Banking on the House: Freight Forwarder Bills of Lading and the Cro Case

• Author: David Goodwin
• Position: Barrister and MBA Director, RMIT University
• Pages: 10-24

(2018) 32 ANZ Mar L J 10

BANKING ON THE HOUSE:

FREIGHT FORWARDER BILLS OF LADING AND THE CRO CASE

Dr David Goodwin*

1 Introduction

A decision of the New South Wales Court of Appeal handed down in July 2018, Cr o Travel Pty Ltd v Australia

Capital F inancial Management Pty Ltd,1 illustrates liabilities that can arise when bills of lading issued by a freight

forwarder are provided to a financier of international trade as security. The Court reviewed the implications of the

issuing of ‘house’ bills of lading by a forwarder, long an uncer tain area under Australian law. The case should

cause freight forwarders to reflect on the architecture and mechanics of their exi sting documentary management

processes.

The case is significant because it is the first decision of a higher Australian court for more than two decades to

explore in depth the nature and effect of house bills of lading. Freight for warders engaged in international export

transactions face a complex web of potential liabilities. This web has been widened b y the CRO case, which

demonstrates the operation of two causes of action that have now become well-established, and which supplement

the usual contractual, tortious and bailment remedies that attend cargo loss litigation: a) breach of warranty of

authority; and b) actions for ‘misleading or deceptive conduct’ under the Australia n Consumer Law.2

This article begins with a brief outline of those usual remedies and their interaction with rules of agency, and a

description of the factors which bear on whether the role of a forwarder in a given transaction has been that of an

agent or a principal (Sections 2 and 3). Section 4 reviews the leading Australian authoritie s, prior to CRO, on the

ramifications of the issue of house bills by freight forwarders: Carrington Slipways P ty Limited v Patr ick

Operation s Pty Limited (The Cape Comorin) 3 and Comalco Aluminium Ltd v Mogal F reight Services P ty Ltd.4

Section 5 describes the facts in CRO, and the discussion of house bills of lading in the case. The Court of Appeal’s

findings on breach of warranty of authority and misleading or deceptive conduct are explained in Sections 6 and

7 respectively. Sections 8, 9 and 10 explore some potential implications of CRO for freight forwarders.

2 The Usual Causes of Action against Forwarders

A shipper or consignee, having entrusted its goo ds to a freight forwarder to arrange a transit but subsequently

discovering that the goods were lost or d amaged in transit, would traditionally consider three main alternative

avenues of recourse: for breach of contract; in tort; and in bailment.

An action for breach of the contract of carriage raises the challenge of identifying who is the actual ‘carrier’ to be

sued. Where a contract has been arranged per medium of a forwarder, determination of this iss ue will depend on

whether the forwarder acted as a mere agent or, by virtue of its contract and the surrounding circumstances, placed

itself in the position of a carrier. This requires analysis of the wording of documentation issued by the various

transport operators, the characteristics of the modes of transport used and the particular facts of a given case. The

precise terms of the contract need to be ascertained. It is also necessary to consider the effect of exclusion clauses

which relieve the carrier from liability.5 A Himalaya clause can provide that the carrier contracts as agent on

behalf of independent contractors such as stevedores and inland carriers and ensure those parties become

principals to the contract and are protected by the exclusion clauses.6

There are a range of reasons for pursuing claims in tort. It may not be clear who the contract of carriage has been

made with, and if there is an insol vency, a particular defendant may be a better target to sue. It may be desirable

* Barrister and MBA Director, RMIT University

1 [2018] NSWCA 153, 13 July 2018. The case is hereinafter referred to as “CRO”.

2 This legislation, under the Competition and Consumer Act 2010 (Cth), is referred to in footnotes below as the “ACL”.

3 (1991) 24 NSWLR 745.

4 (1993) 113 ALR 677.

5 In Nissho Iwai Australia Ltd v Malaysian International Shipping Corpor ation, Berhad (1989) 63 ALJR 468 a clause exempted a carrier

from any liability whatsoever. The High Court held that a well-worded exclusion clause can protect a party even where the exempted events

would defeat the object of the contract if they occurred.

6 Continental Seagram Pty Ltd v ABC Containerline NV Pty Ltd, Unreported Supreme Court NSW (No 12 of 1989).