New Zealand Pelt Export Company Limited v Trade Indemnity New Zealand Limited [2004] VSCA 163

7. This is an appeal from a judgment given in the Commercial and Equity Division on 18 December 2002. The Appellant's claim was for indemnity pursuant to a Trade Indemnity policy of insurance issued by the Respondent. The Appellant contended that it had sold lamb skins to a Turkish company called Teodem Deri Sanaye Ve Ihracat Asserbest ("Teodem"), for which Teodem failed to pay, and that the outstanding debt was an Insured Debt within the meaning of the policy[1]. Alternatively, the Appellant said that the Respondent was estopped from denying that the debt was an Insured Debt within the meaning of the policy. The judge dismissed the claim.

10. It was not in issue below that the transactions in question arose out of the trade specified in Section 1 of the Schedule (namely, "skins and hides") or that Teodem was an Insured Buyer or that the amount in question did not exceed the Permitted Limit for Teodem. In effect there were only two questions for determination: whether the Appellant had sold the skins to Teodem; and, if there were no sale, whether the Respondent was estopped from denying that the Appellant had sold the skins to Teodem.

13. 4 The judge answered the first question in the negative. Her Honour found that an English company called Kidort Limited sold the skins to Teodem and that, although Kidort later "discounted" or "transferred" the sales to the Appellant, the discounts or transfers did not occur until after risk and property in the skins had passed from Kidort to Teodem. It followed in the judge's opinion that, whatever the nature of the transaction as between the Appellant and Teodem, it could not have been one of sale pursuant to contract of sale.

16. Thus as her Honour expressed that part of her reasoning:

"There was no issue that the sales to Teodem occurred in a particular fashion. Teodem negotiated with Brian Conroy to buy product sourced in the United Kingdom. This product was duly shipped to Teodem under an invoice issued by Kidort and bills of lading also produced by that company. Subsequent to the shipping of the goods a decision was taken to transfer the sale from Kidort to the plaintiff. Hence both in fact and at law [the goods were sold CIF, that is Cost, Freight, Insurance where risk passes to the buyer at the point of lading][2] the goods had passed to Teodem before the plaintiff issued its invoice."

"The terms of the contract of insurance in question are unambiguous and indeed standard. It is the plaintiff's claim that the meaning of such terms can be stretched to take on the nature of the trading arrangements in question. Such arrangements were entirely idiosyncratic and went beyond all notions of typical industry practice. They were effected in a highly unusual and indeed somewhat nefarious manner, without the consent or knowledge of the defendant. The terms of the policy being clear, and the meaning sought to be imported by the plaintiff not being reflective of a generalised industry practice and usage the plaintiff's claim in contract therefore fails."

22. As to the Appellant's alternative contention of estoppel, her Honour found that while the Respondent had on occasion agreed to the swapping of permitted limits (sometimes called "credit limits") between the Appellant and Kidort and another associated company called South Pacific Sheepskins Pty Ltd ("Southpac"), the Respondent did not have specific knowledge of the manner in which the transactions in question were discounted to the Appellant, and therefore that it could not be said that the Respondent induced by explicit or tacit approval an assumption on the part of the Appellant that the transactions would be treated as sales pursuant to contracts of sale within the meaning of the policy. It followed in her Honour's opinion that an essential ingredient of the case in estoppel had not been made out.

"...It is the plaintiff's case that the defendant permitted the sales transactions as described. Certainly the defendant did on occasion agree to credit swapping of unused credit limits between the related companies, and in a sense this arrangement was a continuation of the recognition of the companies functioning as a trading group. As a[d]verted to the notion of credit swapping only came into operation in any meaningful sense after the splitting of the policies in 1995 and after this point in time the plaintiff's case rests on documentation which only supports the finding that the defendant whilst being requested to authorise swaps had no specific knowledge of the manner in which the related companies were doing business. Given this lack of knowledge it cannot be said that the defendant induced either through explicit or tacit approval the assumption or expectation of the plaintiff that its dealings would be covered by the policy."

29. On this appeal the Appellant contends that the judge was wrong on both issues. It argues that the judge erred in holding that property in the skins passed from Kidort to Teodem. It says that property passed from Kidort to the Appellant and then from the Appellant to Teodem, and therefore that the Appellant did sell the skins to Teodem. Alternatively, as to the estoppel question, the Appellant contends that the judge erred in equating the sort of detail needed to be disclosed in relation to the discounting of sale transactions with the type of detail ordinarily disclosed in relation to the swapping of permitted limits. In the Appellant's submission the evidence was clear that, although permitted limits were only allowed to be swapped after the disclosure of full details, the Respondent customarily dealt with the Appellant on the basis that any sales transferred by one company to another were to be treated as sales made by the transferee company within the meaning of the policy, provided that the sales were within the permitted limit of the transferee company for the buyer in question.

32. It was assumed for the purposes of the appeal, as it was assumed below, that the applicable law is the same as the law in force in Victoria.

36. The undisputed facts below were that one Brian Edward Conroy was closely associated with and in effect controlled the three companies which, at all relevant times, were engaged in the international sheepskin trade. Kidort which was incorporated in the United Kingdom was Mr Conroy's family company and Mr Conroy held all of the shares in it. The Appellant was incorporated in New Zealand and Mr Conroy was a director of and for some time held 50% of the shares in the Appellant. In 1997 he transferred 20% of the shares to Phil Rzoska, who was a trusted and long serving employee of the company who was appointed as managing director of the company, and Mr Conroy transferred the remainder of his shares to Mr Conroy's children. Southpac was formed by Mr Conroy in 1990 with the aid of Marc and Luke Kivlinghon and it conducted a business based in Melbourne but controlled from London of procurement, processing and sales. Each of the three companies had its own business objectives and was administered as an unconnected unit in the sense that each traded autonomously using its own capital and bank facilities and made profits and losses and without right of contribution from the other companies. But commercially they operated as a group and in that sense they were associated. At one stage Mr Conroy was the managing director of each of the companies. When that was so the Appellant and Southpac contributed a management charge for the benefit of Mr Conroy's services.

39. During 1990 Southpac took out a policy of credit insurance with Trade Indemnity Australia Limited ("TIAL"). In 1990 that policy was extended to cover Southpac and in March 1992 it was extended to cover Kidort. The policy was thereafter renewed annually until 1995. Under the policy in that form there was a global monetary endorsement limit and the three companies were covered collectively in total up to the amount of the limit. So long as that was so it did not matter which company transacted a trade. The trade was covered provided it was within the global permitted limit for the buyer concerned.

42. Those arrangements changed in 1995 with the growth of the three companies. Southpac retained its original policy but the Appellant and Kidort were removed as joint insureds and took out individual policies. The Appellant took out a policy written by the Respondent but it was managed in Melbourne by TIAL and it was a term of the policy that Kidort and Southpac continue to hold policies with TIAL.

45. There was then no longer any global limit for the group. Each company was assigned an individual limit representing part of the old global limit. But Mr Conroy did seek and obtain from Messrs Wheate and Gilbert of TIAL and the Respondent an assurance that the companies would be permitted to swap part or all of their individual limits with each other.

48. It was Mr Conroy's custom to negotiate sales of UK skins in the name of Kidort and sales of Australian skins in the name of Southpac. He did that because those were the companies that sourced and purchased the skins in the relevant markets. But since those companies sometimes lacked credit with which to fund the purchase of skins, Kidort and Southpac not infrequently transferred or "discounted" sales to another company or other companies in the group. The final decision to transfer a Kidort sale in that fashion was usually made by Mr Conroy or by Don Nunn or Chris Conroy on behalf of Kidort after consultation with Mr Conroy.

51. At the same time it became commonplace for Mr Conroy to apply to the Respondent from time to time and for the Respondent to give its approval for one of the companies to transfer part of its permitted limit for an Insured Buyer to another company: by reducing the transferring company's permitted limit for the Insured Buyer in question and increasing the transferee company's permitted limit for that Insured Buyer by the same amount.

54. The three companies first began to trade with Teodem in 1991. At that time payment terms were either cash against documents or confirmed irrevocable letter of credit incorporating deferred terms. Once the three companies established their own insurance policies in 1995 they were able to offer Teodem open account terms on a substantially improved basis of greater limits and payment at up to 120 days. Mr Conroy gave evidence below, which was not disputed, that he told Mr Demir of Teodem that the seller under any sale transaction could be any one of the three companies, depending upon which company had available bank credit at the time, and that Mr Demir had said that he would leave it to Mr Conroy to decide which company was to be the seller. According to Mr Conroy, Mr Demir told Mr Conroy that he was free to replace a seller at any time before goods were landed or the documents in respect of the goods were accepted.

57. The sales in question occurred between June and August 1998, under four separate invoices as follows:

(a) Invoice number 2144 for a consignment of skins received on board on 8 June 1998 with payment due on 9 October 1998 under a Bill of Exchange maturing on that date. It was for the amount of £49,500.00. Teodem paid that invoice after the institution of the proceeding and, consequently, the claim on that invoice was not pursued at trial. (b) Invoice number 2145 for a consignment of skins received on board on 9 June 1998 with payment due on 9 October 1998. Once again for the amount of £49,500.00. (c) Invoice number 2205 for a consignment of skins received on board on 31 July 1998 with payment due on 28 November 1998. The amount due was £49,304.00. (d) Invoice number 2211 for a consignment of skins received on board on 8 August 1998 with payment due 5 December 1998. The amount due was £205,920.00.

61. Mr Conroy gave evidence that he made a decision in advance of completing the sales that the sales should be transferred to the Appellant. He deposed that he spoke by telephone to Mr Rzoska of the Appellant early in March 1998, and asked if the Appellant would have available credit to discount the sales, and that Mr Rzoska agreed that he would do the business.

"36. The transfer of sale was purportedly effected by Kidort forwarding a blank replica invoice to the plaintiff and the plaintiff then producing to its banker an identical invoice, except this time on its letterhead and relevant shipping documents in order to obtain discounted finance for the sale. It will be observed each transaction involved the production [of] three invoices. 37. Once finance was obtained from the banker Westpac this money was then transferred to Kidort less fees and interest. The plaintiff was paid a margin on these transactions of between one and two percent."

69. The argument which the Appellant now seeks to put on the first leg of this appeal is different to the way in which the case was put below. The case as pleaded was that the Appellant was the seller of the goods within the meaning of the policy because it sold the goods to Teodem under a contract of sale made by Mr Conroy on behalf of the Appellant or alternatively by Mr Conroy on behalf of Kidort as agent for the Appellant. Early in the trial, counsel for the Appellant applied for leave to amend to allege that Kidort entered into the contract on its own behalf and that the contract was later novated or assigned to the Appellant. But that application was refused because the particulars which were provided were inadequate. The judge invited counsel to apply again when proper particulars had been formulated. But further particulars were not provided and there was not any further application to amend. Rather, as the end of the trial drew near, counsel for the Appellant expressly abandoned the allegation of agency and at the same time in effect abandoned any suggestion that the Appellant was otherwise necessarily to be regarded as a seller strictly so called.

72. Consequently, as the trial of the case concluded, the argument was simply one of contractual construction. In his final address to the judge, counsel for the Appellant put the Appellant's position as follows:

"Could I just identify for your Honour what is not pursued, and that is the agency claim, your Honour. As I flagged in opening, given the evidence it's not possible to pursue that claim. What is pressed is the contract case purely on the construction of the policy, that there was cover, and the estoppel case."

That contention was developed in the Appellant's final written submissions to the judge, as follows:

"16. In construing the Policy, and ascertaining the presumed common intention of the parties the Court will have regard to the facts known to both parties and the aim of the contract: Codelfa Construction Pty Ltd v State Rail Authority [1982] HCA 24; (1982) 149 CLR 337 at 351-352; DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 429; Greig & Davis "The Law of Contract" (1987) pp 414-417. The mutually known facts here were that cover applied [to] NZPE even though the sale was arranged by Kidort and even though the goods were sourced from the United Kingdom. It was also a mutually known fact that the insurance was in respect of the risk of Teodem not paying for the goods (see Gilbert XXN p 346-349, 352-353) - that was also the aim of the insurance contract."

In effect what was being said was that, regardless of the correct legal characterisation of the transaction, the transaction should be seen upon the proper construction of the policy to fall within the ambit of the policy.

79. Contrastingly, the Appellant now seeks to argue on the first leg of this appeal that although Kidort agreed as principal to sell the goods to Teodem, it retained a jus disponendi by taking the bills of lading to its own order and that, while the goods were in transit from England to Teodem in Turkey, Kidort sold and transferred property in the goods to the Appellant, by delivering to Kidort the pro forma invoice and one of the original parts of the bill of lading. That means, it is said, that the Appellant became the seller strictly so called and on that basis that the transaction fell squarely within the ambit of the cover.

82. The difference between the way in which the case was put below and the argument which the Appellant now seeks to advance on appeal was foreshadowed some time before the hearing of the appeal in an application to amend the Notice of Appeal. The difference also resulted in counsel for the Appellant making application during the hearing of the Appeal for leave to amend the Appellant's Reply to allege novation. At the same time counsel for the Appellant sought to maintain that it was unnecessary and immaterial for the Appellant to establish a novation. Their contention was that it was enough that the Appellant show that Kidort sold the goods to the Appellant and that the Appellant then resold the goods to Teodem, and that that could be done without consideration of whether the Appellant's sales to Teodem discharged Kidort from its obligations to Teodem or were in breach of Kidort's obligations to Teodem. It was really only out of an abundance of caution, they said, that they sought leave to argue that novation as a relevant consideration.

85. As might be expected the applications to amend the Notice of Appeal and pleadings were opposed on the basis that a party to litigation is ordinarily bound by the conduct of its case at trial and that it would be unfair to allow by amendment the allegation of a new matter whereby the Respondent would be subjected virtually to a new trial on an issue different from that already litigated[3].

88. In turn counsel for the Appellant sought to overcome that objection by arguing that the Appellant's new argument is simply a more detailed and precise formulation of the fundamental contention advanced below - that the Appellant sold goods to Teodem under a contract of sale - and that all of the detail now sought to be relied upon in support of that contention was advanced below in the Appellant's pleadings and in Mr Conroy's witness statement and in the Appellant's final submissions to the judge.

The pleadings, evidence and submissions below

92. There is some truth in what is said on behalf of the Appellant. It was pleaded in the Amended Statement of claim, among other things, that :

"7. In or about June and August 1998 the plaintiff entered into contracts with Teodem, for the supply to Teodem of new season lamb skins ("the Relevant Goods")... 8. The Relevant Goods were sold by the plaintiff to Teodem and despatched to Teodem within the Policy Period specified in Section 2 of the Schedule to the Policy pursuant to a contract of sale providing for repayment of the debt upon the terms specified in Section 5 of the Schedule to the Policy and official limit endorsement form number 724407ME issued by the defendant on or about 3 March 1998. 9. The debts owing by Teodem to the plaintiff, were Insured Debts for the purposes of the Policy."

96. It was also alleged in the particulars given under paragraph 8 of the pleading that each of the contracts was partially oral and to that extent constituted of conversations between Brian Conroy on behalf of the Plaintiff and either Teoman Demir or Jack Finzi on behalf of Teodem in or about late May in the course of which conversations Mr Demir or Mr Finzi on behalf of Teodem placed the order for the goods, and in part in writing, and to that copies of the invoices and bills of lading in respect of the Relevant Goods were available for inspection at the offices of the solicitors for the plaintiff.

"2. (c) ... since in or about 1990, the companies had a trading arrangement, the purpose of which was to maximise the companies' trading opportunities ("the Agreement") whereby one of the companies would be selected to sell animal skins sourced from the United Kingdom, Australia or New Zealand to Teodem and other customers. The selection of which of the companies was to be the vendor of the skins was dependent upon which company had bank finance facilities available to discount the invoice in respect of the particular sale... (d) After the skins were shipped by Kidort to the customer as agent of the plaintiff under the Agreement pleaded in sub-paragraph 2(c): (i) the plaintiff would issue and send to the customer an invoice and bill of exchange in respect of the goods shipped by Kidort to the customer; (ii) the customer would accept the bills of exchange in respect of the relevant goods; (iii) the plaintiff would discount the relevant bill of exchange in respect of the Relevant Goods with its banker, Westpac Trust at the earliest opportunity and immediately make payment to Kidort Limited for the Relevant Goods... 3. When the plaintiff was the vendor of animal skins sourced from the United Kingdom that were sent to a non-EEC country (including Turkey), in accordance with the Agreement pleaded in sub-paragraph 2(c), and the established course of conduct between Kidort and the plaintiff, the skins were sent to the customer by Kidort, acting as the plaintiff's agent, generally as "shipper" and with Kidort's name appearing on an "invoice" which was unsigned. 4. The arrangement in paragraph 3 was adopted to facilitate the preparation of documents necessary for Turkish import and UK export requirements, to allow Teodem to begin its import procedures as soon as possible, and to provide the information required by the companies' freight forwarders. PARTICULARS The import procedures required by Turkey and/or the plaintiff's Turkish customers included the production of a health certificate, a customs document AT.R-1, a certificate of origin and a bill of lading... 5. The arrangement in paragraph 3 also avoided the risk of Teodem incurring demurrage. 6. The process outlined in sub-paragraph 2(d) and paragraph 3 above was followed in respect of the supply by the plaintiff to Teodem of the Relevant Goods. 7. The plaintiff will say that it was a term of the Agreement that when one of the companies ("the supplier") supplied goods to another of the companies ("the vendor"), the price negotiated with a third party customer, less a sum of money equal to the discount and other relevant charges would be paid by the vendor to the supplier. The vendor would receive a margin that was negotiated in relation to each transaction or group of transactions... 8. The plaintiff will say that where Kidort was the agent for either Southpac or the plaintiff, Kidort would act as agent only in relation to matters relating to shipping and documentation. 9. The plaintiff will say further that although not required under the terms and conditions of the Policy, the plaintiff obtained from Teodem accepted bills of exchange as payment for the Relevant Goods..."

103. The substance of those paragraphs of the Reply was also verified in Mr Conroy's witness statement, as follows:

"Arrangement of the trade between the Three Companies 70. There was an arrangement between each of the Three Companies that under certain conditions one would trade with the other. 71. This usually occurred because the company that negotiated the sale could not fund the credit terms, but one of the other Three Companies could. The negotiating company would with the agreement of the purchaser sell the goods to the company that had available credit from its banker to finance the sale. This second company would then sell the goods to the final buyer and take a margin on the sale. In this way, the second company would effectively provide finance for the sale. 72. The final decision to transfer product was usually made by me or, in my absence, Don Nunn or Chris Conroy after consultation with me, at or around the time of shipment. There were frequent occasions when it was made after the shipment had left port. Very occasionally an earlier decision by me or Don Nunn or Chris Conroy in my absence, whereby Kidort had already issued their own bills of exchange and invoice, would be rescinded and the sale transferred to another of the Three Companies. In all cases this was because the negotiating company did not have credit available to finance the sale. 73. The bills of lading, certificate of origin, health certificate and Customs form ATR1 were, in the case of a Kidort product destined for non-EEC countries, prepared by or at the general direction of me. For deliveries, from the United Kingdom to other EEC countries, except for a CMR, no export documentation was required. 74. When UK sourced goods were being sold to Teodem, I or one of Kidort's staff at my direction caused a pro forma invoice to be issued by Kidort because it was the shipper. It was my belief that the invoice was required first for Kidort's freight forwarder to prepare Bills of Lading and to supply information for UK statistical analysis (which I believe was completed by UK customs so that it could quantify the United Kingdom's exports), and secondly to facilitate Teodem's import procedures into the free zone of Turkey. If I knew at the time the pro forma invoice was sent that the sale would definitely be a NZPE sale, then the pro forma invoice might be in the name of NZPE. This was very seldom. 75. ... 76. It was the practice of all Three Companies to sign invoices sent to a buyer. These invoices were the demands for payment. An invoice was final only when it was signed. 77. The common understanding between the Three Companies was that when one company could not finance a transaction it would offer it to another one of the Three Companies. In this way, the Three Companies acted as a loose commercial grouping and provided each other with profit opportunities. If one of the Three Companies could not finance a sale it was usual that I or one of the managers of the appropriate company would send a facsimile transmission or call another representative of one of the other of the Three Companies to ask if they could make the sale. This would ordinarily be arranged between me of behalf of Kidort, Nick Atherden or James Inifer on behalf of Southpac and Rzoska on behalf of NZPE. An example of such a communication is my message sent to NZPE by facsimile transmission on 15 January 1998...Rzoska agreed to make these sales and limit was transferred to NZPE By TINZ to cover the sales. ... 80. In the particular circumstances of the sales that are the subject of this proceeding, Kidort offered NZPE the opportunity to make the sales to Teodem. I spoke to Rzoska in or about early March 1998, by telephone, to check that he thought that he would have discounting facilities available in June - August 1998 to trade with Teodem. He told me that he thought that he would. At or about the time of each of the shipments, Don Nunn or I called Rzoska to confirm the details of the sale and to confirm that NZPE was still about to make the sales. He agreed to make the particular sales in these telephone calls. Management of NZPE could, if it so wished, have rejected the offer after assessing its discount facility together with credit insurance cover. 81. Whenever product was sold to one of the Three Companies there was a common understanding on how the sale price would be calculated. 82. It was always intended that the ultimate seller, in this case NZPE, would receive 2% margin together with all charges incurred by it in the transaction. There were occasions when the margin was reduced to 1%." ... 84. My facsimile transmission to Rzoska dated 27 January 1998 explains the arrangement that had been reached for NZPE sales of Kidort sourced goods in 1998 I stated: `Our Spanish business is on fairly tight margins, however for Teodem they are satisfactory. Can I suggest we pick up all of your direct charges and give you 2% for Teodem and 1% for the Spanish? We hope to get some Teodem's away to you by courier tomorrow, with copies by facsimile transmission. For Teodem, I hope that all we will need to send you is just one original copy of the B/L plus an Invoice. The boats are almost there and to avoid demurrage we will need to let Teodem have the other original B/L's plus CoO, HC etc. I presume that you will make out your own draft for acceptance. We will prepare an Invoice on your letterhead and on Teodem so you will not have to bother doing too much paperwork. Is there anything else we need to do or supply. Effectively you will be discounting on an Invoice and Draft, supported by an original copy of the Bill of Lading.' ... Trading terms with Teodem 98. When the Three Companies first started trading with Teodem in 1991, payment terms were either cash against documents, where credit insurance was desirable, or confirmed irrevocable letter of credit incorporating deferred terms. Such credits could be discounted through our bankers on a without recourse basis and so credit insurance was not required for these instruments. 99. The terms of payment were soon modified in 1992 to trade with Teodem upon open account payment terms of up to 90 days. The arrangement was essential if the level of trade activity was to be developed. Trade with Southpac or NZPE was by a bill of exchange. 100. In the later part of 1995, as a consequence of the Three Companies having their own policies, the Three Companies were able to offer Teodem open account terms upon a substantially improved basis being greater limits and up to 120 days. I remember telling Demir [of Teodem] when in Istanbul in or about 1995 that the seller forthwith could be any one of the Three Companies depending upon the company that had the available bank facility supported by credit insurance cover. 101. Demir said in response that he left it to me to decide which company was the seller. He said that I could replace a seller at any time before the goods were landed or the documents in respect of the foods were accepted. He was always anxious for the delivery of the product and this impatience did not always give me sufficient time to decide absolutely the funding arrangements supporting the sale. An example of Teodem agreeing to a change in the vendor of goods arose from my request to transfer Kidort sales to NZPE [in a fax of 10 June 1995]. 102. It was agreed with Teodem in or about 1992, orally to the best of my recollection that the terms and conditions of the International contract No. 6 - Hides and Skins and SHALTA Arbitration Rules would apply. This was as subsequently confirmed in Teodems' letter to NZPE dated 21 September 1999... Routine of taking orders from Teodem 103. The routine for placing order upon a bulk pre-season basis was as follows... [ there was here set out the way in which negotiations were conducted between Kidort and Teodem] 104. Once the negotiations were completed for a consignment, Teodem usually wanted delivery as soon as possible. The product had to be acquired and the shipping formalities completed. The company purchasing the product (either Kidort for UK skins or Southpac for Australian skins), did not always have the bank finance in place to discount the trade. In those circumstances, in the case of UK skins, I had to make arrangement for one of the other Three Companies to buy and then resell the product to Teodem. This occurred in the manner described under the heading "Arrangement of trade between the Three Companies". 105. ... 106. When Kidort product was to be sold by NZPE, I would arrange with Rzoska to submit to Teodem, through the banking system, an invoice together with a bill of exchange for acceptance. Teodem would then accept the bill of exchange and return it to his bankers., which I understand held it until maturity as agents for Westpac Trust. I believe that this occurred in relation to the bills that are the subject of this proceeding.

120. ... 121. The above negotiations referred to products supplied under invoices 2144 and 2145. Having obtained by telephone Rzoska's final agreement to the sales being made by NZPE to Teodem at or about the time of the goods being shipped, Kidort arranged to have prepared the shipping papers consisting of bills of lading , ATR1, certificates of origin and health certificates on behalf of NZPE. Rzoska had previously agreed in principle to make sales in June - August 1998 as outlined in paragraph 80 of this statement. 122. Unsigned Kidort pro forma invoices were prepared by a Kidort employee in accordance with my instructions and submitted with the other papers by facsimile transmission and courier to Teodem. A copy of the documents sent by Kidort to Teodem are set out at 1384 - 1385 and 1393- 1395 of the court book [they included copies of on board bills of lading to the order of Kidort and invoices on Teodem on the letterhead of Kidort] 123. Copies of some of the documents sent by Kidort to Teodem were sent to Rzoska immediately after preparation of the shipping papers to permit him to prepare invoice and bills of exchange and to discount those bills of exchange and to sent them to Yapi ve Kredi Bankasi AS ("Yapi") for Teodem's acceptance. The copy of the invoices that Kidort sent to Rzoska had a blank header so that Rzoska could superimpose this onto NZPE letterhead.... 124. The goods sold under these 2 invoices were shipped on or about 12 June 1998. NZPE then discounted bills of exchange through Westpac Trust and transferred the discounted amount, minus certain charges to Kidort on or about 24 June 1998." Relevant Sales - Invoice 2205 [The details given here were similar to those for the other invoices except that the goods sold under this invoice were said to have been shipped on or about 31 July 1998 and Rzoska is said to have discounted a bill of exchange and remitted the discounted proceeds to Kidort on or about 14 August 1998.] Relevant Sales - Invoice 2211 [The details given here were similar to those for the other invoices except that the goods sold under this invoice were said to have been shipped on or about 12 August 1998 and Rzoska is said to have discounted a bill of exchange and remitted the discounted proceeds to Kidort on or about 18 August 1998.]"

111. The points made in Mr Conroy's witness statement were also reiterated in the Appellant's final written submissions to the judge, as follows:

"13. For the 1998 trading year, what would occur was as follows. An agreement was reached between Kidort and New Zealand Pelts on or about 27 January 1998 for the transacting by New Zealand Pelts of business arranged by Kidort. At or about the time of the goods being shipped or shortly thereafter, Conroy on behalf of Kidort would telephone Rzoska [of New Zealand Pelts] and obtain Rzoska's final agreement "to the sales being to Teodem". The goods were shipped by Kidort and an unsigned Kidort invoice was prepared. The unsigned invoice was required based on Conroy's understanding that it was needed in order for Kidort's freight forwarder to prepare bills of lading and to supply information for UK statistical analysis. It was not a demand for payment . Kidort would arrange to have prepared the shipping papers consisting of the bill of lading and other documents. A blank invoice would be sent through to the Plaintiff with a copy of the bill of lading. Mr Rzoska would prepare an instruction to Westpac to prepare a bill of exchange. The bill of exchange would then be prepared, sent to Teodem with a signed NZPE invoice and accepted by Teodem. Teodem would subsequently make payment for the goods, which payment would be made directly to Westac. When the amount was paid the amount of interest owed to Westpac would crystallise and would be entered in NZPEs cash book. ... Construction of the Policy 15. The Plaintiff [therefore] "sold" goods to Teodem and "despatched" them to Teodem within the meaning of the Policy**..."**

116. Despite the range of material in evidence below, however, the principle is clear that a new point will not be allowed on appeal if there is any possibility that evidence might have been given below that prevented the point succeeding. The High Court's decision in Coulton v Holcombe demonstrates the point. The question there was whether an application for a licence to divert river water contravened the Water Act 1912 (NSW). The issues at trial were confined to the formal validity of the application and whether a declaration that had been made under s.20Y of the Act precluded the Commission dealing with the application. There was no suggestion at trial that the s. 20Y declaration was invalid. But on appeal the respondent sought to contend that the declaration was not a valid exercise of the powers conferred on the Commission by the Act. It was held that it was not entitled to do so, because it was plain that evidence might have been given which prevented the point from proceeding.

119. Similarly in this case, the question before the judge was whether the Appellant sold the goods to Teodem. Relevantly, the issues were confined to whether it was Kidort or the Appellant that had sold the goods to Teodem. The case was never put on the basis that Kidort agreed to sell the goods to Teodem but reserved a jus disponendi and in exercise of that right sold the goods to the Appellant. If the point had been taken it is impossible to suppose that evidence might not have been given that prevented the point succeeding.

122. Counsel for the Appellant submitted that the Respondent had not identified with precision any additional evidence that might have been adduced below. But even if that be true I do not think it matters. To allow the Appellant to rely upon the new point would be to allow the Appellant to make use of the evidence in a way which was not and could not have been contemplated at the time of trial and which, if it had been contemplated at that time, may well have turned out to be different. By any measure the facts of this matter were complex. The judge therefore made a significant number of findings of fact. But her Honour did not make findings upon facts which are of critical significance to the Appellant's new arguments. Nor could she have been expected to do so. As is apparent from her Honour's reasons for judgment, and may be confirmed by perusal of the transcript of the trial, it was never suggested that they were to be regarded as facts of significance. The only way now to fill the gap would be for this court to make its own findings on the basis of the evidence before it. But we could not do that without drawing at least some inferences on the basis of evidence that may have come out differently if the point were taken below.

125. For example, counsel for the Respondent said and I accept that he allowed to go into evidence at trial a number of documents which were not duly proved, which were innocuous enough as the pleadings stood but to which he may well have taken objection if he had known that they could be used to establish the existence of the alleged jus disponendi or the passing of property to the Appellant or a novation of the contract between Kidort and Teodem. Equally, counsel for the Respondent says and I accept that if the now alleged jus disponendi, passing of property to the Appellant, and novation had been in issue at trial, he may well have wished to cross-examine the Appellant's witnesses upon facts and documents that were in evidence in ways which were simply not to the point when the case was as conducted below.

128. Examples of the sorts of documents allowed to go into evidence, and to which objection might have been taken if the issues had been as the Appellant now seeks to make them, include photocopies of the front side of bills of lading and bills of exchange without production of the reverse sides (on which it may be supposed that any indorsements would have appeared). Hence if the Appellant were permitted to advance the arguments for which it now contends, the Respondent would be at risk of inferences being drawn on the basis of objectionable and untested copy documents that bills of lading were indorsed to the Appellant and that bills of exchange drawn by the Appellant were accepted by Teodem.

131. Examples of facts upon which counsel for the Respondents may well have wished to cross examine the Appellant's witnesses further or differently included the dates of arrival of goods in Turkey, compared to the dates upon which the Appellant seeks now to contend that property in the goods passed first from Kidort to the Appellant, and the dates of acceptance if any by Teodem of bills of exchange drawn by the Appellant, compared to the dates on which Teodem took delivery of the goods in Turkey. Those matters would be of critical importance in the way in which the Appellant seeks now to put its case because, if Teodem obtained possession of the goods before the date on which property is alleged to have passed from Kidort to the Appellant, it would mean that notwithstanding any jus disponendi, Kidort had allowed property to pass directly from Kidort to Teodem (and hence that the Appellant could not have been the seller of the goods), and because, if Teodem obtained possession of the goods before acceptance of the bills of exchange drawn by the Appellant, it would mean that Teodem took property under its contract with Kidort as opposed to any contract with the Appellant supposed to have been constituted by acceptance of bills of exchange drawn by the Appellant for acceptance by Kidort (and hence again, that the Appellant could not have been the seller of the goods).

134. Examples of documents which were admitted into evidence and to which objection could not have been taken, but upon which counsel for the Respondent may well have wished to cross examine the Appellant's witnesses in a fashion that was not relevant while the case was as conducted below, included the fax of 10 June 1995 which was referred to in paragraph 101 of Mr Conroy's witness statement, the fax of 27 January 1998 which was referred to in paragraph 86 of Mr Conroy's witness statement, a fax of 24 March 1998 from Mr Conroy of Kidort to Teodem concerning marine insurance and a fax of 24 March 1998 from Mr Conroy of Kidort to Teodem concerning the acceptance of bills of exchange.

137. The fax of 10 June 1995, which was referred to in paragraph 101 of Mr Conroy's witness statement, was as follows:

"WE ARE STRUGGLING TO FUND OUR BUSINESS AT KIDORT WHILE WE ARE GOING THROUGH THE TRANSITION PERIOD OF MOVING OUR BANKING FROM BARCLAYS BANK TO NATONAL WESTMINSTER BANK. THIS PROCESS WILL NOT BE COMPLETE UNTIL SOMETIME IN JULY. TO OVERCOME OUR PRESENT SHORT TERM DIFFICULTIES WE ARE USING SURPLUS DISCOUNT FACILITIES WE HAVE WITH OUR SUBSDIARY COMPANY, NEW ZEALAND EXPORT CO. LTD., ("NZPE") IN AUCKLAND, NEW ZEALAND. WE HAVE ALREADY SENT YOU INVOICES AND DRAFTS FROM LONDON FOR INVOICES 1210, 1226 AND 1228, WHICH ARE THE 6 -FCL, TASMANIAN SPRING LAMBSKINS COVERED BY CONTRACTS S300/305. WOULD YOU PLEASE IGNORE THESE KIDORT INVOICES AND DRAFTS. SOON YOU WILL BE RECEIVING INVOICES FROM "NZPE" WITH NEW DRAFTS FOR YOUR ACCEPTANCE THOUGH WESTPAC/AUCKLAND. PLEASE ACCEPT THESE DRAFTS WHEN THEY ARRIVE AND ON THE MATURITY DATES SETTLE WITH "NZPE" DIRECT. YOU ALREADY HAVE THE DOCUMENTS, INDEED YOU SHOULD BY NOW ALREADY HAVE THE CONTAINERS, AGAINST INVOICE 1210. LATER THIS WEEK WE WILL SEND YOU FROM LONDON THE FULL SET OF NEGOTIABLE DOCUMENTS FOR INVOICE 1228 (MORETON BAY DUE 18/6/95). THEN THE FOLLOWING WEEK, WHEN WE TAKE THEM OUT OF THE BANK, WE WILL SEND YOU EVERYTHING FOR INVOICE 1226 (BRANDENBURG DUE 5/7/95). I TRUST THIS IS ALL CLEAR AND ACCEPTABLE TO YOU. THANKS FOR YOUR HELP IN THIS MATTER."

141. Granted that the fax precedes by a number of years the dates of the contracts in question, it remains that Mr Conroy said in his witness statement that instances of the sort of thing referred to in the fax occurred from time to time, and therefore it is possible that it may have occurred at the relevant time. Even if it did not, the apparent willingness of Kidort to send bills of lading to Teodem and to allow Teodem to take possession of goods before acceptance of any bill of exchange - be it drawn by Kidort or one of the other companies - may well be relevant to whether Kidort intended to pass property in relevant to Teodem before it could have passed to the Appellant. But, as the case was conducted below, that was not regarded as relevant.

144. As has already been noticed, it was said in the fax of 27 January 1998 from Mr Conroy to the Appellant that:

"... We hope to get some Teodem's [scil. contracts of sale from Kidort to Teodem] away to you by courier tomorrow, with copies by fax. For Teodem, I hope all that we will need to send you is just one original copy of the B/L, plus an Invoice. The boats are almost there [scil. to Turkey] and to avoid demurrage we will need to let Teodem have the other original B/L's plus CoO, HC etc. I presume you will make out your own draft for acceptance. We will prepare an Invoice on your letterhead and on Teodem (sic) so you will not have to bother doing too much paperwork. Is there anything else we need to do or supply? Effectively, you will be discounting on an Invoice and Draft, supported by an original copy of the Bill of Lading." (Emphasis added).

148. Although that fax too predates the relevant time and relates to contracts other than those which are the subject of the claim, it is plain from the evidence of Mr Conroy earlier set out that the fax epitomised the pattern followed in later transactions and, in light of the argument which the Appellant now seeks to propound, it is significant that it is said in the fax that parts of the bills of lading should be made available to Teodem immediately. It bespeaks an intention that property pass directly from Kidort to Teodem, but that point was not examined.

151. In the fax of 24 March 1998 from Mr Conroy to Teodem concerning marine insurance, it was said:

"BECAUSE WE HAVE INSUFFICIENT DISCOUNT FACILITY LEFT WITH OUR BANK IN LONDON, AS YOU KNOW KIDORT HAVE DISCOUNTED THEIR INVOICES 2028 AND 2033, ON TEODEM, THROUGH OUR SISTER COMPANY IN NEW ZEALAND (NZPE) [scil. the Appellant]. YOU RECEIVE ALL OF THE USUAL DOCUMENTS DIRECT AND NZPE ONLY SEND YOU AN INVOICE AND DRAFT FOR ACCEPTANCE THROUGH YOUR BANK. ALTHOUGH THE GOODS ARE INSURED UNDER OUR (KIDORTS) ALL-RISKS POLICY WE NEVER SEND YOU A CERTIFICATE AS THERE IS TOO MUCH WORK INVOLVED IN DOING THE PAPER WORK. WE ONLY EVER WRITE OUT A CERTIFICATE IF THERE IS A POTENTIAL PROBLEM. FOR THESE TWO INVOICES (2028+2033) YOUR BANK (YAPI - A[TU]TURK FREE ZONE) HAVE SENT A MESSAGE TO NZPE'S BANK ASKING FOR INSURANCE POLICY (THINK THEY MEAN CERTIFICATE). AS WE NEVER SEND YOU THIS DOCUMENT WHY ARE THEY NOW ASKING FOR IT? KNOWING THE GOODS ARE INSURED CAN YOU GET THEM TO WITHDRAW THIS REQUEST?"(Emphasis added).

155. That fax also predates the relevant time and it relates to contracts other than those the subject of the claim. But again because of the way in which it is dealt with in the witness statement it may be thought that it accords with the practice usually followed in the discounting or transfer of Kidort contracts to the Appellant. Consequently, the assertion in the fax that Kidort "receive all the usual documents direct" may well be relevant to the possibility that property was intended to and did pass directly from Kidort to Teodem notwithstanding any jus disponendi.

158. The observation in the fax that the goods were covered in transit under Kidort's all risks policy, and the apparent recalcitrance about providing proof that the goods were also covered under the Appellant's all risks policy, might also be thought to suggest that neither risk nor property was intended to pass to the Appellant. Mr Conroy said otherwise in paragraph 86 of his witness statement. It was as follows:

"Each of the Three Companies had their own marine insurance policies. These were structured on a minimum premium basis based on anticipated turnover. In the case of Kidort, its policy covered all stock and goods in transit internally in the UK and whilst afloat for up to 30 days after arrival at destination warehouse. It was Kidort's practice only to write certificates if requested by the customer or if the payment instrument, such as a letter of credit, called for it. In relation to the relevant sales, NZPE bought on a CIF basis and relied on Kidort's marine insurance cover."

But the issue was not explored in cross examination, because it was not relevant as the case was run below.

163. In the fax of 24 March 1998 from Mr Conroy to Teodem concerning the acceptance of bills of exchange, it was said:

"URGENT PHIL AT NEW ZEALAND PELT EXPORTS (NZPE) IS COMPLAINING THAT DRAFTS ON THE INVOICES HE IS DISCOUNTING FOR US ON TEODEM ARE NOT BEING ACKNOWLEGED AS ACCEPTED BY YOUR BANK. MANY INVOICES AND DRAFTS HAVE BEEN SUBMITTED FOR ACCEPTANCE BY YOURSELVES BUT NOT ONE ADVICE HAS BEEN RETURNED TO CONFIRM THE DRAFTS HAVE BEEN ACCEPTED. WITH THE GOODS HAVING BEEN DELIVERED DIRECT TO YOU I GUESS THERE IS NO NEED FOR YOU TO ACCEPT THE DRAFTS AND EVEN IF YOU DO I KNOW FROM EXPERIENCE THAT THE TURKISH BANKS ARE VERY TARDY IN ADVISING THE OVERSEAS BANKS OF ACCEPTANCE. UNLESS PHIL'S BANK GETS A PROMPT ADVICE OF ACCEPTANCE OF THESE DRAFTS THEY ARE GOING TO PULL THE PLUG ON DOING MORE DISCOUTING FOR US AND WILL ALSO DEMAND WE PAY THEM BACK THE ADVANCES WE HAVE ALREADY HAD. WE CANNOT AFFORD THIS TO HAPPEN AND WOULD BESEECH[4] YOU TO CONTACT YOUR BANK TO GET THESE ACCEPTANCES ARRANGED AS SOON AS POSSIBLE. THANKS FOR YOUR HELP IN THIS MATTER AND WE AWAIT YOUR CONFIRMATION THAT THIS REQUEST HAS BEEN ACTIONED."

167. Once more that fax predates the relevant time and it concerns contracts other than those the subject of the claim. But it comes close in point of time to the relevant transactions and it implies that at the relevant time Kidort's practice was to send bills of lading directly to Teodem, before acceptance of bills of exchange drawn by the Appellant, and that Teodem thereby obtained possession of and property in the goods directly from Kidort before entering into any contract with the Appellant supposed to be constituted by the acceptance of a bill of exchange drawn by the Appellant.

170. Furthermore, the description of the transaction in terms of "advances" and the reference to the possibility that the Appellant may "demand" repayment from Kidort of amounts paid by the Appellant to Kidort appear at first blush more consistent with the transaction being one of loan by the Appellant to Kidort than of sale by Kidort to the Appellant. The latter aspect of the document was the subject of cross examination at trial, because it was the Respondent's case below that the transaction was a financing transaction as opposed to a sale. But the cross examiner could not have and therefore did not anticipate the significance of the first aspect of the document, and thus it was not explored. It is difficult to think that cross examination on the second aspect of the matter could not have been aided by exploration of the first.

174. In the result, and although the new argument may fall within the ambit of the pleadings, and on one view of the matter may be no more than a better focussed iteration of the law that was in issue below, it is plain that the new argument:

(a) for the first time identifies and puts at the forefront of consideration the effect of the bills of lading issued to Kidort upon the shipment of the goods from the United Kingdom to Turkey and the effect of the delivery of one original part of those bills to New Zealand Pelt;

(b) necessitates consideration of whether any transfer to the Appellant of property in the goods took place before Teodem obtained possession of the goods upon their delivery to Turkey; and

(c) for the first time, makes relevant a consideration of whether there was a novation of the contract between Kidort and Teodem (even if it is not necessary to decide if there were a novation).

180. As has been seen, each of those matters is the subject of a large volume of documentary material and oral evidence, and I consider that the way in which that material was dealt with below and the cross examination of witnesses below may well have been different if the argument now sought to be advanced had been put as part of the Appellant's case below. Accordingly I do not consider that it is appropriate to allow the Appellant to rely upon the new jus disponendi argument.

183. The position is even clearer in respect of the application for leave to amend to allege and argue for novation. The issue of novation was absent from the pleadings, notwithstanding the invitation of the judge to apply for its inclusion upon the provision of proper particulars, and the question of novation would be even more dependent upon questions of fact than the issue of whether Kidort reserved a jus disponendi by taking bills of lading to its own order and exercised it so as to pass property in the goods to the Appellant before property passed to Teodem. If novation were allowed to be argued on appeal, the resolution of those questions of fact which bear upon the issue of novation, including in particular relations between Kidort, the Appellant and Teodem, and the willingness of the latter to accept obligations of the Appellant in discharge of obligations of Kidort, would have to be decided upon the basis of evidence never tested below with a view to that significance. Since the Respondent could not have conceived of the need for that sort of testing or of any need for answering evidence of its own and, if novation had been in issue below, it is plain from the Respondent's opposition to the application made to the judge to amend the pleadings that the Respondent would have recognised both needs and been likely and able to do something about meeting each of them, I think it clear that the Appellant ought not now be permitted to argue for novation.

186. Recently, in Whisprun Pty Ltd v Dixon[5], the High Court reiterated that it is inimical to the due administration of justice to allow a party to raise on appeal a point not taken below unless the point could not possibly have been met by further evidence at the trial.[6] The High Court also repeated the point earlier made in Water Board v Moustakas[7] that while the pleadings are frequently decisive as to whether a point sought to be raised on appeal departs from the way in which the case was put below, it may be that the point is new even if it is within the ambit of the pleadings. The Court said that it is necessary to look to the actual conduct of the proceedings. In my opinion that decision lends further weight to the conclusion that the Appellant should not now be permitted to rely upon the new arguments that it seeks to advance.

190. Counsel for the Appellant argued that even if all that be so the Appellant should still be allowed to put forward its new argument because the judgment below was clearly wrong in law and because "the Court of Appeal should not allow a judgment of the Supreme Court of Victoria, which is clearly wrong and may have international repercussions, to remain standing." That argument is not persuasive.

193. The respect in which the judge is said to have erred is in that part of the reasons earlier set out in which her Honour said that:

"Hence both in fact and at law [the goods were sold CIF, that is Cost, Freight, Insurance where risk passes to the buyer at the point of lading] the goods had passed to Teodem before the plaintiff issued its invoice."

The contention as formulated in the Appellant's written argument was that "the judge held that the goods passed to Teodem upon shipment in view of the CIF contract" and that "this is clearly wrong at law...in light of the function and operation of bills of lading and CIF Contract as understood internationally, and contrary to the provisions of the Goods Act 1958." It was also said that there is already a case note on the decision "which perpetuates the error".

198. I do not consider that the judge erred in the way contended. As the Appellant would have it, the judge is to be taken as saying that property in goods sold under a CIF contract necessarily passes to the purchaser upon shipment. But the judge did not say that and, as I read what her Honour did say, she should not be taken as deciding any more than that risk passed to Teodem upon shipment and that, on the particular facts of the case before her, property passed to Teodem before the plaintiff issued its invoice.

201. The law upon this area of the sale of goods is clear. In the case of FOB contracts the general rule is that both property and risk pass on shipment, which is to say as the cargo crosses the ship's rail[8]; for the loading of the goods is usually taken to be an "unconditional appropriation" under s.23 Rule 5(2) of the Goods Act 1958[9] and under s. 39 of the Act delivery to the carrier is prima facie delivery to the buyer himself. In the case of CIF contracts the general rule is that risk passes at the ship's rail[10] but that property passes only when the shipping documents are transferred and paid for[11]. That is why it has been said that the peculiar feature of CIF contracts is the importance attached to the shipping documents[12]; delivery of which transfers the property and the possession in the goods to the transferee. It goes without saying that all of that would have been well known to the judge and therefore it is most improbable that her Honour would have intended to suggest that the law was otherwise.

204. In case it matters, however, I add that, even if the Appellant were permitted to put the new argument, I would not be satisfied upon the available evidence that the effect of the transactions was one of sale by the Appellant strictly so called, and I would not be satisfied that there was a novation of the contracts into which Kidort entered with Teodem.

207. I have referred already to the general rule which applies to CIF contracts: that property only passes when the shipping documents are transferred and paid for. But that rule is only one of a number of general rules that may apply to the question of when property passes. The principle is that property passes at such time as the parties intend it to pass[13] and therefore the general rules may yield to contrary intention.[14] The point is made in the judgment of Roskill, L.J. in The Albazero[15], as follows:

"Mr Hobhouse for the plaintiffs, relying strongly on Johnson v Taylor Bros. & Co Ltd [1920] AC 144, sought to insist first that the sale and purchase contract between the plaintiffs and RBP was, to use his phrase, a "classic" c.i.f. contract. For myself I am not sure what additional force, if any, the adjective adds to the words "c.i.f. contract." It is a trite observation that what is sometimes called a true f.o.b. or a true c.i.f. contract is a comparative commercial rarity. Contracts vary infinitely according to the wishes of the parties to them. Though a contract may include the letters f.o.b. or c.i.f. amongst its terms, it may well be that other terms of the contract clearly show that the use of those letters is intended to do no more than show where the incidence of liability for freight or insurance will lie as between buyer and seller but is not to denote the mode of performance of the seller's obligations to the buyer or the buyer's obligations to the seller. In other cases, though the letters c.i.f. are used, other terms of the contract may show that the property is intended to pass on shipment and not upon tender of and payment against the documents so tendered or though the letters f.o.b. are used, other terms may show that the property was not intended to pass on shipment but upon tender and payment, the seller by the form in which he took the bill of lading intending to reserve his right of disposal of the property until he was paid against the shipping documents. As Kennedy, C.I.F. Contracts, 1st ed. (1924) states, at p.139: `It'(i.e. the passing of property) `is entirely a question of intention and no general rule can be laid down as to when property passes under a c.i.f. contract. The intention has to be gathered from the terms of the contract, the conduct of the parties and the circumstances of the case.'."

212. Counsel for the Appellant lay emphasis upon the fact that Kidort shipped the goods under bills of lading to its own order and the provision in s. 24(2) of the Goods Act 1958 that, where goods are shipped and by the bill of lading the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal of power to deal with the goods. They submitted that it was a powerful indication of intention that property should not pass until the bills of lading were delivered to Teodem and that the evidence is clear that before that happened Kidort sold and transferred property in the goods to the Appellant[16]. I do not think that argument to be persuasive.

215. The general principles applicable where a seller retains the power of dealing with goods are not in doubt. They are essayed in the judgment of Dixon, J. in James v The Commonwealth [17] and summarised in Sutton, Sales and Consumer Law[18] as follows:

"The position appears to be that if the seller takes a bill of lading in this form or on his own behalf and not as agent for or on behalf of the purchaser the seller reserves the jus disponendi and no property will pass to the purchaser on shipment. Hence, the seller can dispose of the goods to a third party if he or she so desires. However, the usual reason for retention of the bill of lading is to secure payment of the price, and where the seller deals with it only to secure the price and not with the intention of withdrawing the goods from the contract, the property in the goods will pass to the purchaser on payment or tender of the price."

219. Consequently, I accept that it is of significance that Kidort took bills of lading to its own order. Prima facie it is an indication that Kidort intended to retain the bills of lading and thus a jus disponendi until it was paid[19] and, in as much as Kidort discounted or transferred the sales to the Appellant before payment by Teodem, that Kidort was then in a position to and did pass property in the goods to the Appellant

222. But the difficulty with the argument as I see it is that upon the evidence as it now stands there is no certainty as to when Teodem got possession of the relevant goods, and there are some strong indications that it was customary for Teodem to obtain possession by means of original parts of the bills of lading sent directly by Kidort to Teodem before payment to the Appellant and even before acceptance of any bills of exchange drawn by the Appellant. There is also no certainty that Kidort ever indorsed in favour of the Appellant the one part of the bills of lading which it appears to have delivered to the Appellant and even less certainty that it did so before Teodem obtained possession of the goods by means of the other parts of the bills of lading which Kidort sent directly to Teodem. In that connection I do not accept the suggestion of counsel for the Appellant that one should infer, from the fact that the Appellant's bank was prepared to discount the bills of exchange drawn by the Appellant, that the Bank was satisfied that the bill of lading was indorsed in favour of the Appellant. For one thing, if the Bank had been all that particular about the paperwork I should not have expected the Bank to advance funds, as it did, on the faith of only one part of the bill of lading. I should have thought that the Bank would have wanted to be in possession of all of the parts; for where various parts of a bill of lading are in the hands of different persons the shipowner is entitled to hand over the cargo to the first person presenting a bill provided that he has no notice of any other claims to the goods or knowledge of any other circumstances raising a reasonable suspicion that the claimant is not entitled to the goods[20]. It is only when one part has been accomplished that the other parts stand void.[21] For another thing, there is the direct evidence to which I have already referred of cases in which Teodem got possession before any discounting or transfer of the sale to the Appellant. I see nothing sufficient to exclude the possibility that that may have occurred in the relevant transactions.

225. There is too the further difficulty that if it really were the intention of Kidort to retain a jus disponendi, Kidort is unlikely to have parted with the bills of lading until and unless it had been paid or at least until and unless its bills of exchange had been accepted. Yet it is apparent from the evidence to which I have already referred that Kidort frequently sent the shipping documents immediately to Teodem - as Mr Conroy said in his witness statement, in order to avoid demurrage - or at least well before payment or acceptance of the bills of exchange. That being the case, the circumstances here appear to me to be similar to those which Roskill, L.J. described in The Albazero[22] as follows:

"...The business arrangements of the Occidental group required Courtage, holding the bill of lading as agents for the plaintiffs who were the chartering company in the Occidental group, to decide at the appropriate time, either for themselves or on instructions, where the cargo should ultimately go and then put the receiving and refining company in the group (in this case R.B.P.) in a position to obtain discharge of the cargo. In other words the group's business arrangements required the plaintiffs to release their interest in the cargo to the chosen receivers in time for those receivers to obtain discharge once the allocation and ultimate destination of the cargo was finally decided upon. There was never any question of payment being made against documents. It is against this commercial background that the intention of the parties as to the passing of property and as to the immediate right to possession is to be ascertained.

229. While it is unnecessary to make a positive finding about it, it is clear enough that Kidort did make a habit of sending the shipping documents to Teodem almost immediately after shipment. Therefore just as in The Albazero it was part of the business arrangements of the Occidental group to allow property to pass to a chosen receiver in time to obtain immediate discharge before payment, and hence there was never any question of payment being made against documents, so too in this case it appears that it was part of the business arrangements of the Kidort group of companies to allow property to pass to Teodem in time for Teodem to obtain immediate delivery upon arrival of the ship in port and that Kidort did not intend that payment should be made against documents. If that is right it means that property passed as soon as Teodem obtained physical possession of the goods and possibly even earlier when Teodem obtained parts of the bills of lading sent directly to it by Kidort[23]. At least as the evidence stands there is no saying that property did not pass until after the sales had been discounted or transferred to the Appellant.

233. Counsel for the Appellant sought to argue in the alternative that, whether or not the Appellant ever acquired property in the goods, it could be regarded as the seller of the goods, because it dispatched the goods to Teodem by providing Teodem with the shipping documents. Thus at the moment in time when Teodem accepted the bill of exchange, the goods should be treated as having passed irretrievably out of the Appellant's possession for the purposes of delivery to Teodem.

236. That analysis does not appear to me to take the matter any further. As with the argument based upon the reservation of property by means of the bills of lading drawn to order and the passing of property to the Appellant by means of delivery of one part of the bills of lading to the Appellant, it depends upon a factual inquiry (which was not conducted below) as to whether possession and property passed directly from Kidort to Teodem by means of the shipping documents sent directly by Kidort to Teodem before any acceptance by Teodem of the bills of exchange drawn by the Appellant. Accordingly, I think it too late for the Appellant now to be raising the argument for the first time.

240. Apart from the new arguments based upon the bills of lading and bills of exchange, and the suggestion that the judge may have misstated the law applicable to CIF contracts of sale, counsel for the Appellant did not suggest that it was not open to the judge to find that property had passed to Teodem before the transfers of the sales or, given that property may have passed before the transfers to the Appellant, that it was not open to her Honour to hold that they were not sales strictly so called. Nor was it sought to suggest that the judge had erred in rejecting the contention put below about the proper construction of the policy.

243. Some reference was made to the judge's observations that the arrangements "were entirely idiosyncratic and went beyond all notions of typical industry practice" and that they "were effected in a highly unusual and indeed somewhat nefarious manner, without the consent or knowledge of the defendant". I do not think that they make any difference. Admittedly, it is difficult to see why her Honour should have thought the arrangements to be nefarious. I suspect, however, that "nefarious" is a typographical error, possibly an erroneous substitution for "nebulous"; for in the respects already mentioned the evidence about the details of the arrangements was vague. It is also hard to understand why her Honour regarded the arrangements as "unusual". They appear to be the sort of thing which is common enough in international trade. But it may be that her Honour had in mind no more than Mr Gilbert's evidence[24] that he regarded as unusual that there was a group of three companies in three countries connected through common insurance arrangements. Either way, I am unable to see that her Honour's observations were in any way productive or reflective of error on the first aspect of the case.

246. In the result, and since I am of the view that the Appellant should not be permitted to rely upon the new argument about the effects of the bills of lading and bills of exchange, I consider that the Appellant has failed to demonstrate any error in the judge's decision upon the first aspect of the case.

250. I take a different view about the second aspect of the case. I consider that the judge was in error about the extent of the Respondent's knowledge of the way in which the Appellant and Kidort did business. As the evidence appears to me, the Respondent well knew that it was a routine part of the Appellant's business to take transfers of sales from Kidort and that the Appellant did so in the belief that the Appellant would be held covered under the policy as if the transferred sales were sales of its own.

254. Mr Conroy gave unchallenged evidence that when he had discussions with Messrs Gilbert and Weate in 1995 about splitting the global policy, Mr Gilbert said that the cover to be allocated between the Southpac and Kidort policies would be regarded as a global limit. Then when negotiating the separate NZPE Policy, Mr Gilbert wrote in a facsimile transmission to Kidort on 20 September 1995:

"We will link the new policy to the existing four policies as this will give us greater flexibility in doing limits. "As you know, our maximum liability for political risks in Turkey for Southpac and Kidort combined is $1,5000,000. Would you be comfortable with our increasing this to $2,000,000 combined for Southpac, Kidort and NZPE? With regard to limits we will need to rationalise these as we did when we split the Kidort and Southpac policies i.e. transfer some over to NZPE completely, split some between the various policies and look at new or increased limits as and when appropriate"

258. Later, as business developed, the Respondent was asked to and did approve frequent swaps of insured limits between the three companies for the express purpose of transferring to one of the companies with available bank credit a transaction contracted by another of the companies with insufficient bank credit to fund the transaction. For example, on 20 September 1996 Kidort faxed to the Respondent as follows:

"Brian [Conroy] has called me from Turkey and asked me to send you the following message. Kidort are fully utilising their discount facility and so they will be transferring some of their transactions to New Zealand Pelt Export where Phill Rzoska will discount against his bank facilities. We will therefore need to transfer part of Kidort's existing credit limit on Teodem Llinars and La Doma on temporary basis. NZPE will need A$200000 on Teodem and A$100000 each on Llinars and La Doma. Phil arrives in Auckland on Monday and he will bring with him appropriate documentation to discount on these people. We need him to send Kidort the money on Monday and therefore it would be appreciated if you could send him a message as soon as possible in your day confirming he [sic] the appropriate credit limits on these people so that he can effect the discounting without delay."

262. That was answered by Mr Gilbert on behalf of the Respondent by fax dated 23 September 1996 as follows:

"Ref your fax of 20 September 1996, before we can transfer the limits across to NZPE we need to know what amounts Kidort has outstanding on the 3 buyers. If the limits are not being fully utilised then there is no problem in transferring any unused balance. However, if they are fully utilised then effectively we would be increasing our overall exposure by doing so."

266. After Mr Conroy faxed through the existing usages of limits on 24 September 1996, Mr Gilbert faxed again the same day as follows:

"We confirm that the following credit limits will be approved: Teodem NZ$230,000 La Doma NZ $230,000 Llinas NZ $120,000. Kidort's limits will be reduced by the same amounts. Our offical limit approvals will follow shortly."

270. Mr Gilbert was cross examined about the fax of 20 September 1996 and agreed that it was consistent with his general understanding of the arrangements with the Kidort group:

"The facsimile says that Kidort are fully utilising their discount facility, and so they will be transferring some of their transactions to New Zealand Pelts where Phil Rzoska will discount against his bank facilities?---Correct. That was a transaction similar to the ...transaction I took you to of 13 February 1998, wasn't it?---Yes, it was.[25]. And that was consistent with your general understanding of the arrangements with the Kidort group?---Yes. And the document which is...[the fax of 24 September 1996], is that your approval of the switching of the limits contemplated by the request in ...[the fax of 20 September 1996]---Yes, it is."

274. On 19 December 1996 Mr Conroy sent a fax from Southpac to Kidort (of which a copy was sent to Mr Gilbert) which in part was as follows:

"LLINARS CREDIT INSURANCE LIMIT NOTED YOUR ADVICE THAT YOU CAN DO NO MORE DISCOUNTING WITH NATWEST AS THOSE CONSIGNMENTS ALREADY IN THE SYSTEM NEARLY EQUATE TO OUR "TI" CREDIT INSURANCE LIMIT... I HAVE SPOKEN TO PHIL, AT NZPE, WHO ADVISES HIS POSITION IS NOW CLEAR WITH LLINARS HAVING PAID ALL OF THEIR OUTSTANDINGS TO HIM. ACCORDINGLY, I HAVE ASKED "TI" TO RETURN HIS TEMPORARY LIMIT BACK TO KIDORT AND THEY HAVE DONE THIS AS PER THE ENCLOSED MESSAGE. BY PASSING A COPY ONTO BIALIOUS I PRESUME THIS WILL BE GOOD ENOUGH FOR YOU TO IMMEDIATELY CONTINUE DISCOUNTING THROUGH NATWEST UP TO THIS LIMIT OF $AC 500K (SAY LSTG 244K)..."

278. On the same day Mr Gilbert faxed to Mr Conroy at Kidort confirming that cover had been increased to $500,000 and that cover for the Appellant on Curtidos Llinas SA had been reduced to nil to accommodate the increase.

281. On 23 January 1997 James Inifer of Southpac faxed to Mr Gilbert:

"WE HAVE A LIMIT ON COMIPEL OF $600,000 AND CURRENTLY ARE USING APPROX $260,000 OF IT. KIDORT WOULD LIKE TO HAVE $300000 TRANSFERRED TO THEIR POLICY TO ENABLE THEM TO PROCESS CURRENT SALES. WE HAVE NOT SALES IN MIND TO THIS CUSTOMER THAT A REDUCED LIMIT OF $300000 WILL NOT SATISFY. PLEASE TRANSFER THE LIMIT TO KIDORT IMMEDIATELY AND ADVISE THE RESPECTIVE BANKS ACCORDINGLY."

Significantly, the fax is indorsed with a note that Mr Gilbert had informed Inifer that the transfer should be a formality .

286. Then on 16 January 1998 Mr Conroy faxed on behalf of Kidort to Mr Gilbert stating among other things that:

"...KIDORT HAVE WRITTEN A GREAT DEAL OF BUSINESS WITH COMIPEL RECENTLY IN THE KNOWLEDGE THAT THIS WAS NOT THE TIME OF THE YEAR TO BE SELLING THEM AUSTRALIANS AND ON THE UNDERTSTANDING WE COULD TEMPORARILY PASS ANY UNUSED SOUTHPAC LIMIT ONTO KIDORT. INCIDENTLY**,** BECAUSE OF CURRENT MARKET CONDITIONS AND PRODUCT AVAILABILITY KIDORT HAVE ALSO TAKEN ON FURTHER LARGE COMMITMENTS WITH LA DOMA AND LLINARS, AND WE ARE ALSO NEGOTIATING SOMETHING WITH LABORDA. WE HAVE DONE THIS BUSINESS WITH COMIPEL AND HAVE USED ALL THE EXISTING KIDORT LIMIT. KIDORT NOW NEEDS TO DISCOUNT MORE AND SO NEED THE UNUSED PORTION OF SOUTHPAC'S COMIPEL LIMIT..."

290. In a further fax sent on 18 January 1998 Mr Conroy wrote:

"FURTHER TO OUR TELEPHONE CONVERSATON EARLIER THIS EVENING MY TIME. 1) THANKS FOR YOUR UNDERSTANDING ON COMIPEL AND AFTER YOUR FURTHER CONSIDERATION THROUGH YOUR DAY I LOOK FORWARD TO A POSITIVE REPLY FROM YOU OVERNIGHT CONFIRMING AGREEMENT TO TRANSFER THE UNUSED PORTION OF SOUTHPACS LIMIT TO KIDORT. 2) I WOULD NOW ALSO MAKE A FORMAL REQUEST THAT YOU TRANSFER THE WHOLE OF SOUTHPAC'S PRESENT CURTIDOS LA DOMA LIMIT TO NZPE. I WOUD CONFIRM THAT SOUTHPAC HAVE NO OUTSTANDING TRANSACTIONS WITH LA DOMA. ALL PAST ORDERS HAVE BEEN SETTLED IN GOOD TIME... ... KIDORT HAVE RECENTLY TAKEN AN ORDER WITH LA DOMA FOR DELIVERY PROGRESSIVELY OVER THE NEXT 3 TO 4 MONTHS, ON 120 DAY OPEN ACCOUNT BASIS, WORTH ABOUT $AC1,250,000. BECAUSE OF LIMITATIONS ON KIDORT'S OVERALL BANK DISCOUNT FACILITIES, PART OF THIS ORDER WILL BE FINANCED BY NZPE WHO WILL USE THEIR OWN DISCOUNT FACILITY. THIS IS THE REASON WE WANT THE EXISTING SOUTHPAC LIMIT TRANSFERRED TO NZPE. IN TIME WE MAY ALSO WANT SOME OF THE KIDORT LIMIT TRANSFERRED TO NZPE AS WELL, BUT THIS WILL DEPEND ON HOW KIDORT USE THEIR OWN EXISTING DISCOUNT FACILITY. ... ... 3) FOR THE SAME REAONS AS ABOVE WE WOULD ALSO FORMALLY REQUEST THAT SOUTHPAC'S EXISTING LIMIT ON TOMAS LABORDA, ALSO BE TRANFERRED TO NZPE. KIDORT HAVE SOLD TO LABORDA GOODS TO THE VALUE OF ABOUT $AC150,000, AND WE WILL PROBABLY NEED NZPE TO DISCOUNT THESE AS WELL." 4) KIDORT HAVE A TEMPORARY LIMIT IN PLACE ON CURTIDOS LLINARS OF $AC 700,000. THIS WAS VALID FOR DELIVERIES UP TO 15TH JANUARY, .... BUT WHICH WE HAVEN'T YET DISCOUNTED. IT WOULD BE OUR INTENTION TO DISCOUNT THESE AS THE EXISTING BUSINESS IS PAID OFF. THIS TEMPORARY LIMIT IS THEREFORE LIKELY TO STAY IN PLACE FOR UP TO ANOTHER 120 DAYS, BEFORE GRADUALLY REDUCING THEREAFTER. IT WOULD GREATLY ASSIST IF YOU COULD WRITE AN ADDITIONAL LIMIT ON LLINARS OF $AC100,000 FOR NZPE SO THAT THEY CAN DISCOUNT SOME OF THE EXISTING KIDORT BUSINESS FOR US..."(Emphasis added).

In cross examination Mr Gilbert gave evidence that the switches requested in the fax were approved.

295. On 19 January 1998 Mr Gilbert faxed to Mr Conroy:

"Further to your faxes of 16 & 18 January 1998 and our telephone conversation this morning, I am pleased to confirm that we have agreed to increase Kidort's credit limit on Comipel to AUD 746,000 and at the same time reduce Southpac's to AUD 54,000 reflecting their current commitments. ... I would ask that in future you give us as much notice as possible of such requests and provide us with all the information stipulated on our credit limit application forms, in particular order on hand and amounts outstanding. I trust the foregoing clarifies our position."

299. Evidently the transfer of cover from Kidort to the Appellant was the subject of discussion, possibly in the telephone call referred to in the fax. Consequently, on 22 January 1998 Mr Conroy on behalf of Kidort faxed to Phil Dunn of the Appellant:

"I have arranged some A$600,000 worth of TI cover in respect of Teodem to be transferred to NZPE as we would like to use your discount facility to lodge some of Teodem's debt. Is that ok?"

303. That was followed by a fax of 23 January 1998 from James Inifer on behalf of the Appellant to Mr Gilbert, as follows:

"BRIAN HAS REQUESTED THAT WE TRANSFER $600,000 OF LIMIT FOR TEODEM TO NZ PELT, WOULD YOU PLEASE ARANGE THAT ASAP. CURRENTLY WE HAVE ONLY ONE TRANSACTION OUTSTANDING WITH TEODEM FOR A $154,000 AND WE HAVE A SWIFT ADVICE FROM YAPI BANK TO WESTPAC FOR PAYMENT WITH A VALUE DATE OF 26/1/97 - THE LIMIT SHOULD BE COMPLETELY CLEAR BY TUES/WED NEXT WEEK..."

307. On 27 January 1998 the Respondent issued official limit endorsement number 721378ME with effect that the $600,000 of cover for transactions with Teodem was transferred to the Appellant.

310. On 28 January 1998 Mr Conroy on behalf of Kidort faxed to Mr Gilbert seeking a further $500,000 of credit limit for the Appellant, and making plain that the purpose of the request was to enable Kidort to discount to the Appellant sales to the value of £190,000 just made by Kidort to a new customer, Pieles Y Curros Perez Carreno SL of Spain and which Kidort proposed to discount to the Appellant. The fax read in part that :

"COULD WE PLEASE APPLY FOR A CREDIT LIMIT ON BEHALF OF NEW ZEALAND PELT EXPORTS TO COVER SOME NEW BUSINESS WE HAVE JUST CONCLUDED WITH A NEW SPANISH CUSTOMER. THESE ARE KIDORT SALES THAT WILL BE PROCESSED THROUGH THE NZPE DISCOUNT FACILITY AND SO IT IS NZPE WHO WILL NEED THE COVER. DETAILS ARE: ... LIMIT COVER REQUIRED: $AC500,000.00 OPEN ACCOUNT TRADING" (Emphasis added).

314. On 13 February 1998 the Respondent issued official limit endorsement number 1998/ E11858/081N01 establishing a credit limit of $500,000 in the name of Kidort for transactions with Pieles Y Curros Perez Carreno SL.

317. The fact that the increased limit was established in the name of Kidort (instead of the name of the Appellant as had been requested) is explained in a fax from Mr Conroy to Kidort of 13 February 1998 (of which a copy was sent to Mr Gilbert), as follows:

"IF YOU SPEAK WITH CHRIS HE WILL TELL YOU THAT KIDORT HAVE SOLD PEREZ 10-TRUCKS, ABOUT 40,000, UK DOMESTIC FELLMONGERS. I THINK WE HAVE A PROGRAMME TO BEGIN DELIVERING SOMETIME NEXT WEEK. THE DELIVERIES WILL BE PROGRESSIVE OVER THE FOLLOWING SIX WEEKS OR SO. PAYMENT WILL BE ON AN ACCEPTED DRAFT BASIS AT BETWEEN 60/120 DAYS (EG: THE FIRST ON 60, THE NEXT ON 90, THEN 120, AND THEN BACK TO 60 ETC). IT WAS MY INTENTION TO FINANCE THESE THROUGH NZPE AND WE APPLIED FOR A TI LIMIT ACCORDINGLY. I AM ADVISED BY RAY GILBERT THAT THE REQUESTED LIMIT OF $AC 500K, HAS BEEN AGREED, BUT THAT IN SO DOING THEY WANT TO INCREASE NZPE'S MINIMUM PREMIUM TO $NZ 28K. I THINK THEY ARE BEING MERCENARY AND TOTALLY UNREASONABLE IN THIS ATTITUDE AND SO HAVE TOLD THEM TO ALLOCATE THE LIMIT TO KIDORT AND WE WILL HAVE TO STRETCH OUR UK DISCOUNT FACILITY TO ACCOMMODATE THIS PEREZ BUSINESS THROUGH THAT . I TELL YOU THIS INFORMATION SO THAT : 1) YOU CAN EXPECT A LIMIT ENDORSEMENT ON THIS BUYER FROM TI IN THE NAME OF KIDORT 2) YOU CAN PLAN YOUR CASH-FLOW'S AND DISCOUNT FACILITY USAGE. IF YOU NEED ANY FURTHER INFORMANTION PLEASE MAKE CONTACT."

321. Mr Gilbert was cross examined on that document and agreed that he understood it had been Mr Conroy's intention to finance the sales through the Appellant using the Appellant's bank discounting facility and that it was typical of advice which had been given to him previously in respect of other sales:

"And Mr Conroy was telling you by way of copying you in on this fax that it was his intention to finance those sales through New Zealand Pelts?---Yes. And it was your understanding, wasn't it, that by financing these through New Zealand Pelts Mr Conroy was contemplating using New Zealand Pelts' discount facility?---Yes. ... You told me a little earlier, Mr Gilbert, that you had a general understanding from information give to you by Mr Conroy that there were financial arrangements in place constituting a discount facility with respect to Kidort and New Zealand Pelt, and you said this information was conveyed to you during the period 1991 to 1998?---Yes. Was it typical of advice that had been give to you previously?---Yes, it was. And in terms of the approval limit shown...[in the official limit endorsement of 13 February 1998], was that typical of your arrangements and dealings with Mr Conroy?---Yes, it was."

325. There is then an Application for Credit Limit Endorsement filled out in the name of the Appellant seeking a limit of NZ$805,000 for dealings with Cirtidos La Doma with terms of payment on open account up to 120 days. It is noted in the form that the "Kidort limit may be reduced by $AC500,000 to compensate this requirement", and the form is indorsed as approved by the Respondent on 3 February 1998.

328. That was followed by a fax of 23 February 1998 from Don Nunn of Kidort to Mr Gilbert, as follows:

"Brian [Conroy] tells me we can expect a revised limit for NZPE on Teodem of NZ$825,000. Please confirm that this has been done."

332. Official Limit Endorsement Number 723933PY was issued by the Respondent on 24 February 1998 establishing a limit of A$825,000 in the name of the Appellant for transactions with Teodem.

335. On 2 March 1998 Mr Conroy lodged with Mr Gilbert of the Respondent an application to increase still further to NZ$1,400,000 the credit limit of the Appellant for transactions with Teodem and it was noted in the form that the "Kidort limit may be reduced by $AC500,000 to compensate this requirement". By fax of the same date to Ms Armstrong of the Respondent Mr Conroy noted that he had done so and requested to know when he might expect to receive a response.

338. Then by fax dated 6 March 1998 from the Respondent it was confirmed that the limit for Teodem had been increased to A$1,400,000. Mr Conroy also gave uncontradicted evidence that the limit of A$1,400,000 was the applicable limit at the time of the subject transactions with Teodem and that:

"...if we knew the money wasn't available from Southpac or New Zealand Pelts, Kidort would never have undertaken the trade, and would have had a lower turnover."

342. Mr Gilbert gave further evidence in cross examination that:

(1) The Kidort group of three companies comprising three separate countries with three separate policies was a unique situation.

(2) At relevant times he knew from discussions with Mr Conroy that there was a general understanding between the three companies whereby one of the companies would be selected to sell animal skins sourced from the United Kingdom, Australia or New Zealand to Teodem and other customers and that the selection of which of the companies was to be the vendor of the skins was dependent upon which company had bank finance facilities available to discount the invoice in respect of the particular sale.

(3) Before the policies were separated in 1995, if a sale were arranged by Kidort, or if it were a sale entered into by Kidort but invoiced by New Zealand Pelts using its discount facility, the transaction was covered by the policy.

(4) After the policies were separated out in 1995:

(a) the companies were permitted to apply to switch insurance limits between themselves and usually the only consideration was that the overall global limit not be exceeded;

(b) if there were a Kidort sale of product to an insured buyer within the permitted limit under the Kidort policy, and that was not transferred, the transaction was covered under the Kidort policy; and

(c) if there were a Kidort sale which was transferred to New Zealand Pelts then, provided the limit were switched to New Zealand Pelts, the transaction was covered under the New Zealand Pelts policy.

(5) At relevant times he knew from the documents sent to him by Mr Conroy that the Appellant was discounting Kidort sales through the Appellant's bank finance facility.

(6) At relevant times he knew that the Appellant's bank needed to know that credit insurance limits with the Respondent were in place before the bank would agree to the discounting.

(7) He did not know the detail of how the discounting transactions were financed and, as with other clients' discounting arrangements, he would not have expected to know the detail.

(8) The Kidort group was unique in his experience, in that it comprised a group of companies in three countries with three separate policies, but for that reason he did not think to be "unusual" the arrangements for discounting sales between the companies and the transferring of limits which attended it.

348. I accept that so far as the evidence goes the Respondent was unaware of the detail of the financing of the discounting transactions. I also accept that in all probability the Respondent did not know and did not consider whether the discounting transactions took the form of a sale and sub-sale as opposed to a mere assignment or transmogrification of the right to receive payment. But equally, so far as the evidence goes, and certainly so far as Mr Gilbert said that he was concerned, the Respondent was not the least interested in either detail. The Respondent's concern was with the terms of payment that applied to the sale and that the sale was within the credit limit for the relevant buyer. The Respondent was well aware of both of those details in respect of every relevant transaction. On the facts established by the evidence, it is plain that the Respondent knew:

(a) that the discounting of a transaction by one company (I shall call it the "assignor") to another company in the Kidort group (I shall call it "the assignee") was constituted by the assignee financing the transaction through the assignee's bank discount facilities;

(b) that the assignee was intended to bear the credit risk for the purchase price, which is why insurance limits were frequently transferred by assignor companies to assignee companies;

(c) that the assignee's bank would not provide the finance unless the assignee was covered under the policy for the price;

(d) that insurance credit limits were transferred from the assignor and other companies in the group to the assignee for the specific purpose of ensuring that the assignee had cover under the policy in respect of the purchase price; and

(e) through Mr Gilbert's dealings with Mr Conroy, Mr Inifer and Mr Rzoska, that the companies of the Kidort group, and thus the Appellant, transferred insurance credit limits, entered into discounting transactions and otherwise dealt with the Respondent upon the basis that the assignee company would be held covered in respect of discounted sales (in the sense that the sale would be treated as one made by the assignee).

354. Consequently, and with all respect to the judge below, I think it clear that the Respondent did have sufficient "specific knowledge of the manner in which the related companies were doing business" and therefore that the Respondent did induce "either through explicit or tacit approval the assumption or expectation of the [Appellant] that its dealings would be covered by the policy."

358. According to Deane, J. in The Commonwealth v Verwayen[26], the central principle of estoppel is that the law will not permit an unconscientious departure by one party from the subject matter of an assumption which has been adopted by another party as the basis of some relationship, course of conduct, act or omission. Consequently, an estoppel may arise where the party claiming the benefit of the estoppel has adopted an assumption as the basis of action or inaction and thereby placed himself or herself in a position which would be productive of significant disadvantage if the party claimed to be estopped were permitted to depart from the assumption. The question whether the departure would be unconscionable relates to the conduct of the allegedly estopped party in all the circumstances but the cases indicate four main but not exhaustive categories in which an affirmative answer to that question may be justified, namely, where the party: (a) induced the assumption by express or implied representation; (b) entered into or continued contractual or other material relations with the other party on the conventional basis of the assumption; (c) exercised against the other party rights which would exist only if the assumption were correct; or (d) knew that the other party laboured under the assumption and refrained from correcting him when it was his duty in conscience to do so. In cases falling within category (a), a critical consideration will commonly be that the allegedly estopped party knew or intended or clearly ought to have known that the other party would be induced by his conduct to adopt, and act on the basis of the assumption and, in cases falling within category (b), actual belief in the correctness of the fact or state of affairs assumed may not be necessary. The facts of a particular case may, however, be such that it fall within more than one of the categories.

361. Brennan, J. expressed the principles a little differently in Waltons Stores v Maher[27], in a passage upon which the judge below relied. Brennan, J. said:

"In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed or expected that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs."

365. One possibly significant difference between the two formulations is that Brennan, J. considered that it was a requirement that the party to be estopped should know or intend the other party act in reliance on the assumption or expectation. Deane, J. considered it was enough that the party to be estopped clearly ought to have known that the other party would be induced by the estopped party's conduct to adopt, and act on the basis of the assumption or expectation. But for present purposes I doubt that it matters. On the view which I take of the evidence, the Respondent did know that the Appellant was acting in reliance upon the assumption that the Respondent would be bound to treat transferred sales as if they were sales made by the assignee company.

368. I add, however, that if it were necessary to make a choice, there are at least three reasons to prefer Deane J's formulation. In the first place, it is more consistent with the observations of Mason, C.J. and Wilson, J. in Waltons Stores v Maher, that the principle which underlies High Trees estoppel is that the courts will grant relief to a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party has played such a part in the adoption of the assumption that it would be unfair or unjust if left free to ignore it.[28] That view accords with the broad general ground of estoppel that where one of two innocent parties must suffer, the loss should fall on him by whose indiscretion it was occasioned.[29] Secondly, as the joint judgment of Mason, CJ. and Wilson, J. in Waltons Stores v Maher demonstrates, the principle which underlies High Trees estoppel is the same principle as underlies the kind of estoppel exemplified in Ramsden v Dyson[30]; and the better view is that in such a case the party to be estopped need not know of the full extent of his or her legal rights - it is sufficient that he or she ought to have appreciated what they were.[31] Parity of reasoning suggests that it may be sufficient in a case of High Trees estoppel that the party to be estopped ought to have known that the other party would be induced by the estopped party's conduct to adopt and act on the basis of an assumption or expectation[32]. Thirdly, the source of the idea that actual knowledge is an essential requirement seems to be the judgment of Lord Denning in Crabb v Arun District Council[33], and while his Lordship did say in that case that it was necessary that the party to be estopped know and intend that the other party act on the basis of the relevant assumption, his Lordship based his judgment on the speech of Lord Cairns in Hughes v Metropolitan Railway Co[34], and Lord Cairns did not speak in terms of knowledge or intent. The crucial passage[35] of his speech was as follows:

"...if parties who have entered into definite and distinct terms involving certain legal results - certain penalties or legal forfeiture - afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties. My Lords, I repeat that I attribute to the Appellant no intention here to take advantage of, to lay a trap, but it appears to me that both parties by entering upon the negotiation which they entered upon, made it an inequitable thing that the exact period of six months dating from the month of October should afterwards be measured out as against the Respondent as the period during which the repairs must be executed."

373. In my opinion the facts of this case fall within categories (a) and (b) as articulated by Deane J in Verwayen: the Respondent induced the relevant assumption by implied representation; and the Respondent and the Appellant continued their contractual relations under the policy on the conventional basis of that assumption.

376. No doubt a representation must be clear and unambiguous before it may be relied upon as creating an estoppel[36]. But it need not be an express representation. An estoppel may arise just as much from the failure of one party to communicate with the other as from an affirmative representation made by the other. That was the point in Waltons v Maher. The circumstances were such that the appellant "must have known" that the respondent was proceeding upon the assumption that it had an agreement and that completion and exchange were a formality. The appellant's inaction in the circumstances - its failure to communicate that there was no agreement - was unconscionable. So too in my opinion it is here. The circumstances are such that the Respondent must have known that the Appellant was proceeding to transfer sales on the assumption that the Respondent was bound by the policy to treat the transferred sales as made by the assignee. The failure of the Respondent to say otherwise was in the circumstances unconscionable.

379. No doubt too it may not be enough to constitute an estoppel that one party to a contract has induced the other to make an assumption as to the way in which the other party might act in future. Marlborough Gold Mines[37] suggests that it is necessary to establish an assumption that the other party is bound to act in a particular way. But the significance of that requirement needs always to be assessed in context (as the decision in Foran v Wight serves to demonstrate), and in any event, in this case I think it to be satisfied.

382. I consider that the Respondent knew and intended (and clearly ought to have known) that the Appellant would be induced by the Respondent's conduct to proceed on the basis that the Respondent was bound to treat discounted sales as sales made and dispatched by the assignee. I reach that conclusion on the basis of Mr Gilbert's direct evidence as to the way in which the parties dealt with each other and also on the basis of the objective evidence of the Respondent's conduct in approving swaps for the purposes of discounting transactions. In my opinion the Respondent's conduct could not reasonably have been interpreted by the Appellant otherwise than as signifying that the Respondent would treat discounted sales as sales made and dispatched by the assignee, and the evidence is plain that the Appellant did in fact so interpret the Respondent's conduct.

385. For the same reasons I am persuaded that the Appellant and the Respondent acted towards each other in their dealings in relation to the policy upon the basis that the Respondent was bound to treat discounted sales as sales made and dispatched by the assignee for the purposes of the policy.

388. For reasons earlier expressed, I regard the evidence as clear that the companies in the Conroy group discounted sales upon the basis of the assumption that the Respondent was bound to treat discounted sales as sales made by the assignee for the purposes of the policy. As Mr Conroy said, and is in any event obvious, the companies would not have discounted sales if they had not considered that the assignee was covered under the policy in respect of the sales.

391. It follows in my opinion the Appellant placed itself in a position which would be productive of significant disadvantage if the Respondent were now permitted to depart from the assumption. Such a departure from the assumed conventional basis on which the parties dealt would for that reason be unconscientious or unconscionable. It was not suggested and it does not appear to me that it would be disproportionate to the detriment to hold the Respondent to the assumption or that the minimum equity should otherwise result in anything less than the Respondent being held to the assumption.[38]

395. In the result, I would allow the appeal and order that the judgment the subject of appeal be set aside. I would give judgment for the Appellant in the amount of its claim.

[1] "Insured Debt" was defined in the policy as follows:

"An "INSURED DEBT" means so much of any indebtedness arising out of the trade specified in Section 1 of the Schedule and owing by an INSURED BUYER as does not exceed the PERMITTED LIMIT for that buyer and is in respect of the invoice value of goods (or the face value of the original bill where a bill of exchange is accepted by the INSURED BUYER in respect of the invoice value of goods) sold by the INSURED to the INSURED BUYER and despatched to him within the POLICY Period (specified in Section 2 of the Schedule) pursuant to a contract of sale providing for repayment of the debt upon the terms specified in Section 5 of the Schedule."

[3] Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 at p.438; Metwally v. University of Wollongong [No.2] (1985) 59 ALJR 481 at p.483; Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 at p.8; Whisprun Pty. Ltd. v. Dixon [2003] HCA 48; (2003) 77 ALJR 1598 at p.1608 [51-53]; Dovuro Pty. Ltd. v. Wilkins [2003] HCA 51; (2003) 77 ALJR 1706 at p.1733 [151].

[5] [2003] HCA 48; (2003) 77 ALJR 1598.

[7] [1988] HCA 12; (1988) 180 CLR 491 at p.498.

[8] Colonial Insurance Co of New Zealand v Adelaide Marine Insurance Co (1886) 12 App. Cas. 128 at p.139; Sutton, Sales and Consumer Law, 4th Ed. at [14.28].

[9] Port of Brisbane Authority v Santos Ltd. [1988] 1 Qd R 645; Sutton [14.29].

[10] Manbre Sacharine Co. Ltd v Corn Products Co Ltd [1919] 1 KB 198 at pp.202-3; Sutton [26.12]

[11] Mirabita v Imperial Ottoman Bank (1878) 3 Ex D 164 at pp.172-3 per Cotton, L.J.; Sutton [14.42].

[12] Atiyah, The Sale of Goods 6th Ed. at p.271.

[13] Goods Act 1958, s. 23.

[14] The Parchim [1918] AC 157 (PC) at p.171.

[15] [1977] AC 774 at p.809, which was approved on appeal at [1977] AC at p.840.

[16] See Schmitthoff's Export Trade 10th Ed. at p.69.

[17] [1939] HCA 9; (1939) 62 CLR 339 at pp. 377 - 380.

[19] Goods Act, s. 24(2).

[20] Scrutton on Charter Parties and Bills of Lading, 20th Ed. at p.296; Schmitthoff, at p.256.

[21] Schmitthoff refers to bills being "accomplished" as if that were the result of a particular rule or principle of law. But as Ormiston, J.A. has pointed out to me, it is the result of the terms of the bills of lading. The usual receipt or affirmation on the face of a bill of lading and on the face of the bills of lading in this case, is to the effect that upon one of the original bills of lading being "accomplished", the others stand "void". I am also indebted to Ormiston, J.A. for pointing out to me that the effect of such an affirmation was considered by Lord Cairns in Glyn Mills Currie & Co v. East and West India Dock Co. (1882) 7 App.Cas. 591 at p.595, and for reference to further consideration of the subject in Gaskell on Bills of Lading (2000) at 79ff, 414 and 432-436; Carver on Bills of Lading, paras.5-052ff, 6-01ff and 6-045ff; and J.J. McWilliam Co. Inc. v. Mediterranean Shipping Co. SA [2003] EWHC 2792; [2004] QB 702 at 747 [124]-750 [133], per Rix, L.J. and 752 [148] per Jacob, L.J.

[23] Mirabita v Imperial Ottoman Bank (1878) 3 Ex D 164 at pp.172-3 per Cotton, LJ.

[24] Referred to in paragraph [93(8)] below.

[25] See below at paras.[85] and [86].

[27] Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at pp. 428-9; see also The Commonwealth v. Clark [1994] VR 333 at pp.381-4 per Ormiston, J.

[28] (1988) 164 CLR at 404; and see also Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at p. 412.

[29] Tobin v Broadbent [1947] HCA 46; (1947) 75 CLR 378 at p. 407; Pacific Carriers Ltd. v BNP Paribas [2004] HCA 35 at [38]- [40].

[31] Meagher Gummow & Lehane, Equity, Doctrines and Remedies, 4th Ed at [17.050].

[32] Cf Milchas Investments Pty Ltd v Larkin (1989) 96 FLR 464.

[33] [1976] Ch 179 at p. 188.

[34] (1877) 2 App Cas 439 at p.448.

[35] So described in Meagher, Gummow and Lehane, supra at [17.055].

[36] Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at p. 411, per Mason, C.J.; Kuligowski v. Metrobus [2004] HCA 34 at [52].

[37] Australian Securities Commission v Marlborough Gold Mines Ltd. [1993] HCA 15; (1993) 177 C.L.R. 485 at p.506.

[38] cf Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 at pp. 123-125; Re Minister for Immigration and Multicultural Affairs Ex parte Lam (2003) 214 CLR 1 at p.20 [62].