to Lucky Star Meat Wholesalers in Capetown. They were inspected by South African veterinary officers. Inspection revealed that the meat in one of the containers was no longer frozen and was unfit for human consumption. Aside from the generally poor condition of the container, a lower door seal on the container was found to have been missing which had allowed warm air to enter. The appellant sued the respondent for breach of contract and negligence, and claimed a loss of $34,122.54 for the value of the mutton and the labour charges for the disposal of the carcasses.

The Bill of Lading contained a significant exclusion clause as follows:

"Clause 15(c) If the articles accepted for transportation are containers the contents having been packed and stowed inside the container by or on behalf of the Merchant and not by or on behalf of the Carrier, then the Carrier shall be under no liability in the event of loss or damage to any of the goods directly or indirectly caused by the manner in which the contents have been packed and/or stowed inside the container/s or by the unsuitability of the contents for container carriage or by the unsuitability or defective condition of the container."

The respondent's case was that the meat had been stowed in the container by or on behalf of the appellant. The Bill of Lading also contained a limitation clause similar in effect to Article 3 Rule 6 of the Hague Rules, contained in Schedule 1 to the Carriage of Goods by Sea Act 1991 (Cth). It relevantly provided:

"Clause 21 ... In any event, the Carrier shall be discharged from all liability if suit is not commenced within one year after delivery of the goods or the date that the goods should have been delivered."

Although the container had been delivered to Lucky Star Meats on 15 May 1995, the action was not commenced until 7 June 1996.

At the trial in the District Court, the appellant relied on deemed formal admissions and called one witness, Mr Hines, the managing director of the appellant. In the course of its case the appellant also tendered, by consent, the report of Winterton and Stanbury, a firm of loss assessors. It made reference, among other things, to the cause of the loss, the value of the meat and cost of disposal. The respondent chose not to call any witnesses. As the trial Judge observed, "both parties chose to conduct the trial with very little direct evidence. This meant that technical points about what was, and was not, proved were likely to be important."

During the appellant's final submissions, the learned trial Judge brought to counsel's attention the fact that there was no evidence that the appellant had not been paid for the relevant container of meat and therefore there was no evidence that it had therefore suffered any loss. The trial Judge had also raised this issue earlier during the respondent's address. Counsel for the appellant then made an oral application to recall Mr Hines in order to prove that discrete point, namely that the appellant had not been paid for the destroyed carcasses. Mr Hines was in Melbourne at the time, and an adjournment would have been necessary if he was to be recalled.

The Judge resolved that he would only deal with the application to reopen the appellant's case once he had delivered his reasons, and only if failure to prove the appellant's loss was the only point upon which the appellant failed. Counsel argued that in any case there was sufficient evidence for an inference to be drawn that the loss was suffered. Finally, in response to a question from the trial Judge, counsel for the respondent indicated that, if the appellant were given leave to reopen, the respondent would also want to reopen, presumably on that topic only.

On 26 June 2000, the trial Judge published his reasons without making any order. He found that a contract between the appellant and the respondent was entered into orally before the delivery of the containers. He rejected a submission of the appellant that the contract for the hire of the container was separate from that for the shipment:

"The provision of such a container by the respondent was an integral part of its performance of its contract. All shippers provided the necessary containers for such carriage of meat by sea."

However, it was held that as the Bill of Lading was only issued on about 4 April 1995 it did not form part of that contract, and therefore the exclusionary effect of cl 15(c) and the limitation contained in cl 21 did not apply.

The respondent's argument that the time bar contained in Article 3 Rule 6 of the Hague Rules could be applied was dismissed on the grounds that it was excluded by Article 1(b) of the Hague Rules:

"1(b) 'Contract of carriage' applies only to contracts of carriage covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charter party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same."

The trial Judge also found that the respondent had breached its duty of care. He concluded that the appellant had established "what would otherwise be a cause of action if it had established any damage" but that he could not find on the evidence that he had before him that the appellant had proved that it had suffered any loss at all. In short, his Honour found that there was no evidence as to whether property in the meat had passed to Capital Meats or to Lucky Star at the time when it was destroyed; there was no evidence of the purchase price to be paid by Capital, or whether the appellant had been paid. His Honour inferred from the Winterton and Stanbury report that the cargo was insured. There was no evidence to show that the appellant was the insured or that the amounts mentioned in the report were based on the contract price payable by Capital Meats to the appellant. In relation to the consequential loss, there was no evidence that it was an exposure to which the appellant was liable.

The appellant then reapplied to reopen its case. The respondent also applied to reopen its case to lead evidence of previous dealings between the parties designed to show that the Bill of Lading formed part of the terms of the contract.

On 29 June 2000 the trial Judge heard the application by the appellant to have the case reopened for the purpose of adducing evidence from the appellant "that the damages it sought were incurred by the plaintiff." In the light of his Honour's observations in the published reasons, this was obviously a more extensive application than that originally made. He justified the reason for the omission as being "a matter of an oversight, inadvertence on the part of counsel that this particular issue wasn't raised at the time." Counsel for the respondent, argued that counsel for the appellant had made a deliberate decision to rely upon the report prepared by the loss assessors, instead of adducing evidence from the appellant. He argued that the matter could not be reopened on a discrete issue, as it would raise real questions as to who held a proprietary interest in the meat at the relevant time. He also developed his argument that the respondent should be allowed to reopen as to the previous contractual relations between the parties and the terms of the Bill of Lading. He relied on the fact that if Mr Hines were recalled, his cross-examination would be at large, and he could be questioned on such issues.

The trial Judge reserved his decision on the issue, and on 8 August 2000, both applications were refused. The trial Judge concluded that had the respondent's application stood on its own, he would have dismissed it. However, he resolved that:

"....if an indulgence is to be granted to the [appellant] it may be only fair that a similar indulgence is granted to the [respondent] ... the interests of justice are better served by refusing the applications of both parties than in allowing either of them...As the parties were content to conduct the original trial on a restricted basis I do not see why it is in the interests of justice that most of the contentious issues should now be reopened because some of my findings on the evidence which was presented have not suited the purposes of each party."

The court ordered that judgment be entered for the respondent and that the appellant pay the respondent's costs of the trial. Each party was to pay its own costs of the application to reopen.

The appellant appealed on the grounds that the trial Judge erred in refusing to reopen the case. Alternatively, the appellant contended that there was sufficient evidence of loss in any case to justify a judgment in its favour. Mr Walsh QC, counsel for the appellant on the appeal, argued that an inference could be drawn that the property in the meat at all material times remained with the appellant, and therefore that the loss was the appellant's. The amount of the loss had been proved through the Winterton and Stanbury report.

The respondent filed a Notice of Alternative Contention. It contended that the trial Judge erred in holding that the terms and conditions of the Bill of Lading did not form part of the contract between the parties. It further contended that as the Bill of Lading embodied the terms of the contract, the appellant was not entitled to succeed, first because of the exclusion contained in clause 15(c) in the Bill of Lading, secondly because of the limitation in clause 21, and thirdly, that any action in tort was barred by Article 3 Rule 6 of the Hague Rules, which is similar to clause 21, in setting a period of limitation of one year.

I deal first with the appellant's alternative argument. It has a number of difficulties. In the first place, the Winterton and Stanbury report did not deal directly with which party had property in the goods and whether the appellant had been paid for them. The report arrived at a CIF value of the loss, but a different figure for the insured value. Neither figure related to any loss said to have been incurred by the appellant. The appellant can only recover damages for breach of the contract of carriage which it suffered as a result of the respondent's breach of the contract, or for breach of the respondent's common law duty of care to the appellant. In the second place, there are certain passages in the report which suggest that the loss may well not have been the appellant's.

The contract between the appellant and Capital Meats was a CIF contract. Such contracts are commonly described as a sale of goods by documents. The relevant documents are the bill of lading, the commercial invoice and a marine insurance policy. Generally speaking, the delivery of the goods on board the vessel, followed by the delivery of correct documents, is a complete performance by the consignor of its duties under a CIF contract.[1] Risk generally passes to the consignee on shipment, and the consignee must accept and pay for the goods on presentation of the documents, even if it is known that the goods have already been lost at sea.[2]

The bill of lading is issued by the carrier upon shipment of the goods. Bills of lading are usually made out in sets of three, one being retained by the shipper, the other travelling with the goods and the last being sent to the consignee. A bill of lading serves three purposes. It is evidence of the terms of the contract of carriage, a receipt for the goods and a title document which represents the goods themselves. The bill must be a "clean on board" bill of lading. A "clean" bill is an acknowledgment by the carrier that the goods have been received in apparent good order and condition.[3]

In this case Capital Meats had already on sold the meat to Lucky Star. It is not uncommon for goods to be sold many times before arriving at their destination. Indeed most standard form CIF contracts contain provisions for these "string contracts".[4]

The appellant maintained that at all times it retained property in the goods as they could not be said to have been "delivered", as delivery could only take place once the meat had been through Customs and passed any quarantine or similar barriers or inspections. However, the respondent relied on a statement in the Winterton & Stanbury report dated 24 May 1995 that:

"Container No.SCXU 80188314 was delivered to Lucky Star Meat Wholesalers on the 15 May 1995, in exchange for a clean receipt."

Mr Howard, for the respondent, argued that the reference in the report to a "clean receipt" meant that the goods had been delivered in exchange for a clean Bill of Lading. He argued that the title therefore had passed to Lucky Star, as the Bill of Lading would only have passed initially to Capital after the appellant had been paid for it. He also relied on the evidence given by Mr Hines to the effect that ownership of the Bill of Lading must have passed to Lucky Star. He argued that property in the goods had therefore passed to Lucky Star. The evidence was that the veterinary inspection was carried out at their premises.

It may well be, as Mr Howard argued, that the reference to a clean receipt did relate to a "clean" Bill of Lading: cf Hunter Grain Pty Ltd v Hyundai Merchant Marine Co Ltd [1993] FCA 133; (1993) 117 ALR 507. That and other evidence might suggest that property in the goods had passed to Lucky Star. In any event, there was no evidence led as to the contract with Capital Meats in order to suggest that the risk, upon shipment, remained with the appellant. Risk may not necessarily be in the party who has property in the goods. It is not necessary to make a finding as to who had property in the goods at the time of the loss. It is sufficient to say that there was no evidence that the appellant retained property in the meat or that the risk remained with the appellant. In my opinion, the trial Judge was correct in holding that the appellant had not proved that it had suffered any loss.

This is an unusual case in that although the application to reopen by the appellant was made during the final addresses, that application and the application of the respondent were not heard until after reasons for judgment had been published. Different principles are to be applied when determining whether or not to allow a case to be reopened, depending upon the timing of the application.

In Smith v New South Wales Bar Association [1992] HCA 36; (1992) 176 CLR 256, the Court drew a distinction between a case where the hearing is complete and one in which reasons for judgment have been delivered. In their joint judgment Brennan, Dawson, Toohey and Gaudron JJ said, at 267:

"It is difficult to see why, in the former situation, the primary consideration should not be that of embarrassment or prejudice to the other side. In the latter situation the appeal rules relating to fresh evidence may provide a useful guide as to the manner in which the discretion to re-open should be exercised." (Footnotes omitted).

However, in Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 122 ALR 717, Young J said, at 719:

"If one is asking to re-open before the evidence is finished, then the matter depends on the justice of the situation. If one is asking to re-open at the final address stage, or after reasons for judgment, then the approach appears to be what is just in the situation, but normally the test of what is just will be rather close to what is applied in the appeal situation: see Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471 at 478."

I do not consider that Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471 is authority for the proposition that the "fresh evidence on appeal" test is to be applied where the application is made before the end of trial. Mullighan J in The Duke Group v Pilmer & Ors (No 6) (1997) 193 LSJS 204 at 208 reached the same conclusion.

In this case, at the time of the formal hearing of the appellant's application, reasons for judgment had been delivered. However, the judgment had not been entered. The application was first made during the course of submissions, but its hearing was conditionally deferred by the Judge until after he had given reasons for judgment. In the trial Judge's reasons for dismissing the applications he said that they were to be dealt with on the basis that they were made in the course of addresses, and not after judgment. I agree. However, the reasons for refusing the application turned largely on the fact that, if the appellant's case were reopened, it would necessarily raise other questions which had been the object of findings in his Honour's published reasons. He did not consider that to be in the interest of justice.

In my opinion, the trial Judge erred in not dealing with the appellant's application at the time that it was made. By deferring the hearing of the application, the trial Judge, in effect, invited both parties to trawl through his reasons in order to make up the deficiencies in their respective cases.

In the case of the appellant, it caused its application to be cast wider than appears to have been originally contemplated. It would have allowed the respondent to canvass, in cross-examination of the appellant's witnesses, defects identified by the trial Judge in the respondent's case. In fact it caused the respondent to make its own application to reopen, an application which it did not press on the appeal.

In Murray v Figge (1974) 4 ALR 612, after referring to earlier cases decided in South Australia and Western Australia, Muirhead J extracted three tests for the reopening of a party's case before judgment is delivered. These were that fresh evidence should only be admitted where:

(a) the fresh evidence is so material that the interests of justice require it to be admitted;

(b) the evidence if believed would most probably affect the result;

(c) the evidence could not by reasonable diligence have been discovered before.

However, Muirhead J also added one further category (at 614), namely where inadvertence was established, "provided the evidence was clearly admissible, could be admitted on conditions which ensured no prejudice to the other party by reason of its introduction at a late point of time and provided always that interests of justice so require". These principles were adopted by Legoe J in Footersville Pty Ltd v Miles (1986) 41 SASR 211.

The general principle in deciding whether or not a case should be reopened has been that if the decision not to call evidence is a deliberate decision of counsel, a trial should not be reopened: Hughes v Hill [1937] SAStRp 43; [1937] SASR 285; Barker v Furlong [1891] 2 Ch D. 172. However, it would seem that this factor is not as decisive as it once was. In Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471 Clarke JA said, at 478:

"The principle which should guide the court in determining whether to grant an application for leave to re-open is whether the interests of justice are better served by allowing or rejecting the application as the case may be. No doubt it is relevant to take account of a number of matters such as likely prejudice to the party resisting the application and the reasons why the evidence was not led in the first place, but there is not, in my opinion, any hard and fast rule which requires the court to reject an application where the decision not to call the witness in the party's case was a deliberate one. Of course that does not mean that that is not a very relevant consideration. It is. Where for instance, a decision was based on tactical grounds it may be difficult to resist the conclusion that the interests of justice were better served by the rejection of the application. But even in that circumstance there may be cases in which it is felt that the client whose application it is should not have to suffer for his or her counsel's deliberate decision. Where the decision is not made for tactical reasons and is based on a mistaken apprehension of the law or the fact the case is more appropriately to be considered as one in which the application has resulted from an error by counsel."

See also Ljoljic v Sherlock (No 2) (1990) 157 LSJS 463, Prior J at 465. Mullighan J in The Duke Group v Pilmer (No 6) (1997) 193 LSJS 204 at 212 concluded that "... the guiding principle in the present circumstances is the obligation to do justice". That must always be the overriding principle. In each case, there will be different considerations which must be brought to bear on its application.

In this case, the trial Judge never properly addressed the right questions in ruling on the appellant's application. He never resolved whether or not the omission by counsel for the appellant was due to inadvertence or was a deliberate choice - a factor highly relevant to the ultimate decision on reopening. By the time he came to consider the issue, his Honour was deflected by considering the respondent's application and the possibility of both parties seeking to overcome their respective shortcomings which had already been the subject of his reasons for decision. The trial Judge ought to have dealt with the appellant's application to reopen before reasons for decision were published, thus avoiding the consequences referred to by his Honour that further evidence might then require an alteration of those reasons.

As it was presented to him initially, the appellant's application was merely to recall Mr Hines for the purpose of saying whether or not the appellant had been paid for the shipment. That omission might well be explained, as it was, by inadvertence. If that were all, justice could have been done by granting the application on terms as to the respondent's costs of the necessary adjournment.

However that may well not have been all. As the reasons of the trial Judge show, in the eyes of his Honour the appellant had other difficulties in proving its loss. Had the trial Judge dealt with the appellant's initial application when he should have, some of these perceived difficulties may well have been revealed in the course of argument. The appellant's application may well have been expanded to cover some or all of the deficiencies identified by the trial Judge in his reasons. One cannot be certain of this; it is necessarily speculative. But at least his Honour's reasons give some indication of what he may have been thinking at the time. If he had allowed the appellant to proceed with its initial application, it may well have been seen not to resolve the appellant's difficulty in the light of other unproven facts. That in turn may have prompted a further or expanded application by the appellant to rectify other difficulties. Those omissions may or may not have been due to oversight or incompetence. The difficulty is that we shall never know, as the appellant has now been fully alerted to his Honour's thinking and to other perceived difficulties.

In determining whether or not to allow the application when it was first made, the trial Judge should have required the appellant to identify precisely what evidence was to be led and on what topic or topics, in order to assess the propriety of the application and in order to set the parameters of the further evidence in chief if the application were to be granted.

By not dealing with the application when he should have, the trial Judge allowed irrelevant factors to intrude into the decision to refuse the application. Normally, the judgment should be set aside and the matter remitted to the trial Judge to hear and determine the appellant's application to reopen. Ideally, that should be decided as if the trial Judge had not published his reasons. However, to do so would inject an air of artificiality into the proceedings. In this case it will also create a further injustice.

The plaintiff is now alerted to a number of perceived difficulties in its case. It would now approach any application to reopen with the great benefit of hindsight, and of the deficiencies revealed in the trial Judge's reasons. This may well be a forensic benefit which the plaintiff would not otherwise have had. The plaintiff would therefore have a significant advantage not afforded to the defendant, whose evidentiary case was also found by the trial Judge to be deficient, in respect of the alleged incorporation of the terms of the Bill of Lading into the contract.

It can be said, with some justification, that if the appellant is now to have the benefit of reopening its case, the respondent should not be prejudiced because of that. After all, as the trial Judge observed, the case was fought largely on technical points of proof. If the appellant is to be permitted some latitude, the respondent should at least be permitted the same latitude.

If the appellant's case were reopened, the respondent would have to be allowed to reopen its case, at least to answer any further evidence led by the appellant. There is no appeal by the respondent against the trial Judge's refusal to allow it to reopen its case, but in my opinion, in the unusual circumstances of this case, the interests of justice would require that the respondent be permitted to reopen its case if the appellant is now permitted to reopen on matters which have been revealed to it by the trial Judge's publications of reasons.

This litigation has had a tortuous history: see Mediterranean Shipping Company SA v Hines Exports Pty Ltd [1999] SASC 52, an unreported decision of Nyland J in this Court. The history both before and since that decision reflects poorly on the advisers of both parties, and can only bring the administration of justice into disrepute. It is tempting to say that the litigation should now be brought to an end, and that matters should remain where they stand. However, to do so may well compound one injustice with another.

I am persuaded that, in the circumstances of this case and in the interests of justice, both parties should be allowed to call such further evidence as they may be advised. This will inevitably require the trial Judge to revisit his reasons, but that is a product of the earlier procedural failure. However, a number of qualifications need to be placed upon such reopening.

In the first place, any reopening must be within the confines of the present pleadings. Secondly, as in any reopening case, either party wishing to take advantage of such reopening should be required to state to the trial Judge with some precision what further evidence it proposes to call, and on what nominated topics. The evidence-in-chief then led would have to be confined to those topics, unless leave of the trial Judge were obtained to extend the scope of such evidence. Thirdly, cross-examination would inevitably be at large: R v Beckett [1986] Qd R 170; Wallace v Wallace [1899] VicLawRp 165; (1898) 24 VLR 859.

2. That the trial Judge's orders made on 8 August 2000 be set aside.

3. That the matter be relisted for trial before the trial Judge, and that both parties be at liberty to reopen their respective cases and adduce such further evidence as they may be advised, in accordance with the qualifications expressed by this Court in its reasons for decision now published.

I should say something further about the respondent's Notice of Alternative Contention. If the case were to be remitted to the trial Judge, the respondent's alternative contentions could well be affected by any evidence led, even if it were only the appellant who reopened its case. In the circumstances, we did not hear argument on the respondent's alternative contentions. For my part, that should not be taken as any indication of any lack of substance in those alternative contentions. That too is a matter which can be revisited by the trial Judge. It is sufficient to say that the contention on its face may not be without substance[5].

[1] PS Atiyah and J N Adams, The Sale of Goods (9th ed. 1995) 379.

[2] A L Tyree, Sale of Goods (1997) 206.

[5] See: M Davies and A Dickey, Shipping Law (2nd ed 1995) 267-268; Pyrene Co v Scindia Navigation Co [1954] 2 QB 402.

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