Plaimar Ltd v Waters Trading Co Ltd [1945] HCA 34; (1945) 72 CLR 304 (23 November 1945)

Plaimar Limited Defendant, Appellant; and Waters Trading Company Limited Plaintiff, Respondent.

This appeal concerns the liability to the seller of a buyer of goods, to be shipped late in 1941 from Zanzibar to Fremantle, which, it is conjectured, were lost at Singapore while awaiting transhipment to Fremantle.

The buyer, a manufacturing company carrying on business in Perth, had been accustomed to purchase Zanzibar clove oil from the seller, a company carrying on a merchant's business in Sydney and elsewhere. The transaction now in question depends upon a written contract, dated 22nd September 1941. The seller claims that it amounts to a c.i.f. contract, or, if not that, at least one which places upon the buyer the risk of loss or damage to the goods during transit. Having tendered to the buyer, who rejected them, a bill of lading, insurance policy and invoice in respect of the lost goods, the seller sued in the Supreme Court of Western Australia for the price, for which it recovered judgment before Wolff J. From that judgment, the present appeal comes.

The contract is expressed in a letter from the seller confirming the buyer's order. It describes the order as one for four tons of Zanzibar clove oil packed in drums each approximately five hundredweights. Then under "price" it proceeds as follows:—"eight shillings and a penny (stg.) per lb. Nett landed weight Cost Insurance Freight Fremantle, Bank exchange Australia/London to buyers' account. This price is based on the current rate of freight and marine insurance, any variations to buyers' account."

Under "shipment" there is the statement:—"Per steamer during October/November/December 1941 from original port." Then follow references to "insurance" and "war risk insurance." "W.P.A. for not exceeding the above value plus 10%. If it can be arranged by sellers war risk insurance is to be covered and charged to buyers' account."

Next comes:—"Terms: nett cash against delivery order or bill/lading." The contract then concludes:—"Sellers not responsible for any loss or delay caused by strikes—direct or indirect—fire force majeure and other circumstances beyond their control."

A contract for the sale of goods upon c.i.f. terms places upon the seller an obligation to ship goods of the contract description to a destination, from a port and at a time indicated by the contract, to obtain a proper bill of lading and a customary insurance covering the ocean transit, to make out an invoice for the price showing what sum, if any, the consignee must pay for freight and giving the buyer credit for the amount, and, as soon as reasonably practicable, to tender these documents to the buyer in exchange for payment of the amount shown on the invoice, or acceptance of a bill of exchange therefor, as the contract may provide.

It is "a contract for the sale of goods to be performed by the delivery of documents, and what those documents are must depend upon the terms of the contract itself": Per Bankes L.J., Arnhold Karberg & Co. v. Blythe, Green, Jourdain & Co.[1]. "It is not a contract that goods shall arrive, but a contract to ship goods complying with the contract of sale, to obtain, unless the contract otherwise provides, the ordinary contract of carriage to the place of destination, and the ordinary contract of insurance of the goods on that voyage, and to tender these documents against payment of the contract price. The buyer then has the right to claim the fulfilment of the contract of carriage, or, if the goods are lost or damaged, such indemnity for the loss as he can claim under the contract of insurance": Per Scrutton J. in Arnhold Karberg & Co. v. Blythe, Green, Jourdain & Co.[2]. "The condition of the goods at the time of the tender of the shipping documents is not material, nor is the value of the documents at the time of the tender material. In all such matters the risk is on the buyer. He may be obliged to pay for goods although they may be at the bottom of the sea, or although through some unforseen circumstance they may never arrive, or although they may have been lost owing to some cause not covered by the agreed form of policy": Per Bankes L.J.[3]. "In my view, therefore, the relevant question will generally be not what at the time of declaration or tender of documents is the condition of the goods? ... but what, at the time of tender of documents, was the condition of those documents as to compliance with the contract ...?": Per Scrutton J.[4].

The leading terms of the contract under our consideration are characteristic of a sale on c.i.f. terms and raise a presumption that it falls within that category. But it is claimed that a close examination of its terms show that some of them conflict with the basal conception and change the character of the contract into one in which the arrival of the goods is essential and the risk of their loss in transit is not accepted by the buyer.

In the first place, the words following the statement of money price "nett landed weight" are relied upon as showing that the price is only ascertainable after the goods are landed and that, at all events, risks of loss of weight, as by leakage, fall on the seller. Then, the use of the expression "not exceeding the above value plus 10%" in stating the amount of the insurance is used as an indication that, since the choice of amount lies with the seller, insurance must be his protection, not the buyer's, and since the clause fixes a maximum, the object of all the references to insurance must simply be to put the burden of the cost of it upon the buyer. In the third place, it is contended that, if payment may be against delivery order, the theory of the c.i.f. transaction is destroyed. Lastly, the force majeure clause is relied upon as another indication that the seller takes the risk and needs to be relieved in exceptional circumstances.

It is convenient to deal with these points in reverse order. The argument upon the force majeure clause is fallacious because it is referable to the obligations of the seller whatever they may be and throws no light on their extent or duration. It is entirely consistent with its terms to treat it as relieving him in circumstances beyond his control from the obligation of shipping the goods and forwarding and tendering the documents. It is comparable with the clause, a clause differently worded however, in Diamond Alkali Export Corporation v. Bourgeois[5].

The reference to the delivery order gives the seller a choice. If he finds it more convenient, because for example the bill of lading includes other goods, he can await the ship's arrival, obtain a delivery order and tender that instead of a bill of lading. It does not alter the conditions which the seller must fulfil if he chooses to tender a bill of lading and the obligations of the buyer, if that course is taken. The use of the words "not exceeding" does appear illogical for, if insurance is to protect the buyer, the naming not of a maximum but a definite amount would be expected. The reference, however, to war risk that immediately follows, is plainly on the footing that insurance is to protect the buyer and the clause making variations in insurance rates an affair of the buyer looks in the same direction. The addition of ten per cent, or some other percentage, to cover the buyer's profit or the increased value to him is a not uncommon practice, and, on the whole, it looks as if the clause is to express a limit of the amount of the responsibility of the seller to insure but, subject to that limit, to leave him under the same obligation of effecting a reasonable insurance as well as to amount as to other terms.

There is more cogency in the argument founded on the words "nett landed weight." If the landing of the goods must be awaited, how can the conditions imported by c.i.f. terms be complied with and how can the responsibility for risks ever arise?

The provision is, of course, based on the assumption that the purpose of the contract will be fulfilled and the goods will be available for weighing. The real question is whether it imports an indispensable condition into the contract. It seems clear that one way open to the seller of performing his obligations under the contract is to hand over a bill of lading against payment. The goods could not be weighed before delivery to the consignee which, of course, means that the bill of lading is spent, even if not surrendered. It is evident that the weighing may be after payment of the price has been made against the bill of lading. In other words, just as under a c.i.f. contract examination of the goods for condition and quality must take place after the delivery of the bill of lading, so under this contract may the final computation of the quantity and adjustment of the price. It is a fair inference that arrival and weighing were not intended to be a condition of or precedent to liability. In In re Denbigh Cowan & Co. and R. Atcherley & Co.[6] the particular contract there in question was held to be on c.i.f. terms, notwithstanding that it provided for "net landing weights" and specified—"payment: cash (before delivery if required) against documents or delivery order." The Court of Appeal decided, accordingly, that the buyers were entitled to receive a policy of insurance, even although the goods arrived and the sellers chose to tender, not a bill of lading, but a delivery order. The purpose, according to counsel in that case, of giving the seller the choice of presenting a delivery order and not a bill of lading was to free him from difficulties when goods comprised in one bill of lading were sold in different parcels and so, too, with goods covered by one insurance. The Court of Appeal, however, on the terms of the particular form of contract, rejected the view that, if the seller chose to use a delivery order, that dispensed him from tendering a policy of insurance. In Karinjee Jivanjee & Co. v. William F. Malcolm & Co.[7], in dealing with a contract containing another divergence from what otherwise were c.i.f. terms, Roche J. said[8]: "There are many contracts of a mixed nature which contain elements proper to c.i.f. contracts and proper to contracts for actual delivery of goods; but in its general scope this contract partakes far more of the elements and character which belong to c.i.f. contracts than to any other form of contract." This observation applies to the present case, in which the proper conclusion from the whole document appears to be that, in spite of the variations from type, the contract is in essence a sale upon c.i.f. terms, and that it casts an obligation on the buyer to pay the price on a tender in due time of proper shipping documents independently of the arrival of the goods.

It is, therefore, necessary to decide whether the seller did so tender proper shipping documents.

It was objected on behalf of the buyer that neither the bill of lading nor the insurance gave him adequate protection; that a policy had not been obtained until after the loss of the goods; that reasonable expedition had not been shown in forwarding and tendering the documents; and that, at the trial, proof of actual shipment, at a proper port, of the contract goods had not been given.

The bill of lading acknowledges that, on 27th November 1941, eighteen drums, contents said to be clove stem oil, weight said to be 11 tons 2½ cwt., were shipped by the Clove Growers Association by a Dutch ship lying in Zanzibar for shipment to Fremantle, transhipment at Singapore, delivery to order. The Clove Growers Association, it is said, controlled the distribution of the East African cloves products.

In the language of the Sale of Goods Act, 1895 W.A., the seller must make such contract with the carrier as may be reasonable, having regard to the nature of the goods and the other circumstances of the case. "The obligation is satisfied if the contract of carriage is in a form current in the trade or on the contemplated route. The seller is not called upon to procure a contract on more favourable terms than those usually contained in the ordinary bill of lading in use in the trade or on the route concerned. In any given case the test to be applied is whether it is in accordance with the usage and practice in the trade to carry goods of the contractual description shipped from and to the places in the contract under a contract of carriage such as that in question": Kennedy on C.I.F. Contracts, 2nd ed. (1928), p. 41.

The buyer, in the particulars under its defence, has set out a number of objections to the conditions of the bill of lading. They are all governed by the consideration that, on the particular route, the shipper could not be expected to obtain a more favourable bill of lading and it is enough to mention the chief objection relied upon in the argument of the appeal. It relates to the transhipment provisions, and, no doubt, it is of practical importance in the application of the facts of the case. For it assumed, and with every probability, that the loss of the goods was occasioned by the state of affairs at Singapore, where they are thought to have arrived late in December 1941. The effect of the provisions in question, briefly, is to relieve the original shipowner of all liability for loss or damage occurring while the goods are in course of transhipment and to give him no greater responsibility than that of a forwarding agent, subjecting the goods to the terms of the bill of lading of the on-carrying steamer, to whose agents at the port of destination claims must be made. The practice apparently is for the consignee to secure delivery of the goods on production of the through bill of lading and to obtain the on-carrying bill of lading, or a copy of it, only if needed in connection with a claim for loss or damage. In Hansson v. Hamel & Harley Ltd.[9], a case of transhipment at Hamburg after a voyage from Braatvag, the bill of lading tendered was that of the on-carrying steamer granted after shipment of the goods, but it was headed "Through Bill of Lading" and acknowledged shipment in the first ship at Braatvag for Hamburg for transhipment there. The margin mentioned the first bill of lading and its date, thirteen days before the date of the second or ocean bill of lading. Lord Sumner said:—"A c.f. and i. seller, as has often been pointed out, has to cover the buyer by procuring and tendering documents which will be available for his protection from shipment to destination, and I think that this ocean bill of lading afforded the buyer no protection in regard to the interval of thirteen days which elapsed between the dates of the two bills of lading and presumably between the departure from Braatvag and the arrival at Hamburg"[10]. The reasons for the conclusion that the ocean bill of lading gave insufficient protection during those thirteen days were summed up in a sentence:—"It is the contract of the subsequent carrier only, without any complementary promises to bind the prior carriers in the through transit"[11].

Although the facts are quite different, the buyer contends that Lord Sumner's general statement is applicable and that the goods were in substance unprotected after discharge at Singapore. The contention cannot prevail. The buyer is entitled only to that measure of protection which the seller can reasonably procure according to the usage and practice obtaining in the trade and with reference to the available routes: See N. V. Meyer v. Aune[12] and Burstall & Co. v. Grimsdale & Sons[13].

The evidence shows that there is no direct shipping available from Zanzibar to Fremantle, that the only practicable course was that adopted and that it involved the acceptance of the bill of lading in question as that of the only shipping line carrying cargo from Zanzibar to Singapore on through bills of lading to Fremantle. It also appears that, in a number of prior transactions, the sellers had shipped by the same route and, for what it is worth, under the same bill of lading.

It appears that the triplicate copy of the bill of lading reached Sydney on 5th January and Perth on 19th January 1942, and the first copy reached Sydney on 18th April 1942. The triplicate copy was not presented to the buyer, but it was handed at once to the customs agent with instructions to clear the goods on arrival. The insurance by which the goods were covered consisted in a floating policy and a declaration thereunder. On 18th April, too, there arrived the certificate of insurance, the weight specification, customs declaration and a statement of debits, including the amount of the exchange. The seller at once converted the declaration into a policy, which he could tender, by obtaining from the insurers a policy expressing the conditions of the contract effected by the declaration. The fate of the goods was at the time unknown, as indeed it still is. An invoice was made up and the documents, the bill of lading, policy and invoice were presented to the buyer in Perth on 27th April 1942.

Objections, which again are stated in the particulars, are made to the adequacy of the cover afforded by the policy. One of these points calls especially for notice because it relates to transhipment. It is that at the port of transhipment the insurance ceases to attach at the end of fifteen days after arrival unless the goods are loaded on the on-carrying ship and does not re-attach till they are so loaded.

The limitation to fifteen days customary in transhipment clauses caused much difficulty during the period of the Japanese advance and, as from 13th August 1942, cover unlimited as to time was made available to insurers under an arrangement pursuant to the War Risks Re-insurance Scheme of the United Kingdom. This point is answered by the fact that no marine insurance could be obtained at the time of the transaction covering the goods for more than fifteen days pending transhipment or reloading.

The other objections made by the particulars against the cover afforded by the insurance fail for the reason that, according to the evidence, it was a usual policy.

The objection that the policy was not issued until 20th April 1942 is met by the fact that the goods had been covered from the commencement of the voyage and the policy amounted only to a more formal expression of the contract of insurance as affecting the goods. This consideration answers also the point made that the goods were known to be lost, if, indeed, it could be said that they are yet "known" to be lost.

The question whether less than reasonable expedition was shown in tendering the bill of lading is one upon which there seems to have been no express finding. But the seller did all that could reasonably be expected of him. The question really turns on the course taken by the seller with the triplicate copy received in January 1942. For no delay occurred in dealing with the documents received on 18th April once they arrived and there is no ground for supposing that they had not been transmitted to Sydney in the best way available. Delays in the course of post with Australia at that time were considerable. Ought the triplicate to have been tendered at once? The answer lies in the fact that neither the insurance document nor the materials for making up the invoice had arrived and to tender the triplicate copy alone would not have fulfilled the seller's obligations nor have advanced their fulfilment. It is the practice to use the first or original copy and, as between the parties, it seems that the seller took the customary and practical course.

Two points remain. The first is that the seller failed to prove that the goods were actually shipped, a fact alleged in the statement of claim and put in issue by a denial of each and every allegation in the paragraph alleging it. Wolff J. considered that another paragraph of the defence impliedly admitted the fact, as indeed, having regard to the bill of lading, the defence might have been expected to do. But it is difficult to treat the defence in this way. The seller relied on rule 4 of Article III. of the Hague Rules, but they are rules governing the contract of affreightment and it is more than doubtful whether the particular rule can operate adversus extraneos.

The second point is that judgment ought not to have been given for the price but only for unliquidated damages. The property in the goods had not passed. The contract did not provide for payment for the goods on a day certain. The appellant is, therefore, right in saying that the remedy is in unliquidated damages. See per Atkin J., Stain Forbes & Co. v. County Tailoring Co.[14] and Muller, Maclean & Co. v. Leslie & Anderson[15].

If the holder of the policy of insurance can recover upon it or it is valued on that footing in assessing damages, the matter may be more than formal. But the point is not clearly and specifically taken in the notice of appeal and there is much reason to doubt its practical substance.

In all the circumstances, however, it is better to remit the cause to Wolff J. to deal with the two last mentioned points. It is difficult to see any merit in the first, but if the defendant persists in it evidence on commission may be necessary unless under the rules of the Supreme Court of Western Australia some such course can be taken as was adopted in Murine Eye Remedy Co. v. Eldred[16].

Remit the action for further hearing upon the issue of the shipment of the goods in pursuance of the contract and upon the issue of damages and, for this purpose, set aside the judgment appealed against. Otherwise appeal dismissed. Costs of the appeal and of the trial costs in the cause.

[1] (1916) 1 K.B. 495, at p. 510.

[2] (1915) 2 K.B 379, at p. 388.

[3] (1916) 1 K.B., at p. 510.

[4] (1915) 2 K.B., at p. 388.

[5] (1921) 3 K.B. 443.

[6] (1921) 125 L.T. 388.

[7] (1926) 25 L1. L. Rep. 28.

[8] (1926) 25 L1. L. Rep., at p. 30

[9] (1922) 2 A.C. 36, at p. 45.

[10] (1922) 2 A.C., at pp. 44, 45.

[11] (1922) 2 A.C., at p. 46.

[12] (1939) 3 All E.R. 168, at pp. 173, 174.

[13] (1906) 11 Com. Cas. 280.

[14] (1916) 86 L.J. K.B. 448.

[15] (1921) W.N. (Eng.) 235.

[16] (1926) V.L.R. 425.

High Court of Australia

Plaimar Ltd v Waters Trading Co Ltd [1945] HCA 34; (1945) 72 CLR 304 (23 November 1945)

HIGH COURT OF AUSTRALIA