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

New Zealand Pelt Export Company Limited v Trade Indemnity New Zealand Limited [2004] VSCA 163 - VSCA 2004 case summary — Zoe

[39]

"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..."

[41]

"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.

[42]

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.]"

[86]

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.

[139]

(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.

[147]

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:

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Cases Cited (16)