The plaintiff, Abrar Ahmad (Ahmad) claimed that the defendant, Mitsui OSK Lines Ltd (Mitsui) breached its duty and obligations as a carrier or bailee for reward under the contract of carriage evidenced by the bill of lading, when Mitsui failed to deliver 43 out of 55 packages of clothing. Mitsui cross-claimed for storage fees from Ahmad in respect of the remaining 12 packages, which it was holding at its own expense.

Several years prior, around February 2001, Ahmad entered into a sales contract with Goldie Sud/AJ International (the seller), which operated out of Mumbai. The contract involved vast quantities of men's T-shirts and ladies' lingerie. An invoice for the shipment was addressed to Ahmad in Singapore on 21 March 2001, using his trading name 'Kambil Trading'. The cargo was expected to reach Sydney on or before 8 May 2001. The cargo consisted of two containers, one containing the expected 43 packages of clothing and the other 12 packages.

Mitsui issued the seller's bill of lading on 30 March 2001, naming AJ International as the shipper and, in the space for 'notify party', listing the address of 'Fashion Co', a business in Australia owned by the seller's brother, Ajay Sud. This was a combined transport bill of lading and contained all the usual conditions, including the stipulation that one of the original bills of lading be exchanged in return for the goods at the place of delivery (Sydney). A stamp near the reference to the first container, with the 43 packages, read 'CFS/CY'. A stamp near the reference to the second container (containing the 12 remaining packages) read 'CFS/CFS'. In addition, in the space for freight and charges on the bill of lading, some charges were designated 'FCL Part 20', or 'full container load', and some charges 'LCL' (less than full container load). 'LCL' was also included next to a reference to the 12 packages.

Containers marked FCL had already been packed and sealed by the shipper, and would be marked 'CY', meaning that the sealed container was to be delivered to the consignee at the terminal's container yard. When a container was designated 'LCL', every shipper of every lot of goods within the container received a separate bill of lading, all with the same container number. For these containers, the notation 'CFS' meant that the container was to be delivered to a 'container freight station' where the different lots of goods within the container could be separated and stored. The designation 'CFS/CY' meant that a delivery order must not be issued for any lot of goods from a container unless every bill of lading for every consignment in the container was produced at the same time, which was the designation given to the first container in this case.

Mitsui also issued another two bills of lading on 30 March 2001, for the same kind of goods and from the same port, aboard the same vessel. The first of these bills was for 140 packages and designated RR International as the shipper (the RRI bill of lading), while the other was for 79 packages, and listed Vismaad Exports as shipper (the Vismaad bill of lading). Both bills referred to the same container (the first container) that held the above mentioned 43 packages of clothing. Thus the first container held the 43 packages listed in the seller's bill of lading, plus 140 packages that were the subject of the RRI bill of lading, plus the 79 packages that were the subject of the Vismaad bill of lading. The second container only held the 12 packages listed in the seller's bill of lading. The three lots of packages in the first container all had the same seal number, while there was a different seal number for the second container.

On 16 April 2001, the seller drew a bill of exchange on Kambil Trading, to be paid to his chosen bank. Questions were raised as to whether this bill of exchange was ever accepted, which Emmett J dealt with later in his reasons. In April 2001 Ahmad arranged to sell the 55 packages of clothing to Sumeet Raval. An invoice was raised by Ahmad using the name 'Abrar Textiles'. This was sent to Raval and was accepted on his behalf on 29 April 2001.

When the containers were transhipped in Singapore to another vessel, a final cargo manifest was prepared. This stated that the 'ultimate consignee' for each of the three bills of lading was Fashion Co, and that the consignee was 'to order'. Both the final cargo manifest and preliminary freight manifest noted that, in respect of all three bills of lading, 'one of three part cargoes in [the first container]'.

Two separate delivery orders were prepared by Mitsui OSK Lines (Australia) Pty Ltd (Mitsui Australia), Mitsui's Australian agent, for the containers mentioned in the seller's bill of lading, after they received the carrying vessel's manifest. Their standard practice at the time regarding goods carried to Sydney under bills of lading issued by Mitsui was that they would only release pre-prepared delivery orders relating to particular bills of lading once those original bills of lading had been received and all charges paid. When Mitsui Australia released a delivery order to a consignee, that delivery order could be presented to the stevedores at the port terminal or freight station run by or on behalf of Mitsui.

Mitsui Australia prepared one delivery order for the first container and one for the second container, but neither was released, as the seller’s bill of lading (naming AJ International as shipper) never made an appearance. This meant that the 55 packages of clothing in the two containers should have stayed where they were, but some of these were released. Given that the first container was marked ‘CFS/CY’, the correct procedure would have been to hold all the goods within (which were: part of the shipment of 55 packages, the complete RR International shipment, and the complete Vismaad Exports shipment) until bills of lading for all three shipments were produced at once. Each consignee would have then received their respective shipment on presentation of their delivery order, and Mitsui Australia would have conveyed the goods.

Regarding the first container, what actually happened was that Fashion Co, as the ‘notify party’ on the bills of lading for all three shipments, was made aware of the container’s and vessel’s arrival, and both the RRI and Vismaad bills of lading were presented by Fashion Co’s representative, Ajay Sud, on 10 May 2001. He was given delivery orders corresponding to both shipments. As explained above, this should not have happened without also presenting the seller’s bill of lading. As it was, Ajay Sud received the complete first container, and he returned it to the container yard completely empty, having taken the 43 packages of clothing as well.

When Ajay Sud sought release of the 12 packages in the second container on 14 May, however, he was unable to obtain a delivery order as he could not present the original bill of lading. He set out to obtain a bank guarantee instead. The second container was moved from the container yard to Seatons Container Freight Station Pty Ltd (Seatons) on 14 May. Several weeks later, Ajay Sud again attempted to obtain the container without possession of the delivery order for the 12 packages, and was denied. He faxed a banker’s undertaking from Westpac Banking Corp to Mitsui Australia, which was not accepted because it was not in the standard form. On 30 July 2001, Seatons was told by Mitsui Australia to unpack the second container and bond the goods within, and these storage charges were put on Mitsui Australia. The cross-claim in this case by Mitsui was for recovery of those expenses.

The originals of the seller’s bill of lading were finally sent on behalf of Ahmad to his solicitors in Sydney on 7 May 2002, but it remained unclear when this case was decided as to when Ahmad received those originals.

In evidence, the seller (AJ International/Goldie Sud) claimed that he had named Fashion Co/Ajay Sud as the ‘notify party’ on the original bill of lading so that his brother could keep track of when the consignment arrived in Sydney, and then could notify him so that if necessary he could regain possession of the goods and all copies of the original bill of lading, should Ahmad not pay. Eventually, as the seller claimed, Ahmad did accept the bill of exchange, and from that point the seller was no longer concerned about whether payment would come through. However, there was no concrete evidence that the bill of exchange was accepted apart from this testimony. There was also no evidence that the bill of exchange had been presented for payment or paid, apart from two debited amounts taken from a bank account in the name of ‘Kambil Trading’, used by Ahmad, on 29 September and 31 October 2001. The context for those payments remained unclear, particularly whether those amounts were subtracted following the presentation of accepted bills of exchange or otherwise, and why those amounts were paid if Ahmad still had not received the goods.

When the vessel carrying the two relevant containers arrived in Sydney on 26 April 2001, an email was sent from Mitsui’s shipping agents, Orient Ship Agency Pvt Ltd, to Mitsui Australia. The email stated that the shipper that authorised delivery of cargo against the consignee’s bank guarantee, in the absence of the original bill of lading. Possibly the reference to the consignee meant Fashion Co, but again this was unclear. A further email relayed the shipper’s request to extend the free storage period, given that the necessary original documents were delayed, and asked to arrange LCL delivery of cargo as opposed to FCL because only two bills of lading for the first container had reached the consignee.

Mitsui Australia responded to these emails by stating that storage could not be extended but that the first container could be moved to the LCL depot, and that the consignee had communicated that he would abandon the cargo due to the costs he was incurring for holding it.

The evidence suggested that if the bill of exchange was accepted, it was not accepted at the time when Ajay Sud took possession of the RRI and Vismaad consignments as well as (presumably) 43 of 55 packages intended for Ahmad, and that Ajay Sud was continuing to act as the consignee as his brother had intended him to. When Ajay Sud took steps to obtain the remaining 12 packages that were part of the original consignment, he was doing so to monitor the entire consignment and keep it in his possession because Ahmad had still not paid in full for the goods.

When Ahmad began asking questions about the missing consignment to Goldie Sud and through him, Ajay Sud, the latter denied having taken any of the packages. It can, however, be inferred that he had 43 of 55 packages because he did not seek them at the same time he sought the remaining 12, and that he was doing this in his brother’s interests, while payment for the goods was waited for. It also became clear that Ahmad could not have accepted the bill of exchange in May 2001, as Goldie Sud had said, because if he had, the originals of the seller’s bill of lading could have been delivered to him and have been exchanged for delivery orders. This was evidently not done. The originals of the seller’s bill of lading were not presented to Mitsui at any point in time.

Held: Ahmad was not entitled to sue for non-delivery of the packages described in the seller’s bill of lading. Claim for damages against Mitsui dismissed with costs, and cross-claim allowed.

Ahmad put forward an argument based on the Sea-Carriage Documents Act 1997 (NSW), in an attempt to bolster his argument that he was at some point a lawful holder of the seller’s bill of lading or a holder in due course of the seller’s bill of lading. Under s 8(1)(a) of that Act, all rights under a contract of carriage in relation to which a sea carriage document is given are transferred to successive lawful holders of a bill of lading. Ahmad claimed to have acquired the shipper’s bill of lading in good faith, regardless of the fact he only acquired it after 43 of 55 packages had already been released. The bill of lading was incomplete because not all packages mentioned in it had been acquired and thus the document was not ‘spent’. Also, Ahmad failed to present the shipper’s bill of lading to obtain the remaining 12 packages. These factors persuaded Emmett J that Ahmad did not lawfully possess the seller’s bill of lading in a way that satisfied s 8(1)(a) of the Sea-Carriage Documents Act 1997 (NSW).

Limitation of liability for Mitsui

Clause 5(1)(a) of the seller’s bill of lading stated that if any loss or damage occurred to cargo during the ‘Waterborne Carriage’, Mitsui’s liability would be worked out in accordance with arts 1-8 of the Hague Rules. It was accepted in this case that the 43 packages went missing during the Waterborne Carriage due to how it is defined in the seller’s bill of lading. Mitsui pointed to art 4.5 of the Hague Rules, under which a carrier is only liable for up to GBP 100 per package or unit that is lost or damaged. Ahmad countered this suggestion with reference to cl 6(1) of the seller’s bill of lading, under which the parties agreed that the liability of the carrier would not exceed the limit provided by the applicable national law, if that law rendered the Hague Rules applicable. In these circumstances the Hague Rules were not applicable by national law. However, Ahmad suggested the Hague Rules were applicable other than by national law, which cl 6(1) also provides for. His argument was that the Hague Rules applied by operation of cl 5(1)(a), and that cl 6(1) of the seller’s bill of lading should be the reference point for the carrier’s liability, and not art 4.5 of the Hague Rules.

Ahmad contended that Mitsui breached its primary obligation to transport the consignment from Mumbai to Sydney, and only to release the goods upon receipt of an original bill of lading. He argued that a breach of this magnitude could not be read as an event for which Mitsui’s liability could be limited under cl 6(1) or art 4.5 of the Hague Rules.

Emmett J thought it was possible for either art 4.5 of the Hague Rules or cl 6(1) to be interpreted as containing an implicit exception to the unequivocal language used. That language includes the reference in art 4.5 of the Hague Rules to carriers not becoming liable ‘in any event’, including failure to deliver the agreed consignment. Clause 6(1), on the other hand, refers to there being ‘no event’ in which the liability of a carrier can exceed the limit. Neither provision leaves much room for the possibility that the bill of lading, or the Hague Rules, meant to exclude the circumstances in this case. The seller could also have waived the limitation of liability rules in the bill of lading and did not choose to do so.

It was held that if Ahmad was able to sue on the seller’s bill of lading, Mitsui’s liability should not exceed GBP 100 for each missing package, or GBP 4,300 total.

Conversion

Ahmad also argued that Mitsui was guilty of conversion because it gave the delivery order for the first container to Ajay Sud, allowing him to take possession without first producing the seller’s bill of lading. This claim was based on a notation reading ‘Telex Release’ on a freight slip prepared in respect of the seller’s bill of lading. Normally, this notation is written on freight slips after shippers have handed over the original bill of lading to Mitsui’s office at the relevant load port, where the notation means that the cargo should be released without presentation of the original bill of lading, not when delivery has been requested against a banker’s guarantee but without the bill of lading.

The argument was that Mitsui breached the main purpose of the contract by failing to deliver the first container to him, and thus Mitsui could not rely on any exception or exclusion in the seller’s bill of lading to limit its liability.

Mitsui admitted negligence was involved with the release of the container to Ajay Sud and that there was a breach of the contract of carriage as evidenced by the seller’s bill of lading.

The freight slip was included in a file that also held the pre-prepared delivery order for 43 of 55 packages, as shipped in the first container. The delivery order was, of course, never released. Ahmad argued that the delivery orders for the RRI and Vismaad bills of lading were rightly and intentionally delivered to Ajay Sud, but that Osoba-Buttrose, an employee of Mitsui Australia, wrongfully released the other 43 packages in the first container as well because she believed there was a telex release for the whole container. This act, Ahmad contended, was the breach of the contract of carriage.

To this argument, the Court pointed out that there was no evidence Osoba-Buttrose had seen the telex release note on the freight slip, and that while the wrongful release of the packages without seeing the accompanying bill of lading was negligent, giving rise to a potential breach of contract claim, cl 5(1)(a) of the seller’s bill of lading could still operate to limit Mitsui’s liability in that respect.

Ahmad’s Liability for Storage Charges

The Court considered whether Ahmad was responsible for Mitsui’s expenses in storing the second container (with the 12 packages inside). Despite Ahmad’s arguments against the charges, it was notable that he never presented any of the three original bills of lading in his possession to gain custody of the second container. Nor did he order Mitsui to have the packages sold, destroyed, or disposed of in order to prevent the accruing storage costs. Nor did he have any concrete reason for having not presented the bills of lading at the time this case was decided. The storage rate was reasonable and was according to Seatons’ policy. Ultimately, Ahmad had no basis on which to dispute the storage charges.