Contract
579 On 25 March 2002, Safbulk Pty Limited ('Safbulk') (on behalf of the defendant) appointed Inchcape Shipping Services Pty Ltd ('Inchcape') as ship agent for the Fortius for the purposes of its call into Newcastle and Port Kembla. One of the duties of Inchcape as ship's agent was arranging for a pilot for the berthing and departure of the vessel. On 26 March 2002, Inchcape informed Safbulk of the fees associated with the vessel's call to Port Kembla including an estimated $5,843 for pilotage.
580 Safbulk requested Inchcape to nominate the vessel to the relevant authorities at Port Kembla, which it did.
581 The Corporation published Harbour Guidelines which, under the heading 'Vessel Booking and Scheduling Information', specified information to be supplied by the vessel's agent to the Corporation including the vessel's name, estimated date and time of arrival, vessel's particulars and estimated time of departure. Those information requirements were also published on the Corporation's web site.
582 The Harbour Guidelines also required the vessel's agent to 'firm up' arrival date '3 to 2 days out' and, in cl 6.4, provided that 'confirmed bookings shall be made by the shipping agent 24 hours prior to arrival'. On 11 April 2002 Inchcape booked the Fortius for a 15 April 2002 arrival to be berthed at CB2 indicating that a pilot was required. Inchcape 'firmed up' the booking by email dated 12 April 2002.
583 On 15 April 2002, Mr Ross, of Inchcape, telephoned the Corporation's vessel traffic centre to advise of the Fortius' likely arrival time off Port Kembla, resulting in a mutual agreement that the pilot would board the Fortius at 1300.
584 On 23 May 2002 the Corporation forwarded an invoice to Inchcape Shipping in relation to the provision of pilotage services in respect of the Fortius in the sum of $11,248.31, the invoice to be payable within 14 days in accordance with the Corporation's terms of trade. Included in the invoice was a claim for $2,921.64 with respect to pilotage services provided on 15 April 2002. An amount for GST was also charged, being 10 per cent of the total of the original charge.
585 From at least 1996 the Corporation's Port Charges Guide (including in relation to pilotage rates), noted that the Corporation's 'terms of trade' were 14 days from the date of invoice. The Port Charges Guide noted that pilotage is compulsory at Port Kembla and is:
'… a service provided by the Port Kembla Port Corporation. Boarding ground is 2.3 nautical miles north of the breakwater entrance. The charge is dependent on vessel size measured in terms of Gross Registered Tonnage (GRT) which takes account of the skill factor for piloting larger vessels. The payer of the charge is the Shipping Agent.'
586 A substantial part of the defendant's cross claim depends upon the notion that the Corporation entered into a binding agreement with the defendant pursuant to which the Corporation agreed to provide pilotage services. In particular, the defendant contends that the 'statutory immunities' referred to hereunder, do not apply to a claim for breach of contract.
587 The contract on which the defendant relies is alleged to arise from:
(a) the Corporation's 'standing offer' to supply pilotage services for a fee and the acceptance of that offer by Inchcape Shipping on behalf of the defendant. The 'standing offer' is said to have been made in a letter forwarded by the Corporation to Inchcape Shipping advising of the schedule of port charges for the upcoming year. The letter actually received by Inchcape has not been produced, but I accept that it took the form of the pro-forma letter produced on discovery by the Corporation. That letter is dated 9 July 2001 and includes the following:
'The attached Schedule of Port Charges, effective 1 July 2001, shows the statutory and non-statutory charges for Port Kembla, inclusive of GST. The new prices have been approved by the Minister for Transport and endorsed by our Board and NSW Treasury.
The Corporation remains committed to its strategy of providing a more commercially oriented pricing policy specifically designed to attract new and diversified cargoes through the port of Port Kembla. The more successful we are in achieving this outcome then ultimately the more beneficial it will be for all users of the port and the region.
In line with this policy there are no increases in prices for the coming year…'
'Pilotage charges' are statutory charges.
(b) Inchcape's offer (on behalf of the defendant) to pay the Corporation the advertised fee in return for pilotage services. That offer is alleged to have been made by Mr Ross of Inchcape on or about 15 April 2002. Mr Ross prepared a statement for use in connection with these proceedings which was received as an exhibit. That statement does not disclose any oral communication in which fees were discussed or agreed upon. The statement also does not disclose any acceptance of either of the offers referred to in this paragraph and paragraph (a) above.
588 As earlier noted (see [401] above) the Corporation is not sued for breach of a duty (howsoever arising) to make available or to assign a licensed pilot to conduct the Fortius on its movement into and within the Port. The breach of contract which the defendant alleges is a failure on the part of the Corporation (through its servant, Captain James) to exercise reasonable care and skill in the conduct of the Fortius within the Port. The complaint is, in substance, that the pilot's services were not rendered with due care and skill: ie that the navigation of the vessel was faulty, rather than that an unqualified person was appointed to navigate the vessel.
589 The Corporation admits that Inchcape was the defendant's agent, but all claims which depend upon the existence of a contractual relationship between the defendant and the Corporation are denied on the basis that there was no relevant contract between the Corporation and the defendant. That is because the taking on board of the pilot and the payment of the associated pilotage charges was not the result of a consensual arrangement from which a contract would be implied, but was instead the consequence of legislation which made the taking on board of a pilot compulsory, and which unilaterally imposed on the shipowner a liability for pilotage charges.
590 The essence of a contract is that there is a voluntary assumption of a legally enforceable duty: Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424 at 457. Whilst tort obligations are imposed on the parties, contractual obligations are voluntarily assumed: Astley v Austrust Ltd (1999) 197 CLR 1 at 36.
591 The PCWM Act makes pilotage compulsory at Port Kembla, and prohibits a master of a vessel from entering, leaving or moving the vessel within the port without first 'taking on board a pilot made available by' the pilotage service provider (s 78). Later in these reasons, I conclude that the Corporation was the relevant pilotage service provider. The defendant therefore had no option but to take on board a pilot supplied by the Corporation.
592 Further, Regulations 10 and 11 of the Ports Corporatisation & Waterways Management Regulation 1997 (NSW) expressly required the owner of a vessel in respect of which navigation and/or pilotage charges are payable to furnish particular information to the port authority, including such information as the port authority reasonably requested. The information which was supplied by Mr Ross of Inchcape to the Corporation was thus no more than compliance with the applicable regulatory procedure.
593 The Corporation was in turn required by s 11 and s 12 of the PCWM Act to exercise 'port safety functions' (which include providing or arranging for the provision of 'pilotage services') in accordance with its operating licence. Clause 16.1 of the operating licence obliges the Corporation to ensure 'that licensed pilots are always available'.
594 Pilotage charges are imposed by s 53 of the PCWM Act. Section 53(4) of the PCWM Act provides that a pilotage charge is payable by the owner of the vessel concerned. The Corporation is authorised by s 54 of the PCWM Act to set the level of pilotage charges, but only with the approval of the Minister and in accordance with its operating licence. Section 68 of the PCWM Act provides that a charge under Part 5 of the Act (including a pilotage charge) is payable on demand by the Corporation, or at such time, or on such terms, as the Corporation may determine. Section 70 provides for interest to accrue on charges that are unpaid by the due date at a rate determined by the relevant port authority. Section 70(3) imposes a limitation on the rate which may be determined.
595 There was nothing voluntary about the engagement of the pilot by the defendant. The defendant's obligation was to take on board the pilot 'made available' or 'assigned' by the pilotage service provider. Nor was there any need for the defendant or Inchcape to agree upon the charges payable with respect to the provision of the pilot because the applicable charge was fixed by the operation of the statute and payable by virtue of the statute. Further, as a matter of fact, there is no evidence that the parties negotiated about, or agreed upon, the price which was to be paid by the defendant in respect of the Corporation's provision of a pilot.
596 Section 67 of the PCWM Act authorises the relevant port authority, with the approval of the Minister, to enter into an agreement with any person liable to pay any kind of charge under Part 5 (including a pilotage charge). Section 67(2) specifies the matters for which such an agreement may make provision and s 67(3) provides that to the extent that provision is so made, the agreement displaces any determinations of the relevant port authority in relation to the matter. Section 67 allows for agreement to be reached, with the approval of the Minister, for a regime different from that which would otherwise flow from the application of the Act. However, s 67 has no application in the circumstances of the present case, because there was no express agreement between the defendant and the Corporation for a regime in relation to the provision of a pilot or for the payment of pilotage charges different from that which the PCWM Act makes provision, nor was there any approval of the Minister to enter into such an agreement.
597 In Holman v Irvine Harbour Trustees (supra) the Lord Justice-Clerk characterised the relationship between the ship and the trustees as one of contract (at (1877) 4 Sess Cas (4th series) 421) 'under which the vessel was bound to pay pilotage dues, and the commissioners in return undertook the safe pilotage of the vessel'. On the other hand, in Oceanic Crest Shipping Co v Hamersley Iron Pty Ltd [1986] WAR 88 the Full Court of the Supreme Court of Western Australia rejected an argument that a contract came into existence between the relevant pilotage services provider and the shipowner on the ground that the ship took on the pilot and handed over control of the ship to him under legal compulsion. In the High Court, only Brennan J, who was in dissent in the result of the case, dealt with the contract question. Under the heading 'No Contract between the Shipping Company and Pilbara', his Honour said (at (1986) 160 CLR 656):
'The master of the "Oceanic Crest", being bound by reg. 7 of the Port of Dampier Regulations to take a pilot on board, took on board Captain Hammonds. He became liable to pay the pilotage charges prescribed by the regulations. If it were not for the provisions of the regulations making pilotage on entering the Port of Dampier compulsory, a contract for the engaging of the pilot and the payment of a pilotage fee may have been implied between the shipping company or the master on the one hand and Pilbara and the pilot (or one of them) on the other. When the question is whether a contract has been made for the provision of pilotage services in a case where pilotage is compulsory, something in the nature of a consensual arrangement must appear before a contract can be found - something more than an arrangement on the part of the shipowner or master to discharge the statutory obligation by taking a pilot on board and permitting the pilot to navigate the ship: see per Barton A.C.J. in Fowles v. Eastern and Australian Steamship Co. Ltd. [(1913) 17 CLR 149 at 167-18] (an appeal to this Court on a case stated before the trial of the action which led to the appeal to the Privy Council earlier mentioned). In the present case, the master of the "Oceanic Crest" was not shown to have done more than to have taken Captain Hammonds on board and to have permitted him to navigate the ship within the harbour. No contract was thereby to be implied between the shipping company or the master on the one hand and Pilbara or the pilot (or one of them) on the other. The Full Court was right in so holding.'
598 In the passage quoted above, Brennan J referred to a passage from the judgment of Barton ACJ in Fowles v Eastern and Australian Steamship Co Ltd (1913) 17 CLR 149 where his Honour said that it was (at 167-168):
'…doubtful whether there is any contract even between the shipowner and the government (See, however, Brabant & Co v King [[1895] AC 632]). The plaintiffs were compelled by law to take a pilot, and compelled by law to pay pilotage rates or dues. There was neither a voluntary promise nor a voluntary consideration…'
599 In Oceangas (Gibraltar) Ltd v Port of London Authority [1993] 2 Lloyd's Rep 292 ('The Cavendish') Clarke J agreed with Brennan J's analysis and said (at 299):
'The arrangement made was no more than an arrangement to discharge the shipowner's statutory obligation by taking a compulsory pilot and paying for his services … as provided for in the regulations made under the Act. I therefore accept Mr Tomlinson's submission that there is no room for a finding that there was a contract between the [shipowners] and [the Harbour Authority]. The [shipowner's] claim in contract therefore fails.'
600 In R W Miller & Co Pty Ltd v Shortland County Council (1988) 83 ALR 225 Mason CJ distinguished between an arrangement which was predicated upon a performance by a Council of its statutory duty to supply electricity to a consumer, who being entitled, demands a supply, and an acceptance by the Council of an offer by a potential consumer to take and pay for the supply. In Norweb PLC v Dixon [1995] 3 All ER 952 the English High Court held that legal compulsion as to both the creation of the relationship and the fixing of its terms is inconsistent with the existence of a contract. Reference was made in Norweb to the decision of the House of Lords in Pfizer Corporation v Ministry of Health [1965] AC 512 where their Lordships held that there was no consensual bargain where one party was obliged by statute to supply medicines at a particular price, and the other party had a statutory right to obtain medicines at that price. Similarly in Suatu Holdings Pty Ltd v Australian Postal Corporation (1989) 86 ALR 532 at 542 Gummow J held that the routine dealings between the Postal Corporation and members of the public were non-contractual, although there was power to enter into special arrangements which would have contractual force.
601 In the present case, the defendant submits that there is, using the language of Brennan J 'something more than an arrangement on the part of the shipowner or master to discharge the statutory obligation by taking a pilot on board and permitting the pilot to navigate the ship'. The additional matters upon which the defendant relies is that the Corporation was carrying on the business of the provision of pilotage services for profit, and that the Corporation assumed the function of piloting vessels into and within Port Kembla itself, as opposed to making available a (licensed) pilot for that purpose.
602 The Corporation was constituted as a statutory State-owned corporation ('SOC') pursuant to s 7 of the PCWM Act. Section 9 of the PCWM Act provides that the principal objectives of each of the three Port Corporations (Newcastle, Port Kembla and Sydney) established by the Act are as follows:
'(a) to be a successful business and, to this end:
(i) to operate at least as effectively as any comparable business; and
(ii) to maximise the net worth of the State's investment in the Port Corporation; and
(b) to promote and facilitate trade through its port facilities, and
(c) to ensure that its port safety functions are carried out properly.'
603 Section 20F of the State Owned Corporations Act 1989 (NSW) ('the SOC Act') provides that an SOC is not and does not represent the State, and s 20ZB(1) of the SOC Act, gives a SOC, for or in connection with the performance of its functions, all the powers of a natural person, including the power to enter into contracts and to charge, and fix terms, for goods, services and information supplied by it.
604 Thus the Corporation had a statutory objective to be a successful business and to maximise the net worth of the State's investment in the Corporation. The Corporation developed and maintained a competitive price structure, including in respect of pilotage services, although, in accordance with s 54(2) of the PCWM Act, such charges were only fixed with the approval of the Minister. The provision of pilotage services was described by the Port Corporation in its annual report for 30 June 2001 as part of its core business and monies earned from pilotage services formed part of the Corporation's revenue. For the year ended 30 June 2001 revenues from the provision of pilotage services amounted to about 6.5 per cent of the Corporation's total revenue. On the Corporation's website, the Corporation promoted itself and its pilots as having 'world class people and state of the art navigation tools'. The Corporation referred to users of pilotage services as its 'customers'.
605 These factors indicate that the Corporation was both authorised and required to act in a business-like manner in the discharge of its statutory functions and that the Corporation endeavoured to do so. Clearly the Corporation had power to enter into contracts (remembering, of course, that agreements in respect of charges authorised by s 67 of the PCWM Act require Ministerial approval). However, the evidence does not establish any undertaking given by the Corporation to do anything in relation to the Fortius that went beyond the Corporation's statutory obligations. While it is true that the terms of the Operating License charge the Corporation with the responsibility of ensuring that licensed pilots are available for allocation to vessels, it is the pilot, rather than the Corporation, which undertook the actual piloting of the ships: cf Oceanic Crest (supra) at 649 (Wilson J), 682 (Dawson J).
606 The fact that there has been a commercialisation of entities, such as the Corporation, carrying out statutory functions does not alter the fact that both the creation of the relationship between the Corporation and the defendant, and the fixing of its terms, arose by the operation of the PCWM Act. The Corporation offered a pilot to the Fortius because it was bound to do so, and the defendant took a pilot on board the Fortius because it was bound to accept and, as I have outlined above, even the resultant financial obligations between the defendant and the Corporation were imposed by the PCWM Act. The absence of voluntariness and the fact of compulsion operating on both the defendant and the Corporation must inevitably lead to a conclusion that in the case of routine arrangements for the provision of pilotage, such as the present, there is no contract.
607 In Branir Pty Ltd v Owsten Nominees (No 2) Pty Ltd (2001) 117 FCR 424 Allsop J (with whom Drummond and Mansfield JJ agreed) emphasised that (at 525):
'The essential question … is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential terms of the contract.'
The question of whether there was 'agreement' and 'mutual assent' presupposes that the parties had a choice in the matter of whether they could agree and assent, as well as in relation to the terms or conditions on which they would do so. Where there is compulsion, no question of contractual intent in either party arises: Lismore County Council v Stewart (1989) 18 NSWLR 718 at 726 (Hope AJA, Kirby P and Samuels JA agreeing). It is true that in Puntoriero v Water Administration Ministerial Corporation (1999) 199 CLR 575 the High Court had no difficulty in envisaging the existence of a contract between a supply authority and a customer even in circumstances where as a practical and legal matter the customer was constrained to deal with the supply authority, and there was only limited room for negotiation. But the existence of a contract does not appear to have been in issue before the High Court: the issue was as to the scope of the statutory immunity. And, in any event, a majority in Puntoriero appears to have regarded the class of transaction there before the Court as being either (at 585 (Gleeson CJ and Gummow J)) 'consensual' or being undertaken with (at 589 (McHugh J)) 'consent'.
608 The Corporation's performance of its port safety function in relation to the provision of pilotage services for the Fortius was imperfect, since it assigned an unlicensed pilot to conduct the Fortius into and within the Harbour, contrary to the stipulation in its operating licence that a duly licensed pilot should be available at all times. This, however, has no bearing on the issue of whether there was a contract between the defendant and the Corporation of the kind which the defendant alleges. There is no reason why a consequence of imperfect performance by one party of a statutory obligation should be the creation of a contract which would not have come into existence had the statutory obligation been properly performed.
609 The cross claim, insofar as it alleges a breach of contract, therefore fails.