Papua New Guinea Law Reports - 1987
[1987] PNGLR 427
N650
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
PIMCO SHIPPING PTY LTD
V
WILLIAM CARLOS MOEDER AND HANS HERMANN AND MOEHER TRADING PTY LTD
Waigani
Kapi DCJ
20-22 May 1987
23 December 1987
SHIPPING AND NAVIGATION - Carriage of goods by sea - Actions for loss or injury in transit - Action for indemnity - Statutory provision as to time for making claim - Indemnity proceedings based on claim - Indemnity proceedings barred if claim barred - Sea-carriage of Goods Act (Ch No 261), Art III, r 6.
INDEMNITY - Proceedings for - Time for bringing - Carriage of goods by sea - Action for loss or injury in transit - Statutory provision as to time for making claim - Indemnity proceedings based on claim - Indemnity proceedings barred if claim barred - Sea-carriage of Goods Act (Ch No 261), Art III, r 6.
Under the terms of Art III, r 6, of the schedule to the Sea-carriage of Goods Act (Ch No 261) the carrier and the ship shall be discharged from all liability in respect of loss and damage to goods unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.
Held
An action by the carrier of cargo seeking to be indemnified by the owner of the ship in respect of a judgment against him for damages for loss or damage to goods in transit cannot be maintained after the action by the cargo owner is barred under Art III, r 6: such an indemnity is based on and supported by the rights of the cargo owner and the liability of the carrier which are barred.
Grace Lines Inc v Central Gulf Steamships Corporation 416 F 2d 977 (1969), adopted and applied.
Cases Cited
Goulandris Brothers Ltd v Goldman & Sons Ltd [1958] 1 QB 74; 3 WLR 596; 3 All ER 100.
Grace Lines Inc v Central Gulf Steamships Corporation 416 F 2d 977 (1969).
Statement of Claim
These were proceedings in which the carrier of a cargo against whom a judgment had been obtained for damage to goods in transit sought to be indemnified by the owner of the ship in which the goods were carried.
Counsel
P E King, for the plaintiff.
D Ryan, for the first defendant.
Cur adv vult
23 December 1987
KAPI DCJ: The plaintiff is a company which has been engaged in coastal shipping since 1972. In 1978, it owned and operated a coastal vessel, MV Atun. It is a steel cargo ship powered by a 360hp engine with a speed of 9 knots.
In July 1978, WD & HO Wills (PNG) Ltd arranged a stock transfer of 590 cartons of assorted cigarettes from the factory in Madang to Kieta North Solomons. The goods were shipped on the MV Atun. When the goods arrived in Kieta, 155 cartons were destroyed beyond salvage. WD & HO Wills subsequently sued the plaintiff (in this action) for the cost of the damage. A judgment against the plaintiff was signed on 7 July 1982. The damages in the action were assessed by Woods J who in a judgment dated 22 February 1985, awarded damages of K17,145.95 with interest of K7,636.22.
In this action, the plaintiff is suing the defendants on the basis that they indemnified the plaintiff for any damage to the goods shipped on the MV Atun. The plaintiff claims that when the vessel carried the goods, the vessel was already owned by the defendants.
In 1978, the plaintiff company decided to sell the vessel, MV Atun. Discussions were held between the representatives of the plaintiff and first and second defendants. There is some dispute as to the nature and the location of these discussions. However, an agreement was finally reached and a price of K90,000 was agreed upon as the price of the boat. An initial K10,000 was deposited and the balance was paid on 25 July 1978. The last mentioned date was the date when the sale was completed. The issue which has been hotly contested in this action is the question of the personal liability of the first defendant, Mr Moeder. Mr Moeder was represented by counsel but both the second and the third defendants were not represented at the trial. The following issues arose for determination:
(1)      Whether Mr Moeder was a party to the sale of the boat?
(2)      Whether the plaintiff acted as agent for the defendants in respect of the goods in question?
(3)      Whether the defendants indemnified the plaintiff from any damage to the goods in question? And
(4)      Whether the action by the plaintiff against the first defendant is barred by the Sea-carriage of Goods Act (Ch No 261)?
WAS MR MOEDER A PARTY TO THE SALE?
Counsel for the first defendant has submitted that his client is not liable on the basis that he was not personally a party to the sale. The negotiations to sell the boat appeared to have started about May 1978. At this stage, no company had yet been formed. However, it is clear that the first and second defendants had decided that they would form a company which would eventually acquire the boat in question. Certain steps had been taken to form this company. While the attempts to form the company were continuing, the negotiations between the representative of the plaintiff and the first and second defendants on the sale of the boat also continued. This has complicated the status of Mr Moeder in the sale. There is evidence to suggest that Mr Moeder was negotiating the sale of the boat on behalf of the company that he intended to form in the future. For example, when he made the application for a license in anticipation that the vessel would be sold, he signed the application as a director. However, at the time of the application, there was no company in existence. The company was incorporated on 23 July 1978 and the sale was completed on 25 July 1978.
Counsel for the plaintiff has submitted that the actual sale of the boat took place between Mr Moeder and Mr Hermann on the one part and the plaintiff company on the other. He does not dispute the fact that there was an intention on the part of Mr Moeder and Mr Hermann eventually to transfer the title to the company, Moeher Trading Pty Ltd. This he submitted was never done. On the other hand, counsel for the first defendant submitted that there was an intention on the part of Mr Moeder that this boat would be purchased by the company he intended to form and that the sale was as between Moeher Trading Pty Ltd and the plaintiff. He submitted that Mr Moeder simply acted as a director of the company.
There can be no doubt from the evidence that the first and second defendants intended to form a company which would eventually acquire the boat in question. It is also clear from the evidence that the first and second defendants would be the major shareholders in the company. It is also clear from the evidence that all the negotiations were carried out by the two defendants although Mr Moeder appeared to have played a major part.
The agreement to sell the boat for K90,000 was reached between the parties before the company was incorporated. It is also clear that K10,000 was paid as a deposit. Strictly speaking, it cannot be said that the company which had not yet been incorporated could be a party to these negotiations at that stage. It is reasonable to hold the view that in these circumstances, the first and second defendants who would have a substantial interest in the proposed company which was yet to be incorporated, were using their names and legal personalities to do everything that was possible to acquire the boat. For example, the deposit of K10,000 was contributed by Mr Hermann. It cannot be said that the K10,000 belonged to the company which was incorporated only on 23 July 1978. A significant piece of evidence which would determine the question of the proper parties to the sale of this boat was given by Mr Moeder. Before the completion of the sale on 25 July 1978, Mr Moeder gave evidence to the effect that he had a telephone conversation with Mr Sharp and pointed out that the bill of sale was ready to be executed. However, he pointed out to Mr Sharp that the company had no funds to purchase the boat. According to Mr Moeder, Mr Sharp had suggested to him that the bill of sale should be made out to him, that is, Mr Moeder, and that the title could be transferred to the company later on. It appears that after this discussion was held, Mr Moeder had arranged a personal bank loan with a bank in Madang. There is no evidence to suggest that this money was injected into the company which had by 23 July 1978 been incorporated. The bill of sale is documentary evidence which supports the contention that the sale was between William Carlos Moeder and Hans Hermann on the one part and the plaintiff company on the other. The registry of ships under the Merchant Shipping Act (Ch No 242) was based on the bill of sale which also shows the first and second defendants as the owners. Although there was no direct evidence on this, it appears from the registry that the ownership of the ship was transferred to Moeher Traders Pty Ltd at a later date. This supports the proposition that the sale on 25 July 1978 was to the first and second defendants. I therefore find that Mr Moeder was a party to the sale of this boat. This means that at the time of the action for damages by WD & HO Wills, the first defendant should have been joined as a party to the action. The issue never came to light in the earlier action because it was not tried as it was a default judgment. As will be seen later, this is fatal to the plaintiff’s claim in this case.
SEA-CARRIAGE OF GOODS ACT (CH NO 261)
It would be appropriate at this stage to deal with the question of whether or not the indemnity action by the plaintiff is barred by the Sea-carriage of Goods Act (Ch No 261). The applicability of the terms of the Sea-carriage of Goods Act to this transaction was not an issue. Counsel for the defendant Mr Moeder, has submitted that the indemnity claim by the plaintiff is subject to Art III, r 6, which says in its third paragraph that in any event the carrier and the ship are discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. Counsel for the plaintiff has submitted that the article in question has no application to the facts of this case.
In supporting his proposition, counsel for the defendant Mr Moeder, relied on the case of Gracelines Inc v Central Gulf Steamships Corporation 416 F, 2d 977 (1969). An action was filed by the insurers of the cargo that was damaged against the charter party and the owners of the vessel. At the same time there was a third party action filed by the charter company against the owners of the vessel. This latter action was based on indemnity. The indemnity action was based on the original claim by the insurer against the charter party and the owner of that vessel. The trial judge dismissed the action by the insurer of the cargo against the two defendants because it was brought outside the time limitation imposed by Art III(6) of the Carriage of Goods by Sea Act. However, the trial judge refused to dismiss the third party action brought by the charter party against the owners of the vessel on the indemnity action. The owners of the vessel appealed. The United States Court of Appeal’s Fifth Circuit stated the issue in this way:
“Therefore, Royal’s suit filed on 9 August 1961 against Grace was barred by the statute of limitation, being filed too late. ... Thus, the question presented of what effect would the statute of limitation provision of the time charter agreement have relative to the indemnity suit? We hold that the indemnity cause of action by Central against Grace was barred by the statute of limitation under the Carriage Of Goods By Sea Act.”
The Court of Appeal analysed its decision in the following terms:
“Central’s cause of action is based on the rights of the cargo claimant, and the fact that Central bases its cause of indemnity on the breach of the time charter agreement could not under any theory give Central a greater right than that which the cargo claimant and its insurer, Royal, had against Grace. At the time suit was field, Royal’s cause of action was barred by the limitation period of the Carriage Of Goods By Sea Act from proceeding against the vessel owner, Grace, and the trial court correctly so held. Central’s indemnity right being predicated on the claim of the cargo owner, and the cargo claimant and its insurer, Royal’s cause of action against Grace being barred, clearly Central’s cause of action for indemnity against Grace would also be barred. To hold otherwise would be to deny Grace its legal defence of limitation; therefore, the motion of Grace to dismiss the impending petition should have been granted, for once the period of limitation ran on Royal’s suit against Grace no indemnification theory could establish Central’s right to receive indemnification from Grace. Indemnity may not be awarded without the support of liability on the part of the indemnitor to the person injured and since Grace was no longer obligated to Royal, Grace could not be liable in the cause of action for indemnity by Central.”
I have not been referred to any other authority which deals with this particular issue. I consider that the question stated by the United States Court of Appeal Fifth Circuit is the correct law on the issue. The relevant provisions in the Carriage of Goods by Sea Act are similar to our Sea-carriage of Goods Act (Ch No 261). I would adopt the statement of law and apply it in this jurisdiction when dealing with an indemnity action in similar circumstances.
In this case, the owners of the goods, WD & HO Wills brought an action against the shipowners either as owners severally or jointly, that is Pimco Shipping and Moeder Trading Pty Ltd. There is no question here that the damages related directly to the goods: see Goulandris Brothers Ltd v B Goldman & Sons Ltd [1958] 11 QB 74 at 105. The cause of action was brought within time. The assumption in the judgment was that Pimco Shipping was the owner of the ship (either severally or jointly) with Moeder Trading Pty Ltd as alleged in the writ of summons. In this case, Pimco Shipping has brought an indemnity action against the first and second defendants who were not parties to the action brought by the owners of the cargo. In order for the plaintiff to be successful now, it should have joined the first and second defendants in the action by cargo owners, WD & HO Wills. Counsel for Mr Moeder has submitted that according to the principles stated in the abovementioned case, the indemnity action against him is barred by the Sea-carriage Of Goods Act. He submitted that the plaintiff’s action is based on the claim of the owners of the goods and such an action was not brought against Mr Moeder and that such an action is now out of time. I find that the principles stated in the United States case are applicable to the facts of this case. I rule that an indemnity action by the plaintiff against Mr Moeder is now time barred.
The plaintiff has also sued Moeher Trading Pty Ltd as third defendant. However, if one were to accept the judgment against the third defendant in the action by WD & HO Wills, in principle the indemnity action would not be barred by the Sea-carriage of Goods Act. The contention by the plaintiff in this action was that contract of sale was entered into between first and second defendants and not the third defendant. Any judgment against Moeher Pty Ltd may not bear fruit. I understand, it does not have financial resources. I understand that a default judgment entered against the third defendant in the action by WD & HO Wills has not been satisfied. On my findings, Moeher Pty Ltd was not a party to the transaction at the relevant time. I would also dismiss the action against the third defendant.
Having come to the conclusion of the view I take of the applicability of the Sea-carriage Of Goods Act (Ch No 261) to the facts of this case, it would not be necessary to determine the other issues.
I would dismiss the action.
Action dismissed
Lawyers for the plaintiff: Warner Shand Wilson Donigi Reiner.
Lawyers for the first defendant: Brian White & Associate.