Cro Travel Pty Ltd v Australia Capital Financial Management Pty Ltd

[2018] NSWCA 153

Court of Appeal

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	Cro Travel Pty Ltd v Australia Capital Financial Management Pty Ltd [2018] NSWCA 153
Hearing dates:	19 April 2018
Decision date:	13 July 2018
Before:	Meagher JA at [1]; Ward JA at [2]; Barrett AJA at [268]
Decision:	1. Appeal dismissed with costs.
Catchwords:	CONSUMER LAW – misleading or deceptive conduct – whether the appellant contravened s 18(1) of the Australian Consumer Law by issuing sea-carriage documents in respect of goods as agent for certain carriers despite having no authority and whilst other sea-carriage documents issued by carriers as principal in respect of the same goods were also in circulation – whether such conduct caused the respondent loss   AGENCY – warranty of authority – whether the appellant’s breach of warranty of authority caused the respondent loss – whether primary judgment could be supported on the basis that, if the documents had been issued with authority, the respondent would have obtained rights as pledgee
Legislation Cited:	Bills of Lading Act 1855, 18 & 19 Vic, c 111 Carriage of Goods by Sea Act 1992 (UK), c 50, ss 2(1) and 5(2) Competition and Consumer Act 2010 (Cth), Schedule 2 s 18(1) Sea-Carriage Documents Act 1997 (NSW), ss 5 and 8 Sea-Carriage of Goods Act 1924 (Cth) Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Sch 2, s 18(1)
Cases Cited:	Australia Capital Financial Management Pty Limited v Freight Solutions (Vic) Pty Limited [2017] NSWDC 279 Barber v Meyerstein (1869) LR 4 HL 317 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2009] FCA 1087 Borealis AB v Stargas Ltd (The “Berge Sisar”) [2002] 2 AC 205 Brandt v Liverpool, Brazil and River Plate Steam Navigation Company Ltd [1924] 1 KB 575 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 C.A. Pisani & Co Ltd v Brown, Jenkinson & Co Ltd [1939] 64 Lloyd’s Law Rep 340 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12 Carrington Slipways Pty Ltd v Patrick Operations Pty Ltd (1991) 24 NSWLR 745 Chabbra Corporation Pte Ltd v Jag Shakti (Owners) (The “Jag Shakti”) [1986] AC 337 Comalco Aluminium Ltd v Mogal Freight Services Pty Ltd [1993] FCA 180; 113 ALR 677 Commonwealth Bank of Australia v Hamilton [2012] NSWSC 242 Comptroller of Stamps (Vic) v Howard Smith (1936) 54 CLR 614; [1936] HCA 12 Deputy Commissioner of Taxation v Bluebottle UK Ltd (2006) 68 NSWLR 558; [2006] NSWCA 360 Dick v Lumsden (1793) Peake 250; 170 ER 146 East West Corpn v DKBS AF 1912 A/S [2003] QB 1509 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 Firbank’s Executors v Humphreys (1886) 18 QBD 54 Glyn Mills Currie & Co v East and West India Dock Co (1882) 7 App Cas 591 Henville v Walker (2006) 206 CLR 459; [2001] HCA 52 Heskell v Continental Express Ltd [1950] 1 All ER 1033 Jones v European & General Express Company Ltd [1920] 4 Lloyd’s Law Rep 127 Keppel Tatlee Bank Ltd v Bandung Pte Ltd [2003] 1 Lloyd’s Law Rep 619 Kum v Wah Tat Bank Ltd [1971] 1 Lloyd’s Law Rep 439 Kuzmanovski v New South Wales Lotteries Corporation [2010] FCA 876; 270 ALR 65 Last v Rosenfeld [1972] 2 NSWLR 923 Lickbarrow v Mason (1787) 2 Term Rep 63 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 Meyer v Sharpe (1813) 5 Taunt 74; 128 ER 614 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 Nathan v Giles (1814) 5 Taunt 558; 128 ER 808 Olsson v Dyson (1969) 120 CLR 365; [1969] HCA 3 OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120 Re Beaumont [1902] 1 Ch 889 Skinner v Redmond Family Holdings Pty Ltd [2017] NSWCA 329; (2017) 123 ACSR 593 Standard Chartered Bank v Dorchester LNG (2) Ltd [2016] QB 1 The “Future Express” [1992] 2 Lloyd’s Law Rep 79 Thomas v National Australia Bank [2000] 2 Qd R 448; [1999] QCA 525 Thomson v Dominy (1845) 14 M & W 403 Traderight Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 V/O Rasnoimport v Guthrie & Co Ltd [1966] 1 Lloyd’s Law Rep 1 Westpac Banking Corp v The “Stone Gemini” (1999) 110 FCR 47; [1999] FCA 434
Texts Cited:	A Mocatta, M Mustill and S Boyd, Scrutton on Charterparties and Bills of Lading (19th ed, 1984, Sweet & Maxwell) B Eder, H Bennett, S Berry, D Foxton and C Smith, Scrutton on Charterparties and Bills of Lading (23rd ed, 2015, Sweet & Maxwell) E McKendrick (ed), Goode on Commercial Law (5th ed, 2016, LexisNexis UK and Penguin Books) F M B Reynolds, Bowstead and Reynolds on Agency (18th ed, 2006, Sweet & Maxwell) I Holloway, “Troubled Waters: The Liability of a Freight Forwarder as a Principal Under Anglo-Canadian Law” (1986) 17(2) Journal of Maritime Law and Commerce 243 J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths) M Davies and A Dickey, Shipping Law (4th ed, 2016, Thomson Reuters) N Palmer, Palmer on Bailment (3rd ed, 2009, Sweet & Maxwell) P Watts and F M B Reynolds, Bowstead and Reynolds on Agency (21st ed, 2018, Sweet & Maxwell) R Aikens, R Lord, and M Bools, Bills of Lading (2nd ed, 2016, Routledge) S Girvin, Carriage of Goods By Sea (2nd ed, 2011, Oxford University Press) The Law Commission and The Scottish Law Commission, Rights of Suit in Respect of Carriage of Goods by Sea, (19 March 1991)
Category:	Principal judgment
Parties:	Cro Travel Pty Ltd (Appellant) Australia Capital Financial Management Pty Ltd (Respondent)
Representation:	Counsel: M Y Bearman with S P Thomas (Appellant) E G H Cox (Respondent)   Solicitors: Rothwell Lawyers Pty Ltd (Appellant) Mills Oakley (Respondent)
File Number(s):	2017/322488
Publication restriction:	Nil
Decision under appeal	Court or tribunal: District Court of New South Wales Jurisdiction: Civil Citation: [2017] NSWDC 279 Date of Decision: 16 October 2017 Before: Russell DCJ File Number(s): 2015/185920

Headnote

[This headnote is not to be read as part of the decision]

The respondent (ACFM) conducted a money-lending business. As security for its obligation to repay drawdowns under a loan agreement with the respondent, ASSH (a skin and hide exporter) agreed to deposit with the respondent “all original shipping documents” which “relate[d] to” each drawdown.

In 2014, in the course of applying to the respondent for drawdowns, ASSH deposited with the respondent eleven bills of lading which referred to goods ASSH had shipped to purchasers in China (“CRO bills”). In reliance on the CRO bills, the respondent advanced money to ASSH. When ASSH failed to repay the advances, the respondent sought to take possession of the goods referred to in the CRO bills. However, it found that the goods had already been delivered by the carrier at the destination in China.

The appellant (CRO), which was a freight forwarder, had issued the CRO bills. The CRO bills contained a statement that they were issued by the appellant “as agent for [various named carriers]”. The appellant did not in fact have the authority of any of the carriers named in the CRO bills to issue bills of lading.

At the same time, the appellant had provided to ASSH an original bill of lading, issued by the carrier, corresponding to each shipment of goods to which the CRO bills related.

The respondent obtained judgment against the appellant in the District Court of New South Wales, first, for damages for misleading or deceptive conduct contravening s 18(1) of the Australian Consumer Law; and, second, for damages for breach of warranty of authority (although there was to be only one recovery, given the overlap in the causes of action).

As to the finding of misleading or deceptive conduct, the appellant contended on appeal: first, that the primary judge had erred in finding that the bills were not “genuine” (ground 4 of the grounds of appeal); second, that there was no misleading or deceptive conduct because the bills of lading took effect in accordance with their tenor; they did not purport to be ocean bills; and they conferred on the lawful holder a right of suit against the appellant (and that there was no conduct that represented otherwise) (ground 5 of the grounds of appeal); and, third, in the alternative, that no loss or damage was suffered by reason of any misleading or deceptive conduct (ground 5A of the grounds of appeal).

As to the judgment for breach of warranty of authority, it was held by the primary judge that, although the CRO bills were not bearer bills and were never endorsed, the respondent would have had a right to demand the delivery of the goods if the bills had been issued with authority. The appellant contended on appeal (ground 6 of the grounds of appeal) that the respondent’s failure to obtain endorsement meant that it never became the lawful holder of the bills and would never have obtained delivery of the goods, with the result that the appellant’s conduct did not cause the respondent any loss. The respondent, in its notice of contention, gave further reasons for upholding the primary judge’s conclusion on this issue.

Held (Meagher JA, Ward JA and Barrett AJA), dismissing the appeal:

1.   The primary judge’s description of the CRO bills as not genuine should be understood by reference to the conclusion that the CRO bills were not issued with authority. There was no disconformity with the finding that the CRO bills were negotiable instruments. Ground 4 of the grounds of appeal was dismissed: at [96], [98] (Ward JA); [1] (Meagher JA); [268] (Barrett AJA).

2.   There was no error in the primary judge’s conclusion that the issue by CRO of the CRO bills, expressly as agent for the named carriers, whilst at the same time circulating bills of lading authorised by the carrier, was misleading or deceptive conduct on the part of the appellant. Ground 5 of the grounds of appeal was dismissed: at [140] (Ward JA); [1] (Meagher JA); [268] (Barrett AJA).

3.   The primary judge was correct to conclude that the appellant’s misleading or deceptive conduct caused the respondent’s loss. The respondent relied on the bills as providing a right to obtain possession of the goods and would not otherwise have lent the moneys. Ground 5A of the grounds of appeal failed: at [151] (Ward JA); [1] (Meagher JA); [268] (Barrett AJA).

4.   There was no error by the primary judge in the conceptual approach to the assessment of damages for breach of warranty of authority (assuming the CRO bills had been endorsed) and, to that extent, ground 6 of the grounds of appeal is not made good: at [172]-[173] (Ward JA); [1] (Meagher JA); [268] (Barrett AJA).

5.   If the CRO bills had been issued with authority, the respondent would have had a sufficient interest in the goods to sue the carrier, as a possessory pledgee and this is sufficient to support the primary judge’s award of damages in relation to the breach of warranty of authority claim: ground 3 of the respondent’s notice of contention accepted: at [235] (Ward JA); [1] (Meagher JA); [268] (Barrett AJA).

East West Corpn v DKBS AF 1912 A/S [2003] QB 1509; Chabbra Corporation Pte Ltd v Jag Shakti (Owners) (The “Jag Shakti”) [1986] AC 337; Kum v Wah Tat Bank Ltd [1971] 1 Lloyd’s Law Rep 439, applied.

Judgment

1. MEAGHER JA: I agree with Ward JA.

2. WARD JA: This matter involves a dispute arising out of the issue by the appellant, Cro Travel Pty Ltd (CRO), which was formerly known as Freight Solutions (Vic) Pty Ltd, of eleven bills of lading which named Australian Sheep Skin and Hide Pty Ltd (ASSH) as the shipper (the CRO bills of lading). It was common ground on this appeal (though not at first instance) that the CRO bills of lading were negotiable instruments capable of endorsement to a party “to order” or “to bearer” (see AT 1.43). ASSH provided originals of each of the CRO bills of lading to the respondent, Australia Capital Financial Management Pty Ltd (ACFM), as security under a loan agreement entered into between ACFM and ASSH in relation to the goods referred to in the bills of lading.

3. At the same time as the issue by CRO to ASSH of the CRO bills of lading, CRO also provided ASSH with original negotiable “ocean” bills of lading issued by the ocean carrier (the ocean bills of lading). It was common ground that ACFM was not aware that any ocean bills of lading existed in respect of the same cargo.

4. The ocean bills of lading were subsequently used by a third party to obtain delivery in China of the goods referred to in the CRO bills of lading. In oral submissions on the appeal it was said by Counsel for CRO, Mr Bearman, that the goods were released on production by email to customs of photocopies of the ocean bills of lading (see AT 5.48; 9.8) but Counsel for ACFM, Mr Cox, says that there was no evidence called by CRO at first instance as to how delivery occurred and that the assumption by the primary judge was that the ocean bills of lading had been surrendered to procure delivery of the goods (see AT 49.12). This Court was not taken to any evidence as to the means by which the goods were released in China to the third party.

5. There was default by ASSH in repayment of the loan and, after recovery of some amounts by claims on guarantors, ACFM commenced proceedings against CRO in the District Court of New South Wales, claiming damages for misleading and deceptive conduct and for breach of warranty of authority in relation to the issue by CRO of the CRO bills of lading. ACFM was successful in those proceedings on both causes of action (see Australia Capital Financial Management Pty Limited v Freight Solutions (Vic) Pty Limited [2017] NSWDC 279).

6. Judgment was entered for ACFM against CRO in damages for misleading and deceptive conduct in the sum of $823,172.93 and (though the primary judge made clear (see [199]) that there was an overlap in respect of the damages on the two causes of action and there could not be recovery of both) in damages for breach of warranty of authority in the sum of $845,456.93 (see judgment at [200]). The difference in the quantum of the respective amounts of damages relates to the basis on which interest was awarded on the respective causes of action.

7. CRO has appealed from the primary judge’s decision by amended notice of appeal filed 20 March 2018, of which only grounds 4-6 were ultimately pressed at the hearing of the appeal (see AT 1). ACFM contends that the decision should be affirmed on grounds other than those relied on by the primary judge (see its notice of contention dated 4 April 2018) but does not seek a discharge or variation of any part of the orders entered at first instance.

8. For the reasons below, I am of the opinion that the appeal should be dismissed with costs.

Background

9. CRO carried on business at the relevant time as a freight forwarder; ACFM was a financier which conducted a business lending money to local companies in Australia (some of which have a Chinese background); and ASSH carried on a business as a skin and hide exporter (see primary judgment at [1], [22], and [7], respectively).

10. ASSH entered into a Loan Agreement with ACFM dated 16 May 2014, pursuant to which ASSH borrowed money from ACFM to purchase sheep skins and/or cow hides for export to China (primary judgment at [7]). As collateral security for the payment of all moneys owing in respect of the loan facility, and for the due performance by ASSH of all obligations and provisions under the Loan Agreement, ASSH was required to provide or cause to be provided to ACFM the securities set out in item 6 of the Schedule to the Loan Agreement (cl 15). Pursuant to cl 16, each of ASSH and the specified guarantors represented, warranted, and undertook in favour of ACFM, relevantly, that:

g.   the Borrower [ASSH] will deposit all original shipping documents for each shipment of sheep skins and/or cow hides which relate to a drawdown made in accordance with Item 1A of the Schedule including but not limited to the invoice, customs declaration, packing slip, insurance document and bill of lading.

11. As earlier noted, ASSH supplied ACFM with the CRO bills of lading, presumably in compliance with the above representation, warranty and undertaking.

12. The primary judge proceeded on the basis that each bill of lading was provided as security for a loan from ACFM to ASSH of the purchase price of the goods referred to in the respective bills of lading. See, for example, at [121]-[122], where the primary judge says that:

ASSH applied for and was granted three drawdowns which it did repay on time.

As security for those drawdowns ASSH delivered bills of lading relating to the goods purchased with each drawdown, to the plaintiff.

13. However, the evidence of ACFM’s principal, Mr Chen, points to an arrangement whereby ASSH provided the CRO bills of lading as security to draw down funds for its purchases of future goods in the course of its business. So, for example, in cross-examination Mr Chen said (at T 76.49-77.5):

Q.   Do you have any knowledge of the timing of trips in export ships from any port in Australia to any port in China?

A.   INTERPRETER: I don’t. I’d like to say that I wish you could have a look at the structure paper, which clearly states that the securities for my drawdown is the first goods, so it’s not that he used my money to purchase the first goods, but he purchased the first goods and then used the first goods as security to get money from me to purchase the second ones.

14. No issue, however, was raised on appeal as to this seeming disconformity between the evidence and the factual findings.

15. Each of the CRO bills of lading was consigned “TO ORDER”, was signed with CRO’s stamp, and was executed by CRO “As Agents Only” for the named ocean carrier (usually, though not always so named on the bills of lading, China Ocean Shipping), who was to carry the goods in question from Australia to China. All but one of the CRO bills of lading (the exception being MELZHE1021) were stamped “original”. (No point was taken at trial or on the appeal about the fact that one of the bills was not stamped original – see AT 6.49.) The CRO bills of lading also included the description “BILL OF LADING FOR COMBINED TRANSPORT OR PORT TO PORT SHIPMENTS”. Together with the three originals of each bill of lading, CRO also issued bills of lading stamped “COPY NON-NEGOTIABLE” (for example, three such copies of MELZHE1020 were in evidence). (The definition of “carrier” on the back of the bills named CRO as the carrier – inconsistently with the information provided on the execution page of the bills.) CRO provided an original of each CRO bill of lading to ASSH. One only of the CRO bills of lading (MELQIN5364) has been stamped with the common seal of ASSH. No party attributed any significance to this.

16. At the same time, as noted earlier, CRO provided ASSH with an original negotiable ocean bill of lading issued by the ocean carrier corresponding to each of the eleven bills of lading. There were, therefore, parallel sets of “original” bills of lading in respect of each of the shipments in question (as Mr Bearman accepted at AT 4.13). Copies of the eleven ocean bills of lading, each corresponding to the eleven CRO bills of lading, were in evidence. In each case, the ocean bills of lading in evidence are marked as a “COPY” and in all but two cases (being COSU6094829430, which corresponds to MELZHE1021, and COSU6094829439, which corresponds to MELZHE1020) they are also marked “NON-NEGOTIABLE”.

17. Pausing here, at [42] of the primary judgment his Honour refers to eight bills of lading. There were in fact eleven bills of lading in issue.  The discrepancy relates to the fact that in relation to Drawdown 4 (as part of an application on 9 October 2014 to extend the time for repayment), two CRO bills of lading that had initially been provided to ACFM were returned to ASSH and ASSH then provided five further CRO bills of lading to ACFM (see the affidavit affirmed 28 October 2016 by Mr Howard Ting, the Assistant General Manager of ACFM, at [48]).  Nothing turns on the fact that his Honour referred (at [42]) to eight bills of lading rather than eleven. (There was also a typographical error in the identification of one of the CRO bills of lading at [42] of the primary judgment, but again nothing turns on that.)

Bills of lading – terminology and definitions

18. Before turning to the primary judgment, and the challenges made by CRO to some of the primary judge’s conclusions in that judgment, it is convenient at this stage to explain the relevant terminology. This is particularly relevant in light of the emphasis placed by CRO on the fact that the CRO bills of lading were found to be negotiable instruments.

19. The nub of CRO’s argument (at least on the misleading and deceptive conduct claim) was that the CRO bills of lading carried “precisely the rights they purported to carry” (see AT 5.8) and operated in accordance with their tenor (AT 9.13); though CRO accepted that (at least as at the time of hearing and of the appeal, though not accepting that this concession was “extant” at any earlier time) there was no authority for CRO to issue the bills on behalf of the ocean carrier (AT 9.30). CRO attributed confusion at the first instance hearing to the fact that both parties described the bills as “house bills”, as did the experts – but CRO’s expert described them as house bills that were negotiable and ACFM’s expert as house bills that were not negotiable (see AT 11.48ff).

20. That said, I agree with the primary judge (at [85] of his Honour’s reasons), and with the submission advanced for ACFM on appeal (AT 36.26), that the definitional boundaries of these concepts are not determinative in this case; nor are the labels always helpful to an understanding of the real issues in dispute between the parties.

21. In this regard, it is apposite to note the observations of Richard Aikens, Richard Lord, and Michael Bools in Bills of Lading (2nd ed, 2016, Routledge) that (at [2.1]-[2.2]):

Like an elephant, a bill of lading is generally easier to recognise than to define. … When considering the classification of bills of lading, some distinctions are legally significant, as they affect the legal rights and obligations attaching to the bill. Others are of commercial or only semantic significance, being descriptive of and suited to the particular trade in question. Examples of these “commercial” species of bills of lading are “liner” bills, “house” bills and “container” bills.

Bills of lading

22. The authors of Bernard Eder, Howard Bennett, Steven Berry, David Foxton and Christopher Smith, Scrutton on Charterparties and Bills of Lading (23rd ed, 2015, Sweet & Maxwell) (“Scrutton on Charterparties”) provide the following general summary of a bill of lading (at [1-024]):

A bill of lading is a type of transport document that may be issued in respect of the carriage of goods by sea by or on behalf of the owner, or less commonly the charterer, of the carrying ship. Bills of lading are commonly used when a vessel is employed as a general ship, being put up for a particular voyage to carry the goods of any persons. The several legal properties of a bill of lading outlined in this Article reflect the commercial function of the document in relation to the trading of cargoes. Particular issues arise where a bill of lading is issued by a shipowner in favour of a charterer.

23. Relevantly, the following properties of a bill of lading are outlined:

1. a bill of lading serves as a receipt for the goods entrusted to the carrier in respect of both the quantity and the condition of the goods received (at [1-025]);

2. a carrier that issues a bill of lading assumes a fundamental obligation to deliver the goods at destination only against presentation of the bill (at [1-028]); and

3. a bill of lading serves also as evidence of the terms of the contract of affreightment (at [1-029]).

24. To similar effect, Aikens, Lord, and Bools say (at [2.3]):

A bill of lading is a document. Generally it must be signed by, or on behalf of, the carrier by sea. Three common characteristics of a bill of lading are that (a) it constitutes a receipt for the goods shipped or received by the carrier, (b) it constitutes a document of title for such goods and (c) it contains or evidences the contract of carriage by sea relating to the goods. A document that has all these characteristics will almost certainly be a bill of lading, and a document that lacks any of them will rarely be; however … there is no universally applicable definition of a bill of lading.

Negotiable and non-negotiable bills of lading; bearer and order bills of lading

25. In Scrutton on Charterparties, the following useful summary of various kinds of bills of lading appears (at [1-026]):

A bill of lading made out either without naming the consignee but in favour simply of “bearer” or “holder” or in blank (known as a “bearer bill”) or in favour of a named consignee “or order” (known as an “order bill”) is said to be “negotiable”. This denotes that the bill and various rights in respect of the goods covered by the bill are transferable simply by the physical transfer of the bill accompanied, in the case of an order bill, by endorsement in favour of the new holder or in blank. In contrast, a “straight” bill of lading is made out in favour of a named consignee without contemplation of negotiation. Such a bill is transferable by simple delivery from the shipper to the named consignee, but not otherwise. A standard form bill of lading may be printed in hybrid form, to take effect as a negotiable or straight bill depending upon how it is completed.

26. The authors note that in Lickbarrow v Mason (1787) 2 Term Rep 63, judicial recognition was granted to the custom and practice of merchants that a shipped, negotiable bill of lading was a ‘document of title’, so that a transfer of the bill effected a transfer of ‘property’ in the goods covered by the bill (see at 71, 75-76).

27. In Kum v Wah Tat Bank Ltd [1971] 1 Lloyd’s Law Rep 439 at 446, Lord Devlin said:

It is well settled that “Negotiable”, when used in relation to a bill of lading, means simply transferable. A negotiable bill of lading is not negotiable in the strict sense; it cannot, as can be done by the negotiation of a bill of exchange, give to the transferee a better title than the transferor has got, but it can by endorsement and delivery give as good a title. … The bill of lading obtains its symbolic quality from the custom found in Lickbarrow v. Mason [here referring to (1794) 5 Term Rep 683; 101 ER 380] and that is a custom which makes bills of lading “negotiable and transferable” by endorsement and delivery or transmission.

28. Aikens, Lord, and Bools comment (at [2.37]) that the essence of a “negotiable” bill of lading is that “its transfer by indorsement and delivery operates to transfer the symbolic possession of the goods, and the carrier is entitled to deliver to the party to whom the bill of lading has been so transferred”. Their explanation of bearer and order bills is in substance similar to the passage set out from Scrutton on Charterparties above. That is, a “bearer bill” is one which requires the carrier to deliver to the bearer (or holder) without the requirement that that bearer is a named consignee or endorsee; whereas an “order bill” is one where the consignee is described either as “to order” or “X or order” or “to the order of X”, or in words to similar effect (see at [2.41]-[2.43]).

“House” bills of lading

29. At [18-019], the authors of Scrutton on Charterparties say:

A “house bill of lading” issued by a forwarding agent acting solely in the capacity of an agent to arrange carriage is not a bill of lading at all, but at most a receipt for the goods coupled with an authority to enter into a contract of carriage on behalf of the shipper. It is not a document of title, nor within the Carriage of Goods by Sea Act 1992, and it is unlikely that it would ever be regarded as a good tender under a c.i.f. contract.

30. The equivalent paragraph in the 19th edition of Scrutton on Charterparties (Alan Mocatta, Michael Mustill and Stewart Boyd, Scrutton on Charterparties and Bills of Lading (19th ed, 1984, Sweet & Maxwell)) was quoted with approval by this Court in Carrington Slipways Pty Ltd v Patrick Operations Pty Ltd (1991) 24 NSWLR 745 at 753 per Handley JA (Kirby P and Samuels JA agreeing) (“Carrington Slipways”).

31. As to “house bills”, Aikens, Lord and Bools make the following remarks (at [11.12]):

A “house bill” may be issued, commonly by a forwarding agent as opposed to an “actual” or “performing” carrier … it is unlikely to be a bill of lading in the strict sense at all.

32. Davies and Dickey similarly note, in Shipping Law (4th ed, 2016, Thomson Reuters) (at [12.840]):

The traditional view of the role of a freight forwarder is that it acts as agent for the shipper of goods, arranging for carriage and delivery of the goods by others, without contracting to carry and deliver the goods itself. The forwarder enters into a contract of carriage with a carrier on behalf of the shipper as an undisclosed principal. The freight forwarder may issue to the shipper a document called a consignment note or a house bill of lading, but that document is not a true bill of lading when the forwarder acts merely as an agent. The document is, at most, a receipt for the goods coupled with an authority to enter into a contract of carriage on behalf of the shipper.

33. In submissions for ACFM on this appeal, Mr Cox submitted (see AT 33-35) that the conclusion in Carrington Slipways (as to the effect of house bills) should be read in a limited way, with emphasis on the fact that [18-019] of Scrutton on Charterparties (as set out above) is limited in scope to the situation where a house bill of lading is issued by a forwarding agent acting solely in the capacity of an agent to arrange carriage. In this regard, Mr Cox referred to Comalco Aluminium Ltd v Mogal Freight Services Pty Ltd [1993] FCA 180; 113 ALR 677 (“Comalco”) at 699-700, where Sheppard J noted that Handley JA was focussed, in Carrington Slipways, on the position where a freight forwarder was acting solely as agent. (I consider these cases at [39]-[50] below).

The “usual” role of freight forwarders

34. In Jones v European & General Express Company Ltd [1920] 4 Lloyd’s Law Rep 127, the owner and shipper of goods sued a freight forwarder for negligence occasioning the loss of part of the shipment. Rowlatt J said (at 127) (in a passage referred to in Holloway, “Troubled Waters: The Liability of a Freight Forwarder as a Principal Under Anglo-Canadian Law” (1986) 17(2) Journal of Maritime Law and Commerce 243 (at 244)):

It must be clearly understood that a forwarding agent is not a carrier. He does not obtain possession of the goods and he does not undertake to deliver them. All he does is to act as agent and make the necessary arrangements, so far as is necessary, between the ship and the railway or anything else. His liability depends upon his failing to carry out the duties I have just described.

35. Holloway also cites a passage from C.A. Pisani & Co Ltd v Brown, Jenkinson & Co Ltd [1939] 64 Lloyd’s Law Rep 340. In that case, the defendant, a firm of shippers’ agents, was sued for breach of contract and in negligence when a cargo of marble, shipment of which the defendant had arranged, was damaged in transit. The defendant contended that it was only engaged to effect customs clearance and arrange delivery. Goddard LJ considered that it was difficult to see how in any conceivable circumstances could there be a claim against the firm of brokers for the loss the plaintiff had sustained, and made the following general remarks (at 342):

[Freight forwarders] are willing to forward goods for you or to book you to the uttermost ends of the earth. They do not undertake to carry you, and they are not undertaking to do it either themselves or by their agent. They are simply undertaking to get somebody to do the work, and as long as they exercise reasonable care in choosing the person to do the work they have performed their contract.

36. In Heskell v Continental Express Ltd [1950] 1 All ER 1033, Devlin J said (at 1037):

The forwarding agent’s normal duties are to ascertain the date and place of sailing, obtain a space allocation if that is required, and prepare the bill of lading. The different shipping lines have their own forms of bill of lading which can be obtained from stationers in the city, and it is the duty of the forwarding agent to put in the necessary particulars and to send the draft stamped to the loading broker. … After shipment he collects the completed bill of lading and sends it to the shipper.

37. In his article, Holloway observed (at 244) (emphasis added):

[E]ven as late as 1965 it was said that it was exceptional for a freight forwarder to be a principal to a contract for sea carriage. The traditional duties of the freight forwarder in the maritime context include, inter alia, ascertaining the place and date of sailing, obtaining space allocation, preparation of the bill of lading, arranging for the goods to be brought alongside, and payment of customs dues. Other duties might be undertaken … but the essential feature of the relationship was that the freight forwarder was an agent of the shipper. As such, he did not incur personal liability in case of loss, and the contracts he arranged were between the shipper and actual carrier as principals.

38. While the above gives a useful outline of commercial practice, it is not in any sense a description of a rule. Holloway goes on to give a number of instances (at 245-248) of cases involving contracts of carriage where a so-called freight forwarder had itself promised to carry the goods. However, it is useful to bear in mind the usual role of freight forwarders when considering Carrington Slipways and Comalco – both cases where a freight forwarder issued a bill of lading or similar document of title as principal.

Comalco/Carrington Slipways

39. In Comalco, the freight forwarder had contracted as principal to undertake the shipping of the goods. Sheppard J concluded that a consignment note issued by the freight forwarder both evidenced this contract for carriage and, in light of its other features, was intended to be a document of title for the goods, meaning that it was, if not a bill of lading, at least “a similar document of title” within the meaning of the Sea-Carriage of Goods Act 1924 (Cth) (see in particular at 698-700).

40. By contrast, Carrington Slipways concerned a bill issued by a freight forwarder as principal which was held not to be a bill of lading (and which bill was referred to in the judgment as a “house” bill). There, the plaintiff had made a claim for loss occasioned by the negligent handling of goods (engines). A difficulty arose in identifying the contract for carriage (and therefore the relevant limitation clause), because the goods were referred to in two bills.

41. The appellant purchased the diesel engines in 1983. Pacific Austral Pty Ltd was a freight forwarder engaged by the appellant to arrange carriage of the engines from Japan to Australia.

42. Relevantly, for present purposes, there was in existence a document referred to as the “Peace Line bill”, which was issued by “Peace Line” (a business name under which the freight forwarder, Pacific Austral Pty Ltd, operated). The Peace Line bill, which was apparently issued to comply with a requirement in a letter of credit by which the plaintiff paid the vendor of the goods, named the vendor (Nissho) as the shipper; was consigned to shipper’s order; and was endorsed in blank. However (this being the distinguishing feature from Comalco), Pacific neither owned nor operated the “Cape Comorin”, on which the goods were shipped (at 751).

43. On the same day the Peace Line bill was issued, the “Simsmetal bill”, which referred to the same cargo and the same voyage, was issued by Hong Kong and Eastern (Japan) Ltd, a subsidiary of the time charterer of the “Cape Comorin”. That is referred to as the “ocean bill” in the judgment.

44. The plaintiff sued, relevantly, the stevedore for negligently handling the goods. The primary judge held that the stevedore was entitled to the benefit of a limitation of liability clause in the Peace Line bill. The plaintiff appealed against that judgment. By notice of contention, the stevedore contended that it was entitled to the benefit of a limitation clause in the Simsmetal bill (rather than, as the primary judge had found, the limitation clause in the Peace Line bill).

45. Handley JA concluded (at 752):

In my opinion the Peace Line bill was not a bill of lading, and in particular was not an on board ocean bill. It is not within the definitions of a bill of lading contained in Scrutton, Sewell v Burdick [(1884) 10 App Cas 74], or in The Ship “Marlborough Hill” [referring to The Ship “Marlborough Hill” v Cowan and Sons, Ltd [1921] 1 AC 444].

His Honour went on to say:

The Peace Line bill evidenced a contract of affreightment with Pacific, not with an ocean carrier. … Accordingly it was not a document of title and was not within the Bills of Lading Act 1855 or its New South Wales equivalents.

46. It is clear from this that his Honour treated the Peace Line bill as one that purported to be a contract binding Pacific as principal. The other party to the apparent contract was the appellant. Handley JA also observed (at 753), in the course of considering whether the issue of the Peace Line bill “exhausted” the authority of Pacific, that it was clear that:

… Pacific was not authorised by the appellant to contract with it as principal for the carriage of the goods to Sydney and for this reason also the issue of the Peace Line bill was not a performance of its duty as agent.

47. Carrington Slipways is therefore not a case where a freight forwarder entered into a contract as an agent. The Peace Line bill was issued by the freight forwarder as principal.

48. Pausing here, in the present case, the CRO bills of lading were signed “For the Carrier”. Following CRO’s stamp, the words “Signed As Agents Only” appeared. This indicates that they were not house bills of lading (in the sense of the term considered earlier), because they purported to evince a contract with the carrier (not a contract binding the freight forwarder as principal).

49. Therefore, where the primary judge in the present case said (at [83]) (citations omitted):

The nature of a house bill was considered by Justice Handley in Carrington Slipways Pty Limited v Patrick Operations Pty Limited. … His Honour referred to Charter Parties, Scrutton 19th Edition (1984) where the following was said:

A “house bill of lading” issued by a forwarding agent acting solely in the capacity of an agent to arrange carriage is not a bill of lading at all, but at most a receipt for the goods coupled with an authority to enter into a contract of carriage on behalf of the shipper. It is not a document of title …

that quotation from Scrutton on Charterparties should be read as though the words “as principal” follow the words “issued by a forwarding agent”. It appears from the course of the primary judgment, however, that the primary judge may have taken the view that a house bill and a bill issued by a freight forwarder as agent are the same. They are not. The nature of a house bill issued by a freight forwarder is that it is issued by the freight forwarder as principal. A house bill is not a bill of lading because in the usual case, the freight forwarder is not a carrier, but is engaged to do other things (such as arrange delivery and effect customs clearance). That conclusion is consistent with what was said in Aikens, Lord and Bools, at [11.12] in the passage cited earlier (see [31] above).

50. In Girvin, Carriage of Goods By Sea (2nd ed, 2011, Oxford University Press), it is said (at [3.19]) (emphasis added):

The exact status of any document of carriage issued by a forwarder will be determined by a number of factors. It should be noted, however, that the fact that a freight forwarder is described in a document of carriage as an agent will not, as a matter of law, prevent him from being regarded as the principal party to the contract. Putting this another way, mere description as “freight forwarder”, “principal”, “agent”, or “forwarding agent”, is not determinative; it is the substance of the obligation undertaken which is often pivotal in determining the legal status of the relationship.

and at [3.21]:

Although, as we have seen, it is always a matter of construction, house bills of lading are not, technically speaking, bills of lading. This is because, in issuing such a bill of lading, the freight forwarder may be acting in his capacity as the agent of the shipper. In those circumstances, the bill of lading which is issued will be no more than a receipt for the goods.

The relevant legislation

51. At common law, while possession of a bill of lading identifies the beneficiary of the carrier’s duty under the contract of carriage of delivery at destination, transfer of a bill of lading did not carry with it a transfer of the right to enforce the contract of carriage (see Thomson v Dominy (1845) 14 M & W 403; Scrutton on Charterparties at [1-028]). While a third party holder of a bill of lading (following a transfer) might be the only party delivery to whom will discharge the carrier’s delivery obligation, such a third party owner would not (at common law) be entitled to sue for breach of contract in the event that the carrier delivers to another party.

52. This position was altered in the United Kingdom by the Carriage of Goods by Sea Act 1992 (UK) c 50, by virtue of which rights of suit (as well as, in certain circumstances, liabilities) under the contract of carriage pass upon the transfer of a negotiable bill of lading to the new lawful holder of the bill. Much the same is achieved by the relevant NSW legislation, the Sea-Carriage Documents Act 1997 (NSW).

53. Section 5 of the Sea-Carriage Documents Act contains the following definitions:

In this Act:

bill of lading means a bill of lading (including a received for shipment bill of lading) which is capable of transfer:

(a)   by endorsement, or

(b)   as a bearer bill, by delivery without endorsement.

…

lawful holder, in relation to a bill of lading, means a person who:

(a)   has come into possession of the bill, in good faith, as the consignee of the goods, by virtue of being identified in the bill, or

(b)   has come into possession of the bill, in good faith, as a result of the completion, by delivery of the bill:

(i)   of any endorsement of the bill, or

(ii)   in the case of a bearer bill – of any other transfer of the bill, or

(c)   would be the lawful holder of the bill under paragraph (a) or (b) had not the person come into possession of the bill as the result of a transaction effected at a time when possession of the bill no longer gave a right (as against the carrier) to possession of the goods.

sea-carriage document means a bill of lading, a sea waybill or a ship’s delivery order.

54. Part 2 of the Sea-Carriage Documents Act provides for rights under contracts of carriage. Section 8 (“Transfer of rights”) is in the following terms:

(1)   All rights under the contract of carriage in relation to which a sea-carriage document is given are transferred to:

(a)   in the case of a bill of lading – each successive lawful holder of the bill, …

…

(2)   Rights in a contract of carriage transferred to a person under subsection (1) vest in that person as if the person had been an original party to the contract.

…

(4)   Where a person becomes the lawful holder of a bill of lading when possession of the bill no longer gives a right (as against the carrier) to possession of the goods, no rights are transferred to that person under subsection (1) unless the person becomes the lawful holder of the bill:

(a)   by virtue of a transaction effected under any contractual or other arrangement made before the possession of the bill ceased to give such a right to possession, or

(b)   as a result of the re-endorsement of the bill following rejection to that person by another person of goods or documents delivered to the other person under any contractual or other arrangement made before the possession of the bill ceased to give such a right to possession.

(5)   Where, in relation to a sea-carriage document:

(a)   a person with any interest or right in relation to the goods sustains loss or damage in consequence of a breach of the contract of carriage, and

(b)   subsection (1) operates to transfer the rights in that contract to another person,

the person to whom the rights in the contract are transferred is entitled to exercise those rights for the benefit of the person who sustained the loss or damage to the same extent that they would be able to be exercised if they were vested in that person.

…

55. The term “bill of lading” is not itself defined in the legislation.

56. I note that CRO’s position in the present case is that the finding that the CRO bills of lading were negotiable instruments means that they are bills of lading under the Sea-Carriage Documents Act and that, on endorsement, ACFM would become the lawful holder of the bills for the purposes of that Act and able to sue the carrier upon them (see AT 5.16-31; AT 10.1ff), even though CRO accepted (both on appeal and at first instance) that the bills were not issued with the authority of the ocean carrier.

57. That argument is premised on the CRO bills of lading being bills of lading within the opening words of the definition in the first place (the argument on this issue having the air of circularity). However, if all that is meant thereby (in s 5 of the NSW legislation) is that a bill of lading is a type of transport document issued in respect of the carriage of goods by sea by or on behalf of the owner (or charterer) of the carrying ship (to use the terminology found in Scrutton on Charterparties at [1-024] – see [22] above), that would be the case.

Experts’ opinions

58. It is also useful at this point to consider the expert evidence as to the bills of lading in issue in these proceedings.

59. ACFM instructed Mr Paul Golland, the general manager of a logistics company in Sydney, who occupies executive roles in various associations of international freight forwarders, with over 40 years’ experience in the freight forwarding industry, to give expert evidence in the proceedings. Mr Golland produced a first report dated 27 October 2016 and then a supplementary report dated 5 May 2017 commenting, among other things, on the expert report of Mr Forster (see below).

60. CRO instructed Mr John Forster, a customs broker with some 37 years’ experience in the freight forwarding industry, to give expert evidence as to ocean and house bills of lading (and the respective functions of each) and as to the bills in question in the present case (see his report of 17 February 2017).

61. The two experts met in conclave on 31 May 2017 and then produced a joint expert report dated 1 June 2017 stating that there were no points on which they disagreed and identifying the issues on which they were agreed (by reference to their respective expert reports). In particular, they agreed (see [5.5]-[5.7] of the joint expert report) as to the following passages in Mr Golland’s report:

2.   On the face of the house bills of lading, Freight Solutions (Vic) Pty Ltd [CRO] has signed “As Agents Only” of the named ocean carrier;

5.18   This is not standard practice in the freight forwarding industry. When a freight forwarder signs their own bill of lading they are acting as the carrier, not an agent, of the contracted ocean carrier. If they are signing any bill “as agents” (of the carrier) then they are signing another party’s bill of lading, i.e. a bill of lading that names another company as a contracted carrier, because they have been asked by that contracted carrier to sign the bill of lading in that capacity. By signing the bill of lading “as agent”, the forwarder is binding the contractual carrier to those terms. In this case, Freight Solutions signed their own house bills of lading “as agents” of a named ocean carrier despite not having been instructed by that carrier to do so.

3.   Despite naming the ocean carrier on the face of the house bills of lading, the terms and conditions on the reverse side of the house bills of lading identify the carrier as “Freight Solutions (Vic) Pty Ltd and its successors and assigns”; and

5.19   This would be the case, as these are Freight Solutions house bills of lading and as such would be issued under their terms and conditions listed on the back of their house bill.

4.   The ocean carrier issued ocean bills of lading in which the shipper and consignee as recorded on the ocean bills of lading are identical to the shipper and consignee as recorded on the house bills of lading.

5.20   As previously stated, the ocean carrier would not be aware of how the house bill of lading had been issued, as it would have no bearing on the delivery of the goods at destination. The main reason to use house bills of lading would be if Freight Solutions wanted their agent in China to collect charges at destination and/or handle the custom clearance. However, in this case the ocean bill should have been consigned to Freight Solutions’ agent, and not to the actual consignee, which is not what occurred. Freight Solutions claim that the house bills of lading were issued for custom purposes only, but also acknowledge that a copy of the ocean bill would have fulfilled the same purpose. In this case, it begs the question of why house bills identical to the ocean ones were issued. In my opinion, there seems to have been no real reason to have done this.

62. They concluded (at [6.1] of the joint expert report) that:

Both parties agree that Freight Solutions [CRO] have produced no evidence signed by the shipper and requesting house bills of lading. We also agree that there was no need to issue House Bills of Lading if they were required for Custom purposes only. Freight Solutions acknowledge that they could have used a copy of the Ocean Bill for the same purpose. Additionally, we both agree that there was no need to issue an original House Bills of Lading when a copy marked “for Custom purposes only” would have been sufficient.

63. Also in evidence at first instance was a one page document headed “Agreement reached by Experts” bearing the handwritten date 7 June 2018, which recorded that:

Agreement reached by experts

1   It was not necessary for the defendant to provide an original bill of lading to customs in China, it was sufficient for customs clearance purposes in China for a copy of the ocean bill of lading to be provided. Customs do not require an original bill of lading to be provided, and the provision of original documents would not be standard practice. Alternatively a copy of the house or ocean bill marked “for customs purposes only” could have been issued.

2   The usual practice when a negotiable house bill is used by a freight forwarder is:

(a)   The freight forwarder names the consignee as “to order” in the house bill of lading;

(b)   Three copies of the house bill of lading are stamped “original” and handed by the freight forwarder to the shipper, together with 3 non-negotiable copies.

(c)   The 3 original house bills of lading are then endorsed by the seller/shipper and either negotiated through the banking system or released to the consignee after paying for the goods.

(d)   The buyer/consignee then presents one of the “original” copies of the house bill of lading to the freight forwarder or the freight forwarders [sic] agent in China.

(e)   The freight forwarder or its agent then presents the original ocean bill of lading to the ocean carrier, who issues a delivery order to the party presenting the ocean bill of lading.

(f)   The delivery order is then used to collect the goods at the terminal.

3   There was no commercial utility in issuing a house bill of lading in identical terms to the ocean bill of lading. One commercial reason for using house bills of lading in a trade of this kind was if the defendant wanted their agent to collect charges at the destination and/or handle the customs clearance.

4   The use of 3 original and 3 copies of a bill of lading was an indication that the house bill of lading was a negotiable document.

5   The practice of signing a house bill of lading “as agent only” for a named ocean carrier, without authority for [sic] the carrier, is not standard practice in the freight forwarding industry.

Pleading at first instance

64. In the further amended statement of claim, ACFM pleaded, relevantly, that:

8   The Defendant [CRO] issued and provided ASSH with original bills of lading in respect of the Goods.

Particulars

[eight bills of lading were there particularised, and defined as the Bills of Lading]

8A   Each of the Bills of Lading purported to be and had the hallmarks of a negotiable instrument providing an entitlement to the holder to present the Bill of Lading to obtain delivery of the Goods.

Particulars

Each of the Bills of Lading appeared on its face to:

a.   be a receipt for the relevant Goods specifying the cargo and the containers for transportation;

b.   evidence a contract of carriage; and

c.   be a document of titled providing rights to the holder of the originals and identifying the “Consignee” as “TO ORDER”.

…

9A   At all material times the Defendant [CRO] was aware or ought to have been aware that the Bills of Lading would or might be provided by ASSH to third parties.

Particulars

Email from Mr Lennon of the defendant to Mr Hunt dated 3 March 2015 stating that the Bills of Lading were “for banking purposes”.

The Bills of Lading were consigned “to order” so by their very nature would, in the normal course of trade, be endorsed by ASSH in its capacity as shipper and either sent to the buyer to present them to the carrier or their agent to obtain delivery of the Goods and/or could be held by third party as security for payment for the Goods and/or to secure financial arrangements.

65. The misleading or deceptive conduct claim was pleaded (at [11] of the further amended statement of claim) as follows:

11.   In issuing the Bills of Lading, the Defendant represented that:

a.   each Bill of Lading was a negotiable instrument providing an entitlement to the holder to present the Bill of Lading to obtain delivery of the Goods;

b.   Alternatively, in issuing sets of “original” Bills of Lading consigned “to order”, each Bill of Lading could be held by third party [sic] as security for payment for the Goods and/or to secure financial arrangements. (the Representations).

12. The Representations were made in trade and commerce within the meaning of section 18 of the Australian Consumer Law (ACL).

13.   In reliance upon the Representations, the Plaintiff:

a.   accepted the Bills of Lading as security for the Outstanding Amount;

b.   did not take any steps to obtain further or other security for the Outstanding Amount; and

c.   advanced the Outstanding Amount … to ASSH as set out at paragraph 8 above.

14. By virtue of the matters pleaded above at paragraphs 3 to 25 [sic] (inclusive) above, the Defendant has engaged in misleading and deceptive conduct in breach of section 18 of the ACL.

15.   By virtue of the Defendant’s Representation the Plaintiff has suffered loss and damage of the Outstanding Amount as particularised above plus contractual interest owing to the Plaintiff on the Outstanding Amounts in accordance with the Loan Agreement.

[Particulars omitted]

16.   The Plaintiff is entitled to damages from the Defendant pursuant to sections 236 and/or 237 of the ACL.

Primary judgment

66. The misleading and deceptive conduct claim was advanced by ACFM at the hearing at first instance in two ways: first, that CRO’s conduct, in issuing a negotiable bill of lading whilst another negotiable bill of lading in respect of the same cargo was in existence, was misleading and deceptive; and, second, that CRO’s negotiable bills of lading represented that the holder, including a financier, was entitled to obtain delivery of the goods and could hold the bill of lading as security.

67. ACFM’s alternative claim for breach of warranty of authority was based on the execution by CRO of its bills of lading “as agent only” for the ocean carrier without authority. The primary judge noted (at [16]) that it was agreed between the parties that CRO did not have authority to execute each bill as agent for the carrier.

68. The primary judge noted that the provision of bills of lading as security for each drawdown was an express term of the Loan Agreement between ASSH and ACFM (see judgment at [25]) and that ACFM insisted on provision of the original documents, and retained the bills of lading in a safe pending repayment of each loan (see judgment at [30], [37], [39]).

69. The primary judge accepted that ACFM only advanced the loans to ASSH in reliance on CRO’s original negotiable bills of lading as security for the loans because ACFM understood those bills of lading gave the holder a right to delivery of the cargo and a valuable security for the loan (see at [30]-[35], [125]-[127], [138], [149]).

70. As adverted to earlier, ACFM had contended at the hearing at first instance that the CRO bills of lading were bearer bills. The primary judge noted the description of the functions of a bill of lading in the Aikens, Lord, and Bools text (at [66]-[70]ff); and said (at [78]) that it was common ground “based upon the agreement reached by the experts for both parties” that the bills of lading issued by CRO were not of a kind which gave the bearer the right to demand delivery of the cargo, because CRO had no authority from the ocean carrier to issue them. (On appeal, CRO says that the above statement is incorrect; whereas ACFM maintains that it is correct other than for the reference to this being based on agreement reached by the experts. If read without reference to the experts, the statement on its face appears to be correct.)

71. The primary judge also noted (at [82]) that it was common ground that the (CRO) bills of lading were what were known as “house” bills of lading and not negotiable “ocean” or “liner” bills. The distinction between “house” bills and “true” bills of lading was noted by the primary judge at [81]; [83].

72. The primary judge found that because the bills of lading were not endorsed by ASSH, they were not negotiable bearer instruments (see [98]). Rather, the primary judge held that the eleven bills of lading were negotiable “To Order” bills of lading (see at [150]-[152]) and that, although the bills of lading had not been endorsed, ACFM was contractually entitled to have the bills endorsed by ASSH pursuant to its loan agreement with ASSH (see at [154], [167]).

73. Relevantly, for the purposes of ACFM’s notice of contention, the primary judge said at [150] – [153] (emphasis added):

… [P]ossession of the bills of lading, if they had been the only original negotiable bills (as they appeared to be) would have given the plaintiff leverage, if not certain rights, to enable it to obtain repayment of the loans.

Firstly, if these bills had been the only original negotiable bills (as they appeared to be) the plaintiff would have had a possessory pledgee’s lien over the original shipping documents being the bills of lading. Some accommodation would have had to be reached between lender, borrower/shipper, consignee and carrier, before the goods when landed in China could be taken by the eventual purchaser.

Secondly, if these bills were (as they purported to be) original negotiable bills of lading (of the kind an ocean carrier would issue), then all the plaintiff had to do to perfect its security interest was to have the borrower endorse each “TO ORDER” bill.

Thirdly, if Mr Chen had been aware of the need for endorsement to perfect the securities, he could have (and I find would have) required an endorsement before approving any further drawdowns.

74. There was not, in terms, an express finding in the above paragraphs of the reasons that ACFM had the benefit of a possessory pledgee’s lien over the original (but unauthorised by the carrier) shipping documents.

75. The primary judge accepted that the principal of ACFM (Mr Chen) believed that holding the original bills of lading meant that ACFM, or someone acting on behalf of ACFM, could collect the goods and realise those goods to repay any amounts owing to ACFM by ASSH (see [30]; and see [149]). Importantly, his Honour found that if the three copies of the bills of lading stamped “ORIGINAL” had not been provided to ACFM Mr Chen would not have allowed ACFM to lend the funds the subject of each application for drawdown (see [34]; [155]; [157]).

74. At [99], the primary judge held that, when Mr Chen received the CRO bills of lading as security for the drawdowns (under the Loan Agreement), Mr Chen was mistaken in his view that the bills would have given the right to demand delivery of the goods (since the bills when delivered were not endorsed) ([99]) but his Honour considered that Mr Chen’s error was consistent with the opinion likely to be formed by other commercial recipients of the said bills of lading (see [161]-[163]).

75. The primary judge accepted the submission put for ACFM that what CRO did, by issuing the bills of lading without the authority of the ocean carrier, was “to put into the world two sets of bills of lading (one being the genuine ocean carrier bills and the second being the defendant’s [CRO’s] unauthorised bills) which on their face gave a right to demand delivery of the goods” (see [156]). The primary judge found that each of the bills of lading purported to provide an entitlement to the holder to obtain delivery of the goods ([158]) and that each was in a form where, if “genuine”, it could have been held by a third party as security.

76. Thus, on the misleading and deceptive conduct claim, the primary judge concluded: that the CRO bills of lading conveyed a representation that they gave the holder a right to delivery of the goods from the carrier, which representation was conveyed by each bill of lading stating that it was original and because the cargo was consigned “To Order” ([164], [169], [170]); that the form of the bills of lading represented that they could be held by a third party as security ([165]); and that CRO placed into the world two negotiable bills of lading which purported to confer a right to obtain delivery of the same goods by presentation of either document to the carrier ([156]).

77. The primary judge found that ACFM did not become a lawful holder of each bill because each bill was not endorsed (see [166]); that ACFM could have become a lawful holder of each bill by requesting and obtaining endorsement of the bill by ASSH and that, if such a request was made by ACFM to ASSH (to endorse each bill of lading) it is likely that ASSH would have done so (see [167]); and that even without endorsement each bill of lading, if issued with authority, would have given ACFM a lien as pledgee over the bills of lading, which would have had the practical effect of ACFM being empowered to prevent any other party taking delivery of the cargo unless it were repaid for each drawdown (see [168]).

78. The primary judge found that a false meaning was conveyed by the bills of lading issued by CRO: first, that they were ocean bills of lading issued by CRO in its capacity as authorised agent of each ocean carrier; and, second, that, by being specifically stated to be “ORIGINAL” and “TO ORDER”, they purported to be ocean bills of lading which would have entitled the lawful holder to possession of the goods the subject of the bill ([169]).

79. At [170], the primary judge said that, even if these were “genuine” ocean bills issued by CRO with the security ([sic]; presumably meaning “authority”) of each carrier, ACFM would not have obtained a “perfect security” because each bill was not endorsed; however, it had a security which could be perfected by endorsement (which would probably have been given by ASSH had it been asked).

80. The primary judge found that Mr Chen had relied on the bills as original negotiable bills of lading “as they appeared to be on their face” and that, in view of such reliance, ACFM had suffered loss or damage because of the misleading or deceptive conduct of CRO ([172]) and that the conduct was the dominant cause of the loss or damage ([173]).

81. On the alternative claim, the primary judge found that: the CRO bills purported to evidence a contract of carriage between the shipper and CRO as an agent for the various ocean carriers ([176]); CRO purported to execute each bill of lading as agent for the ocean carrier without having authority from any of the ocean carriers ([177]); a cause of action for breach of warranty of authority is available even if the plaintiff enters into a transaction with someone other than the agent who misstated the extent of the agent’s authority ([178]); and, if CRO had not breached its warranty of authority, ACFM would have suffered no loss as it would never have advanced the three unpaid drawdowns to ASSH ([180]). Hence the primary judge also found CRO liable to ACFM on the cause of action pleaded for breach of warranty of authority.

82. The assessment of damages and rate of interest was different for each cause of action because: on the misleading and deceptive conduct claim, the primary judge held that damages were limited to the funds loaned to ASSH in reliance on the appellant’s misleading conduct and did not include contractual interest ([175]), interest on this claim being at the Court rate; whereas, on the breach of warranty of authority claim, the primary judge accepted that the assessment of damages included contractual interest ([182], [183], [185]).

Grounds of Appeal

85. As noted earlier, CRO presses only grounds 4-6 of the grounds of appeal in its amended notice of appeal. Those grounds are as follows:

4   The learned Trial Judge erred in finding that the bills of lading were not “genuine”.

5 The learned Trial Judge erred in finding that the appellant engaged in misleading or deceptive conduct within the meaning of s 18 of the Australian Consumer Law.

5A   Alternatively, the learned Trial Judge:

(a)   erred in finding that the respondent suffered loss and damage by the misleading or deceptive conduct of the appellant; and

(b)   should have found that any loss of the respondent arose by the respondent’s failure to obtain endorsement of each bill of lading.   

6   The learned Trial Judge erred in finding that a breach of warranty of authority by the appellant:

(a)   was a cause of the respondent lending monies, which it would not have lent but for the breach, and

(b)   hence, which caused the respondent loss.

86. ACFM, by its notice of contention, contends that the primary judge’s decision should be affirmed on the following grounds:

1 That the passing of possession of the appellant’s bills of lading from the shipper, Australian Sheep and Hide Pty Ltd (ASSH), to the respondent in accordance with the Loan Agreement between ASSH and the respondent without an endorsement by ASSH in accordance with s 8 of the Sea-Carriages Documents Act 1997 (NSW) was an equitable assignment of ASSH’s rights under the contract of carriage which the appellant’s bills of lading related to.

2   That equity should treat the assignment of ASSH’s contractual rights in the contract of carriage which the appellant’s bills of lading related to as valid and enforceable despite the absence of an endorsement to the respondent by ASSH.

3   That the respondent, as the holder of a possessory pledgee’s lien in respect of the appellant’s bills of lading, was entitled to demand delivery of the goods from the carrier who would have been a party to the appellant’s bills of lading (assuming the appellant had authority to bind the ocean carriers).

87. The issues arising on the appeal were summarised by ACFM as follows:

i.   Whether it was misleading and deceptive for CRO to issue an original negotiable bill of lading, purporting to create a right for delivery to the same goods covered by a negotiable ocean bill of lading, to ASSH concurrently with the ocean bill?

ii.   Whether there is any basis to challenge the primary judge’s findings of fact in relation to causation, including by reference to the absence of an endorsement by ASSH to ACFM?

iii.   Whether ACFM’s interest as a pledgee of the bills of lading, with a contractual entitlement to have the bills endorsed by the shipper, is sufficient to transfer rights in respect of CRO’s bills of lading?

iv.   Whether on breach of warranty of authority, the ocean carrier would have had a defence to a claim for delivery of the goods upon ACFM presenting CRO’s original bill of lading (assuming authority)?

v.   Whether there was an equitable assignment of ASSH’s rights in the bill of lading, by transfer of possession to ACFM (without endorsement of the bills of lading) and pursuant to the Loan Agreement?

Ground 4 – Error in finding that the bills were not “genuine”

88. The primary judge made various references to “genuine” bills. It is clear from the references to “genuine ocean carrier bills” at [156], (see [77]-[78] above) the primary judge was distinguishing such bills from CRO’s “unauthorised bills”, in the context of the submission by ACFM that CRO had put into the world two sets of bills of lading which on their face gave a right to demand delivery of the goods. The adjective “genuine” was also used at [158] (see [77] above) when the primary judge said that the bills were in a form where “if genuine” they could have been held as security.

89. The issue raised by ground 4 appears to be as to what rights the CRO bills of lading would have given had they been what they “purported” to be. This is an essential part of CRO’s argument on the appeal, which is that “the bills of lading took effect in accordance with their tenor” (written submissions for CRO at [6]). CRO further argues that “[t]he bills were security, as AASH was liable to their lawful holder in the event of non-compliance with their terms” (written submissions for CRO at [8]).

90. CRO argues that on their face the CRO bills of lading were in fact and in law bills of lading to which the Sea-Carriage Documents Act applied (see AT 20.30-37) and that they purported to be issued by an actual ocean carrier (see AT 20.49). Although CRO accepts that it did not have authority to bind the named carrier, it says that the documents evidenced a contract of carriage between CRO as ostensible agent for the carrier and the shipper (see AT 11.26; AT 21.5), such that they carried the rights conferred under the Act (and therefore, in order to recover the goods, ACFM could have sued the carrier on the bills, joining CRO (as an agent who had ostensible authority)). CRO submits (see AT 21.9-21.15):

[I]f one goes to the terms at 1.1 the carrier is, to whom all the obligations arise, defined to be the appellant. So the only error in the bill, the only bit of the bill that caused the problem is the words “for the carrier” which we accept have the consequences that they said. Although it was contended that these bills didn’t do what we say they’d been found to do and we say no, it’s in dispute that they were found to do, and therefore they carried the rights. …

91. CRO maintains that the CRO bills of lading “carried an entitlement, which is a right of suit, which encompassed the right to claim delivery” (see AT 23.15). CRO contrasts the CRO bills (which it says evidenced a contract of carriage between ACFM and the ocean carrier, as well as between ACFM and CRO – see AT 27.23) with house bills, which it says would be merely a receipt.

92. CRO argues that the primary judge erred in finding that the issue of the CRO bills of lading on their terms would lead the commercial world to believe that they were the only negotiable bills of lading. It says that it was common ground that the bills were “house” bills of lading and that they did not purport to be “ocean carrier” bills of lading. It argues that the commercial world would comprise a class of persons unlikely to be deceived that a bill stating that it was “applicable only … when used as a combined transport bill of lading” was the only negotiable bill of lading in respect of the goods to which it referred.

93. In this regard, ACFM argues that the reference in CRO’s submissions to the finding as to the absence of commercial purpose (see [12]) should be understood in relation to the need for an original negotiable house bill of lading in China for customs clearance purposes (referring to the agreed summary of the expert evidence that was in evidence at the hearing before the primary judge (Exhibit PX 11). ACFM says that the reference to a freight forwarding acting as an agent only (at [83]; by reference to Carrington Slipways) is to a house bill signed by the freight forwarder as principal, not the form of execution used by CRO here “as agent only”.

94. Further, CRO argues that the fact that the primary judge found that the bills had no commercial purpose (at [145]) or utility (at [187]) does not assist ACFM. It points to the observation by the primary judge (at [83], again by reference to Carrington Slipways) that a house bill of lading issued by a forwarding agent acting solely in the capacity of an agent is at most a receipt for goods coupled with an authority to enter into a contract and is not a document of title. CRO thus argues that it may be inferred that CRO intended to issue house bills lading which were not negotiable instruments at all but that, having been found to have issued documents that operated as negotiable instruments in accordance with their tenor, it took the liability imposed upon it, if performance of the bills was called upon by their lawful holder (see written submissions for the appellant at [12]). CRO argues that, by issuing bills of lading that took effect in accordance with their tenor, it took the risk that their lawful holder would call upon them – regardless of the existence of any other bills of lading issued in respect of the goods.

95. ACFM argues that the reference to “genuine” bills was a reference to bills of lading issued by the contractual carrier or bailor who has possession of the goods and that such a description was accurate in circumstances where CRO’s bills of lading as an agent for the carrier were issued without authority and did not bind the bailor who had possession of the goods.

Determination

96. In my opinion, this ground can be dealt with in short compass. It is clear that when the primary judge used the word “genuine” (at [156] and [158]) his Honour was focussing not simply on whether the CRO bills were in a form that would have entitled the lawful holder to demand delivery (and could have been held as security by a third party) but also on the distinction between bills of lading issued with authority (the “genuine” ocean bills) and those issued without authority (the “unauthorised” bills). In that sense, there is no error and no disconformity with the finding that the CRO bills were negotiable instruments.

97. CRO’s position in this regard was one that focussed on appearance rather than reality. First, Mr Bearman argued that the concession at trial (that in fact there was no authority on the part of CRO to bind the carrier) was one that was not necessarily “extant” at times that someone wanted to rely on the document (see AT 11.10). Second, it was submitted that the (CRO) bills of lading were issued by CRO as an “ostensible agent” for the shipping company (AT 11.26). The argument, as I understand it, was that (if endorsed) the CRO bills would carry rights of suit (AT 12.38) such that if presented in part at China then, although they “may or may not have bound the carrier to whom the bill was addressed” (AT 13.25), the documents put CRO in the positon of carrying liability for any promises made in the bill – AT 15.29 (I note that the transcript says “respondents” but, read in context, must refer to the appellant). Mr Bearman maintained that “It’s [CRO] acting without authority; it’s issued a document. It’s no different than if it issued it in its own name. It was in fact the carrier” and that it “creates a right of suit to the lawful holder” (see AT 15.29 – 38). He says that the “ultimate upshot” would have been that CRO would have been liable on the bill, “for suit and conversion of breach of contract” (AT 15-50). I consider this argument in due course.

98. That the primary judge referred to “authorised” ocean bills cannot be the subject of complaint – since it was conceded (albeit somewhat reluctantly and on a temporal basis only) that the CRO bills of lading were not authorised by the ocean carrier. Nothing relevantly turns on the choice of the adjective “genuine” by his Honour. The real issue is as to the findings in relation to misleading and deceptive conduct. I am not persuaded that ground 4 is made good.

Ground 5 – Misleading and Deceptive Conduct

CRO’s submissions

99. CRO maintains that the primary judge erred in finding that it had engaged in misleading or deceptive conduct which led ACFM to rely on the bills of instruments as if they were negotiable bearer instruments (see [164]) (having accepted the second way that ACFM had put its misleading and deceptive conduct claim as being that CRO had represented that each bill of lading was a negotiable instrument providing an entitlement to each successive lawful holder to present it to obtain the delivery of the goods – see [104] below).

100. That error is put on the basis that, since the representation was found to derive from the issue of the bills of lading on their stated terms, then once the primary judge accepted that the bills of lading took effect in accordance with their tenor the issue of those bills to CRO on their stated terms was not capable of comprising misleading or deceptive conduct in the absence of any additional conduct having the effect of communicating to ACFM that the bills had some operation or effect otherwise than in accordance with their tenor. (CRO notes that no such additional conduct was alleged by ACFM nor was any such additional conduct found by the primary judge. ACFM – see below at [114] – argues that there was such additional conduct – by the act of issuing two parallel sets of original bills.)

101. CRO emphasises that it that was neither alleged nor found that the bills of lading were issued in response to a demand or request by ACFM (apart from them being sought for “banking purposes”) and that there was no requirement for the provision of an “ocean bill of lading” or bearer instrument. It is submitted that even accepting (which CRO does not) that a “banking purpose” conveyed that the documents were sought as security “and not merely evidentiary”, ACFM received precisely what it sought, as the bills of lading it received took effect in accordance with their tenor.

102. CRO argues that the primary judge erred in finding that, by issuing the bills of lading marked as “original” and consigned “to order”, CRO represented to ACFM that the bills: could be held by a third party as security for payment for the goods and/or to secure financial arrangements; and purported to be ocean or liner bills of lading (see [165]).

103. CRO accepts that it engaged in conduct capable of causing third parties to accept the bills of lading as security (see written submissions at [8]) but contends that this conduct was not misleading or deceptive on the basis that the bills of lading were negotiable instruments taking effect in accordance with their tenor. It is submitted that the bills were security, as AASH was liable to their lawful holder (albeit on a claim for conversion) in the event of non-compliance with their terms.

104. As to the finding that CRO represented that the bills of lading purported to be ocean bills of lading in consequence of their terms, CRO argues that this cannot be sustained, on the basis that the question whether a bill of lading is a house bill of lading or an ocean bill of lading is a matter to be determined from the terms of the bill, and that it was common ground that the bills of lading were house bills of lading. It is again submitted that, in the absence of CRO having communicated to ACFM that the bills had some operation or effect otherwise than in accordance with their tenor (which was neither alleged nor found), CRO did not engage in any conduct representing that the bills of lading were anything other than that which they were stated to be.

105. It is said to be significant in this regard that ACFM did not plead at first instance that it “suffered in some way because CRO duplicated up the bills” (AT 5.9-5.10).

199. As to the argument that the primary judge’s conclusion in relation to the breach of warranty of authority can be sustained on the basis that, even absent a valid endorsement, ACFM had a pledgee’s lien, it is said by ACFM that an undertaking to procure an endorsement is capable of passing the property in the goods referred to in the bills of lading.

200. To support that contention, ACFM made reference to the statement in Scrutton on Charterparties, at [10-010] (emphasis in original):

The property in goods shipped under a bill of lading may be passed without indorsement of such bill. … The ordinary operation of the law as to the sale of goods which transfers the property in them is not affected by the existence of a bill of lading relating to those goods, by the indorsement of which, as one of the methods recognised by that law, the property may be passed. And, in truth, “property does not pass by indorsement of the bill of lading, but by the contract in pursuance of which the indorsement is made”.

210. ACFM referred in its written submissions to Dick v Lumsden, a case of competing priorities to goods, where it was held that a factor (Eustace and Holland), had superior title to the goods as against a third party with notice by reason of its possession of an unendorsed bill of lading (together with a letter promising to send endorsement). The shipper, Thompson & Co, sent to Eustace and Holland, a factor, the bill of lading, “not regularly indorsed, but with the name of Eustace and Holland written on the back”. The shipper followed this with a letter saying the failure properly to endorse the bill was a mistake, and promising to send an endorsement.

211. The plaintiff paid certain bills which had been drawn on Eustace and Holland and had the benefit of a later endorsement of the same bill of lading by Thompson & Co. It sued the master of the ship in trover to recover the goods. However, the plaintiff also had knowledge of the facts stated above in relation to the possession of Eustace and Holland of the same bill of lading. Lord Kenyon held that the plaintiff was not entitled to sue the master in trover to recover the goods.

212. Lord Kenyon observed (at ER 146-147; Peake 251-252) that “[t]hough between persons ignorant of the transactions, an indorsement is the only transfer, yet where parties know the whole circumstances, a letter of this kind is sufficient to transfer the property”. (The case therefore does not stand for the proposition that legal title in the goods referred to in a bill of lading may pass to the holder of the unendorsed bill, but rather, for the proposition that the title to the goods obtained by the holder of such a bill may withstand a challenge by a third party who is on notice of the circumstances in which that holder came to claim title to the goods.)

213. ACFM also referred to Meyer v Sharpe. There, Krehmer Land and Co shipped goods on board the “Latona” in October 1809. The goods were shipped under bills of lading made out to shipper’s order. The relevance to the present case is that the shipper sent them, unendorsed, to the purchaser, who received them in February 1810. The purchaser sent the bills, still unendorsed, to the defendants on 21 February 1810 as security for an advance of 33,000 pounds. The purchaser was made bankrupt in December 1810 and the plaintiffs were the assignees of his estate. When the “Latona” eventually arrived in London from St Petersburg, the defendants took possession of the goods.

214. The assignees in bankruptcy sued in trover to recover the value of the goods. The claim was unsuccessful. Mansfield CJ held (at 5 Taunt 79; 128 ER 616) that, notwithstanding the fact that the bills of lading were unendorsed, the defendant (emphasis added):

… acquired an equitable lien and right; and though the bills of lading were not so indorsed as to give the Sharpes a legal title to the goods, that imperfection will not prevent the Sharpes from retaining those goods in part indemnity against their acceptances of Grant’s bills.

215. Gibbs J agreed that the suit in trover should be dismissed, saying (at 5 Taunt 80; 128 ER 616) (emphasis added):

It has been insisted that the Plaintiffs are entitled to recover the original cargo of the “Latona”, because the bills of lading were not indorsed to the Defendants. A bill of lading, however, is not necessary as the means for the owner of goods to convey his interest therein.

216. ACFM cites this decision for the proposition that a lender may obtain a right to possession of goods by virtue of the pledge of an unendorsed bill of lading. However, it should be noted that in Meyer v Sharpe the defendants did eventually take actual possession of the goods (when the “Latona” finally arrived in London), which distinguishes it from the present case. Also, the case should be treated with some care, given that the plaintiffs were the assignees in bankruptcy and not, for example a third party without notice of the prior transactions in relation to the bills.

217. In Nathan v Giles, Levin purchased a cargo of wheat, which was shipped from Hamburg to London under a bill made out to Levin or order or bearer. The master of the vessel refused to deliver the cargo to Levin’s agent in London, Josephs, because the bills of lading had not yet arrived. Josephs requested that a cornfactor (Giles and Hennings) provide the master with an indemnity in exchange for delivery of the wheat (and directing it to sell the wheat and account for the proceeds to Nathans, who had advanced funds to Josephs). This was done and the master delivered the wheat to Giles and Hennings, who sold it in a falling market. The bills of lading still had not arrived in London. (It never became clear when the bills of lading eventually arrived. Before Mansfield CJ at first instance, Josephs at first stated that the bill of lading was received and endorsed in January or February of 1811. Afterwards, however, he said he could not fix the precise time, nor say whether it was earlier than June.)

218. On 25 April 1811 (that is, quite possibly before the bills of lading arrived in London), Smith and Seisse, creditors of Levin, obtained an order attaching to the proceeds of the cargo in the hands of Giles and Hennings. Smith and Seisse obtained a verdict against Giles and Hennings. This was an application to set aside the verdict on the basis that Mansfield CJ had wrongly directed the jury that the cargo could not be assigned by Josephs by any other medium than by endorsement and delivery of the bill of lading.

219. The Court of Common Pleas concluded that the jury had been wrongly instructed. In the Court’s view, “Levin might have disposed of the cargo so as to take it out of the reach of the attachment, before the bill of lading was endorsed”: at 5 Taunt 575; 128 ER 814 (emphasis added). However, the Court did expressly limit its decision that there was a need for a new trial to the proposition that “if Nathans had a lien upon this cargo, and nothing more, no creditor of Levin’s could attach it, or the produce of it, in their hands … without discharging such lien” (at 5 Taunt 575; 128 ER 815).

220. From the above authorities, it may be said that the absence of an endorsement in favour of the holder of a bill of lading referring to the goods, or of any undertaking to procure such an endorsement, does not preclude the property in the goods from passing (even where the bills of lading are in circulation elsewhere: Nathan v Giles) in accordance with the usual rules about the transfer of title to goods. In each of the foregoing cases, an intention on the party of the owner of the goods to transfer the title was present, which was sufficient to confer title (admittedly, in the relatively weak circumstances of a contest with a third party with notice (Dick v Lumsden) and an assignee in bankruptcy (Meyer v Sharpe)). Also, in Meyer, the defendants had taken actual possession of the cargo, which is an important distinction from the present case.

221. In The “Future Express” [1992] 2 Lloyd’s Law Rep 79, Judge Diamond said (at 94):

… [I]t is always necessary to enquire whether it was the intention of the transferor and the transferee of the bill that a property or possessory title should pass by endorsement and delivery of the bill and only if it is found to be the intention of the parties that the transfer of the bill should pass a possessory title to the goods to the transferee does the law protect the possessory right of the transferee.

222. Lastly, ACFM’s submission that the holder of a pledgee’s lien (even absent endorsement strictly to comply with s 8 of the Sea-Carriage Documents Act) has a sufficient possessory interest to seek delivery up and sue in conversion for non-delivery is supported by the decision in The “Jag Shakti”. There, the Bihar Supply Syndicate of Calcutta shipped 5,000 metric tonnes of salt on board the ship the Jag Dhir in India for carriage to Chittagong. The Privy Council noted (at 343) that the shipowners’ agents issued two bills of lading which named the Bihar Supply Syndicate as shippers, and provided for consignment to order or assigns. The buyers were named as the notify party. After receiving payment by negotiation of two letters of credit, the Bihar Supply Syndicate endorsed the bills of lading generally and handed them to the paying banks; eventually, the bills were endorsed over to the plaintiffs for value. In the meantime, the shipowner had discharged the cargo to the buyer in exchange for the buyer’s indemnity. When the plaintiffs, as endorsees, had difficulty obtaining payment from the buyer in respect of the bills, they sued the shipowners for breach of the contract to deliver and in conversion. At first instance it was argued that the various endorsees were only pledgees of the bills, they could recover only the amount expended by them in financing the transaction, not the market value of the goods.

223. The Privy Council said (at 345):

It is not in dispute that the pledgee of a bill of lading is entitled, on presentation of it to the ship at the port of discharge, to the possession of the goods represented by it. It has further, in their Lordships’ opinion, been established, by authority of long standing, that where one person, A, who has or is entitled to have the possession of goods, is deprived of such possession by the tortious conduct of another person, B, whether such conduct consists in conversion or negligence, the proper measure in law of the damages recoverable by A from B is the full market value of the goods at the time when and the place where possession of them should have been given. For this purpose it is irrelevant whether A has the general property in the goods as the outright owner of them, or only a special property in them as pledgee, or only possession or a right to possession of them as bailee.

CRO’s submissions

224. CRO submits that even if a contract of the kind inferred in Brandt v Liverpool were capable of being implied after the implementation of the legislative scheme of the Sea-Carriage Documents Act, the present case is distinguishable.

225. First, it is said that Brandt v Liverpool was concerned with whether a banker taking delivery under a bill of lading endorsed to it as pledgee only held rights under the carriage of contract (see 581-582, 583); and, second, that here (unlike Brandt & Co in that case), ACFM did not present the bill – that being the act upon which the inferred contract in Brandt v Liverpool was founded.

226. CRO argues that Westpac Banking Corp v The “Stone Gemini” does not assist ACFM – that case concerning a pledge of a bill of lading which pre-dated the present Sea-Carriage Documents Act (see at [28]) and which concerned bearer bills of lading found to be in the lender’s possession as their holder (see at [40]).

227. CRO argues that the submission that the transfer of the bill from ASSH to ACFM comprised an equitable assignment is inconsistent with the bills of lading being held as security by way of pledge.

228. It argues that even if that were not so, the CRO bills of lading operated by providing a mandate to the lawful holder; in that sense, it is submitted that they are analogous to a cheque operating as a mandate to pay, and not as an assignment of moneys in a bank account (referring to Re Beaumont [1902] 1 Ch 889, at p 894).

229. CRO argues that, in any event, as the Sea-Carriage Documents Act provides a statutory mechanism for the transfer of rights and obligations under a negotiable bill of lading, there is no call for equity to intervene and treat a mere lawful possessor of the bills of lading as their lawful holder in due course against their issuer. It argues that, in the absence of an identification of unconscionable conduct by CRO towards ACFM, equity would not intervene to transfer the benefit of a contract in a manner that would wholly undermine the requirements of the Sea-Carriage Documents Act (itself an enactment to overcome shortcomings with the common law). CRO notes that, to the extent that ACFM now contends the equitable assignment should be founded in estoppel, that submission was neither pleaded nor the subject of evidence or submission at first instance (and in this regard it notes that it elected not to adduce any lay evidence at first instance).

230. It is submitted that if there were an equitable assignment, it was an equitable assignment of legal property (being the rights enuring under the bill of lading and the contracts of carriage) and hence ASSH would have been a necessary party, which it was not, as “[a]n assignee in equity could never sue at law in the assignee’s own name” (referring to J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths) at p. 366 [9-030], and the cases there cited; as well as to Deputy Commissioner of Taxation v Bluebottle UK Ltd (2006) 68 NSWLR 558, at 566 [27]; [2006] NSWCA 360). It is submitted that should equitable intervention have been necessary the minimum equity would have been for ACFM to compel ASSH to endorse the bills of lading to enliven ACFM’s legal rights.

231. CRO further argues that whether a pledgee of an unendorsed bill of lading has a sufficient possessory interest to seek delivery up and sue in conversion upon the bill post the Sea-Carriage Documents Act was neither pleaded nor the subject of evidence or submission at first instance.

Determination

232. ACFM acknowledged (AT 42.7-42.26) that such overseas authority as exists indicates that a person who does not have the benefit of both a transfer of possession and an endorsement does not have title to sue by reason of the statutory transfer of the contract of carriage (effected in NSW by the Sea-Carriage Documents Act). This also appears to follow plainly from the definition of “lawful holder” in s 5 of the Sea-Carriage Documents Act.

233. The observation by Mance LJ in East West Corpn (at [16]) on which ACFM relies was clearly obiter. On the authorities referred to above, the primary judge was correct to conclude that (assuming that the CRO bills of lading had been authorised and thus bound the carrier) ACFM was not a “lawful holder” in relation to the bills of lading within the meaning of s 5 of the Sea-Carriage Documents Act. Therefore, insofar as ACFM’s claim for damages for breach of warranty of authority assumed that it had obtained the right to sue the carrier under the contract for carriage as lawful holder of the bill, it would fail.

234. There is authority in the United Kingdom that the Carriage of Goods by Sea Act 1992 (UK) has not reduced the rights of a bailee of goods (see below at [251]). In my view, that is also the correct position also in respect of a pledgee of goods. That is a question of law which was argued on the appeal and no prejudice has been shown to have been suffered by the fact that the argument was not put in this fashion (or pleaded as such) at first instance.

235. In my view, for the reasons set out below, if the CRO bills of lading had been issued with authority, ACFM would have had a sufficient interest in the goods to sue the carrier by reason of its possession of the bills (as the holder of a possessory pledgee’s lien), and this is sufficient to support the primary judge’s award of damages in relation to breach of warranty of authority. Thus ground 3 of the notice of contention should be accepted.

236. In my view, if the CRO bills had been issued with authority, ACFM would have had a perfected pledge of the goods referred to therein. As the primary judge found (at [153]; [167]) (and there is no challenge to that finding), ASSH would have endorsed the bills if asked. This would have permitted ACFM to take proceedings against the carrier either for possession of the goods or in conversion (if the goods had already been delivered to a third party).

237. A pledge of goods comes into existence when the legal owner of goods delivers them with the intention of creating a security over them in respect of the performance of some obligation. In order to have rights as a pledgee, a person must have either constructive or actual possession of the goods pledged. It is well-accepted that a bill of lading is capable of transferring constructive possession of the goods for this purpose: see E McKendrick (ed), Goode on Commercial Law (5th ed, 2016, LexisNexis UK and Penguin Books) at [24.05], where it is said that taking possession of the security is “the oldest and safest method” of perfecting a security interest, and it is then said (emphasis added):

A pledge of the documents of title to goods is a pledge of the goods themselves. There are, it is true, dicta suggesting otherwise – for example, the speech of Lord Wright in Official Assignee of Madras v Mercantile Bank of India Ltd that “a pledge of documents is not in general to be deemed a pledge of the goods; a pledge of the documents (always excepting a bill of lading) is merely a pledge of the ipsa corpora of them…”. But the true explanation is that the bill of lading remains the only document recognized by the common law as a document of title to the goods. Given, however, that a document is a document of title (whether because it is a bill of lading or because it is made a document of title by statute), a pledge of the document is a pledge of the goods if so intended.

238. A pledgee who is in possession of a bill of lading can sue in conversion: see The “Jag Shakti” at 345 (set out above at [223]).

239. The effectiveness of the pledge is founded on the fact that a shipowner is both entitled and bound to deliver against an original bill of lading (East West Corpn at 1439, citing Barber v Meyerstein (1869) LR 4 HL 317 and Glyn Mills Currie & Co v East and West India Dock Co (1882) 7 App Cas 591).

240. The rights of a pledgee are not founded, as the primary judge suggested in passing, on the commercial reality that no-one else can take possession of the goods whilst the pledgee has the original documents.

241. Turning to the existence of the pledge in this case, (see the finding in the primary judgment at [168]), the question is whether the fact that the bills were not endorsed would have prevented ACFM from asserting rights as pledgee.

242. The intention of ASSH, as legal owner of the goods, to grant a security interest in the goods referred to in each bill of lading as security for the repayment of the various drawdowns, is apparent from the loan agreement between ASSH and ACFM (see, especially, Special Condition 1 and clause 24(a)). However, a pledge is a possessory security interest. ACFM had no pledge unless it had possession of the goods.

243. In Kum v Wah Tat Bank Ltd, Lord Devlin, delivering the judgment of the Privy Council, said (at 442):

At common law a pledge of goods is not complete without delivery. Delivery is likewise necessary to give the bank the possessory right without which they cannot sustain an action for conversion.

244. Devlin J observed in the next paragraph that “[n]ot only is the bill of lading a document of title, but delivery of it is symbolic delivery of the goods”.

244. Whether the transfer of possession of the bills has created a pledge is a question of intention. In The “Future Express”, Judge Diamond said at 89-90:

The question whether and at what stage the bank was to become a pledgee of the goods is at least in part a question of the proper construction of the contract between the parties. In my judgment [in the present case] the intention manifested in the application for the opening of the credit was that the bank was to become a pledgee of the goods upon receipt of the bills of lading. … What is meant by being a pledgee is simply that the bank was to have the right to retain the goods until the pledge was honoured and, if it was not, to sell the goods and reimburse itself out of the proceeds…

246. Later at 90, Judge Diamond observed:

This I hold to be the scheme of the contract between the bank and Dalali. It does not, however, follow from this that when it received the documents the bank would necessarily become a pledgee of the goods. The bank would only remain a pledgee if at that stage the bills of lading remained valid documents of title to the goods (in the sense that they remained a symbol of constructive possession of the goods) and if it was intended that a transfer of the bill of lading should operate as a transfer of constructive possession of the goods.

247. In The “Future Express”, Judge Diamond concluded that there was no pledge of the goods because, to the knowledge of the bank, the goods had already been dispersed elsewhere. It therefore could not have been intended “by either party that a transfer of the bills should operate as a transfer of constructive possession of the goods” (at 93).

248. In East West Corpn, the facts of which have been set out above, Mance LJ concluded that the transfer of possession of the bills of lading to the Chilean banks (who were also the consignees) was not intended to create a pledge: saying (at [42]):

[T]he Chilean banks were named as consignees, and the bills were transferred to them, not as pledgees, but simply for convenience, so that they could freely use them to collect the price for the claimants. They were to hold them (and if it ever became material, the goods which they represented or symbolised) for the claimants. … Although the Chilean banks had physical possession of the bills, I would therefore doubt that they thereby acquired at common law a sufficient possessory title in respect of the goods to sue in tort for loss of or damage to the goods.

249. In contrast, I conclude that, in the present case, ASSH clearly intended to pledge the CRO bills of lading as security for its drawdowns; and, if CRO had had the authority which it warranted it had, ACFM would have been able to sue the carrier in conversion based on its possessory interest in the goods referred to in the bills of lading.

250. For the purpose of determining the existence of the pledge, it is not relevant that the carrier might have already made delivery against an ocean bill in respect of those goods. The following obiter of Judge Diamond in The “Future Express” at 99 (emphasis added) suggest that the bill of lading may not have become exhausted as a document of title in that situation but it is not necessary to reach such a conclusion in order for ground 3 of the notice of contention to be made good:

I would … be reluctant to hold that a bill of lading becomes exhausted as a document of title once the carrier has delivered the goods against an indemnity to a person authorized to receive delivery. In such a situation the bill of lading has not been surrendered and can be passed to third parties who may take it for valuable consideration without notice that the goods have meanwhile been discharged. This would mean that, even if the purchaser took the precaution of ensuring that all parts of the bill were delivered to him … still he could not be sure that he had acquired a good possessory title to the goods. To hold that a bill of lading becomes spent when goods are delivered against an indemnity would greatly detract from the value of bills of lading as documents of title to goods, would diminish their value to bankers and other persons who have to rely on them for security and would facilitate fraud.

251. CRO contended that the rights of a pledgee of a bill of lading might have been affected by the Sea-Carriage Documents Act. That submission should be rejected. That Act is concerned only with the contract of carriage to which the bill relates. It was intended to remedy a defect which precluded a lawful holder of a bill of lading from taking rights under the contract of carriage. It would be a perverse outcome if the Act reduced the property rights of a pledgee of the goods referred to in the bill. Mance LJ considered at some length the question whether the equivalent Act in the United Kingdom had reduced the rights of a bailee of the goods in East West Corpn at 1537-1538, saying (emphasis added):

[T]he 1992 Act does not expressly modify any rights other than contractual rights. … The mischief at which the 1992 Act was aimed was that rights under the bill of lading contract could remain vested in persons other than those having the property or risk in the goods. This might occur either because the general property did not pass at all, or because it did not pass upon or by reason of the indorsement of the bill, so that the 1855 Act was of no assistance. The remedy adopted by the 1992 Act was to transfer contractual rights to any holder of the bill, as defined in section 5(2). The result is, however, to create a new class of cases in which the bill of lading contract may be vested in a person other than the person at risk.

252. Mance LJ concluded (at 1538):

If it were necessary, however, I would conclude that the sole effect of the 1992 Act is on contractual rights, and, where there is no intention to pass any possessory right, possessory rights sounding in bailment remain unaffected. But in my view it is unnecessary even to reach any such conclusion. Whatever the position in that regard, I do not consider that the 1992 Act can be treated as working an automatic transfer of any rights in bailment, so that they enure exclusively to the person entitled under its provisions to exercise the contractual rights.

253. In relation to the (slightly different) proposition considered in the third sentence of that passage, that is, whether the Carriage of Goods By Sea Act 1992 (UK) might actually transfer property rights, Mance LJ quoted from the Law Commission’s Rights of Suit in Respect of Carriage of Goods by Sea report at [2.39], which stated that “there would be nothing in our recommendations to prevent the seller suing in tort by reason of being the owner of the goods, which he can do under the present law”. Mance LJ said (at 1539) (emphasis added):

I see nothing impossible or surprising in the idea that one party should, as a result of the statutory transfer, possess the contractual right to delivery against the contracting carrier, while another person, the real owner and party at risk, should possess a right of suit in bailment against anyone, including the carrier, for loss or damage caused by their negligence as bailees in possession of the goods.

254. To similar effect are the comments of Lord Hobhouse in Borealis AB v Stargas Ltd at 227.

255. I consider that that reasoning applies with equal force to the rights of a pledgee, and I would conclude that the Sea-Carriage Documents Act does not affect the rights of a pledgee of a bill of lading.

256. I conclude that ground 3 of the notice of contention has been made good. In those circumstances it is not necessary to make a final determination of grounds 1 and 2 of the notice of contention. My view, however, is that they should be rejected. The transaction between ASSH and ACFM does not evince an intention on the part of ASSH to transfer finally and completely all of its rights against the carrier to ACFM.

257. ACFM relies on Olsson v Dyson at 375-376, where Kitto J said:

… [P]roperty which is assignable at law but is not assigned in the manner which the law requires for a legal assignment of it cannot be held in equity to be assigned unless by reason of some fact or circumstance which a court of equity regards as binding the legal owner in conscience to hold the property upon trust for the assignee. A promise for valuable consideration to assign the property is enough for this purpose, for equity, regarding that as done which ought to be done in return for the consideration given, holds the assignee to have an equitable interest commensurate with the legal interest which specific performance of the promise would give him.

258. Olsson v Dyson was a case where the testator’s “whole intention … [was] to make an immediate gift” (see at 375).

259. In order to assess the contention that ASSH effected an assignment in equity of its contractual rights against the carrier, it is necessary to consider the terms of the Loan Agreement (being a deed made on 16 May 2014) which created the rights in question.

260. The Loan Agreement recites (Recital C) that “[t]he borrower wishes to obtain funding from the Lender to fund the purchase of export shipments of sheep skins and/or cow hides in the ordinary course of its trading business with China”. The borrower promised (cl 5A) to use each drawdown for the Authorised Purpose and not any other purpose. Under Item 1A of the Schedule, the Authorised Purpose was the “purchasing of export shipments of sheep skins and/or cow hides in the ordinary course of its trading business with China”.

261. Importantly, the Loan Agreement stipulated that a drawdown must be repaid at the time that that the particular shipment relating to that drawdown was collected from the receiving port in China (Schedule, Item 5). This indicates that by the time the drawdown became due, the shipment would already have been collected. That this was the intention of the parties is also indicated by cl 16(i), by which the Borrower “represents, warrants and undertakes” that:

the Borrower will collect or cause the importing party to collect a shipment relating to a drawdown … from the receiving port in China within ninety (90) days from the date on which the Borrower makes that drawdown.

262. If the Borrower was “in breach” of that clause, the Lender had the power (cl 24) to:

cause the Borrower to assign the right of collection to the relevant shipment to the Lender … or otherwise enable the Lender or its Representative to take possession of the shipment, sell the sheep skins and/or cow hides in that shipment, keep the sales proceeds and apply against the balance due[.]

263. As to security, under cl 16(g), the Borrower and each Guarantor “represents, warrants and undertakes” to “deposit all original shipping documents for each shipment of sheep skins and/or cow hides which relate to a drawdown”.

264. In my view, the provisions of the Loan Agreement just outlined are inconsistent with ASSH having intended to effect an immediate assignment of contractual rights against the carrier at the time of each drawdown. First, such an assignment would be difficult to reconcile with the ongoing business needs of the borrower (for example, if the borrower repaid the drawdown on time, a re-assignment of the contractual rights would apparently be necessary). If an assignment of contractual rights in relation to the shipments was indeed intended at the time of giving possession of the bills of lading to the lender, the Borrower would have no right to collect the shipment (as stipulated by cl 16(i)). Also, cl 24, which contemplates an assignment of the “right of collection” in the event of the Borrower failing to collect the cargo, cannot be reconciled with an intention to immediately assign the contractual rights against the carrier at the time of deposit of the bill of lading.

265. In my view, the transaction between ASSH and ACFM should not be interpreted as an assignment of ASSH’s contractual rights. The intention was to pledge possession of the bills of lading, and by that means to give the respondent security for its advances; the intention was not to effect a transfer of the underlying contract of carriage. As Lord Hobhouse said in Borealis AB v Stargas Ltd at 221-222:

… [B]ills of lading are as often as not used as security documents facilitating the financing by banks of merchants’ sale transactions (e.g. under documentary letters of credit). A bank’s interest is to use the possessory rights to the document and the goods it represents as security; its interest is not to enter into contractual relations with the carrier, still less to undertake contractual obligations towards the carrier.

266. That observation is apposite here. An immediate assignment of contractual rights against the carrier would not have achieved a desired result for either the borrower or the lender. In those circumstances it is not necessary to consider whether (as CRO contended) the recognition of an equitable assignment of a contract of carriage would be inconsistent with s 8 of the Sea-Carriage Documents Act.

Conclusion

267. For the above reasons I would dismiss the appeal with costs.

268. BARRETT AJA: For the reasons given by Ward JA, this appeal should be dismissed with costs.

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Decision last updated: 13 July 2018