The plaintiff, an Australian exporter, shipped one consignment of goods from Melbourne to Guam and another from Melbourne to Nauru under bills of lading issued by the defendant carrier. In both cases, the receivers obtained possession of the goods from the wharf without producing the bill of lading, and without paying the plaintiff for them. The plaintiff sued the defendant, alleging that it had failed to deliver the goods to the holders of the bills of lading, as it had agreed to do. The defendant relied, inter alia, on a clause in the bills of lading which provided that: “The carrier shall not in any circumstances whatsoever be liable for any loss of or delay or damage to the goods … howsoever caused occurring … after they are discharged at the ocean vessel’s rail at the port of discharge.” The defendant argued that, because any misdelivery had occurred after the goods had been discharged over the ship’s rail, it had no liability for the loss of the goods.

In earlier proceedings between the same parties on exactly the same issues,3 Beach, J., in the Supreme Court of Victoria, had held that the defendant was not protected by the exclusion clause, because of the now-discredited doctrine of fundamental breach of contract. Beach, J., held that the exclusion clause should not be interpreted so as to defeat the main object and intent of the bill of lading contract,