The Ship "Socofl Stream" v CMC

A. Was Sovcomflot liable under the bills of lading as demise charterer? 17 The learned primary Judge found that the Master of the "Socofl Stream" was not employed by Sovcomflot and had no actual authority to act as its agent. As to the latter issue, his Honour observed; "It must be accepted that at no point after the demise charter was terminated was the Master employed by Sovcomflot and was, by virtue of his employment, an agent of Sovcomflot. It was an admitted fact, and common ground (at least as a matter of fact), that Kamchatka continued to employ the Master in January 1999 (though counsel for CMC appeared, at times, to resile from this agreed fact). However agreement on that fact does not conclude, in Sovcomflot's favour, the inquiry about the status of the Master and his authority. There may be an agency by estoppel in circumstances where the putative agent is not the agent of the principal at all." 18 His Honour went on to find that Sovcomflot had held the Master out as having authority to bind it by signing bills of lading. The relevant part of the reasons at first instance recited; "For reasons given in the preceding paragraphs concerning the consequences of the failure of Sovcomflot to nominate a port for redelivery, the conduct of Sovcomflot constituted a representation that the Master had authority to bind it even though the Master was not its employee. For these reasons I am satisfied that Sovcomflot is bound by the bills of lading and is, for the purposes of the bills, the carrier." 19 The conduct relied on by the learned primary Judge as constituting Sovcomflot's holding out of the Master as its agent was its failure to demand redelivery of the vessel to a safe port in accordance with Art. 11(2)(d) of the demise charterparty between Sovcomflot and Kamchatka, which is reproduced at [5] of these reasons. In that context, his Honour observed; "However Kamchatka was under no contractual obligation to redeliver unless a port was nominated. Its status after the termination of the charterparty and the nature of its possession of the Vessel was debated at some length during the jurisdictional argument. It is an issue that need not be resolved. It is sufficient to observe that Sovcomflot allowed Kamchatka to continue to use the Vessel in the sense that it did not require redelivery of the Vessel by exercising the contractual right to demand redelivery at a nominated port. Sovcomflot exercised one right (to terminate) but not another (redelivery at a nominated port). Sovcomflot's demand for redelivery in its telex of 25 December 1998, in which it demanded that Kamchatka "forthwith re-deliver the above vessel to the disponent owner as soon as possible at a safe port to be nominated by us, failing which re-delivery the disponent owner (or their agent) may itself enter upon and repossess the vessel," was a barren one in the absence of the nomination of a port for redelivery. Moreover, the failure of Sovcomflot to nominate a port might reasonably have been taken by Kamchatka to be an indication that Sovcomflot was not prepared to assert or enforce its legal rights, at least fully. Sovcomflot neglected to nominate a port for redelivery even when Kamchatka made it plain (again) in its telex of 30 December 1998 that it proposed to continue to trade. Sovcomflot thus afforded Kamchatka the opportunity to continue to trade using the Vessel under the command of the Master. Sovcomflot effectively clothed the Master with authority to issue bills of lading on behalf of the "owner", that is, the person who was, at that time, in fact and in law the demise charterer. Sovcomflot would have had no reasonable basis, in my opinion, for assuming that what had occurred in late December 1998 between it and Kamchatka would be known to shippers who might use the Vessel before Sovcomflot regained physical possession of it. It should have known that by allowing Kamchatka to trade in the way just discussed, shipowners would enter contracts of carriage on the assumption that the Master could bind the owner." 20 On the hearing of the appeal, Counsel for Sovcomflot attacked that reasoning because it rested on the implied finding that, had a demand been made under Art. 11(2)(d), Kamchatka would have complied with it by delivering the vessel to a safe port nominated by Sovcomflot. The surrounding circumstances, Counsel argued, indicated that Kamchatka would have ignored any demand for redelivery. On the view we take of the matter, it is unnecessary to resolve this question because we consider that, for the purpose of analysing whether the Master had the ostensible authority of Sovcomflot to issue the bills of lading, it is necessary to focus on what happened between 15 December 1998 when the notice under Art. 11(2)(a) of the charterparty was given and the time when CMC's cargo was taken on board the "Socofl Stream" and the bills of lading were signed. 21 On appeal it was contended on behalf of Sovcomflot that merely allowing the vessel to continue to trade did not constitute a representation to the world by Sovcomflot that the Master had been authorised by it to issue bills of lading. There was no obligation, so the argument went, to have regard to cargo interests in determining how Sovcomflot would exercise its contractual rights to terminate the demise charterparty with Kamchatka. Nor was there any communication by Sovcomflot to the Master or any other person from which the making of the representation could be imputed to Sovcomflot. Likewise, it was argued that this was not a case where Sovcomflot's inaction allowed others to assume that a particular state of affairs would continue. Rather, what CMC claimed to have assumed was a complete change whereby the Master, who was formerly the agent of Kamchatka, had become the agent of Sovcomflot. 22 We doubt whether the correct analysis of what CMC can be taken to have assumed involved any such "complete change". The assumption to be imputed to CMC is that, when the ship, in the person of the Master, received cargo on board and issued bills of lading, that was done on behalf of the actual or disponent owner of the ship for the time being. On that analysis, although there may have been a "complete change" of ownership by reason of Sovcomflot's termination of the demise charter to Kamchatka, that did not change any assumption which might reasonably have been made by third parties dealing with the ship. That the assumption actually made by CMC accorded with that which we have imputed to it is borne out by the evidence of Mr Hanneman, CMC's Transport Manager, who deposed; "At no time prior to the Arrest of the vessel did I or CMC have any knowledge that any person other than the Owner and POST have any interest in the ship. At the time of accepting Bills of Lading I believed that the Master was employed by the Owner and had authority to sign bills on behalf of the Owner in the normal way." 23 That evidence was explored in cross-examination of Mr Hanneman by Mr Sexton for Sovcomflot when this exchange occurred; Mr Sexton: "Now, Mr Hanneman, in relation to the belief that you had as deposed to paragraph 19, when you say that you believed that the Master had authority to sign bills on behalf of the owner and you used owner with a capitalised first letter, who are you referring to there?" Mr Hanneman: "Whoever the owner was." Mr Sexton: "When you say "in the normal way", do we take it that that means in accordance with whatever the legal position is?" Mr Hanneman: "Yes." Mr Sexton: "At the time that you formed this belief, you didn't know who the Master of the vessel was actually employed by, did you?" Mr Hanneman: "No." Mr Sexton: "You didn't know anything about the arrangements beyond Pacific Orient Sea Transport in relation to this vessel? Mr Hanneman: "No." 24 It was further argued on behalf of Sovcomflot that there is no authority which supports the proposition that an owner or demise charterer of a vessel on which goods are carried is ipso facto liable on a bill of lading in respect of those goods. It was submitted that "the cases speak of the liability of an owner / demise charterer as usually deriving from the bill of lading being signed by or on behalf of the Master who is the servant or agent of the owner or demise charterer" (original emphasis). We take Counsel to mean by the reference to "agent", in the passage which he emphasised, actual agent. In support of the proposition just quoted, Counsel referred first to Baumwoll Manufactur von Carl Scheibler v Furness [1893] A.C. 8, where it was held that the owner of a ship who has parted with possession and control to a charterer under a charterparty is not liable for the loss of goods shipped under bills of lading signed by the captain who is the servant of the charterer and not of the owner and who has no authority to pledge the owner's credit, even though the shipper of the goods has no notice of those facts. In affirming a decision of the Court of Appeal, Lord Herschell L.C. observed, at 17; "Not a single authority has been cited in which the owner of a vessel has ever been held liable on a bill of lading or as for a tort in any case in which the master of the vessel, or those who were guilty of the negligence, have not been properly described as the servants of the owner. No doubt a vessel may be chartered, and the charterer may have, during its continuance, full power to deal with the vessel, to determine her voyage, and to direct the course that she shall take, where, nevertheless, the master and crew remain truly the servants of the owner. In that case I apprehend it is perfectly clear that by reason of the relationship still subsisting, the owner becomes bound by such a contract as a bill of lading, and by all the contracts which a master can ordinarily make, and which persons therefore have a right to presume he is authorized to make, binding the owner." 25 To similar effect, Lord Watson observed, at 21; "At the time when the bills of lading were signed and also at the time when the goods of the appellants suffered damage, the ship was in the possession and under the control of the charterers, who employed their own master and crew in her navigation. That point once fixed, it appears to me that there is really no substantial question which can arise upon this appeal." 26 However, the present case differs from Baumwoll Manufactur by reason of the fact that, by the time when the bills of lading had been signed, the ship was no longer in the possession and under the control of Kamchatka, although that company continued to employ the master and crew. The legal effect of Art. 11(2)(a) and (c) of the charterparty between Sovcomflot and Kamchatka and the telex message of 15 December 1998 was that possession and control of the vessel passed immediately to Sovcomflot. 27 Baumwoll Manufactur was distinguished by the Court of Appeal in Manchester Trust v Furness [1895] 2 QB 539. In that case, the captain had been appointed and paid by the owners of the vessel but it was a term of the time charterparty between the owners and charterers that "in signing bills of lading it is expressly agreed that the captain shall only do so as the agent for the charterers." Nevertheless, it was held that the stipulation just quoted was valid as between the charterers and the owners and had no effect at all on the holder of the bill of lading, notwithstanding that the bill of lading referred to the charterparty by reciting that the goods were to be delivered to the holder of the bill "he or they paying freight for the same and other conditions as per charterparty." Lord Lindley referred to Baumwoll Manufactur at 546, where he observed; "But although there is a great difficulty in reconciling all the earlier cases about demises of ships and so on, the test is in each case that which was applied by the House of Lords in the case of the Baumwoll Manufactur v. Furness ([1893] A.C. 8) - Whose servant is the master? Who is his undisclosed principal when he signs the bill of lading? My answer to that question is, that upon the true construction of these documents he was the servant of the shipowner." 28 The third case cited in this context by Counsel for Sovcomflot was Homburg Houtimport B.V. v Agrosin Private Ltd (The Starsin) [2000] 1 Lloyd's Rep 85, where Colman J observed, at 92; "In identifying what considerations are relevant to the issue whether shipowners are bound by any particular bill of lading there is, in my judgment, no reason to depart in any respect from the approach which would be taken to the same question in relation to any other commercial contract. Where, as in the case of most bills of lading the document has been signed by a person or entity as agent the first stage of the investigation is to look at the document to see whether, on the face of it, the shipowners are represented to be the party contracting to carry the goods. For that purpose, it is necessary to construe the document as a whole in its business context. Although the words are to be understood in their commercial setting, the exercise in construction necessarily involves starting with the express words used and, if the meaning thereby arrived at decisively indicates what can be inferred to be the meaning mutually intended, that will be an end of the matter. In determining the meaning which the parties must be taken mutually to have intended, it is necessary not to lose sight of the fact that, at least in the case of a liner bill, only the shippers and the person or organization issuing the bill are involved. One is concerned to ascertain who the issuer of the bill has represented to be the person undertaking to carry the goods. Whereas it is clearly material when construing the words of representation in the bill that shippers can ordinarily be expected to have knowledge of the fact that liner bills are often issued by liner operators who have the authority to bind owners of chartered vessels to bill of lading contracts, whether in any particular case a liner operator does have that actual authority, must as a matter of principle be completely irrelevant to the process of construction. At the primary stage of construction, the issue is what was represented, not what was authorized to be represented. In answering this question facts, such as the existence of actual authority of the signatory to bind the owners, which would not normally be within the shippers' knowledge, cannot be part of the context or commercial setting." 29 His Lordship then observed that if, on its proper construction, the bill of lading represents that the shipowner is undertaking the obligation to carry the goods, it may be necessary to consider whether the signatory of the bill had actual or ostensible authority to bind the shipowner. He then pointed out, at 93; "However, once it has been determined, as a matter of construction and without regard to the existence of actual or ostensible authority, that the shipowner is the contracting party and that therefore, as they are commonly called, the bills of lading are "owners' bills", the shipowner can escape liability for the carriage only if he can show that the signatory had neither actual nor ostensible authority to bind him." 30 His Lordship went on to observe that the normal assumption, liable to be displaced by the language of the bill of lading, is that the shipowner is undertaking the obligation of carriage. That proposition was expressed as follows, at 93; "If the shipper were to ask the question what is the identity of the carrier in this case, that is to say the person undertaking the obligation of carriage, the answer would surely be: the shipowner, unless the bill of lading stated that some other person was to be treated as the carrier. The shipper would then look at the face of the bill to see whether any other person was described as the carrier." 31 However, it was concluded, as a matter of construction, that the bills of lading were charterers' bills and not contracts binding on the shipowners. Nevertheless, in case the matter were to go further, his Lordship considered, amongst other things, the question of whether the signatories of the bills had ostensible authority to sign bills which were antedated or did not conform with the mate's receipts. As to that matter, his Lordship said, at 95; "There can be no doubt that ostensible or apparent authority is founded upon the principal's representation to the party relying on the contract that the agent has authority to enter into it on the agreed terms. That representation may be made either specifically in relation to a particular contract or generally by reason of the principal's placing the agent in a ministerial position in which an agent would ordinarily have actual authority to enter into transactions of the kind in question: see generally Armagas Ltd. v. Mundogas S.A. (The Ocean Frost), [1986] 2 Lloyd's Rep. 109; [1986] A.C. 717 (see Lord Keith at p.112, col.2; p.777 A.C). In testing the presence of ostensible authority it is, however, necessary not to lose sight of the need to identify the scope of the representation. This is particularly so in the case of an agent who has been placed in a ministerial position in which one would normally be expected to have actual authority to enter into a particular kind of transaction. Thus, if a director of a company were authorized by the board or other internal approval committee to enter into a contract with a supplier of goods on certain specific terms and due to a negligent oversight the director signed the contract on terms which omitted certain of the details included in the draft approved by the board, or other approval body, it would normally not be open to the company to assert that it was not bound by the contract signed by a director who could normally be expected by a third party to have actual authority to bind the company to contracts of that kind. That consequence would follow from the scope of the representation arising from the company having placed the director in that position vis-ŕ-vis the third party. The representation in such a case is not that the director is acting with the approval of the company in respect of each detail of the contract but that the transaction is one of a kind to which the director has authority to bind the company and that his conduct in relation to the entering into of transactions of that kind may be relied upon as conduct authorized by the company and as giving rise to obligations by which the company will treat itself as bound. Notwithstanding that the director may not have had actual authority to agree to the details of the transaction and that the third party may have appreciated that the director would ordinarily need such authority, the company will still be bound under the ostensible authority principle unless the third party knew that the director did not have the requisite authority." 32 Applying that general principle of ostensible authority to the issuing of bills of lading by a time charterer or local agent, it was observed, at 96; "Once such a time charter has been entered into or letter issued, the shipowners have placed the time charterer or local agent in the position of their representative in respect of the issue of bill of lading contracts relating to the cargo to be loaded and have thereby indirectly represented to the shippers and to indorsees of the bills that they, the shipowners, have authorized the time charterers or agents to bind them to contracts of that kind. Consequently, the shippers and indorsees are entitled to assume that the owners are content to be bound by the terms of the bill even if, unknown to them, there was no actual authority to issue the bill in precisely the terms in which the bill was issued." 33 Colman J referred to several authorities in this area including Grant v Norway (1851) 10 C.B. (N.S.) 665, which he explained as deciding that a master had no authority, actual or ostensible, to bind the shipowner in respect of goods that were never shipped, and some obiter remarks of Rix J in Sunrise Maritime Inc v Uvisco Ltd (The Hector) [1998] 2 Lloyd's Rep 287. The first part of Rix J's dictum is illuminating for present purposes. It is in these terms; "For these purposes, I would regard an owner as giving his time charterer ostensible authority to bind him (in signing bills of lading on the master's behalf) by reason of putting his vessel under his time charterer's orders and directions regarding employment. That is not simply a matter of private contract; it is reflected in the reality of what happens when a time chartered vessel enters port in order to load cargo. An owner in such circumstances holds out his time charterer as a disponent owner with powers over the employment of his vessel, and thus as having power to bind him by signing a bill of lading." 34 Later in his reasons in The Starsin, Colman J made a further reference to Grant v Norway, saying, at 97; "Accordingly, as the law has now developed, Grant v Norway should be treated as conceptually aberrant and should not be used as a basis for the extension of the protection of shipowners against being bound by bills of lading issued by time charterers, or other agents on behalf of the owners, which by reason of some inaccuracy on their face, have been, issued without actual authority. Not only does this conclusion give effect to the conceptual basis of ostensible authority but it also reflects a further important policy consideration. That is that if an innocent shipper, indorsee or consignee could not rely on statements on the face of a bill of lading as to such matters as the date of shipment and the absence of clausing and was obliged to verify the accuracy of the date and the apparent good order and condition of the goods each time he took a bill of lading, that would represent a most serious impediment to international trade which depends so heavily on the accuracy of bills of lading as negotiable instruments." 35 The reasoning of Colman J in The Starsin was approved by Timothy Walker J in Alimport v Soubert Shipping Co Ltd [2000] 2 Lloyd's Rep 447 where a bill of lading issued by the master's agent which antedated the loading of the goods was still held to bind the shipowners. His Lordship was content to adopt the reasoning of Colman J by quoting in full from the passage reproduced in the preceding paragraph of these reasons. 36 In the present case, Mr Sexton SC, for Sovcomflot, submitted that, in the absence of express authority from it to the master to sign bills of lading, a shipowner can normally only be said to have conferred ostensible authority on the master where it is the employer of the master. If that "normal" situation does not obtain, so it was submitted, ostensible authority can only be founded on a representation by the shipowner accompanied by reliance on that representation by the shipper or holder of the bill and an alteration of position as a result of that reliance; see Rama Corporation Ltd v Proved King and General Investments Ltd [1952] 2 QB 147 at 149-150. 37 In the present case, it was said that there was no evidence of reliance by CMC on any conduct. We disagree. In our view, the relevant conduct by Sovcomflot was its allowing the "Socofl Stream" to take on cargo after 15 December 1998 for which the master or his agent issued bills of lading. The evidence does not exclude the natural inference that Sovcomflot, at any time after 15 December 1998, could have made clear by arresting the ship (as it ultimately did) or otherwise, that the ship no longer had the disponent owner's authority to take on cargo and issue bills of lading. CMC relied on the conduct of Sovcomflot which we have just identified by having its agents at Singapore and Port Klang put consignments of steel on board the vessel and obtain bills of lading in respect of those consignments in the usual way. 38 Nor can it be said, as Counsel for Sovcomflot put it, that CMC suffered no detriment in the circumstances just described. Counsel contended that CMC had a contractual arrangement with POST for the carriage for the goods to which the bills of lading were incidental and CMC is entitled to claim from POST any loss due to delay in delivery. That argument ignores, in our view, the fact that CMC can be taken to have believed that it was contracting with the owner of the vessel and, in the event of default, would have a cause of action in rem. It is not to the point, we think, that CMC may have had a parallel right to an indemnity or other contractual remedy enforceable in personam against parties other than the shipowner. 39 It was next submitted on behalf of Sovcomflot that "commercial unconscionability" of the kind referred to in The Starsin depended on a chance temporal coincidence. Had the charterparty been terminated, so this argument went, after the bills of lading had been issued, then everything would have appeared the same from CMC's standpoint but there would have been no claim in personam against Sovcomflot because the master would clearly have been the agent of Kamchatka when the bills of lading were issued. It is true that, on that hypothesis, Kamchatka would have been the owner as demised charterer when the bills of lading were issued. However, that is not the critical time. By s 4(3) of the Admiralty Act 1988; "A reference in this Act to a general maritime claim is a reference to; ..... (f) a claim arising out of an agreement that relates to the carriage of goods or persons by a ship or to the use or hire of a ship whether by charterparty or otherwise." 40 Section 18 of the Admiralty Act provides; "Where, in relation to a maritime claim concerning a ship, a relevant person: (a) was, when the cause of action arose, the owner or charterer, or in possession or control, of the ship; and (b) is, when the proceeding is commenced, a demise charterer of the ship; a proceeding on the claim may be commenced as an action in rem against the ship." 41 "Relevant person" is defined as follows in s 3(1) of the Admiralty Act; "relevant person", in relation to a maritime claim, means a person who would be liable on the claim in a proceeding commenced as an action in personam;" 42 The time when the cause of action in the present case arose was when the breach of the contract to which CMC was a party occurred and CMC suffered damage. That was clearly after the bills of lading had been issued. The question for present purposes thus becomes refined to whether, between the end of January and 9 February 1999 when the instant proceeding was commenced, Sovcomflot, which, by then, had indisputably become a demised charterer of the vessel, would have been liable in personam on a claim arising out of an agreement related to the carriage of CMC's steel by the "Socofl Stream". 43 Sovcomflot's next submission was that, once the notice of termination of the demise charterparty had been served, Kamchatka was not entitled to trade with the "Socofl Stream". It was said that Kamchatka was in no better position than a thief who employs a master who purports to issue bills of lading on behalf of the true owner. The judgment at first instance was criticised as being founded upon a finding that, by exercising its contractual rights as it did, Sovcomflot had afforded Kamchatka the opportunity to continue to trade. That reasoning was impugned as inconsistent with High Court and other authorities to the effect that a party may exercise contractual rights as and when that party thinks fit without regard to the effect of that exercise upon third parties. Reference was made to, amongst others, Perre v Apand Pty Ltd (1999) 198 CLR 180, where it was held that there is no general duty of care to avoid loss to a third party although in certain circumstances the law will permit the third party to recover damages for pure economic loss. As McHugh J noted in that case, at par 115; "As long as a person is legitimately protecting or pursuing his or her social or business interests, the common law will not require that person to be concerned with the effect of his or her conduct on the economic interests of other persons." 44 See also, Hill v van Erp (1997) 188 CLR 159, Bryan v Maloney (1995) 182 CLR 609 and D C Thomson & Co Ltd v Deakin [1952] Ch. 646 at 676. Those authorities establish that a person, acting legally in accordance with some contractual or other legal right, is not obliged to have regard to the possibly deleterious effects of his or her actions on third parties. That proposition acknowledges that a person may exercise, or defer the exercise of, his or her legal rights without having regard to the effect of that action on a third party who may be affected thereby. For example, Sovcomflot could, at its election, have terminated the charterparty on 15 December 1998 or 5 January 1999 without regard to the effect of the exercise of that election on a shipper who was expecting to load goods onto the vessel on 6 January 1999. However, that is different from saying that a person whose actions foreseeably create a certain state of mind in another which induces that other to act in a particular way can thereafter assert that the third party is not entitled to act on the faith of the impression just created. 45 In the present case it was said on behalf of the appellant that the action of Sovcomflot claimed to give rise to the ostensible authority of the master to issue bills of lading on its behalf was Sovcomflot's failure to nominate a port for redelivery pursuant to Art. 11(2)(d) of the charterparty. However, that, it was further argued, was a matter of discretion, not obligation, under the charterparty. We agree and we respectfully decline to adopt the finding by the learned primary Judge quoted at [19] of these reasons that "Sovcomflot allowed Kamchatka to continue to use the Vessel in the sense that it did not require redelivery of the Vessel by exercising the contractual rights to demand redelivery at a nominated port. Sovcomflot exercised one right (to terminate) but not another (redelivery at a nominated port)." 46 On the analysis which we favour, the right to require redelivery at a nominated port conferred by Art. A11(2)(d) was not conjunctive with, or alternative to, the right of termination conferred by Art. 11(2)(a). Rather, it was incidental or ancillary to that primary right and its exercise entitled the disponent owner to have the vessel, at the charterer's expense, restored to her pre-charter condition and delivered to a safe port of the disponent owner's nomination, presumably as a step towards the exercise of the power of sale conferred by Art. 11(2)(b)(i) and the possible use of the vessel by the disponent owner pending sale as contemplated by Art. 11(2)(c) or towards a valuation in lieu of sale pursuant to the option conferred on the disponent owner by Art. 11(2)(f). However, this analysis is not fatal to CMC's contention that by 6 January 1999 Sovcomflot had conferred ostensible authority on the master of the "Socofl Stream" to receive goods on board and issue bills of lading to shippers. 47 According to CMC, Sovcomflot, on terminating the demise charterparty with Kamchatka, impliedly took control of the Master and crew of the "Socofl Stream". Although Sovcomflot had actual or constructive knowledge that she was on liner service, it did nothing to prevent the vessel from trading after 15 December 1998. Reference was made by Mr King, who appeared with Mr Levingston for CMC, to Robins v Power (1858) 4 C B (W S) 778; 140ER 1297. In that case, the plaintiff had been a seaman on board the "Constance Emma" which, on 18 December 1855, while she was at sea near Suez, had been sold in Liverpool to the defendant. On 10 January 1856, the defendant's agent, one Parr, arrived in Suez where the vessel was then in port and shortly afterwards the master gave up command of the vessel which was assumed by the first mate. The crew then, for the first time, learned that the vessel had been sold. The plaintiff remained on board until 10 March when a new master, who had been sent out by the defendant, arrived at Suez. The new master endeavoured to persuade the plaintiff to remain with the ship and sign fresh articles. The plaintiff refused and ultimately left the ship on 19 April 1856, having continued to do duty on board until that day. A few days later the ship sailed for Bombay. The plaintiff claimed wages from 23 August 1855 to 19 April 1856, but at trial confined his claim to the period from 18 December 1855, when the vessel was purchased by the defendant to 19 April 1856. On the return of the rule nisi to enter a nonsuit for verdict for the defendant in place of the jury's verdict for the plaintiff, Cockburn CJ concluded that the rule should be discharged "provided that the plaintiff will consent to the damages being reduced by so much of the wages as were covered by the period intervening between the date of the transfer of the ship to the defendant and the time when the notice of the change of ownership reached Suez, that is, when Parr arrived there and the fact of the transfer of the ship to the defendant became notorious to all parties concerned." It will be seen that this case turned on the fact that it had been open to the jury to find that there was an implied contract between the new owner, made by his actual agent, Parr, and the crew, which came into existence on or after 10 January 1856. No question of ostensible authority of the master therefore arose in that case, although Cockburn CJ did observe, obiter, at 786; "I am very much disposed to think that a person who becomes the purchaser of a ship while at sea must be taken by intendment to adopt the master as his agent until his authority can be determined by the arrival of some one impowered by the new owner to supersede him; and therefore I think that Abernethy, the former master, or the mate, were authorized to engage the crew on behalf of the defendant. It is not necessary, however, to go to that extent on the present occasion, because I think there was evidence that this plaintiff was employed and performed service under a person having authority and acting as the agent of the defendant in that behalf." 48 To similar effect, Willes J observed, at 788 - 789; "It is quite clear that the defendant bought the vessel with the view of getting possession of her and using her for his own purposes. It is just, therefore, to presume that it was his intention to bear the burthen of the expenses incurred by the ship from that time, and that the people who were doing duty on board the vessel should continue to do duty as his servants. Immediately the notice of the change of ownership arrived out at Suez that intention was communicated to the sailors, and it was understood that the crew should continue to work the vessel as the servants of the new owner." 49 In reply, Mr Sexton SC referred to Mitcheson v Oliver, 5 Ellis & B 419; 119 ER 537 and Myers v Willis 17 C B 77; 139 ER 996. Mitcheson v Oliver turned on whether a person, Thomson, who had acted as master of a ship in commissioning repairs and supplies to her in London had contractually bound the owner, then residing in Liverpool, to pay for those repairs. In holding that the question should have been answered in favour of the defendant, Parke B observed, at 444; "None of us I believe have doubted that the jury came to the wrong conclusion and that the verdict ought to have been for the defendant, on this single ground that no contract can bind a defendant unless made by some one who had real authority to bind him, or unless the defendant is precluded from denying that there was authority in the person who made the contract. It is perfectly settled now that the liability to pay for supplies to a ship depends on the contract to pay for them, and not on the ownership of the ship." 50 In Myers v Willis a shipowner, on 2 August 1851, executed a registered absolute bill of sale over a ship, The Celt, in favour of the defendant as collateral security for a loan of ₤1,000. On 23 March 1852, while the vessel was in port at Paquica, the master issued a bill of lading in respect of 360 tons of guano for delivery at the port of Cork. The bill recited that the master pledged himself and "the aforesaid vessel, her freight, tacke and appurtenances" to the performance of the bill. The Celt was later surveyed in Valparaiso, found unseaworthy and sold without ever sailing for Cork. The consignee, who was also a voyage charterer of the vessel, sued the grantee of the bill of sale for damages arising from non-delivery of the guano in accordance with the charterparty and the bill of lading. There was evidence that at the time of execution of the charterparty and the bill of lading, the fact that the bill of sale had been granted was unknown to either the master or the consignee. The action against the defendant failed, Jervis CJ holding that the register was not conclusive and the question was with whom was the contract made. His Lordship continued, at 103 and 106; "It is admitted that, where the party is mortgagee of the ship only, taking merely the security of the ship, without intending to incur any of the liabilities incident to ownership, the bare circumstance of his being entitled to the vessel, and by subsequently entering upon the possession entitling himself to the earnings of the ship, will not make the master his agent so as to bind him in respect of contracts entered into by him as master after the date of the mortgage: not because he is not entitled to the profits, as is said to be the reason in some of the older cases; but because, applying the modern doctrine of principal and agent, it never was the intention of the mortgagee when he took the security of the vessel, to adopt the master as his agent so as to be liable for contracts made by him. ... ... ... ... ... and on these grounds I think we are entitled to look to the real state of the facts, to see what was the intention of the parties; and, so doing, the only inference I can draw from them, is, that it never was the intention of Mr Willis to become the absolute owner of the ship, or to adopt the captain as his agent for the purpose of binding him in respect of contracts made by him in relation to the ship." 51 In a concurring judgment, Crowder J observed, at 107 that "[the master] had authority to the extent which the master ordinarily has, to bind the person who was in point of fact really and substantially the owner of the vessel and not merely the person who appeared on the register as the nominal owner." By contrast, in our view, in the present case, Sovcomflot intended to, and did, become the "absolute owner" or "really and substantially the owner" of the "Socofl Stream" on and from 15 December 1998 and impliedly took control of the master and crew so that acts which it thereafter permitted the master to do in the ordinary course of trade were done as its ostensible agent. 52 In support of this part of his reply, Mr Sexton suggested that the present case can be assimilated to that of a ship which is a victim of piracy, where it could scarcely be contended that the shipowner would be liable for bills of lading issued, or other contracts entered into, while the vessel was under the control of pirates. However, on that hypothesis, the act of piracy would normally be made known by the owner, if not already notorious, to shippers and others in the mercantile community at all relevant ports so as to negative any implied authority of the pirate captain. 53 It was next contended on behalf of Sovcomflot that it was not unreasonable for it to have acted as it did by giving the notice of termination on 15 December 1998 and requiring Kamchatka on 25 December to redeliver the vessel "at a safe port to be nominated by us." Until the facsimile message of 30 December from Kamchatka disputing the effectiveness of the termination of the charterparty and threatening legal proceedings, so the contention proceeded, it was not reasonable to expect Sovcomflot to take any steps to locate or arrest the vessel. That much may be conceded but ostensible authority does not depend on the presumptive principal's having acted unreasonably. 54 Moreover, we take issue with the appellant's suggestion that "even if Sovcomflot had taken steps immediately after ….. 30 December 1998 to locate and arrest the vessel, it is most unlikely that the vessel would have been located and arrested before 6 January 1999 or even 9 January." In this context, Counsel referred to the evidence of Mr Neill, the solicitor for CMC, who said, under cross-examination, that a tracking or monitoring service may not be able to provide, in response to an enquiry, information which provides the "exact location on the ocean" of a relatively small ship. However, in the same passage from the evidence this exchange occurred; Mr Sexton: "What I am putting to you is that simply engaging a monitoring or tracking service does not guarantee that you'll be able to locate a vessel within days, does it? Mr Neill: "It depends on what sort of service the vessel is on." Mr Sexton: "That's right; it depends on the circumstances, doesn't it? Mr Neill: "That's right. If the vessel is on a tramper service it may go anywhere. If the vessel is on the liner service it's going to a particular series of ports in a particular order, so they publish that service, and if you want to know where, say, the P & O Melbourne is, they'll publish a list of ports where it's going to, you ask the tracking service and they'll obtain that list somehow and tell you where the ship's going to be on each one of those days." 55 The evidence, including the bills of lading themselves, indicated that the "Socofl Stream", at the relevant time, was engaged on liner service. Doubtless it was the material to which we have just referred or similar evidence which led the learned primary Judge to find, at [17] of the reasons below; "I am satisfied that it would have been open to Sovcomflot to have ascertained the location of the Vessel before issuing the notice terminating the demise charterparty. It could have done so with a view to nominating a port for redelivery. I accept that the Vessel would not have been located immediately. However, by not taking steps to locate the Vessel as a step towards nominating a port for redelivery, Sovcomflot created a circumstance in which Kamchatka could continue to trade using the Vessel though no longer as a demise charterer." 56 As indicated above, we do not regard the failure of Sovcomflot to take a step "towards nominating a port for redelivery" as critical to the question of ostensible authority. However, his Honour's finding equally supports the conclusion that it was open to Sovcomflot to locate the vessel and circumscribe, in an appropriately public way, the master's authority to bind it. Such a conclusion is not tantamount to saying, as Counsel for Sovcomflot argued, that "it may have been possible, if Sovcomflot had ordered its affairs entirely in order to protect the interests of persons such as [CMC], there were things which Sovcomflot could have done which may have prevented any loss to [CMC]" (emphasis added).

B. Were the bills of lading contractual documents or mere receipts? 57 Sovomflot contends that the bills of lading in this case operated only as receipts. An early case which considered the relationship between a charterparty and a bill of lading was Rodoconachi Sons & Co v Milburn Brothers (1886) 18 QBD 67. In that case, the plaintiff charterer was also the shipper, and the bill of lading contained an exception from liability on the part of the defendant owner which was not in the charterparty. The charterparty authorised the Master to sign bills of lading "without prejudice to the stipulations of the charterparty". The Court held that the bill of lading operated only as a receipt. This result is not surprising given the identity of the parties and the limitation on the Master's authority to sign bills of lading. Lord Esher MR in the Court of Appeal said, at 75; "… as between the charterers and the shipowners the bill of lading does not alter the contract between them contained in the charterparty … unless there be an express provision in the documents to the contrary, the proper construction of the two documents taken together is, that as between the shipowner and the charterer the bill of lading, although inconsistent with certain parts of the charter, is to be taken only as an acknowledgment of the receipt of the goods." (Emphasis added) See also the observations of Lindley LJ, at 78, and Lopes LJ, at 79-80. 58 The respondent relies on an extension of the above principle as applied in The President of India v Metcalfe Shipping Co Ltd (The Dunelmia) [1970] 1 QB 289. In that case, there was a charterparty made between the owners and the charterers to carry a cargo of urea from Italy to India. The Italian sellers, who placed the cargo on the vessel, took a bill of lading to order, which they then indorsed in blank. The bill of lading was then forwarded to the charterers, who had purchased the urea and payment was duly made. The Court held that the charterparty was the contract of carriage and the bill of lading was only a receipt. The bill of lading contained the terms "Freight payable by the charterers as per charterparty" and "All conditions and exceptions as per charterparty", but did not incorporate an arbitration clause which was in the charterparty. In that case, however, as distinct from the present, there was an indorsement of the bill and the duly indorsed bill was forwarded to the charterers. 59 The bills of lading, for reasons given in this judgment, are between CMC and Sovcomflot, and not between CMC and POST, who are parties to the Memorandum of Understanding, which is said to embody the contract of carriage. There is no privity between the parties to the two arrangements and it is not appropriate to attempt to apply the provisions in The Dunelmia to the present case. In The Dunelmia,the Court disapproved the following statement in Carver, Carriage by Sea, British Shipping Laws, Vol 2, 11th ed (1963), Article 405 at p 340: "Where … bills of lading are given to a shipper, not being the charterer or his agent, and he indorses them to the charterer, the bills of lading become the governing documents in a claim by the charterer against the shipowners for damage to the goods." (Emphasis added) 60 See The Dunelmia at 304-305, 307-308 per Denning MR, with whom Edmund, Davies and Fenton Atkinson LJJ agreed. The disapproved paragraph covered a situation where there had been an indorsement of the bill of lading to the charterers. That did not take place in the present case. The Dunelmia does not cover the present circumstances where there is no privity. 61 The observations of Sheppard J in Sanko Steamship Co Ltd v Sumitomo (No 2) (1995) 63 FCR 227, at 267, as to the effect of the decision in The Dunelmia are not in point because his Honour said that he did not find it necessary to discuss that decision in any detail. His generalised summary of what was held in that case only refers to the relationship between the shipowners and the charterers in relation to the carriage of goods and is not concerned with the situation where there are two sets of provisions for carriage and where the parties are not identical. 62 In Hi-Fert Pty Limited v Kiukiang Maritime Carriers Inc (2000) 173 ALR 263, at 268-269, Tamberlin J referred to the remarks in The Dunelmia and said: "As Counsel for Hi-Fert pointed out, however, this decision is distinguishable because in The "Dunelmia" the parties to the charterparty and the bills were effectively identical. In the present case they are not. The COA in the present case was between WBC and KMC and parties to the bill of lading are KMC and Hi-Fert. This in my view is an important difference because the court is presently concerned with two separate contracts of carriage between different entities. In my view the extract from The "Dunelmia" provides no support for a conclusion in the present case that the bill of lading is a mere receipt. Some support for the conclusion that the bills of lading are not mere receipts is to be found in the terms of the present bill of lading. On the front page of the bills there are references to terms, conditions and exceptions including arbitration clauses being incorporated. There is also a reference to "this contract". Also the conditions of carriage contain mutual promises and agreements as to what is to happen in certain events and as to the operation of the charterparty. The Hague Rules are expressed to apply … to "this contract". There is also a contractual obligation provided for in relation to contribution to general average. The language of the bill of lading and the above reference are in my view inconsistent with the bill being only a receipt for goods which acknowledges delivery of the goods in good order and having no other relevant operative effect as a contract of carriage. Having regard to these considerations each bill of lading in my view evidences a contract of carriage between Hi-Fert and KMC on which Hi-Fert is entitled to sue as endorsee." 63 The Court, of course, will not find, wherever there are different parties to a bill of lading and a charterparty, that the bill of lading must be considered as a contract of carriage. Much will depend on the surrounding circumstances. Nevertheless, the distinction between the two sets of parties is an important consideration. 64 Mr Sexton, on behalf of Sovcomflot, submits that the Memorandum of Understanding dated 26 August 1998 between CMC and POST contained the only contract of carriage in the present case and that the bills of lading which have been issued were mere receipts having no contractual operation. The function of the bills of lading, so it is said, was simply as instruments to carry out the carriage contract comprised in the Memorandum of Understanding. It is submitted that the fact that the parties to the charterparty and the bills of lading were not identical does not "necessarily" mean that the issue of the bills of lading resulted in a contractual document of carriage between the owner or demise charterer and the consignee. 65 It is submitted for Sovcomflot that the task for the Court in the present case is to identify the contract of carriage. This can be readily accepted. In support of this submission it is said that the bills of lading do not make any provision for freight or charges. In relation to the subject shipment, there was a "special arrangement" made for the freight rates because of the size of the cargo. However, that arrangement was evidenced by freight invoices which were faxed to the respondent in mid January 1999, about two weeks before the bills of lading were received by the respondent on or about 27 January 1999. 66 Sovcomflot submits that the Memorandum of Understanding, by its terms, "takes precedence to the GENCON form of charterparty which in turn takes precedence to the bills of lading". In particular, the first paragraph of the Memorandum of Understanding states: "Each shipment shall be governed by a separate charter party but that charter party shall incorporate and be bound by the terms of this agreement." (Emphasis added). Because the only contractual relationship said to be created in respect of the carriage is between the respondent CMC and POST, Sovcomflot has no liability under the bills of lading. 67 These submissions for Sovcomflot face several difficulties. The first is that the Memorandum of Understanding and the bills of lading are made between different parties. On its face, there is something anomalous in having different contracts of carriage in force for the same carriage between the same parties. However, in the present case, since the Memorandum of Understanding was made between parties different from the parties to the bills of lading, there is nothing anomalous in treating the bills of lading as evidence of an agreement for carriage different from the arrangement constituted by the Memorandum of Understanding. 68 A second difficulty with the submissions on behalf of Sovcomflot is that the Memorandum of Understanding, in terms, operates to provide a "framework" for an overall arrangement for the carriage of cargoes but does not itself specifically state that it is to be a contract of affreightment or carriage. It is necessary to look elsewhere to see what terms apply to any particular contract of carriage made within that framework. The provisions in the Memorandum of Understanding are general. On their face, they are intended only to set out parameters within which specific and detailed contractual arrangements for carriage are to be made. 69 A third difficulty is that the submissions call for the detailed terms of the bills of lading to be ignored apart from the clause concerning receipt of the goods. The terms of the bills are framed as contractual obligations. By way of illustration, there is provision in the receipt box on the first page of the bills which goes beyond a mere acknowledgment of receiving the goods. The first paragraph in this box requires the shipper, owner, consignee and holder of the bill to; "… expressly accept and agree to all its stipulations, exceptions and conditions, whether written, stamped or printed … No agent is authorized to waive any of the provisions of the within clauses." 70 The second paragraph of the receipt box provides that the goods received are to be transported from the port of loading to the point of discharge. This imposes an obligation to carry and it is not purely descriptive. An identical provision appears in the body of the bills of lading themselves. Other operative provisions relating to the carriage which are contained in the bills of lading are as follows: · The words "FREIGHT COLLECT". This governs the payment of freight. This endorsement differs from the Memorandum of Understanding which requires provision for payment of freight to be "Freight payable as per Charterparty." · Clause 2 incorporates the Hague Rules. · Clauses 3, 9, 21, 22, 23, 24, 25 and 26 contain provisions relating to exemptions or limitations in respect of potential liability. · Clause 4 of the bills of lading refers to "The contract". · The remaining clauses contain detailed provisions which in terms govern the respective relationships, obligations and rights of the parties. 71 It can be seen that the whole tenor of the bills of lading is regulatory of contractual rights and obligations. To treat these provisions, other than those which operate as a receipt, as mere surplusage because of the existence of the Memorandum of Understanding between different parties and to ignore all other provisions apart from the receipt clause is not warranted. No persuasive submission has been made that there is any proper basis for adopting this course in the present case. The bills of lading do not purport to incorporate the terms of any charterparty. The position might be otherwise where there are two sets of differing provisions each purporting to comprise the contract of carriage made between the same parties and there is a provision for precedence of one over the other, but that is not this case. The bills of lading in the present case were intended, in our view, to have contractual effect between the parties and to make relevant operative provisions with respect to the carriage as between CMC and Sovcomflot. If the intention were otherwise it would have been a relatively simple matter to make this clear by express wording in the bills themselves.

C. Was there a failure to deliver with reasonable dispatch? 72 It was submitted on behalf of Sovcomflot both at first instance and on appeal that, there being no time for delivery specified in the bills of lading and the goods being steel and not perishable, the evidence did not permit a finding of a breach of the carrier's implied obligation to deliver with reasonable dispatch. The learned primary Judge rejected that submission saying, at [91] of his reasons; "However it is relatively clear, in my opinion, that the delay occasioned by the arrest of the Vessel in Brisbane was material. On any view of the evidence, the residue of the voyage from Brisbane to Newcastle (even allowing for discharge and loading (if any) of cargo in Brisbane) would have taken a limited number of days only and certainly less than seven. There was some evidence that the sea voyage from Brisbane to Newcastle would take 38 hours port to port. That was in relation to a voyage that had, to that point, taken approximately three weeks from the time CMC's cargo had been loaded. It was over a fortnight after the arrest of the Vessel that the cargo was discharged in Brisbane. That occurred in circumstances where, as Mr Fisher indicated to Mr Neill at the time, there was no certainty about when the Vessel might sail and the cargo might be delivered to Newcastle. While there was some discussion about the possibility of CMC's cargo being carried by the Vessel, when that would happen was uncertain and it was not being suggested that it would occur at the rate CMC had already secured. CMC was, in these circumstances, entitled to treat the delay as unreasonable and make its own arrangements to transport the cargo by other means." 73 On the appeal, Counsel for Sovcomflot pointed out that the vessel had been arrested on 25 January and released on 18 February 1999. Accordingly, it was further submitted, if CMC had not, in the meantime, successfully applied to this Court for discharge of the cargo, the delay in delivery would have been less than three weeks. 74 It is not disputed that it is an implied term of a contract of carriage of goods by sea that the vessel will proceed between ports of loading and discharge with reasonable dispatch; see eg Fyffes Group Ltd v Reefer Express Lines Pty Ltd (The Kriti Rex) [1996] 2 Lloyd's Rep 171 at 191. The application of that implied term has been described in these words in Carver's Carriage by Sea, 13th ed. p.1304; "The expressions "reasonable dispatch" and "reasonable time" commonly used are ambiguous unless we know the state of circumstances to which they refer. If the reasonable dispatch is to be estimated by reference to the circumstances which ordinarily exist, the time to be occupied is a definite one, and may be calculated beforehand. But in the case we are considering, the true view is that the dispatch required from the parties is that which can reasonably be expected from them under the actual circumstances which exist at the time of performance. [Hick v Rodocanachi [1891] 2 Q.B. 626; affirmed as Hick v Raymond [1893] A.C. 22; Carlton SS. Co. v Castle Co. [1898] A.C. 486; Hick v Tweedy (1890) 63 L.T. 765.] Not, however, allowing as excuses impediments which the party has himself created, or which are under his control. [Zillah v Midland Ry. (1902) 19 T.L.R. 63; Tillett v Cwm Avon Works (1886) 2 T.L.R. 675; Hill v Idle (1815) 4 Camp. 327; Wright v New Zealand Shipping Co. (1878) 4 Ex.D. 165n, per Cotton L.J.; Hick v Rodocanachi, per Fry L.J. [1891] 2 Q.B. 645.] "The delay having happened without fault on either side, and neither having undertaken by contract, express or implied, that there should be no delay, the loss must remain where it falls ……. If the contract be, as we construe it, only to use reasonable diligence in performing his part of the delivery, he was guilty of no breach, whilst the landing of the cargo was rendered impossible by a cause over which he had no control." [Ford v Cotesworth (1868) L.R. 4 Q.B. 137. Cf. Taylor v G.N. Ry. (1866) L.R. 1 C.P. 385; and per Brett L.J. in Nelson v Dahl (1879) 12 Ch.D. 568, 583, 584. But see Hill v Idle (1815) 4 Camp. 327.]" 75 In this case, the delay occasioned to the vessel by its arrest in Brisbane was clearly an impediment which Sovcomflot itself had created, no doubt considering it in its own commercial interests to enforce immediately its right to possession against Kamchatka notwithstanding the adverse impact on the cargo interests of CMC and other shippers, if it thought about them at all. 76 In the light of these principles, we can detect no error in the conclusions at which the learned primary Judge arrived on this question.

Conclusion 77 It will be apparent from the foregoing reasons that each of the contentions pressed on behalf of Sovcomflot on the hearing of the appeal has failed. Accordingly, the appeal must be dismissed with costs. I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Court.

Counsel for the Respondent: Mr P King with Mr J Levingstone

Solicitor for the Respondent: James Neill, Solicitors