Pondcil Pty Ltd and Starline Rentals Pty Ltd v Tropical Reef Shipyard Pty Ltd [1994] FCA 1206

Pondcil Pty Ltd and Starline Rentals Pty Ltd v Tropical Reef Shipyard Pty Ltd [1994] FCA 1206 - FCA 1994 case summary — Zoe

[62]

" TERMS AND CONDITIONS OF TROPICAL

REEF SHIPYARD PTY. LTD.

1. Where the customer is a consumer as defined by any

relevant law such as the Trade Practices Act 1974 or

similar State laws, then certain terms and rights will

be implied into this contract for the benefit of the

consumer which terms and rights, and any liability of

the supplier flowing from them, cannot be excluded,

restricted or modified by any provision of this

contract. In all other cases and except where

inconsistent with the above and subject to the

provisions of clause (iv) hereof the following terms

shall apply :-

(i) Tropical Reef Shipyard Pty. Ltd. (hereinafter referred

to as the Company) does not accept any responsibility

for the loss of or damage to any boat, ship or other

vessel or any goods, articles or things of any

description whilst the Company is repairing or

otherwise working upon such boat, ship, vessel, goods,

articles or things and/or whilst any such boat, ship,

vessel, goods, articles or things are moored,

anchored, stored, parked, slipped at or within the

confines of the premises of the Company or are

otherwise in the actual custody of the Company and/or

under its actual control, nor does the Company accept

any responsibility for the loss of or damage to any

article or thing in or about any such boat, ship,

vessel, goods, articles or things or for any injury to

any person, howsoever such loss, damage or injury may

arise or be caused.

(ii) All work and/or services to be executed, performed

and/or carried out and/or provided by the Company, are

executed, performed, provided or carried out subject

to the condition that the Company, its servants or

agents shall not be responsible in tort or contract or

otherwise for any default, negligence or error on the

part of the Company's servants or agents.

(iii) Every exemption from liability and every right defence

and immunity of whatsoever nature applicable to the

Company or to which the Company is entitled hereunder

shall also be available and shall extend to protect

every servant or agent of the Company (including every

independent contractor from time to time employed by

the Company) while acting in the course of or in

connection with his employment and for the purposes of

all the foregoing provisions set out in clauses (i)

and (ii) hereof the carrier is or shall be deemed to

be acting as agent or trustee on behalf of and for the

benefit of all persons who are or might be his

servants or agents from time to time (including

independent contractors as aforesaid) and all such

persons shall to that extent be or deemed be parties

to the contract entered into by the Company.

(iv) (a) Pursuant to 68A of the Trade Practices Act 1974

this clause applies in respect of any of the

goods or services supplied under this contract

which are not of a kind ordinarily acquired for

personal, domestic or household use or

consumption, provided that this clause will not

apply if the customer establishes that reliance

on it would not be fair and reasonable.

(b) Liability for breach of condition or warranty

implied into this contract by the Trade

Practices Act 1974 other than a condition

implied by Section 69 is limited to -

(a) In the case of goods any of the following

as determined by the Company.

(i) The replacement of the goods or the

supply of equivalent goods; or

(ii) The repair of the goods; or

(iii) The payment of the cost of replacing

the goods or acquiring equivalent

goods; or

(iv) The payment of the cost of having

the goods repaired.

(b) In the case of services any one of the

following is determined by the Company.

(i) The supplying of the services again;

or

(ii) The payment of the cost of having

the services supplied again.

[71]

"They (the respondents) say that the previous

dealings between themselves and the appellant,

being always on the terms of their `risk note,'

as they call their written conditions, the

contract between themselves and the appellant

must be deemed to import the same conditions.

In my opinion, the bare fact that there have

been previous dealings between the parties does

not assist the respondents at all. The fact

that a man has made a contract in the same form

99 times (let alone three or four times which

are here alleged) will not of itself affect the

hundredth contract in which the form is not

used. Previous dealings are relevant only if

they prove knowledge of the terms, actual and

not constructive, and assent to them. If a term

is not expressed in a contract, there is only

one other way in which it can come into it and

that is by implication. No implication can be

made against a party of a term which was unknown

to him. If previous dealings show that a man

knew of and agreed to a term on 99 occasions

there is a basis for saying that it can be

imported into the hundredth contract without an

express statement. It may or may not be

sufficient to justify the importation, - that

depends on the circumstances; but at least by

proving knowledge the essential beginning is

made. Without knowledge there is nothing.

.....

It seems to me that when a party assents to a

document forming the whole or a part of his

contract, he is bound by the terms of the

document, read or unread, signed or unsigned,

simply because they are in the contract; and it

is unnecessary and possibly misleading to say

that he is bound by them because he represents

to the other party that he has made himself

acquainted with them. But if there be an

estoppel of this sort, its effect is, in my

opinion, limited to the contract in relation to

which the representation is made; and it cannot

(unless of course there be something else on

which the estoppel is founded besides the mere

receipt of the document) assist the other party

in relation to other transactions. The

respondents in the present case have quite

failed to prove that the appellant made himself

acquainted with the conditions they had

introduced into previous dealings. He is not

estopped from saying that, for good reasons or

bad, he signed the previous contracts without

the slightest idea of what was in them. If that

is so, previous dealings are no evidence of

knowledge and so are of little or no use to the

respondents in this case".

[79]

"The task of ascertaining what the parties to a

contract of any kind have agreed shall be their

legal rights and liabilities to one another as a

result of the contract is a familiar one in all

systems of law. It is accomplished not by

determining what each party actually thought

those rights and liabilities would be, but by

what each party by his words and conduct

reasonably led the other party to believe were

the acts which he was undertaking a legal

obligation to perform. There are some rights

and liabilities which arise by implication of

law from the nature of the contract itself such

as a contract of sale of goods or land, a

contract of carriage or bailment, a contract of

service or a contract of insurance. In offering

to enter into a contract of a particular kind a

party leads the other party reasonably to

believe that he undertakes a legal obligation to

perform all those acts which a person entering

into a contract of that kind usually performs,

unless his words or conduct are such as would

make it reasonably clear to the other party that

this is not so and also makes it clear which of

those acts he does not intend to undertake to

perform and which of them he intends to

undertake to perform only in some other and

specified manner.

In English law this general rule has become

subject to a special rule that where parties

have agreed to embody their contract in a

written document they are presumed to have

agreed to be bound by all the terms included in

the written document and by no other terms

except those which arise by implication of law

from the nature of the contract itself; and

this is so whether they have both read and

understood the written document or not.

Whatever the historical origin of this rule,

which since 1677 may well have been influenced

by the Statute of Frauds, its justification

today is that it is so well established that any

party to a contract by agreeing that its terms

shall be embodied in a written document so

conducts himself as to lead the other to believe

that he intended the written document to set out

all the rights and liabilities of each party

towards the other which do not arise by

implication of law from the nature of the

contract itself.

This is the relevant distinction between

contracts which the parties have agreed shall be

embodied in a written document and other kinds

of contracts. The ticket cases are examples of

the former. The only question there is whether

the party proffering the ticket has so conducted

himself as to lead the other party reasonably to

believe that the written term upon which he

seeks to rely formed part of the terms upon

which alone he was willing to contract. He may

fail because he has not taken reasonable steps

to draw the term to the attention of the other

party. But if he has taken such reasonable

steps it matters not that the other party has

never read the term and would not have entered

into the contract if he had read it. His

acceptance of the ticket without demur as

embodying the terms of the contract is conduct

which would lead the other party reasonably to

believe that he intends to contract upon its

terms and not otherwise.

Where, as in the case of the contract between

SAPPA and Grimsdale, the parties have not agreed

to embody their contract in a written document

but have entered into an oral contract with the

intention of thereby creating legal rights and

liabilities and it is sought to rely upon a term

contained in some written document as modifying

the respective rights and liabilities which

would arise by implication of law from the

nature of the contract, the only question is

whether each party has led the other reasonably

to believe that he intended that the rights and

liabilities towards one another which would

otherwise arise by implication of law from the

nature of the contract, namely, a contract for

the sale of goods, should be modified in the

manner specified in the written document".

[86]

"Both Mr. Johnson and Mr. Evans approached the

matter on the basis that terms can be

incorporated into a contract either as a result

of a course of dealing or by the application of

the British Crane doctrine which they seemed to

regard as different approaches. I do not think

that they are different. They are two different

examples of a much wider concept, namely, that a

contract is not made in a vacuum, but against a

background of present and past facts and future

expectations and that its terms, and indeed the

consensus itself, are to be gathered not only

from expressed words, but also from conduct

viewed against that background.

Lord Justice Diplock, (as he then was) pointed

out in the Hardwick Game case, (1966) 1 Lloyd's

Rep 197; (1966) 1 WLR 287, at pp.241 and

339D, that the test to be applied is not what

the parties actually thought were their rights

and liabilities, but what each by his words and

conduct led the other party to believe were the

liabilities which he was accepting and the

concomitant rights which he was granting. In

this context I do not think that Lord Justice

Diplock was referring to the other party

actually believing anything. He meant that the

words and conduct of Party A had to be

considered with a view to what Party B, as a

reasonable man, could and would, if he had

applied his mind to the point, have been led to

believe. This is a variant on the officious

bystander test applied by Lord Reid in

McCutcheon's case[1964] UKHL 7; , (1964) 1 Lloyd's Rep 16;

[1964] UKHL 7; (1964) 1 WLR 125, at pp. 21 and 128. I would

offer a further variant, which may be easier for

commercial men to apply. Would the parties have

agreed that a particular term formed part of the

contract if they were reasonable men looking at

the matter objectively in the knowledge that no

adverse consequences could flow from the answer.

I add this latter qualification because even the

most reasonable commercial man will become a

little less than objective when told that the

answer could cost him U.S. $3 million. The term

will only be contractual if the parties' answer

would have been a definite `Yes'. `Possibly'

will not do."

[97]

"The effect of those authorities is to show in

my judgment that the two propositions which

guided the learned Judge in his approach to the

first issue in this case were incorrect. He was

right to apply the test laid down by Lord

Justice Ackner. But whether one applies Lord

Justice Ackner's simple test, or that stated by

Mr. Justice Donaldson and applied by Mr. Justice

Staughton, it is not necessary to the

incorporation of trading terms into a contract

that they should be specifically set out

provided that they are conditions in common form

or usual terms in the relevant business. It is

sufficient if adequate notice is given

identifying and relying upon the conditions and

they are available on request. Other

considerations apply if the conditions or any of

them are particularly onerous or unusual.

Again, it is not necessary that notice of the

conditions should be contained in a contractual

document where there has been a course of

dealing.

Here, the parties were commercial companies.

There had been a course of dealing in which at

least 11 invoices had been sent giving notice

that business was conducted on the IFF terms at

a place on the document where it was plain to be

seen. Mr. Zacaria knew that some terms applied.

He knew that forwarding agents might impose

terms which would frequently be standard terms

and would sometimes or frequently deal with

risk. He never sought to ask for or about the

terms of business. The IFF conditions are not

particularly onerous or unusual and, indeed, are

in common use. In these circumstances, despite

Mr. Gompertz's clear and succinct argument to

the contrary, I consider that reasonable notice

of the terms was given by the plaintiffs.

Putting it another way, I consider that the

defendants' conduct in continuing the course of

business after at least 11 notices of the terms

and omitting to request a sight of them would

have led and did lead the plaintiffs reasonably

to believe the defendants accepted their terms.

In those circumstances it is irrelevant that in

fact Mr. Zacaria did not read the notices.

Accordingly, I consider that the learned Judge

erred in his conclusion on the first issue and I

would hold that the IFF conditions were

incorporated in this contract".

[115]

"MS PHILIPPIDES: Now, what time was the vessel

scheduled to be unslipped?---We started to start

rolling at 6 o'clock.

And was there any particular reason for that?---

Yes, because it takes - the tides at 7.20, or at

that time, around 7 - after 7, and I wanted to

take that vessel down really slow, and it takes

us about an hour to get it in the water, an hour

and a bit to get it in the water.

Now, on the morning of the unslipping, can you

just explain to us what occurred with respect to

the actual unslipping manoeuvres?---We get in

there about half an hour before we start off so

we can get the ladder off, take the safety

chains off, make sure everything is all right,

there is nothing on the rails, and I just have a

quick check from underneath the vessel to see if

there is nothing left open. Then I stand on one

side of the vessel, the southern side, and Tom

stands on the thing by the winch, and we

communicated with each other and just let the

vessel go down slowly, and we watch all the

blocks and everything like this. When it goes

into the water - - -

You have still got time, Mr. Alderdice?---When

it goes into the - when the vessel is, sort of,

in the water and I can't see the bogies anymore

I usually just go and walk over to Tom's side

because that is the jetty side, and we walk down

the jetty and usually watch it going till we can

see when it is going to float. And we usually

just keep it in the water before the vessel

actually floats until we make sure everything is

already, and we have always got everything -

doing this could take half an hour, but we like

to be there before the top of the tide. And as

I went down there I saw Terry Rus(s)ell, and the

engineer, and I just - the first time I had seen

them - - -

Where were they?---On starboard side of the

vessel on the deck.

And where were you?---On the barge - on the

jetty.

Yes. And what did you say?---I just - more or

less my mornings greetings, and asked them how

the greasing went into the stern tube that

night, and they said it didn't. So I said don't

start anything up I'll go and get you some

grease. So I walked all the way back and picked

up five cartridges of grease, that is all we had

in the rack, and a grease gun.

Now, where - what stage of the unslipping was

the vessel at that stage?---It was just in the

water and the cradle and bogie would have been

half way.

Right. And what did you do after you got the

grease gun and the five cartridges?---I threw

them up to the engineer.

And what happened after that?---I said we will

probably start up if you let us know when you've

got some grease in there - the grease in there

before you start up, and we will carry on

slipping once you're ready.

And can you remember roughly how long that delay

was?---It would be in excess of a half an hour.

Was it? And before you did let go and the

vessel left the yard, did you say anything else

after they had put - - -?---Yes. Like I said,

when they come up and said they have got the

grease in the thing, they said, `Yes, we've got

enough in there to get us down there.' I said -

- -

Down where was that?---Down to Trinity Wharf.

Yes?---And I - I - make sure you pump more

grease into that stern tube.

Did you indicate where that should be done?---

Down at the Trinity Wharf.

Why were you prepared to let the vessel go on that

basis?---Because I knew in that distance they couldn't

hurt the bearings because the grease we installed it

with, and plus the five cartridges that were pumped

into the system, it was only a very short distance and

no way in the world would it hurt it that much".

[133]

"MS. PHILIPPIDES: Could you comment on this

proposition: if the engineer stated that he

quickly pumped the grease until it extruded

through the gland packing, and that is -

supposedly that occurred when the vessel was

being unslipped but before it entered into the

water. Just a moment and I will get the - yes -

if the engineer in fact did the following:

proceeded to apply by hand the five grease

cartridges and continued to do so as the ship

entered the water, after entering the water, but

continued to pack grease into the stern tube

until it was seen to extrude from the stuffing

box - now, if that situation had occurred, given

the tightening of the packing which in your

report you said was packed so tightly that it

caused blueing, would it be possible to see the

grease extruding from the stern gland?---That

doesn't make any sense at all. The - if the

gland had been overtightened, which is obviously

the case, then the grease could not have got -

worked up past the gland packing. If grease was

seen coming past the gland packing, then the

gland must necessarily have been very, very

slack indeed. So somebody afterwards must have

tightened the packing up again - after that

grease was seen.

Yes. If the gland was packed so tightly as to

cause blueing, and that occurred before the

unslipping - that was when the tightening

occurred, then you would not expect, you say, to

see the grease extruding from the gland packing.

You would - where would you expect it to go?---

Well, you'd be able to take the line of least

resistance down into the inter-bearing space.

Right. and what is the effect of tightening the

gland - the packing? Now, I am not talking now

at any particular time, but what is generally

the effect of tightening the gland packing to

the extent of causing the blueing which was in

your photograph in your report?---The effect of

tightening the gland to such a degree that it

raises the steel of the shaft to blue heat would

be to raise the temperature of the shafting

material to in excess of 300 degrees C and that

would, without any shadow of a doubt, cause the

grease as used to burn hot, harden, denature and

become packed.

And where would it be packed?---In the immediate

vicinity of this stern tube bearing.

And in particular in respect of the bearing,

would it block the grooves in the bearing?---It

did block the grooves in the bearing. The

photographs in my report show that quite

clearly.

.....

Right. And that would mean that any grease

being applied would not reach the aft bearing?--

-No, it couldn't possibly.

And the five cartridges that were applied, would

that explain the reasonably well-lubricated

forward end of the shaft that you referred to in

your report - I think it was on page 8 - 8A.

You said that the inter-bearing space appeared

to have a co(r)pulent quantity of grease. You

are referring to the forward part of the shaft

there, are you?---Yes.

And that would possibly be the five cartridges,

would it?---That would be the initial five

cartridges that were pumped in, and possibly any

extra that was pumped in afterwards until the

bearing on the gland reached the temperatures

that are indicated in those photographs, after

which time the grooves would have blocked;

therefore no further grease could have been

pumped into the bearing, and it would obviously

seem very hard to whoever was presumably

administering grease to the stern tube.

Once the engine was engaged and running, that

hardening as a result of the packing being so

tight would occur fairly quickly, would it?---It

depends on the speed of the engine.

Yes?---I'm not being obtuse, but it would depend

on the speed of the engine - the shaft rotation,

and it could happen very, very - it could happen

fairly quickly, because as tight as it would

appear to have been, then it would have happened

very quickly. Bear in mind that we are talking

about somebody pouring 150 litres an hour of

water over it to keep it cool".

[139]

97. I find that the proximate cause of seizure of the shaft while the vessel was steaming from Thursday Island to Cairns on 16 May, 1990 was the failure of the engineer at Trinity Wharf on 6 April, 1990 to completely fill the rear tube with grease so that the grease did not reach the aft bearing and his subsequent over-tightening of the gland packing of the inner bearing which resulted in the baking of grease and the blocking of the lubrication grooves. The grease which was baked was the general purpose grease which had been pumped by him into the stern tube at the slipway and at Trinity Wharf. The blocked lubrication grooves prevented grease being pumped by the engineer in the weeks following the unslipping reaching the aft bearing. I also find that a major contributing factor to the failure was the continued operation of the vessel in service when the engineer, master and management of the vessel knew that there was a serious problem with the inner bearing and ought to have known that proper lubrication of the shaft as a whole required grease to pass through this bearing to the annular spaces and the aft bearing. A proper investigation of the problem of the inner bearing would have revealed that the lubrication system to the stern tube was not operating and that the aft bearing was being starved of lubrication. It is not unreasonable to infer that a reasonably prudent owner or ship's engineer would, upon finding a failure in the system, inspect the space aft of the blocked grooves to ascertain whether any damage had occurred and the state of the lubrication. A proper inspection would have revealed that the stern tube was not fully packed with grease. On the evidence, and in particular that of Mr. Colley and Captain Copeland, the continued operation of the vessel in the known circumstances was unreasonable, if not dangerous, and even if the stern tube had been fully greased so that seizure at the outer bearing would have been unlikely, it was equally likely that seizure would have occurred at the inner bearing.

At a glance

Court

Decision date

Before

Source

Judgment (189 paragraphs)

Pondcil Pty Ltd and Starline Rentals Pty Ltd v Tropical Reef Shipyard Pty Ltd [1994] FCA 1206 (15 July 1994)

Parties

Legislation Cited (1)

Cases Cited (7)