DMC Category Rating: Developed

Facts
MISC sought to recover from VI SA sums said to be due for its late return to MISC of a number of shipping containers pursuant to clause 13(4) of its bills of lading and waybills. The sub-clause was in the following terms:

Clause 1 of the bills defined "merchant" quite widely as follows:

VI SA raised a number of matters in defence to MISC’s claim. One of those matters was described as a short point of construction of clause 13(4) of the MISC bill of lading arising from the uncontradicted fact that none of the relevant containers was unpacked at VI SA’s premises. The judgment was limited to the determination of this point.

In short, VI SA contended that as a matter of the proper construction of clause 13(4), it was only the merchant at whose premises the container was unpacked that could be liable for container demurrage. Whilst VI SA was someone who fell within the definition of "merchant" in the bill of lading, it was not the merchant at whose premises the container(s) was unpacked.

Judgment at First Instance
Justice Byrne accepted that the word "merchant" was intended to refer to a number of persons whose involvement with the carriage arose at different stages and in different ways. In this regard he observed that some sub-clauses of clause 13 were clearly concerned with the merchant as shipper and others possibly so. But when it came to sub-clause (4), it was concerned with responsibilities arising at and after delivery to the consignee with the responsibility to clean and return the container being imposed upon the merchant at whose premises the container was unpacked. In his opinion, the fact that this obligation might not be capable of enforcement under Victorian law by an action for breach of contract, did not detract from the conclusion.

Judgment of Court of Appeal
MISC appealed to the Victorian Court of Appeal.. Justice Buchanan gave the judgment of the court, with which Justices Phillips and Chernov concurred.

At first instance, MISC had sought to distinguish between the word "merchant" in the first sentence in sub-clause 13(4) and the word "merchants" in the second sentence, so as to contend that the obligation to pay demurrage extended beyond the merchant who unpacked the container. Justice Byrne had rejected that contention. On appeal, MISC put the argument differently and contended that the opening words of the sub-clause, "If Containers supplied by or on behalf of the Carriage are unpacked at the Merchant’s premises", together with the definition of "merchants", were sufficiently wide to encompass unpacking containers at the premises of VI SA’s customers such that the remainder of the sub-clause was concerned with the consignee being the party bound by the contract of carriage.

To put it another way, MISC argued that the word "merchant" where it first appeared in the sub-clause included any person answering one or other of the descriptions in the definition of "merchant" and that the word "merchant" and "merchants" when next appearing meant the merchant who was bound by the contract of carriage, that is to say the consignee.

Justice Buchanan rejected this argument holding that it was a condition upon which the operation of clause 13(4) depended that the unpacking of the containers took place at the premises of the merchant who was bound by the contract of carriage or was otherwise subject to its obligations by the operation of the Sea-Carriage Documents Act 1988 (Vic). He held that this condition had not been fulfilled and accordingly dismissed MISC’s appeal.

Comment
It is important to have an understanding of the operation of legislation such as the Sea-Carriage Documents Act 1998 (Vic) (there is similar legislation in other Australian states such as the Sea-Carriage Documents Act 1997 (NSW)).

Essentially, by the operation of such acts, the shipper’s rights and liabilities under the contract of carriage are transferred to:

A "lawful holder" of a bill of lading essentially means a person who has come into possession of the bill, in good faith, as the consignee of the goods as stated in the bill, or has come into possession of the bill by endorsement or transfer of the bill.

Upon the "rights" being transferred, the transferor’s (usually the shipper) rights are then extinguished. But when it comes to "liabilities", their transfer does not prejudice the liability of the original party to the contract. Relevantly, the shipper remains liable for container demurrage and could be sued along with a lawful holder of the bill of lading.

In the MISC case, VI SA’s customer, it would seem, whilst coming within the definition of "merchant", was not the lawful holder of the bill of lading (or named consignee in the sea waybill) and as such did not have transferred to it, the rights and liabilities arising under the MISC bill. So it, VI SA’s customer, could have no contractual liability to MISC. In essence it did not become a party to the contract of carriage with MISC.

VI SA would have been the lawful holder of the MISC bill of lading and as such had transferred to it all the rights and liabilities arising under the bill including any obligation to pay container demurrage. The reason why it had no such obligation was because the wording of clause 13(4) limited the obligation (to pay demurrage) to the merchant at whose premises the container was unpacked, which was not VI SA.