Plaintiff v Defendant

2 The parties first contracted in July 2004. The Port had called for expressions of interest in September 2002 for the development of almost 20 hectares of land at Victoria Dock in the Port of Melbourne. The Port informed potential tenderers that Victoria Dock had the potential for three distinct port operations including a distripark operation. The distripark was intended to have facilities in a concentrated area used for storage and onward transport of cargo. Westgate was the successful tenderer and on 2 July 2004 the parties entered into the Project Deed known as the VDP Deed. Both parties were required to do certain works, and upon those conditions having been met, on 18 February 2009 the parties executed the Victoria Dock Lease on the terms which had been annexed to the VDP Deed. Pursuant to Part 25 of the Victoria Dock Lease, the Port was required to grant Westgate a further wharf lease for Berth A of Victoria Dock. The Port gave Westgate a proposed lease for Berth A in the form of a document styled the Preferential Berthing Licence No 17073 ("the proposed licence"). Westgate has refused to enter into the proposed licence maintaining that its terms do not accord with the Victoria Dock Lease.

3 The Port's obligation under clause 25.2 of the Victoria Dock Lease is to grant a wharf lease to Westgate for the wharf at Berth A, 24 Victoria Dock Terminal to allow Westgate to moor and to load or discharge the cargos carried on "permitted vessels". Clause 21.1.62 of the Victoria Dock Lease defines permitted vessels to mean "general cargo vessels owned or chartered or stevedored by" Westgate. The specific term "general cargo vessel" is not defined in the Victoria Dock Lease. The Port's primary contention was that the term "general cargo vessel" was well known in the shipping industry and that in the Victoria Dock Lease it is to be understood as the adoption by the parties of that generally understood meaning. In particular, the Port submitted that the widely understood meaning of the term in the cargo shipping industry was "that in order to determine the type of a vessel, such as a 'general cargo vessel', one examines the register of the classification society that has actually classified/certified that vessel". In contrast, Westgate maintained that the identity of the vessel for the purposes of the term as used in the Victoria Dock Lease was a matter to be undertaken by reference to the function of the vessel rather than by reference to the classification of the vessel by one of the classification societies.

4 The resolution of the disputes in this case is not easy. There is, in my view, no clear circumstance pointing conclusively in favour of one contention or the other. Indeed, the definition adopted by the Port in the proposed licence was not on all fours with the case it maintained in this proceeding. The definition in the proposed licence was not simply a reference to vessels classified as general container vessels as advanced in the proceeding but, rather, in part to a description of the vessels by reference to their design and use. The definition proposed by the Port was:

General Cargo Vessels means a ship designed with a single deck hull which includes a single hold, arrangement of holds or a hull which includes an arrangement of holds and 'tween decks', specifically for the carriage of diverse forms of dry cargo including pallet form and other unitised cargo. A General Cargo Vessel does not include any of the following types as listed in the Lloyd's Register of Ships and/or classified by any recognised classification society:

(a) a container ship;

(b) a liquid or dry bulk vessel;

(c) a vehicle carrier; or

(d) a passenger ship.

A General Cargo Vessel must be used principally for general cargo that is not in containers.

In other words, some aspects of the definition proffered by the Port are consistent with the approach to the interpretation of "general cargo vessel" advanced by Westgate because the proposed definition identified permitted vessels by reference in part to features of their design and of their principal use. By the same token the positions taken by Westgate in its dealings with the Port are not on all fours with its position in this proceeding. Westgate at times acknowledged that container vessels were not intended to be encompassed by the term "general cargo vessel" but the test they proffered for the term would not exclude them. In the end the resolution of the dispute depends upon an evaluation of all of the circumstances, some pointing in one direction whilst others pointing in another direction, and a judgment about what must be taken to have been the one meaning intended by the parties as objectively ascertained when all the factors are taken into account.[1]

5 The Port's contention depends fundamentally upon the importance of classification of vessels in the shipping industry. Classification societies have existed for a long time and play a central role in the design, construction and classification of vessels. Captain Crawford was called to give evidence on behalf of the Port and he explained the significance of the role of the classification societies from before construction of the vessel. Those wishing to have a vessel constructed will seek to have that done by reference to the requirements and classifications of a society; in other words the vessel will be designed and constructed by reference to the requirements of a classification society to ensure conformity with the society's requirements to ensure that the vessel obtains the desired classification. A naval architect will usually be engaged to design a vessel by reference to the requirements of a classification society. A shipyard will typically be engaged to construct the vessel and the classification society will be engaged to ensure that the vessel is constructed in accordance with its design, will assign it a vessel type on its design and configuration, will certify that the vessel may be used for certain functions (including the kind of cargo it may carry) in accordance with its design and configuration, and will ensure that during its service it is properly maintained by way of a certification process. Classification is also important for safety and insurance purposes.

6 It was Captain Crawford's opinion that the term "general cargo vessel" was a term commonly used in the cargo shipping industry with a specialised, particular and known meaning. It was his evidence that the term as used in the shipping industry means and refers to a vessel which had been classified by a recognised classification society as a "general cargo vessel". The classification by a society necessarily meant that the ship owner had submitted the vessel to the society for the construction of a vessel of that type. The Port also called Captain Shennan to give expert evidence of the meaning of the term "general cargo vessel". Captain Shennan is the harbour master of the port. His evidence, consistently with that of Captain Crawford, was that the term was commonly accepted within the shipping industry as referring to a vessel which was designed and classified as a vessel used for, or intended for the use of, transporting general cargo goods on the water. Such a vessel was intended to handle "break bulk" cargo such as bags, cartons, cases, crates and drums, either individually or in unitised or palletised loads. Captain Shennan's evidence was that the term was not generally used to refer to cargos such as bulk grain, bulk oil products or containers which were carried in specialised vessels and which were classified as such. The expert evidence relied upon by Westgate was, unsurprisingly, to the contrary effect. Westgate relied upon the evidence of Mr Thompson who opined that the term did not have a commonly accepted meaning in the cargo shipping industry.

7 Much of the undercurrent in the dispute between the parties was about whether the Port was obliged to permit Westgate, and correspondingly whether Westgate was entitled to require the Port to allow Westgate, to berth container vessels. Indeed, the catalyst to the commencement of the proceeding was the assertion by Westgate of an entitlement to moor and to load and discharge the cargo of two ships classified as container ships by their respective classification societies rather than as general cargo vessels. On 9 April 2010 Westgate notified the Port that it proposed to moor and to load and discharge cargo on MV Osnabruck at Berth A of Victoria Dock. The Osnabruck was classified by Germanischer Lloyd as a container ship. On 2 February 2011 Westgate notified the Port that it proposed to moor and to load and unload cargo on the MV Andrea at Berth A of Victoria Dock. The Andrea was similarly classified by Germanischer Lloyd as a container ship.

8 Ships which may not be classified as container ships may carry containers. Westgate relied heavily upon the development in recent times of "multi purpose ships" which are capable of carrying containers. This development in the shipping industry was relied upon to indicate that the parties had not intended to confine the meaning of permitted vessels to be those classified as general container vessels by a classification society. Multi purpose vessels may in part be designed to carry containers but may not be classified as container ships by classification societies. Indeed, the evidence of Captain Shennan (who gave evidence on behalf of the Port) was that to him a "multi purpose ship" was the same as a "general cargo ship". In the final analysis the issue between the parties is to be resolved by reference to whether, whatever may have been their actual intentions or beliefs, they are to be taken to have intended in the Victoria Dock Lease that the kinds of vessels Westgate would be permitted to moor and whose cargo could be loaded and unloaded were those vessels identified by reference to the vessels' classification by a classification society or, in contrast, by reference to the capability and function of the vessel.

9 In resolving that dispute the relevant contract is to be construed as a whole without individual clauses being considered in isolation.[2] The meaning to be given to the terms of the contractual document is to be determined by what a reasonable person would have understood them to mean taking into account both the text and also the surrounding circumstances known to the parties, and the purpose and object of the transaction.[3] The task of construction is not an inquiry of "what the parties intended to do, but of what the language which they employed showed that they did."[4] In McCann v Switzerland Insurance Australia Ltd[5] Gleeson CJ emphasised the importance of the object intended to be secured by commercial contracts to their construction when saying:

Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure.[6]

In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd[7] the High Court emphasised the principle of objectivity as the basis upon which the rights and liabilities of the parties to a contract are to be determined.[8] The Court said:

What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement.[9]

In this case the relevant words to be construed are "general cargo vessels" in the definition of permitted vessels in clause 21.1.62 of the Victoria Dock Lease. It was those vessels which the Port assumed an obligation by clause 25.2.2 of the Victoria Dock Lease to allow Westgate to moor at the various berths and to permit Westgate to load or discharge such cargos as may be carried in those vessels in connection with Westgate's business. The definition of "permitted vessels" in clause 21.1.62 was not purporting to define or identify the nature of the cargo which the vessels might carry but, rather, to define and identify the types of vessels to come within the entitlement which clause 25.2.2 gave to Westgate. In my view a reasonable person in the position of the parties would, in the context of the industry in which they operated, understand those words to refer to vessels that had been classified as such by their relevant classification society.

10 Classification of vessels by reference to classification societies has a long and well established history dating from the 1700s. Its function is central to many aspects of the shipping industry including, as the parties seemed to agree, in relation to insurance and security. The fact of classification of ships by reference to classification societies was something known to the parties in the proceeding. The Lloyd's register was described by Captain Crawford as having a quasi governmental function. It contains a definition of "general cargo vessel" as:

[A] ship designed with a single deck hull which includes a single hold or arrangement of holds, or a hull which includes an arrangement of holds and 'tween decks, specifically for the carriage of diverse forms of dry cargo.

The cargo handling mode is lift on/lift off to and from the holds (and 'tween decks) by way of weather deck (and 'tween deck) hatches.

Various features may include:

- a single deck, double skin sides and wide deck openings (box shape holds). Ships of this type may be intended specifically for the carriage of forest products, cargo handling of which may be by use of gantry crane.

- strengthening for the carriage of heavy cargoes (including ore).

- certain holds equipped with container securing arrangements, hoistable or movable vehicle decks, or other facilities pertaining to the carriage of a particular type of cargo.

- the weather deck equipped with container securing arrangements, or arrangements for the carriage of timber.

- the carriage of liquid cargo in specially designed tanks.

- a refrigerated cargo space for the carriage of perishable cargoes.

- additional cargo handling to and from the cargo spaces by way of a side-loading/unloading system (for the carriage of cargo in pallet form and other unitised cargo).

- additional cargo handling to and from a 'tween deck by way of a stern-, side-, or bow-door/ramp situated below the weather deck, and where additional cargo segregation is provided by hinged 'tween deck openings or a hinged movable bulkhead.

The parties took care to specify a definition of the vessels which were to be permitted to moor at the Port's facilities and whose cargo could be loaded or discharged although they did not adopt the definition in the Lloyd's register. The parties did not, however, agree to any vessel without qualification being permitted to moor and to have its cargo loaded or discharged. The parties identified the vessels which would be permitted to do so as those which fell within the description "general cargo vessels". By that description some vessels were to be included within the Port's contractual grant to Westgate and others were to be excluded from the grant. One category of vessels to be excluded were container vessels. General cargo vessels which carried containers would come within the definition of permitted vessels but vessels which are container vessels as such would not. It is the classification by a classification society that determines whether or not a vessel is a general cargo vessel for the purposes of clause 25 of the Victoria Dock Lease and not whether the vessel has the capability to be a general cargo vessel nor whether it otherwise comes within the definition of the term in Lloyd's register.

11 This conclusion flows from the terms of the Victoria Dock Lease itself in the context of the facts and circumstances known to the parties, and the purpose and objects which they sought to achieve by their written agreements. In 2002 the then Victorian Minister for Ports announced that the Port would be seeking expressions of interest for the development of almost 20 hectares of land at Victoria Dock and said that investors were invited to bid on a range of options which included a common user wharf, a rail terminal and four specialist warehouses or transport terminals. On 20 September 2002 the Port sent a standard form letter to interested parties, including Westgate, advising the recipients of the letter that the Port would be seeking expressions of interest in relation to the development of Victoria Dock. That letter indicated that Victoria Dock had the potential for three distinct port operations being break bulk general cargo stevedoring from the existing wharf at Victoria Dock, rail operations from a new terminal running north/south along the new creek, and distripark operations comprising dry and cold store cargo consolidation activities for exports and distribution activities for imports. A short list of bidders, including Westgate, was selected in January and February 2003. The bidding process, and Westgate's successful bid, concerned the overall management of the facilities within the Port's jurisdiction and was understood by the parties as the development of Victoria Dock for general cargo as distinct from dedicated container vessels. That was the context in which the parties adopted the words "general cargo vessels" in the definition of permitted vessels in the Victoria Dock Lease for the purpose of describing, identifying and demarcating the entitlement granted to Westgate and the corresponding obligation assumed by the Port.

12 There is a rebuttable presumption that technical words or phrases are used in their technical meaning when incorporated into a contract. In Marquis of Cholmondeley v Lord Clinton[10] Plumer MR said:

When technical words or phrases are made use of, the strong presumption is that the party intended to use them according to their correct technical meaning, but this is not conclusive evidence that this was his real meaning. If the technical meaning is found, in the particular case, to be an erroneous guide to the real one, leading to a meaning contrary to what the party intended to convey by it, it ceases to answer its purpose.[11]

In this case the parties dispute whether the term "general cargo vessel" has a generally accepted meaning, what any generally accepted meaning in the industry might be, and whether any general accepted meaning was adopted by the parties in the lease.

13 Westgate tendered the evidence of Mr Thompson for the contention that the expression "general cargo vessel" did not have a technical or well established meaning within the shipping industry. Mr Thompson's report in part included his conclusion of a survey of the expression in the literature he found. Mr Thompson did not suggest that classification societies did not exist or that at least some did not classify vessels as general cargo vessels. It may be, as Mr Thompson indicated, that the term "general cargo vessel" is used within the industry in a variety of ways but that is not to detract from the fact that there are classification societies which classify vessels as general cargo vessels and that the classification of vessels as such is critical to their design, construction, certification, insurance and safety. Whether or not the words "general cargo vessel" has a settled meaning within the industry,[12] the better view is that these parties contractually agreed that Westgate would be permitted, and the Port would be required to allow Westgate, to moor and to have cargo loaded and discharged from such ships as were classified as general cargo vessels by one of the classification societies. The parties agreed on "general cargo vessels" to describe, identify and demarcate the vessels within the contractual grant to Westgate. Vessels within that description are apt to be those classified as such by a classification society. The competing construction advanced by Westgate has some force but a reasonable observer would understand the term "general cargo vessel" used in the Victoria Dock Lease to mean those vessels so classified by a classification society. If, however, it were necessary to prefer the evidence of any of the witnesses on the question of whether the term has an established technical meaning in the shipping industry, I would prefer that of Captains Shennan and Crawford to that of Mr Thompson. Their experience was as active operators within the shipping industry over many years. Mr Thompson is an engineer whose evidence was largely secondary in the sense of providing accounts of his research rather than of his personal knowledge within the shipping industry as an active participant.

14 Westgate also relied upon the definition of "permitted use" in the VDP deed as part of the factual matrix relevant to the interpretation of the term "general cargo vessel" when used by the same parties in the Victoria Dock Lease. The definition of "permitted use" in the VDP deed was a reference to a different "use" from the use referred to in the Victoria Dock Lease. However, Westgate contended that the use contemplated by the VDP deed established the scope of general cargo for the purposes of the Victoria Dock Lease. The definition of "permitted use" in the VDP deed described the development of the facilities to include:

... general cargo stevedoring (break bulk and containerised) ...

It was the words in brackets upon which Westgate placed much emphasis in contending that they established the scope of "general cargo" to include "break bulk and containerised cargo". Acceptance of the proposition advanced by Westgate, however, does not carry with it the conclusion that the vessels it was to be permitted to moor and whose cargo it would have the right to load and unload were to be container cargos. The evidence was that general cargo vessels may carry containers and that multi purpose vessels may be classified as general cargo vessels and have containers. Each of these circumstances is consistent with the words in brackets referring to containers on general cargo vessels rather than compelling the conclusion that the parties had agreed that vessels classified as container vessels were to be permitted to moor. The competing view that the permitted vessels are to be determined by reference to the classification of general cargo vessels by the classification societies does not exclude permitting to moor general cargo vessels carrying containers or permitting to moor multi purpose vessels which are classified as general cargo vessels. The same conclusions are true of the other provisions in the VDP deed to which Westgate drew attention. In each case the parties contemplated the need for the facility to be capable of dealing with containers on vessels but they do not indicate that the parties contemplated that general cargo vessels were to include container vessels if classified as such by a classification society.

15 The Port counterclaimed against Westgate that the latter was not entitled to moor and load or discharge the cargo of the Osnabruck and the Andrea at Berth A in Victoria Dock. Westgate had attempted to moor each of these vessels but was not permitted to do so by the Port. Each vessel is classified as a container vessel by its classification society. It appears that Westgate does not presently seek to moor or to load or discharge the cargo of either vessel, however, consistently with my reasons above, the Port is entitled to a declaration that neither vessel comes within the definition of permitted vessels for the purposes of the Victoria Dock Lease. Each is classified as a container vessel and not as a general cargo vessel by their respective classification societies.

B. The MV Osnabruck and the MV Andrea were not and are not "permitted vessels" within the meaning of that term in clause 25 of the Victoria Dock Lease.

[1] Kim Lewison, The Interpretation of Contracts (4th ed, 2007) 29 [2.04].

[2] Chamber Colliery Ltd v Twyerould [1915] 1 Ch 268, 272 (Lord Watson).

[3] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165; see also Kim Lewison, The Interpretation of Contracts (4th ed, 2007) 5, 29, 31.

[4] Great Western Railway v Bristol Corp (1918) 87 LJ Ch 414, 424 (Lord Shaw).

[5] [2000] HCA 65; (2000) 203 CLR 579.

[7] [2004] HCA 52; (2004) 219 CLR 165.

[8] Ibid [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Codelfa Constructions Pty Ltd v State Railway Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 352 (Mason J).

[9] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

[10] [1820] EngR 550; (1820) 2 Jac & W 1, 92; (1820) 4 ER 71, 559.

[11] [1820] EngR 550; (1820) 2 Jac & W 1, 92; (1820) 4 ER 71, 559.

[12] See Hogarth & Sons v Leith Cottonseed Oil Company (1909) 1 SLT 332.