Tech Pacific Australia Pty Limited v Air Pacific Limited and Ors

MEAGHER JA: I agree with Stein JA.

SHELLER JA: I agree with Stein JA.

STEIN JA : Introduction

This appeal arises out of a claim for damages for the loss of a portion of a consignment of computer parts shipped from the USA to Australia in August 1994.

At the outset it is helpful to identify the various parties to the litigation. The appellant, Tech Pacific Australia Pty Ltd (Tech Pacific) is a company which imports computer parts from the USA and elsewhere. The first respondent, Air Pacific Ltd (Air Pacific) is a carrier of air cargo. The second respondent, Hellman International Forwarders Pty Ltd (Hellman Australia) is a freight forwarder employed by Tech Pacific. The third respondent, Universal Air Cargo Pty Ltd (UAC) is an air cargo operator. Other related entities, but not parties to the litigation, include Hellman International Forwarders Inc., (Helman USA), the United States freight forwarder which issued Hellman’s air waybill No 708454 and UAC Inc, the US freight forwarder which issued the UAC air waybill No 505949.

In giving judgment on 4 October 1996, Williams ADCJ summarised the history of the purchase, transportation and loss of the goods: Tech Pacific ordered a number of computer parts namely hard disc drives from a company called Quantum in the U.S.A. Tech Pacific had Hellman as its freight forwarder to organise shipment by air of these parts from the U.S.A. to Australia. This process was set in train but some of the goods were never delivered. Hellman used Universal as its air cargo operator and Universal shipped the goods with Air Pacific, the carrier, from Los Angeles to Sydney via Fiji. [AB 576] … Air Pacific was the carrier of the goods in question for Universal between Los Angeles and Sydney on a flight that was not a direct flight. The original three pallet Universal consignment consisting of 412 pieces of which 338 belonged to Hellman was unloaded in Fiji and reorganised into five containers called D.Q.F.’s for placement onto a different aircraft to Sydney as the aircraft they arrived on was flying to Japan and the Sydney aircraft was incapable of being able to take the pallets as landed in Fiji. The three pallets were shrink wrapped in plastic. The D.Q.F.’s were not sealed or locked. On delivery to Air Pacific’s warehouse which is the Qantas warehouse at Mascot, the containers were not inspected or checked except as to exterior damage. They were placed in storage racks pending delivery to a Universal driver. Universal employed two contract drivers to pick up the containers and transport them to Universal’s warehouse a short distance outside the airport. The container’s contents were not checked by either driver but transported, as they had apparently arrived at Qantas, to the Universal bond store. At Universal the containers were unpacked and sorted. The warehouse manager when he counted the Hellman part of the shipment found that they were short nine pieces. However, when the Hellman driver picked up the cargo the next day he signed for three hundred and thirty eight pieces and allegedly counted them onto his truck. He drove a short distance of about five minutes to the Hellman warehouse where the incoming documentation there reveals the shipment was ten pieces short. [AB 577]

Tech Pacific sued each of the respondents for damages and the respondents brought third party proceedings against one another. The appellant failed against all of the respondents. Issues on appeal

The grounds of appeal are extensive, however the hearing focused primarily on the following issues. First, whether the trial judge erred in holding that, on the balance of probabilities, the most likely place where the goods went astray was at the UAC warehouse in Sydney. The appellant and UAC (by cross-appeal) submit that his Honour should have found that the goods were lost in Fiji. The second issue raises a question concerning the nature of the relationship between the parties. In particular, whether the trial judge failed to recognise that Hellman Australia is a separate and distinct corporate entity from Hellman International Forwarders Inc., which issued house air waybill No 708454 and that the third respondent, UAC Australia is a distinct corporate entity from UAC Inc, which issued house air waybill No 505949. The third issue is whether Hellman was negligent with regard to the loss and, if so, whether it was entitled to exclude or limit any liability by relying on its General Trading Conditions or, alternatively, to limit any liability in accordance with Article 22 of the Warsaw Convention contained in Schedule 2 to the Civil Aviation (Carriers’ Liability) Act 1959 (Cth). Fourthly, whether Hellman was guilty of misleading or deceptive conduct pursuant to s 52 of the Trade Practices Act 1974 (Cth) (the TPA) as a consequence of representations made by it to the appellant concerning the quality and nature of the services it would provide. Finally, there is the question of the negligence of UAC and whether it is entitled to exclude or limit any liability by relying on Hellman’s General Trading Conditions or on the air waybill issued by UAC Inc. Place of loss

The trial judge made the following findings: that the cargo was consolidated in a shipment of 412 pieces which left Los Angeles on the Air Pacific flight to Sydney via Fiji; the 412 pieces left Fiji intact; 412 pieces left the Mascot premises of Qantas intact; the 412 pieces arrived at the UAC warehouse intact; nine pieces of the cargo went missing at the UAC warehouse; the cargo, less the nine pieces, was received into the Hellman warehouse and that the cargo, less the nine pieces, was received by the appellant.

Tech Pacific challenges the findings on two grounds. It submits that his Honour should have found that the respondents failed to deliver ten cartons (not nine as was found) and that he should have found that the loss of the goods probably occurred in Fiji rather than in the UAC warehouse in Sydney.

Williams ADCJ extensively reviewed the evidence before concluding that the loss occurred in Sydney. His Honour did not find the evidence that the weight was exactly that of the missing items to be persuasive. The evidence, including the house air waybills, showed that different weights had been recorded for the consignment at different points in the journey. In the judge’s opinion, the weight difference that the appellant contends for referred to the weight of the goods themselves and did not take into account the weight of packaging or peripheral items which would have been present. Nor was it conceded that the scales used were accurate or corresponded to one another. Far from failing to take account of the evidence of Mr Canon, his Honour considered and reviewed, in some detail, the evidence of both Mr Canon and Mr Reddy, the cargo agent at the airport in Fiji. He preferred the evidence of Mr Reddy, finding that his method of record-keeping was more reliable and his evidence more believable. For my part, I cannot see that the appellant has demonstrated that his Honour failed to use, or palpably misused his advantage or that his relevant findings are glaringly improbable ( Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178-9, Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479). Further, it is clear that the judge was satisfied that there was opportunity for the goods to go missing at the UAC warehouse, as well as evidence that UAC’s procedures had failed in relation to another carton from the same consignment. As to the discrepancy between nine and ten cartons going missing, there was evidence to support his Honour’s finding.

His Honour’s conclusion that, on the balance of probabilities, the cargo left Fiji intact and that the most likely place for it to be lost was at the UAC warehouse at Mascot was, in my view, well open on the evidence. I would dismiss this aspect of the appeal. As a result, no question of liability remains with regard to the first respondent, Air Pacific. In my opinion, the appeal, so far as it concerns the first respondent, should be dismissed with costs. Nature of the relationship between the parties

The next issue concerns his Honour’s analysis of the relationship between the parties. The appellant submits that the judge’s conclusion that UAC was ‘clearly either a subcontractor or agent of Hellman’ was incorrect and that a proper analysis of the carriage arrangements between the parties shows that at no time was UAC the sub-contractor or agent of Hellman Australia.

The appellant submits that the carriage arrangements were as follows: Hellman Australia entered into an agreement with Tech Pacific on 2 July 1993 to provide a customised transportation service for the movement of its goods inter alia from the United States to Australia by air. In April and May 1994 Tech Pacific, pursuant to a distribution agreement with a US company (Quantum), purchased 23 cartons of computer parts. Hellman Australia arranged for Hellman USA to consolidate all of Tech Pacific’s cargo. Hellman USA then consolidated the cargo with that of other customers, making a total of 338 pieces, and issued its air waybill. Hellman USA transported the goods to the premises of UAC Inc (the US freight forwarder) where further consolidation occurred. UAC Inc issued its air waybill to Hellman USA. The goods were delivered to Air Pacific’s agent, which issued the main air waybill to UAC Inc naming UAC as consignee. The goods reached the UAC warehouse via the Qantas depot at Mascot, and from there went to the Hellman Australia depot and thence to Tech Pacific. According to the appellant, there was no evidence that UAC was an agent or subcontractor of Hellman Australia.

UAC submits that the evidence of the appellant at the trial did not make any distinction between UAC, ‘as a warehouse owner near Mascot’ (appellant’s written submissions) and UAC Inc, nor question that the companies were related companies or representatives of one another. It notes that no such point was taken on the pleadings. Nor was the relationship or distinction between the Australian companies and their US associates raised during the hearing. Indeed, and unsurprisingly, the case was run in the District Court on the basis of there being no real distinction.

In contracting with UAC Inc, Hellman agreed that by the terms of the air waybill any exclusion or limitation of liability applicable to UAC Inc ‘shall apply to and be for the benefit of the carrier’s agents, servants and representatives and any person whose aircraft is used by Carrier for carriage and its agents, servants and representatives’ (cl 7, terms and conditions attached to UAC Inc air waybill No 505949). UAC submits that it was the named agent for UAC Inc. That submission is supported by the UAC cargo manifest No 94080 [AB 523] which names UAC as the agent for UAC Inc. Other supporting evidence includes the testimony of Mr Gootee, the managing director of Hellman, who gave evidence that UAC was a cargo handling agent and intermediary which had space on flights to make available to Hellman. There was also evidence that Hellman prepared the UAC Inc air waybill. In my opinion, his Honour’s finding that UAC was either a subcontractor or agent of Hellman was open on the evidence and ought not be interfered with. Liability of Hellman Australia

The next issue concerns the liability of the second respondent, Hellman Australia, and the question of whether it is entitled to the protection of the exemption clauses contained in the agreement with Tech Pacific of 2 July 1993 or to the provisions of the Warsaw Convention . There is also an issue as to whether, pursuant to s 52 of the TPA , Hellman is guilty of misleading or deceptive conduct arising out of representations the appellant alleges were made to it regarding the quality and nature of the services it would provide.

The trial judge considered the relationship between the appellant and Hellman Australia and, having found Hellman Australia liable, held that it was entitled to rely on its General Trading Conditions and in particular, on cl 8B, which he concluded was ‘a complete disclaimer of any liability arising out of non-delivery of freight however caused’. The clear and unambiguous effect of the language of cl 8B is to exclude liability for the non-delivery of part of a consignment and his Honour was satisfied that the clause was part of an arms length commercial agreement negotiated between two commercial parties, ( Life Savers (Australasia) Ltd v Frigmobile Pty Ltd & Anor (1983) 1 NSWLR 431 at 435 C - D).

Clause 8B of the General Trading Conditions provides: The Company shall not be under any liability for any loss or damage … to or failure to forward, misforwarding and delay in forwarding or misdelivery, non-delivery or delay in delivery of any goods received by it or any consequential loss arising therefrom howsoever such loss, damage or consequential loss is caused, whether arising through misconduct, negligence of the Company or otherwise …

I agree with his Honour that there is little to distinguish the present case from the decision in Life Savers . The General Trading Conditions were attached to the proposal which, with the letter of 2 July 1993, comprise the agreement between Hellman Australia and the appellant. Unless the appellant can show that some exception applies, then Hellman is entitled to rely on the plain language of cl 8B and disclaim liability for the loss. In Life Savers , Hutley JA (at 434) refers to Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576 at 587 wherein Lord Denning points out that exception clauses ought be left to operate according to their terms unless such a clause would ‘run counter to the main object and intent of the contract’.

The appellant however submits that the present case can be distinguished from the decision in Life Savers on the basis of representations made by Hellman to the appellant. The exemption clauses, it is submitted, have no relevance against overriding representations as to the quality and nature of the service to be provided. The representations, so it is argued, give rise to additional terms of the agreement and ground an action under s 52 of the TPA .

The representations relied upon are a statement in Hellman’s letter of 2 July 1993 that its ‘aim is to provide the highest possible service’ and an alleged representation that direct flights would always be used. The trial judge rejected the submission, finding no basis for concluding that either representation was contractually enforceable or that either gave rise to a contravention under the TPA.

The appellant submits that the trial judge erred in his approach and that Hellman clearly did not provide the highest possible standard of service. It was negligent in its supervision of the transportation, in consolidating the computer parts with other goods and in sub-letting them to UAC and this negligence was causative of the loss. If not for the representations, it is submitted, the appellant would, in all probability, have reviewed its carriage arrangements. His Honour should have asked whether, by the conduct found, the appellant suffered any loss in trade or commerce rather than whether the words communicated were capable of creating any meaningful contractual obligation, ( Wardley Australia Ltd v Western Australia (1992) 175 CLR 514).

The agreement between Hellman and the appellant does not contain any express term requiring that cargo be sent on direct flights and the trial judge found, on the evidence, that there was no oral variation to the written terms. His Honour accepted the evidence of Mr Gootee that he had never agreed that Hellman would always use direct flights or notify the appellant if a flight was not direct, over the contrary evidence of Mr Batt. The finding was open on the evidence and the appellant has not shown that the judge failed to use, or misused any advantage that he enjoyed in having seen or heard the witnesses. The conclusion also disposes of the claim under s 52 of the TPA as it relates to the ‘direct flights’ representation.

As to the representation concerning the quality of service, in my opinion the statement in the letter of 2 July 1993 was not promissory in nature and cannot be considered to have created any contractual obligation. Further, it cannot establish a breach of s 52 of the TPA . Liability of UAC

Finally there remains the question of whether UAC was negligent and if so, whether as ‘subcontractor or agent of Hellman’ it is entitled to negate or limit its liability by relying on the limitation clauses in Hellman’s General Trading Conditions or by reliance on UAC Inc’s air waybill.

His Honour’s finding with regard to liability was unequivocal: I have found that the items went missing at Universal. This was clearly negligent on their part and a breach of bailment. [AB 596 J - K]

UAC’s primary submission in the appeal is that the decision of his Honour should be upheld insofar as he gave a verdict for UAC against the appellant. Nevertheless, an alternative submission is made that the finding of negligence should be set aside on the basis that UAC had been able to show that it had taken reasonable care of the goods. I have noted earlier that, in my opinion, his Honour’s conclusion with regard to liability was extensively reasoned and should not be disturbed.

The trial judge further found that, as subcontractor and agent of Hellman Australia, Hellman’s General Trading Conditions were effective as between the appellant and UAC and that UAC’s liability was limited to that set out in the conditions and/or the air waybills. His Honour was unpersuaded of the validity of the appellant’s submissions regarding the omission of the Warsaw Convention Article 8 details from the air waybills.

Mr King, counsel for the appellant, submits that the finding concerning UAC’s entitlement to rely on the General Trading Conditions was wrong, not the least because the defence was never pleaded by UAC. A number of defences were pleaded, however no findings were made with regard to those defences and the judgment does not make clear how his Honour came to deal with the issue on the basis that he did. No concession was ever made, so the appellant submits, that UAC Australia was essentially the same entity as UAC Inc. Mr King submits that if the defence had been pleaded, there would have been submissions concerning the applicability of Lord Reid’s tests enunciated in Midland Silicones Pty Ltd v Scruttons [1962] AC 446 at 474, as to whether a third party can rely on the terms and conditions of some other person.

It is conceded that reliance on Hellman’s General Trading Conditions was not specifically pleaded by UAC in its defence. Although reference was made in the submissions to Lifesavers , it was substantially in the context of a submission concerning UAC’s entitlement to rely on the air waybill issued by UAC Inc. Mr Kettle, counsel for UAC, submits that the appellant was not prejudiced by the failure to plead reliance on Hellman’s General Trading Conditions as all respondents were issued with air waybills and all sought to rely on general trading terms. All parties had the opportunity to tender evidence showing the full nature of the carriage. UAC, in cl 5(a) of its Amended Grounds of Defence [AB 33] states that it entered into an agreement with Hellman International evidenced by ‘Air Waybill No LAX 505949 dated 6 August 1994’. There is no mention that this is UAC Inc’s air waybill, however Mr Kettle submits that it supports his contention that, in the course of the trial, argument and submissions were made on the basis that UAC was entitled to rely on and be protected by the UAC Inc air waybill.

As discussed earlier, no real distinction between UAC and UAC Inc was raised at the hearing. It is necessary to ask that if the distinction between the parties had been drawn to the attention of the judge, whether it would have made any difference to his Honour’s decision. I am of the opinion that it would not, nor do I think that the course of the trial would have varied. By cl 10 of Hellman’s General Trading Conditions, Hellman is authorised by the appellant to arrange with subcontractors who, on delivery of goods to them, shall be ‘entitled to the full benefit of these terms and conditions’. Clause 1 defines ‘company’ as Hellman ‘its servants, agents and subcontractors’. The terms are clear that UAC as a ‘servant, agent or subcontractor’ is intended to be protected by its provisions. UAC was at the very least a representative of UAC Inc and, as such, entitled to the protection of the exclusion clause. The appellant should not at this late stage be permitted to rely on a distinction that was not drawn to the attention of the Court at first instance.

As the finding of the trial judge concerning the place of the loss had been upheld, UAC is not entitled to rely on Article 18 of the Warsaw Convention . In my view, however, even if Hellman’s General Trading Conditions were not applicable, UAC would be entitled to exclude liability on the basis of UAC’s air waybill No 505949. Clause 7 of the air waybill provides that any exclusion of liability shall apply to the benefit of UAC’s servants, agents and representatives. UAC is entitled, if not as carrier, then as the representative of UAC Inc, to the protection of the clause.

Accordingly, the appeal should be dismissed. At the conclusion of the hearing of the appeal the parties agreed that the court should leave the question of costs until liability had been determined. Without the benefit of submissions, I would order the appellant to pay the respondents’ costs, particularly Air Pacific. However, if the parties wish to argue to the contrary, this may be done by written submissions.