Rabtrad Niugini Pty Ltd v Abco Pty Ltd [1990] PGLawRp 605; [1990] PNGLR 155 (20 April 1990)

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CONTRACT - Implied terms - From dealings between parties - Customs clearance and forwarding agents - Contract to store goods - Standard terms of customs contracts not imported into storage contract by previous dealings.

BAILMENT - Bailment for reward - Warehousing - Loss or damage - Negligence - Onus of proof.

Where a company regularly engaged to act as customs clearance agents was engaged to “deconsolidate, palletise and store” a particular consignment of fish for which the importer itself had insufficient storage space:

N1>(a) the terms and conditions of the standard contract of carriage as customs clearance agents could not be implied into the contract of storage by virtue of previous dealings between the parties;

N1>(b) in the absence of a written agreement, the arrangement between the parties was one of bailment, any specific terms of which were to be implied from the conduct of the parties;

N1>(c) where goods were lost or damaged while in possession of the company, the company bore the onus of disproving its negligence.

These were proceedings in which the plaintiff sought damages for breach of a contract of bailment.

DOHERTY AJ.: The plaintiff, Rabtrad Niugini Pty Ltd have sued the defendant ABCO Pty Ltd for breach of contract of bailment or in the alternative for negligence in the storage of the plaintiff’s goods. The plaintiff called two witnesses (the operations manager and a director of the company) to give evidence as to the terms and conditions of their agreement and the facts which have led to this dispute.

The defendant elected not to give evidence although it has filed a defence disputing facts and alleging other facts. As a result, the evidence of the plaintiff as to events and the terms is unrebutted. The defendant instead relies on the terms of a standard contract between the parties, which it said was incorporated into this particular agreement. The plaintiff said that that contract and those terms related to a different agreement, an agreement for the services rendered by the defendant as customs clearance and delivery agents.

The evidence shows that Rabtrad Niugini Pty Ltd are in business as importers and wholesalers of, inter alia, tinned fish. This is a particularly popular item and as a result is one subject to a considerable amount of theft if not properly secured.

In February 1986, the parties had come to an agreement to use the defendant’s services as customs clearance and delivery agents. The terms of that agreement were in a standard letter, which was put to the witnesses for the plaintiff by counsel for the defendant and admitted in evidence. It includes a term “storage — secured up to (6) six months, first month free; subsequent months to be negotiated if necessary”. On the back of that document are terms and conditions, which include terms that:

N2>“1. The carrier is not a common carrier and will accept no liability as such. The carrier reserves the right to refuse the carriage or transport of goods for any person, corporation or company and the carriage or transport of any class of goods at its discretion.

N2>2. The goods are accepted by the Carrier subject to the following conditions:

(a) That they comply with the requirement of any applicable law relating to the nature, condition and packaging of the goods and the expenses and charges of the carrier in complying with the provisions of any such law or with any order or requirement thereunder or with the requirement of any harbour, dock, railway, shipping, customs, warehouse or other authority or company shall be paid by the consignor.

(a) The Carrier shall not be under any liability for any loss of or damage to or mis-delivery, delay in delivery, concealed damage, deterioration, contamination, evaporation, non-delivery of goods held in their care, custody or control, or any consequential loss arising therefrom howsoever caused.

(b) In the event of the contract including any handling, installation, removal, assembly or erection of any kind whatsoever it is undertaken on the strict basis that the Carrier accepts no liability for any loss, damage or injury of any kind whatsoever, however arising, caused or incurred or occurring during any part of the movement. The disclaimer extends to include not only loss of or damage to itemised equipment itself, but loss, damage or injury to any person, property or thing damaged during the movement, and to include any loss consequently or otherwise arising from any loss, damage or injury aforesaid.”

In October 1986, an employee of the plaintiff company noted that a consignment of tinned fish was deteriorating owing to the lack of proper storage facilities at the plaintiff’s premises in Lae. He approached the defendant and reached an arrangement with the defendant company to store this tinned fish and it was taken in a container from the plaintiff’s to the defendant’s premises, where it was “deconsolidated” (or taken out of the container) and categorised into four categories from good to damaged fish depending on the state of the cartons and wrappers. This was stored with the worst cartons (referred to as “bad fish”) being separated from the others.

The plaintiff said that it was expecting other consignments of tinned fish totalling 31 containers to arrive in December 1986 or January 1987 and was concerned about their storage conditions and where the fish should be stored. It had not previously had to store goods with any other company and had not stored with the defendant, other than the damaged fish, prior to this. A discussion was held with the defendant company about the storage of the 31 containers and an agreement reached that the 31 containers could be emptied and the contents loaded on pallets, the pallets rented to the plaintiff and the fish stored at the defendant’s warehouse. The first 28 containers, and later three containers were taken directly to the defendant’s warehouse on arrival (they were not brought first to the premises of the plaintiff). It would appear from the evidence that all 31 containers should have arrived together but were not offloaded in Papua New Guinea and had to be brought back. The contents of all 31 containers were unpacked at the defendant’s premises and stored therein. This totalled 22,000 cartons of tinned fish.

Mr Savage, the manager of the plaintiff company, said he was particularly concerned about security. He said in evidence that he spoke to the defendant’s manager on several occasions pointing out the openness of the premises and the poor standard of security guard. He was reassured on both these aspects of security. As no evidence was adduced in rebuttal, I find that security was discussed by the parties and that the importance of security was made known to the defendants and security was a condition of the contract between the parties.

The plaintiff usually did daily stocktakes and reconciliations of the tinned fish within its own premises and intended to do the same at the defendant’s premises. This was an integral part of its security system. This is not rebutted. The daily stocktake was impractical and weekly stocktakes were agreed. However, when large consignments of sugar arrived for storage in the defendant’s premises, and were placed in such a way as to impede access and the defendant shifted the plaintiff’s goods to facilitate storage of other goods, it became difficult to do a proper stocktake. The stocktakes that were done showed a depletion of stock and the plaintiff’s manager states he was reassured by the defendant’s manager that when a proper stocktake was done, it would be found that everything was in order. Again this is unrebutted evidence and I find it is a fact that the plaintiff did bring possible loss to the defendant’s attention and did not acquiesce in the situation.

In May 1987 (that is about five months after the 22,000 cartons of tinned fish were put in the defendant’s store), a proper stocktake was carried out and the plaintiff found 1,321 cartons were missing. The defendants at first denied this but subsequently did a stocktake and they arrived at a greater figure of missing cartons. After subsequent reconciliations this figure of 1,321 missing cartons valued at K18.36 per carton was agreed as a shortfall.

The defendant informed the plaintiff that it was uninsured when the plaintiff claimed for the value of the missing fish. Mr Savage says this “was a first for us, more than a shock”. It would appear from the evidence of the plaintiff about subsequent conversations between the parties and from the pleadings filed in court that there were disputes on the type of fish lost and liability but these have not been pursued before me by the defendant and the defendant does not dispute either the loss or the value of the goods lost and I therefore find that 1,321 cartons of tinned fish costing K18.36 per carton plus profit to a total value of K26,655.56 the property of the plaintiffs were lost while on the defendant’s premises and within the defendant’s control.

The defendant relies instead on the terms and conditions printed on the back of the letter dated February 1986 and in particular the following part of cl 3a quoted above.

“The Carrier shall not be under any liability ... held in their care, custody or control, or any consequential loss arising therefrom howsoever caused.”

The plaintiff acknowledges the terms of the February 1986 letter as “standard practice” in the matter of customs clearance and agents but refutes any suggestion it was a term of the storage agreement. The storage agreement was to “deconsolidate, palletise and store” and the terms were agreed separately. There is no evidence that the February terms were given to the plaintiff when the storage was negotiated in December 1986. The terms of the agreement of February 1986 are headed, “The Carrier shall mean ABCO Pty Ltd ...”. Each of the terms refers to “Carrier” and the defendant terms itself as a “Carrier”, in that contract. There is no reference to the defendant acting as a storeman in these terms.

A standard contract, which imposes terms on a party and purports to reduce liability on a contracting party must be communicated to the other party and the circumstances must show an intention to be bound by it. This has been held in various cases: Olley v Marlborough Court [1949] 1 All ER 127 and, as said in McCutcheon v David MacBrayne Ltd [1964] UKHL 7; [1964] 1 All ER 430 at 435, by Lord Guest:

“It is, in my view, not legitimate to apply the tests of incorporation of conditions in such cases to a case like the present where there is no contractual document. In the present case it is incorrect to assume that the offer of carriage is made by the respondents on what are described as ‘Standard Conditions’. The verbal contract is made by the consignor tendering the goods and by the carrier accepting them. A simple contract of carriage is thereby created. In this situation the respondents, on whom lies the onus to escape liability, would have to show that exempting conditions have been incorporated into the contract. They cannot do this merely by evidence of a previous course of conduct. All that the previous dealings in the present case can show is that the appellant and his agent knew that the previous practice of the respondents was to impose special conditions. But knowledge on their part did not and could not by itself import acceptance by them of these conditions, the exact terms of which they were unaware, into a contract which was different in character from those in the previous course of dealing.”

There is no evidence lead from the defendant that the February 1986 terms were incorporated into the storage agreement either expressly or impliedly and the plaintiff’s evidence that there were separate negotiations and agreed terms relating specifically to the storage of the fish is unrebutted. Further I find that in order for the terms on the back of the letter of February 1986 to apply then those terms at the front of that letter must also have been followed. There is no evidence before me to suggest there was one month free storage or storage would be limited to six months. A contract must be read in its entirety. For the February terms to apply by implication this one month’s free storage etc must also have occurred and it did not.

A contract imposing terms of strict liability is construed against the party relying on it. The “contra proferentem rule” as it is called in Halsbury’s Laws of England (4th ed), Vol 9, par 370 citing Burton v English [1883] UKLawRpKQB 197; (1883) 12 QBD 218, has been applied to parties seeking to rely on a standard contract. The loss in the present case was not due to deterioration, contamination or the other causes listed in par 3(a) and, if the contract did apply, the defendants could not rely on it.

During the course of the five months in which the goods were stored, the plaintiff regularly sold some of the cartons of tinned fish to its customers. In order to keep a record of goods leaving the defendant’s premises and to calculate storage charges, the plaintiff says the defendant “suggested we use his delivery dockets system when we collected goods”. Those delivery dockets were only used when tinned fish was collected from the defendant’s warehouse. Printed on the back of each docket are the terms set out in the February 1986 letter including cl 3a quoted above.

Were the terms then incorporated by way of the delivery dockets? The evidence of the plaintiff is that delivery dockets were suggested by the defendant as a means of recording the movement of goods. They were not for sale of the defendant’s goods. This is unrebutted. I find as a fact that the delivery dockets were an accounting method, and they were not intended by either party to incorporate terms of the agreement between them and did not constitute terms. The defendant therefore cannot rely on those terms on the delivery dockets or the statements on the back of the dockets as agreement between them constituting a contract.

I find therefore that those terms were for the continuing arrangements for the customs and clearance agencies and that the contract for storage was a quite separate agreement from the customs and forwarding one and the arrangement between the parties was that the plaintiff retained title to the goods within the control of the defendant and that the defendant held those goods on condition that they be returned to the plaintiff. This constituted a contract for bailment.

Bailment was considered in O’Regan v Hui Bros Transport Pty Ltd [1969-70] P&NGLR 261 and Co-ordinated Air Services Pty Ltd v Aircair Pty Ltd [1988-89] PNGLR 549 as:

“Bailment namely a delivery of goods on a condition that they shall be restored to the bailor or according to his direction as soon as the purpose for which the bailment was entered into has been completed. Once there is a bailment and in as much as it appears that delivery had not been made in strict compliance with the conditions of the contract of bailment the burden lies on the defendant of proving delivery to the plaintiff or under some other actual authority of the plaintiff.”

The purpose of the bailment was the storage of goods until required by the plaintiff in return for payment of a fee.

Security was a specific term of the contract between the parties and I have found that the cartons of fish disappeared while within the control of the defendants. Even without the benefit of the cl 3a of the standard contract it may be arguable that if the defendant had taken reasonable skill and care in the custody and storage of the tinned fish it might not be liable — such a proposition was discussed in Kenyon, Son & Craven Ltd v Baxter Hoare and Co Ltd [1971] 2 All ER 708. However there is no evidence before me to show that the defendant, having been advised of the plaintiff’s concern on security, made any changes to its premises or the calibre of its guard. In this I find that the defendant was (1) in breach of the term of the contract in relation to security; and (2) negligent in its handling of the plaintiff’s goods.

In a contract for bailment the onus is on the defendant to disprove negligence as was stated in Levison v Patent Steam Carpet Cleaning [1977] 3 All ER 498, by Denning MR, at 505:

“On it I am clearly of opinion that, in a contract of bailment, when a bailee seeks to escape liability on the ground that he was not negligent or that he was excused by an exception or limitation clause, then he must show what happened to the goods. He must prove all the circumstances known to him in which the loss or damage occurred. If it appears that the goods were lost or damaged without negligence on his part, then, of course, he is not liable. If it appears that they were lost or damaged by a slight breach, not going to the root of the contract, he may be protected by the exemption or limitation clause. But, if he leaves the cause of loss or damage undiscovered and unexplained, then I think he is liable: because it is then quite likely that the goods were stolen by one of his servants; or delivered by a servant to the wrong address; or damaged by reckless or wilful misconduct; all of which the offending servant will conceal and not make known to his employer.”

This was also the view of the (then) Supreme Court in O’Regan v Hui Bros Transport Pty Ltd (at 267) when Frost J (as he then was) adopted the following from Romas-National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd [1966] HCA 46; (1966) 115 CLR 353 at 367:

“But it is not essential, in order to discharge the onus of proof, for a person in the position of a bailee of goods which have been damaged or destroyed whilst in his custody, to establish, first of all, the precise cause of the loss and, thereafter, to establish that the cause arose or operated without negligence on his part (Bullen v The Swan Electric Engraving Co (1906) 22 TLR 275; (1907) 23 TLR 258; The City of Baroda (1926) 25 ULR 437 at 441, 442; and Makower, McBeath and Co Pty Ltd v Dalgety and Co Ltd [1921] VicLawRp 45; (1921) VLR 365 at 377, 378; it is sufficient if the bailee is able to establish that he took such care of the goods as was reasonable in the circumstances.”

That case related to a sub-bailee’s legal obligations but the proposition, it appears to me, is the same.

A similar proposition arises in Kenyon, Son & Craven Ltd v Baxter Hoare & Co Ltd where reasonable steps were taken by the storage company (the bailee) to prevent damage to goods. Here the bailee has not given any explanation for the loss. The defence statement next in the pleadings that the fish went bad has not been pursued or subjected to cross-examination and I have found that the goods were lost while within the defendant’s control.

I raised the question of fundamental breach to counsel. Having found that: (a) the contract of February 1986 did not apply to the agreement before me; and (b) on its strict construction the contract does not apply to a contract for storage, it is unnecessary to rule on the question of fundamental breach of the contract. However, for elimination of doubt I would add that if the contract did apply then the performance by the defendant is so different as to render the defendant “guilty of a breach going to the root of the contract” (to adopt with respect, the words of Denning MR in Levison v Patent Steam Carpet Cleaning [1977] 3 All ER 498).

The plaintiff has also sought interest on the judgment amount pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act (Ch No 52). I have read the affidavit of the bank official as to interest rates levied on the plaintiff’s accounts and the judgment of Woods J in Co-ordinated Air Services Pty Ltd v Aircair. The evidence before me does not indicate that the overdraft and therefore the interest levied thereon, arose solely because of this loss or is solely attributable to this breach. For this reason I am unwilling to order more than the accepted rate of 8 per cent.

I order payment of interest at the rate of 8 per cent on the judgment amount of K25,655.56 from the date of issue of the writ to be paid by the defendant to the plaintiff. I reserve the question of costs to be argued by counsel.

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Papua New Guinea Law Reports

Rabtrad Niugini Pty Ltd v Abco Pty Ltd [1990] PGLawRp 605; [1990] PNGLR 155 (20 April 1990)

Papua New Guinea Law Reports - 1990