Gilgandra Marketing Co-Operative Limited v Australian Commodities & Merchandise Pty Ltd & Anor [Administrators Appointed] [2011] NSWSC 16
Between early February 2010 and mid March 2010 Gilgandra Marketing Co-Operative Limited (“Gilgandra”) made several contracts to sell wheat to Australian Commodities and Marketing Pty Limited (“Commodities”). These contracts incorporated the standard Trade Rules of the National Agricultural Commodity Marketing Association (“NACMA”) which included terms relating to payment, passing of title and arbitration of disputes.
The wheat was to move from northern NSW to Port Botany and then through Chittagong in Bangladesh. Gilgandra was to deliver the wheat to its agent, Auscott Limited for packing and shipping. Auscott Limited would then deliver the wheat on Gilgandra’s behalf to three carriers who then shipped the wheat to Bangladesh, where Commodities would take possession. The carriers were organised by Commodities and by its agent Excalibur but liaised with Auscott Limited, who prepared the relevant export documents, packaged the wheat and prepared the shipping schedule.
By 30 April 2010, Gilgandra had issued all invoices for payment of the wheat totalling approximately $3.6 million. Commodities had made payments of $700,000. Commodities did not pay Gilgandra on the due dates and there was no arrangement for late payment; two cheques were dishonoured and despite assurances from Commodities that payment would be made the amounts remained outstanding. The wheat stood in containers in Chittagong Harbour under the control of the carriers.
On 23 July 2010 Gilgandra was granted an injunction to hold the wheat in Chittagong and prevent Commodities from dealing with the wheat (including the bills of lading). Gilgandra sought payment of the outstanding purchase price and a right to take possession of the wheat as an unpaid seller from which title had not passed and as a holder of an equitable lien. In addition, Gilgandra argued its right to exercise a right of stoppage in transitu under the Sale of Goods Act 1923 (“the Act”).
Gilgandra’s retention of title and equitable lien claims failed, but its argument under the Act was successful. The relevant provisions allowed Gilgandra (the unpaid seller) to stop the goods in transitu, if the buyer of the goods becomes insolvent. Gilgandra needed to show that Commodities was insolvent and that the goods were still in transit.
The Act provides that: “A person is deemed to be insolvent within the meaning of this Act who either has ceased to pay his or her debts in the ordinary course of business or cannot pay his or her debts as they become due, whether the person has committed an act of bankruptcy or not”. The Court held that Commodities was insolvent as it had ceased to pay its debts as they became due and in the ordinary course of business. Notably, an administrator was appointed to Commodities on the last day of the hearing.
The substantial issue was whether the wheat was still in transit. Commodities argued that the transit ceased at Port Botany. Justice Slattery analysed the contracts and the facts and held that the wheat was still in transit and that Port Botany was for all intents and purposes “a waypoint and nothing more”. His Honour found that Commodities had provided directions to its agent regarding the transit of the wheat to Chittagong, which passed those directions on to Auscott, who was Gilgandra’s agent and there were no fresh directions given by Commodities to the carriers for new transit once the wheat arrived at Port Botany. In addition, before the wheat could leave Auscott, details of the carriers were to be provided to Auscott by Commodities. Once this information was received, Auscott would submit a load manifest called a “Train Consist” to the railway company showing which containers were to be placed on the train and the connecting vessels they were to be loaded onto. There was no evidence that the carriers were to take delivery of the wheat at Port Botany on Commodities’ behalf.
Commodities raised arguments in relation to an assent given by Gilgandra regarding the disposition of wheat, however his Honour found that no assent had been given by Gilgandra and as such, Gilgandra had a right to possession of the wheat in Chittagong under the Act.
This case serves as a reminder to Administrators and Liquidators to look past defective Retention of Title clauses and consider alternative approaches. Between now and October 2011 the Sale of Goods Act may assist. After that date unpaid sellers must look firstly to the provisions of the Personal Property Security Act 2009.
For further information
Noelle Livesey | Lawyer
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