Factory Direct Fencing Pty Ltd v Kong Ah International Company Limited
[2013] QDC 239
•27 September 2013
DISTRICT COURT OF QUEENSLAND
CITATION:
Factory Direct Fencing Pty Ltd v Kong AH International Company Limited [2013] QDC 239
PARTIES:
FACTORY DIRECT FENCING PTY LTD
(plaintiff)v
KONG AH INTERNATIONAL COMPANY LIMITED
(defendant)FILE NO:
3925/12
DIVISION:
Civil commercial list
PROCEEDING:
Trial
ORIGINATING COURT:
District Court of Queensland
DELIVERED ON:
27 September 2013
DELIVERED AT:
27 September 2013
HEARING DATE:
29 and 30 January 2013
JUDGE:
Andrews SC DCJ
ORDER:
THE PLAINTIFF’S CLAIM IS DISMISSED
ON THE COUNTERCLAIM JUDGMENT FOR THE DEFENDANT AGAINST THE PLAINTIFF FOR US$163,452.50 AND INTEREST ON THAT SUM FROM 15 SEPTEMBER 2012 PURSUANT TO S 58 OF THE CIVIL PROCEEDINGS ACT
THE TRIAL IS ADJOURNED FOR FURTHER ORDERS RELATING TO COSTS, INTEREST AND SPECIFIC PERFORMANCE
CATCHWORDS:
Sale of Goods-Property, passing of-FOB contract-bill of lading-whether title passed to buyer on loading-whether seller in breach for failing to authorise delivery before payment
Negligence-Duty of care-economic loss from fraudster’s interference in email communications-whether seller had duty of care to buyer to guard against misdirecting emails
Contract-implied term-where seller and buyer communicated by email-whether term implied that seller will send emails to correct recipient-where fraudster received emails intended for buyer-where fraudster tricked buyer into paying fraudster
Civil Liability Act-concurrent wrongdoers-where seller misdirects emails to fraudster-where fraudster tricked buyer into paying fraudster-whether seller and fraudster “concurrent wrongdoers”
Apportionment-where fraudster sending emails to buyer and seller-where fraudster tricked buyer into paying into bank account of fraudster-where seller unaware of trick-where buyer suspicious-where buyer sought email assurances from fraudster-where buyer failed to telephone seller for confirmation between fraudster and seller-where fraudster not a party to proceeding-apportionment between buyer and seller-apportionment between seller and fraudster
Civil Liability Act 2003 (Qld), s 28, s 30 (1), s 32G; Sale of Goods Act 1896 (Qld), s 21 Rule 5 (1) and (2), s 22(1) and (2)
James v Commonwealth (1939) 62 CLR 339
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515
Perre v Apand Pty Ltd (1999) 198 CLR 180
Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258
National Australia Bank Ltd v Hokit Pty Ltd (1996) 39 NSWLR 377
Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] 1 AC 80.
London Joint Stock Bank Ltd v Macmillan and Arthur [1918] AC 777
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Peter Pan’s Backpacker Adventure Travel Pty Ltd v Eye Jam Interactive Pty Ltd [2012] QSC 227
Meandarra Aerial Spraying Pty Ltd v GEJ Geldard Pty Ltd [2012] QCA 315
Perpetual Trustee Company Ltd v Ishak [2012] NSWSC 697
Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635
Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234
LexisNexis Halsbury’s Laws of Australia 110 Contract (V) Doctrine of Substantial Performance [110-8140]
COUNSEL:
Dietz for the plaintiff
Greinke with Brandon for the defendantSOLICITORS:
Tucker and Cowen solicitors for the plaintiff
Morgan Conley as Town Agents for Auyeung Hencent and Day for the defendant
Background
The plaintiff is an Australian importer (“the Buyer”) of fencing products. The defendant (“the Seller”) is an exporter of fencing products from the People’s Republic of China. They agreed to do business with each other and to communicate by email. They agreed that the Buyer would order aluminium fencing products by email; that the Seller would reply by email with its bank account details; that the buyer would send a deposit to the nominated bank account; that goods would be delivered by the Seller to a carrier in China and the carrier would transport them to Australia; that the Seller would advise the carrier when the Seller received the balance payment to the Seller’s bank account and the carrier would then release the goods in Australia to the Buyer. They conducted business with each other in this way. A fraudster impersonating the Buyer and the Seller intervened in their email correspondence. The fraudster impersonating the Seller emailed the Buyer requesting payment to the fraudster’s bank account. The Buyer paid to the fraudster’s bank account 70% of the price being the balance due on the goods. The Seller remained unpaid. Goods arrived in Australia in the custody of the carrier. The Seller refused to authorise the carrier to release the goods to the Buyer, on account of non-payment. The Buyer and Seller obtained an interim consent order that the goods be held by the Buyer pending the outcome of this proceeding. That reduced the expense of holding the goods pending the findings in this trial.
Issues
Did the fraudster’s emails to the Buyer come from the Seller’s employee? (No) Is the Seller in breach of contract for failing to provide original bills of lading to the carrier or to otherwise authorise the carrier to release of the goods to the Buyer? (No) Has title to the goods passed to the Buyer and is the Buyer entitled to immediate possession? (No and no) Is the Seller entitled to further payment? (Yes) If the Seller emailed invoices seeking the balance 70% only to the fraudster, and has not emailed invoices to the Buyer is the Seller’s cause of action against complete? (Yes) Did the Seller owe a duty of care to the Buyer in tort to guard against misdirecting emails intended for the Buyer? (No) Did the Seller owe a duty of care to the Buyer in contract not to misdirect emails intended for the Buyer? (No) If economic loss were recoverable from the Seller for breach of duty, would the Seller and the fraudster be “concurrent wrongdoers” within the meaning of section 30 of the Civil Liability Act 2003 (Qld)? (Yes) If so, how would liability be apportioned between the fraudster and the Seller? (90% to the fraudster and 10% to the Seller) If economic loss were recoverable from the Seller for breach of duty, was there contributory negligence by the Buyer? (Yes) How would the hypothetical liability be apportioned between Buyer and Seller? What is the quantum of damage if the Seller had breached the contract by failing to authorise delivery? What is the quantum of damage if the Seller had breached a duty in tort by misdirecting emails? Is the Seller unjustly enriched in respect of detention charges paid and detention expenses incurred by the Buyer since the goods were delivered to Brisbane and is the Buyer is entitled to an order for restitution? (No and no) Is either of the Buyer or Seller entitled to specific performance? (The Seller is) What are the proper adjustments between the Buyer and Seller?
The Facts
The plaintiff Buyer is an Australian corporation which imports aluminium fencing products from the People’s Republic of China. The Seller supplies fencing products. On 17 November 2011 in the People’s Republic of China representatives of the Buyer and Seller met. The Buyer was represented by Mr Glenn Hosking (“Mr Hosking”) and Mr Sutherland. Mr Sutherland is the Buyer’s sales manager and Mr Hosking is its director. Ms Huang was the Seller’s representative at the meeting and acted for the Seller in her subsequent dealings with the Buyer. There is a dispute as to whether the Seller was the manufacturer or only the exporter of the aluminium fencing products. Nothing turns on a resolution of that issue.
There is a dispute as to whether a contract was made at the meeting on 17 October 2011 or whether there were several agreements entered into from time to time. Nothing was identified as turning upon a resolution of that issue. I am not satisfied of the terms which were agreed on 17 October 2011. I accept that the terms may be ascertained by the documents used by the Buyer and the Seller and their course of dealing with each other. That course of dealing seems to be undisputed.
In and from December 2011 there was a consistent course of dealing between the Seller and the Buyer which took place in a consistent sequence. The course of dealing and its sequence follows.
The Buyer would email Ms Huang describing goods the Buyer intended to buy. Ms Huang would email the Buyer with: an electronic copy of the Seller’s invoice detailing the products to be manufactured and to be supplied by the Seller to the Buyer with a demand for an amount to be paid by the Buyer as a 30% deposit with details of a bank account into which the deposit was to be paid; and an electronic copy of the Seller’s “purchase order” form confirming the quantity and “FOB Price” of each of the products that the Buyer had requested the Seller to supply.
On receiving the Seller’s invoice, the Buyer by Mr Hosking would pay the amount of the deposit in accordance with the amount and bank account for the Seller shown in the invoice and email the telegraphic transfer receipt to the Seller.
After confirming payment of the deposit by the Buyer to the Seller’s bank account, the Seller would produce and deliver the products to the Buyer’s nominated logistics company for shipping from the People’s Republic of China to Australia, loading the products into containers provided by the carrier. The carrier nominated by the Buyer in the case of each supply was Mainfreight International Pty Ltd (“Mainfreight”).
When the Seller’s products were loaded into the containers, Mainfreight would email to the Seller a copy of the bill of lading.
The status of a copy bill of lading differs from the status of an original.
Examples of a copy bill of lading are in evidence and their status as a copy is clearly designated by the words:
COPY
ORIGINAL BILL REQUIRED AT DESTINATION[1]
[1]Eg KA-1 pp 47 and 48 and KA-1 pp 71 and 72
The wording of each bill of lading would indicate that the consignee was the Buyer showing the Buyer’s address in Queensland and its contact as Mr Hosking. It would not be expressly consigned “To order”. The bill of lading would also provide, so far as is relevant, “…one (1) original Bill of Lading has been signed…if required by the Carrier one (1) original Bill of Lading must be surrendered duly endorsed in exchange for the Goods or delivery order.” Condition 4(4) of each bill of lading provided, subject to any national law to the contrary, unless consigned “to order” the Shipper, (which was the Seller), was entitled to change the name of the Consignee, (which was the Buyer) at any time to the party claiming delivery of the goods after their arrival at Brisbane.
A feature of condition 4(4) was an agreement between Mainfreight and the Seller, permitting the Seller to change the name of the consignee. That feature seems to be consistent with the Seller’s reservation of a right against Mainfreight which secured to the Seller a power to prevent delivery by Mainfreight to the Buyer even though the Buyer had been named in the original bill of lading as consignee. In addition, the Seller had the capacity to refrain from surrendering to Mainfreight any original bill of lading it had received, duly indorsed. If the Seller failed to surrender an original bill of lading then Mainfreight was at liberty to decline to deliver to the consignee.
Ms Huang’s affidavit described the procedure followed in each case prior to the disputed invoices and she deposed that Mainfreight would email to the Seller a “copy” of the bill of lading.
Upon delivery of the products by the Seller to Mainfreight and receipt of the copy of the bill of lading, Ms Huang would email the Buyer with electronic copies of: the Seller’s “packing list” form which detailed the products the Seller had packed into each shipping container, the container number and the seal number for the container; the Seller’s invoice detailing the products manufactured and supplied with detail of the amount in US dollars to be paid by the Buyer as the 70% balance and details of the Seller’s bank account into which the balance was to be paid by the Buyer; a packing declaration completed and signed by Ms Huang; a copy of the bill of lading issued by Mainfreight to the Seller detailing the shipper (identified as the Seller), the containers, the consignee (identified as the Buyer) and the terms and conditions under which Mainfreight agreed to transport the goods.
Then, after receiving the email from Ms Huang, Mr Hosking would pay the 70% outstanding balance to the bank account number shown in the invoice as the Seller’s account and email a telegraphic transfer receipt to Ms Huang.
Then, Ms Huang would check the Seller’s bank account and upon verifying that the 70% balance had been deposited by the Buyer, she would proceed to the next step.
Then, the next step in the usual course of dealing is described differently by Mr Hosking and Ms Huang. Mr Hosking deposed[2] that the Seller then:
[2]Affidavit G Hosking sw 20 Jan 2013 par 35(g).
released the original bill of lading to Mainfreight, or if this had not occurred within a reasonable period after payment of the final pro forma invoice, Mr McGillivray would send an email to the (Seller’s) address for correspondence requesting the release of the original bill of lading
The Buyer pleaded[3] consistently with Mr Hosking’s affidavit that:
[3]FASOC par 3(i)
Upon payment of the “balance” by the (Buyer)…the (Seller) would:
(i) provide the original of the “Bill of Lading” … to the (Seller’s) nominated logistics company (Mainfreight); or
(ii) authorise (Mainfreight) to release the products manufactured and supplied by the (Seller) to the (Buyer).
That pleading was not expressly pleaded to by the Seller and a consequence is that it is deemed to be admitted. That part of Mr Hosking’s evidence was not expressly contradicted by Ms Huang. When describing the process in transactions prior to the disputed transactions, Ms Huang does not expressly depose to the Seller’s receipt or release of the original bill of lading. Instead, she deposed that after payment of the balance 70% the steps were:
(Seller)…instructs Mainfreight to release the goods to (Buyer) by way of telex release
Mainfreight issues telex BOL to (Seller) after receiving instructions to release
(Seller) provides telex BOL to (Buyer) as evidence of release and transfer of title
(Buyer) presents telex BOL to Mainfreight and obtains the goods
Prior to the disputed transactions the Seller’s method, after confirming payment to it, was to lodge a “REQUEST FOR TELEX RELEASE OF SHIPMENT AT DESTINATION” form at the office of Mainfreight in Shenzhen. The wording of the form was a request to Mainfreight to release the shipment to the Buyer upon settlement of all payable freight charges by the Seller and without presentation of the original bill of lading at destination.
It is not necessary to resolve the correctness of the apparently different suppositions deposed to by Mr Hosking and Ms Huang. Neither party made a submission about the difference or cross-examined the deponents to clarify the differences. The significant fact is that pursuant to the prior course of dealing between Seller and Buyer, after the Buyer had made payment of the final 70%, the buyer depended upon the Seller to provide authorisation to Mainfreight to achieve a release the goods to the Buyer. Each of Ms Huang and Mr Hosking deposed to a course of dealing whereby the right to require the release of the goods to the Buyer was conditional upon a step or steps to be taken by the Seller after full payment by the Buyer. The step was either the Seller’s provision of the original bill of lading to Mainfreight or provision of a request for telex release to Mainfreight, or both and may also have included the Seller’s provision of the telex bill of lading to the Buyer for presentation to Mainfreight.
For communication between the Buyer and the Seller, the Buyer requested that emails be used. Mr Sutherland accepted that reasons for that request included speed and convenience. I accept that they are two reasons for the request.
The email address used by Ms Huang was “[email protected]” and that was the address to which the Buyer successfully sent emails to Ms Huang. At least that was the case until about 17 August 2012. From about that date there is an issue as to whether emails sent to and from that address were sent to or by a fraudster or intercepted by a fraudster. The correct address can be distinguished from a similar but different “[email protected]”. The email address used by Mr Hosking was “[email protected]” and that was the address to which the Seller successfully sent emails to Mr Hosking. At least that was the case until about 17 August 2012. Mr Hosking’s correct email address can be distinguished from a similar but different “[email protected]” from which a number of emails were sent to Ms Huang on and from 17 August 2012.
It is uncontested that a term of the agreements or the agreement was that the transactions were FOB or free on board.
The transactions were expressly on “free on board” or “FOB” terms. This arises from:
1. each of the purchase orders being quoted in “FOB Shenzhen Price”;[4]
2. each of the bills of lading refer to “Incoterms: FOB”, “Shipped on Board”.[5]
[4]eg Exhibit KA-1 p 24; also found in 40-45, 60-65, 85-86, 97-98.
[5]eg Exhibit KA-1 p 47; also found at 58, 71, 74, 89, 101, 103.
Under a classic FOB contract, a seller places the goods on board the ship, and procures a bill of lading in terms usual in the trade. The buyer nominates the shipper (and often also the ship)[6] and bears all the expenses associated with the vessel including port charges, freight, customs duties, storage and arrivals charges.[7]
[6]J & J Cunningham Ltd v Robert A Munro & Co Ltd (1922) 28 Com Cas 42.
[7]Martin v Hogan (1917) 24 CLR 234; Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402.
A consequence was that the Buyer would bear the cost of freight, customs and other costs from the time the cargo was accepted by Mainfreight. The relevance of this comes to determining which party must bear the cost of detention. If the Seller was in breach, it accepts that it must bear the costs of detention. If the Seller was not in breach, it contends that the Buyer must bear those costs. The Buyer does not submit otherwise. The Buyer does have other bases for claiming detention charges. It seems to me that the Buyer claims the detention charges as damages for negligence, as damages for breach of contract or as restitution for unjust enrichment.
The agreements are contracts for the sale of goods within the meaning of the Sale of Goods Act 1896 (Qld) (“SoGA”). There is no dispute between the parties that the provisions of the SoGA apply to the contractual relations agreed between the parties. There is no dispute between the parties that the court need not apply the provisions of the Vienna Convention to the contractual relations agreed between the parties.
The goods were “ascertained” within the meaning of SoGA s19 by the time they were described in the packing lists which detailed the products the Seller had packed into each shipping container after delivery to Mainfreight.
The relevant transactions
The transactions in dispute involved three orders:
| Order No. | Date of Order | Signed by Buyer | Price | Deposit | Invoice No. (deposit) |
| PO 11540[8] | 06.06.12 | 07.06.12 | $155,405.00[9] | $42,781.50 | 20120607 |
| PO 11540[10] | 08.06.12 | 08.06.12 | $3,840.00 | 20120608 | |
| PO 329[11] | 14.06.12 | 14.06.12 | $31,225.00[12] | $9,114.00 | 20120614 |
| Q1PO422[13] | 28.07.12 | 28.07.12 | $57,450.00[14] | $14,892.00 | 20120726 |
[8]Exhibit KA-1 pp 10-12.
[9]Affidavit of Boazhu Huang filed 14.01.13, [66].
[10]Exhibit KA-1 p 13.
[11]Exhibit KA-1 p 16-19.
[12]Affidavit of Boazhu Huang filed 14.01.13, [66].
[13]Exhibit KA-1 pp 21, 23-24.
[14]Affidavit of Boazhu Huang filed 14.01.13, [66].
The Buyer accepted the terms of each of the purchase orders and invoices for the payment of deposits by signing and returning the invoices as follows:
Order No.
Accepted by Buyer
PO 11540
07.06.12[15]
PO 11540
08.06.12[16]
PO 329
14.06.12[17]
Q1PO422
28.07.12[18]
[15]Exhibit KA-1 p 13.
[16]Exhibit KA-1 p 15.
[17]Exhibit KA-1 pp 16-19.
[18]Exhibit KA-1 p 24.
The Seller arranged for the goods for each order to be manufactured and then shipped as follows:
| Order No. | Date Shipped | Container No. | Bill of Lading | Invoice No. (balance price) |
| PO 11540[19] | 19.08.12 | CBHU8511349 CAXU9310628 CBHU9075933 CBHU8967658 CBHU8286504 CBHU5780724 | SZBNE1132237 “ “ “ “ SZBNE1142686 | 20120818 ($108,783.50) |
| PO 329[20] | CCLU7085188 | SZMEL1143764 | 20120831 ($22,111.00) | |
| PO Q1PO422[21] | 03.09.12 | CCLU7410040 TCNU6690064 | SZBNE1143761 | 20120828 ($32,558.00) |
[19]Exhibit KA-1 pp 33-49.
[20]Exhibit KA-1 pp 100–106.
[21]Exhibit KA-1 pp 82-90.
The payment details for the balance purchase price noted on the commercial invoices for each purchase order, PO 1154,[22] PO 329[23] and PO Q1PO422[24] prepared by Ms Huang, stated the following bank details:
[22]Exhibit KA-1 p 40.
[23]Exhibit KA-1 p 103.
[24]Exhibit KA-1 p 85.
Name of Beneficiary: Kong Ah International Company Limited
Bank Address: Units 1208-18 Miramar Tower, 132-134 Nathan Road, Tsimshatsui, Kowloon
Account No.: (Multi-Curreycy,e.g. USD,HKD,EUR) 470890070
Bank Name: DBS Bank (Hong Kong) Limited
Bank Swift Code: DHBKHKHH (must fill in)
Bank Code: 016
Branch Code: 494
The Seller remains unpaid US $163,452.50 being the total for the three invoices 21120818, 20120831 and 20120828. The buyer has paid that sum to the Silvercord account.
The goods were transported to Brisbane. Mainfreight refused to release the goods to the Buyer in Brisbane without the Seller’s authority. The Seller, from on or about 12 September 2012 refused the repeated demands of the Buyer to authorise Mainfreight to deliver or release to the Buyer the disputed goods and refused to deliver the relevant original Bills of Lading.
Facts relating to the fraud
The Buyer contends that the Seller directed it to make payments into a bank account, being HSBC Bank Hong Kong, account number 817-589104-838 in the name of Silvercord Corporation Limited (“the Silvercord account”).
This direction appears in the following emails, each purportedly from Ms Huang. In summary, the emails provided:
1. on 17 August 2012 an email stating that there was a problem with Kong Ah’s bank account, and provided as an alternative the banking details for the Silvercord account;[25]
[25]Hosking at [50] and GH-8 pp 68-69.
2. on 21 August 2012 two emails attaching electronic copies of commercial invoices showing the Seller’s name in the letterhead and each of which nominated the Silvercord account as payee;[26]
[26]Hosking at [53], [57] and GH-8 pp 73-88, 89-94.
3. on 22 August 2012 an email asking whether payment had been made into the Silvercord account;[27]
4. on 31 August 2012 an email attaching further commercial invoices showing the Seller’s name in the letterhead and nominating the Silvercord account;[28]
5. on 5 September 2012 an email attaching another commercial invoice showing the Seller’s name in the letterhead and nominating the Silvercord account.[29]
[27]Hosking at [60] and GH-8 p 95.
[28]Hosking at [64] and GH-8 pp 104-112.
[29]Hosking at [73] and GH-8 pp 123-128.
As for the first of those emails: On 17 August 2012 Mr Hosking received it.[30] So far as is relevant, the email as it appeared when Mr Hosking received it, read as follows:
[30]The email is Exhibit GH-8 pg 68 to the Affidavit of G Hosking sworn 20 January 2013.
From: Jewel Huang [[email protected]]
Sent: Friday, 17 August 2012 4:47 AM
To: Glenn Hosking
Subject: ??: FDF Order
Hi Glenn,
We have just been notified by Our Bankers that Deposit made to us for container loads of our products by a Customer/Buyer from Brazil was under investigation and his funds were believed to have come from suspected drug dealing.
The customer instructed his business associates in Mexico to T/T the Funds for three 40ft container load to our Company account and now it is putting our account under investigation, so not until they finish this pending investigation before we will be able to use the account normally again.
We would not want to make T/T to this our account at this time, pls make payment to this our Subsidiary Company account.
Bank information:
Beneficiary Bank: HSBC. Hong Kong.
Swift Code: HSBCHKHHHKH
A/C #: 817-589104-838
Beneficiary: Silvercord Corporation Limited
Sorry for any inconvenience and hope you will make the payment for us as soon as possible and do please scan and email me receipt when the payment is made.
Thank you, if you have any question, Pls feel free to contact me.
Jewel …
Notable aspects of that email, in the form in which Mr Hosking received it, are that it purports to be from “Jewel Huang [[email protected]]” and it showed Ms Huang’s correct email address in the “From” line. Several later emails from the fraudster to Mr Hosking showed a different email address in the header for the sender, namely, the similar but different “Jewel Huang [[email protected]]”. The Buyer argues that the difference supports its contention that the first email of 17 August and set out above was sent from [email protected] by Ms Huang.
The bank information provided was not for an account of the Seller. A fraudster was responsible for the form of email Mr Hosking received. The first issue is whether Ms Huang was the sender of the email in the form in which Mr Hosking received it.
Ms Huang is the only person in the Seller’s employ who should have known her password to log in to the email account she had with Yahoo at relevant times. She had set the account up herself. Other employees of the Seller use different personal email accounts.
The Buyer relies particularly upon the appearance of Ms Huang’s correct address in the line “Jewel Huang [[email protected]]”. The Seller’s computer expert gave evidence that such addresses can be forged by a sender. I accept that such addresses can be so forged. After “preliminary testing” of the email headers, the expert reported that he did not find any evidence of such forgery. His failure to find evidence of forgery from preliminary testing is not to be understood as an opinion by him that there was no such forgery.
Despite evidence by the expert that in his preliminary testing he did not find any evidence of such forgery, it is more correct to conclude that he found some evidence consistent with forgery, though inconclusive. That evidence was of the Internet Protocol addresses of a number of emails purportedly sent from Ms Huang in The People’s Republic of China and from Mr Hosking in Australia. Such emails as were essential to the fraud had IP addresses from Nigeria. It was the expert’s evidence that the Internet Protocol address data for the email of 17 August and purportedly from Ms Huang, was not for an address within The Peoples’ Republic of China but was for an address within Nigeria. He accepted that IP address data could also be forged. Thus, an email’s IP address within the Peoples’ Republic of China, might be forged to appear to be from elsewhere. An uncontentious email from Ms Huang and sent to Mr Hosking on 26 July 2012 had an IP address from the Peoples’ Republic of China.
Emails’ “headers” include a sender address line, such as “Jewel Huang [[email protected]]”. The disputed emails purportedly from Ms Huang had IP addresses purportedly from Nigeria. Several emails received by Ms Huang purportedly from Mr Hosking in Australia and consistent with being used to conceal the fraud from Ms Huang purported to have a Nigerian IP address.
Ms Huang deposed that she did not send the disputed emails which instructed the Buyer to pay funds to Silvercord account. She was made available for cross-examination. It was not suggested to her that she had sent the email of 17 August or any of the subsequent disputed emails. Ms Huang impressed me as an honest witness. Her evidence and the expert’s are consistent with Ms Huang’s being innocent of the fraud. When the email chains are examined, their contents are consistent with a third party becoming involved, who intercepted and retransmitted the critical emails, with amendments essential for the fraud. I find that is what occurred.
The fraudster interposed between Ms Huang and Mr Hosking by 17 August 2012. Shortly after that date the fraudster used the deceptively similar email addresses:
1. [email protected] for Ms Huang;
2. [email protected] for Mr Hosking.
I accept that Ms Huang did not send any of the disputed emails. It was not the Buyer’s case that any servant or agent of the Seller other than Ms Huang was the author of the disputed emails purporting to be from Ms Huang.
I find that emails directing the Buyer to pay the Silvercord account were not sent by the Seller or for the Seller by its servant or agent.
It follows that the Seller did not direct the Buyer to pay into the Silvercord account, that payments by the Buyer to the Silvercord account do not constitute payment to the Seller or payment in accordance with the course of dealing between the Buyer and Seller.
Further facts and findings relevant to failure to take reasonable care
To the email from the fraudster, Mr Hosking responded with an email which provided as follows:[31]
[31]Exhibit GH-8 pg 70 to the Affidavit of G Hosking sworn 20 January 2013.
From: Glenn
Sent: Friday, 17 August 2012 7:51 AM
To: ‘Jewel Huang’
Subject: RE: … : FDF Order
Hi Jewel
Are our orders complete? Can you please send me copies of the BOL and the balance owing. Can someone from your company also send confirmation of the Bank Details on a letterhead.
Regards
GLENN HOSKING // Managing Director
T // 07 3827 8700
F // 07 3803 1647
E // [email protected]
W // type="1">Mr Hosking was concerned that something might be amiss when he specifically requested confirmation of the change of banking details on the Seller’s letterhead.[32]
[32]Hosking [52] and GH-8 pp 70-72.
He explained in cross-examination:[33]
[33]T1-54 l45 et seq
You don't normally receive emails from your suppliers talking about drug dealing investigations and they've‑‑‑‑‑?‑‑ I've had two other suppliers who've sent us similar emails.
It caused you some concern, didn't it, in relation to your dealings with Kong Ah?‑‑ If the - something like the bank account changes then, yeah, I definitely want to confirm it.
…I just don't accept changes to bank accounts unless it's on a proper commercial document.
Mmm-hmm?‑‑ We were just being careful. As I said, I've had this come up before with other suppliers, so we - we ask from the same previous times.
And you also agree that you could have faxed that request rather than emailed it; yes?‑‑ We could have, but we don't - we never corresponded them with by - with them by fax previously, so I saw no worries in this part then.
And you also agree that you could have telephoned Ms Yuang to talk to her about it?‑‑ Yeah. I - I could have, but I prefer not to. I like to have a - a written trail.
And in relation to your email at page 70, you never received a direct response to that. And what I mean by "direct response" is you never received a reply which referred to this request; that's correct, isn't it?‑‑ No. I received all the commercial documents in a pro forma invoice which had all the documents that we required, and it had the banking details.
He did not pursue it further by facsimile or by telephone to Ms Huang. He received no confirmation of the bank details from someone in the Seller’s company using the Seller’s letterhead. He had Ms Huang’s telephone number but did not call it. Had Mr Hosking made a telephone inquiry at that point the fraud most likely would have been discovered, as occurred after 12 September 2012, when Mr Hosking sent Ms Huang copies of his emails with the fraudster. Ultimately, Mr Hosking received emails which appeared to him to be from Ms Huang attaching electronic copies of invoices showing the Seller’s name at the top and the Silvercord account details at the bottom. He relied solely on email communications.
In response to that email Mr Hosking received from the fraudster the following email which read, so far as is relevant:[34]
[34]The email is Exhibit GH-8 pg 73 to the Affidavit of G Hosking sworn 20 January 2013.
From: Jewel Huang [[email protected]]
Sent: Tuesday, 21 August 2012 12:34 PM
To: Glenn Hosking
Subject: ... B/L FOR PO 11540
Attachments: _2012_08_20.zip
Hi Glenn
We have tried our best to loaded the rest the products of the order 11540 on the last day before the ship is leaving, but there is still one 20GP container can not be caught up with the last minutes of declaring at customs. This container has to be shipped this week with the rest orders. It is our responsibility that we haven’t arranged the time of loading and we promise that it will never happen again.
Pls check the attached files for the packing lists, commercial invoice, B/L copy, the packing declaration and the PI for the balance payment.
In the following email, I will attached the documents for this 20GP container that will be shipped this week, including the packing list, commercial invoice, B/L copy and the packing declaration.
Thanks
Jewel
Attached to the email were a number of documents including an invoice which read, so far as is relevant:
KONG AH INTERNATIONAL COMPANY LIMITED
…
PROFORMA INVOICE
CUSTOMER: FDF FENCING SOLUTIONS P/I MO.: 20120818
P/O NO.: 11540
DATE: 18.08.2012
Product type: Aluminium Panels & Posts
…
70% balance
(USD)
108,783.50
…
4.Bank detail:
Name of Beneficiary: Silvercord Corporation Limited.
Bank Address: 1 Queens Road Central, Hong Kong
Account No.: 817-589104-838
Beneficiary Bank: HSBC Hong Kong
Bank Swift Code: HSBCHKHHHKH …
18.08.2012
As well as that invoice, the email attached five other invoices which contained the Seller’s name at the top and the Silvercord account details at the foot. Mr Hosking considered those invoices, observed the Seller’s name in the invoices, observed Silvercord’s bank account details in the same document and regarded those matters as confirmation of the Seller’s intention to change bank account to the account in the name of Silvercord Corporation Limited.
It is notable that the email attaching the Silvercord bank account details from the person purporting to be “Jewel” also showed Ms Huang’s correct email address in the “From” line. The expert witness’s researches revealed to him that the IP address of the email appears to be from within Nigeria, though that appearance is inconclusive because the IP address is capable of forgery.
On 21 August 2012 at 12.40 pm Mr Hosking received another email attaching files which included invoices. The invoices again referred to the Silvercord account. The email’s header showed Ms Huang’s correct email address in the “From” line.[35] It is the fact that the IP address of the email appears from expert inspection to be from within Nigeria, though that is capable of forgery.
[35]Exhibit GH-8 pp 89-94 to the Affidavit of G Hosking sworn 20 January 2013
On 27 August 2012 Mr Hosking applied to the National Australia Bank for a telegraphic transfer payment to the Seller of US$108,783.50.
On 28 August 2012 Mr Hosking received a call from the bank advising that the transfer had been declined as the beneficiary details, being those of the Seller, did not match the account number. He immediately resubmitted an application for payment to Silvercord Corporation Limited as the beneficiary. Mr Hosking directed the bank to pay funds to the fraudster and to its account because he was tricked by the fraudster. Through Mr Hosking, the Buyer was already alert to the risk that the Seller had not authorised payment to the Silvercord account. Through Mr Hosking the buyer failed to take care for its own safety by directing payment to the Silvercord account without first obtaining confirmation that this was the Seller’s instruction from Ms Huang by telephone or by writing other than email, for instance by facsimile.
On 28 August the Buyer paid to the Silvercord account US$108,783.50.
On 31 August 2012 Mr Hosking received an email[36] which purported to be:
“From: Jewel Huang [[email protected]]”
[36]Exhibit GH-8 pp 104-112 to the Affidavit of G Hosking sworn 20 January 2013
Notably, the sender’s address appearing in the email was different from prior emails which had purported to be from “Jewel Huang [[email protected]]”. The difference is slight, being the inclusion of a full stop between “Junfu” and “metal”. Mr Hosking did not observe the difference. If that failure to observe the difference was a failure to take reasonable care for the safety of the Buyer, it did not cause the loss of the US$108,783.5 which was paid to the Silvercord account several days before. The expert witness’s researches revealed that the IP address of the email appears to be from within Nigeria, though that is capable of forgery.
A number of subsequent emails were received and sent by Mr Hosking relating to orders with the emails purporting to be from Ms Huang showing an address containing the words “Junfu.metal”. The words are part of a sham address not used by Ms Huang.
On 4 September 2012 the Buyer paid another US$32,558.00 to the Silvercord account. Mr Hosking had failed to observe that emails relating to this amount and preceding the payment were from “[email protected]”.
On 6 September Mr Hosking learned from Mainfreight that containers had arrived but that Mainfreight had not received the original bills of lading. Mr Hosking continued to send and receive emails in the belief that he was corresponding with Ms Huang.
On 12 September 2012 Mr Hosking telephoned Ms Huang’s mobile because he was concerned that the Buyer had paid for two orders but the Seller would not provide the original bill of lading to Mainfreight. Though Ms Huang had contacted Mr Hosking using her mobile once in 2011 this was the first time Mr Hosking contacted Ms Huang by telephone. He spoke with Ms Huang who said that she had not received payment. Mr Hosking explained that the Buyer had paid US$108,000 and US$32,558 and had sent TT documents to evidence the transaction. Ms Huang said she had not received them. He offered to resend the documents.
Mr Hosking composed a new email and noticed that he had two email addresses for Ms Huang: “[email protected]” and “[email protected]”. So he sent the documents to both email addresses. He immediately followed up the emails with a telephone call to Ms Huang. She told him she had not received the emails and asked him to send documents to a third, different email address, the Baozhu address. That was successful.
At all relevant times before 13 September 2012, Ms Huang had not appreciated that there had been any change in the email address used by the sender of emails purporting to come from Mr Hosking since the address was not displayed on screen by her “email client”. I understand “email client” to mean the program operating to display an electronic copy of an email sent to Ms Huang and operating when Ms Huang opened her email program to type a message for emailing from her email address. She discovered the different address “[email protected]” only when she examined emails sent to her by Mr Hosking on 13 September 2012 as those emails had copies of email chains within them and the chains revealed the address.[37]Only in the few days following did she print copies of earlier emails for review. By printing them she discovered they too contained the fraudster’s “[email protected]” address.[38]
[37]Affidavit of Jewel Baozhu Huang affirmed 15.01.13 par 5.
[38]Affidavit of Jewel Baozhu Huang affirmed 15.01.13 par 6.
On 13 September Mr Hosking received an email purporting to be from the sham email address and stating that the Seller had received payment for the first and final orders and that telex releases would be sent to the Buyer. He sent to Ms Huang at the Baozhu address copies of the emails he believed he had been exchanging with Ms Huang including the documents which would prove payment.
When the fraudster sent false or altered emails to Ms Huang purporting to be from Mr Hosking, the fraudster sent emails from an address which was not Mr Hosking’s. Instead the fraudster used the different, yet similar “[email protected]” to send emails to Ms Huang. An email reply from Ms Huang to that address would go directly to the fraudster and not directly to Mr Hosking. An issue arose as to whether Ms Huang should reasonably have noticed the change when receiving emails from the fraudster or when sending a reply.
At the time Ms Huang received emails from the fraudster she did not realise that there had been any change in the sender’s email address. Her email client did not display a sender’s address on screen but only the sender’s name. Her email client did not display a recipient’s address on screen but only the recipient’s name. Only the name “Glenn Hosking” appeared on her screen as the sender or as the recipient.[39]Only if she had printed an email would the email address of the sender and recipient have appeared. Only if she had printed an email from the fraudster, would the sender’s line of the header have revealed: Glenn Hosking <[email protected]>. The collapsing of the full sender’s name and email address to just a sender’s name was probably a feature of the email client.
[39]Affidavit of Jewel Baozhu Huang affirmed 15.01.13 at [4] and KA-2.
When Ms Huang would begin to type the address “[email protected]” in her email progam, the program would automatically take over the typing and the name of the intended recipient would appear but without the recipient’s email address. Accordingly, she would see displayed on screen “Glenn Hosking” but no email address. Honestly believing the recipient to be Mr Hosking, Ms Huang sent each of the relevant shipping documents for the orders the subject of this proceeding to “[email protected]”. Importantly, the invoices attached to these emails as prepared by Ms Huang contained the correct direction to pay to the Seller’s true bank account. The proper inference is that the fraudster amended the invoices to add the Silvercord account details before sending fraudulent invoices to Mr Hosking.
Ms Huang did not suspect there might be a fraud being perpetrated on the Buyer. She was unaware that the Buyer had received an email direction to pay to a different bank account or that the account was in the name of a different beneficiary. By the time her suspicions were aroused it was too late; the payments had already been made.
Did the fraudster’s emails to the Buyer come from the Seller’s employee?
The Buyer firstly submits that the Seller has not proved that the disputed emails were not sent by the Seller. On the basis of my findings of fact it follows that I am satisfied that the disputed emails were not sent by the Seller.
Is the Seller in breach of contract for failing to provide original bills of lading to Mainfreight or to otherwise authorise Mainfreight to release of the goods to the Buyer?
On the hypothesis that the court would find that an independent fraudster sent the disputed emails, the Buyer secondly made a written submission that the Buyer has complied with all the terms imposing obligations upon it and as a result the Seller was obliged to either:
1. provide the original bills of lading to Mainfreight for each of the relevant orders; or
2. authorise Mainfreight to release the goods to the Buyer.
An element of the Buyer’s submission required one to refer to the Buyer’s further amended statement of claim and draw inferences as to the argument. I infer that the Buyer’s argument is that by paying the Silvercord account it had made payment of the balance price in compliance with the terms of the contract; that this was because it had complied with the term of the contract (or the agreements) pleaded at paragraph 3(h) of that pleading, namely: “Upon receiving the (Seller’s) ‘pro forma invoice’…the (Buyer) would pay the ‘balance’ in accordance with the terms of that invoice”. I accept that this was a term of the contract or the agreements and was consistent with the course of dealing. I do not accept that the invoices the Buyer received from the fraudster calling for payment to the Silvercord account were the Seller’s pro forma invoices. They had been amended to insert a new beneficiary for payment and different bank account details. They were the fraudster’s invoices. I do not accept that payment to the Silvercord account was payment in accordance with the terms of the Seller’s pro forma invoices.
A payment to the Silvercord account on the basis of an invoice from the fraudster was not compliance with the contractual obligation of the Buyer. The Seller submits that a forgery is a void document with no legal effect. That may also be so. It is not necessary for me to consider. Those invoices were not the Seller’s.
The Seller remained unpaid.
Whether a paid or unpaid seller must deliver documents to the buyer after loading the goods onto the ship, including the original bills of lading to secure delivery from the shipper, turns on the terms of the particular contract.
The course of dealing between the parties established that it was a term of each agreement in practical respects like that pleaded by the Buyer, namely:
Upon payment of the “balance” by the (Buyer)…the (Seller) would:
(i) provide the original of the “Bill of Lading” … to the (Seller’s) nominated logistics company (Mainfreight); or
(ii) authorise (Mainfreight) to release the products manufactured and supplied by the (Seller) to the (Buyer).
Mainfreight required that the original bill of lading, or telex release be provided to it by the Seller before Mainfreight would release goods to the Buyer in Brisbane. The term of the agreements between the Buyer and the Seller was that payment of the balance 70% was to be made before the Seller would provide that original bill of lading or authorise Mainfreight to release goods to the Buyer in Brisbane.
Section 20 of the SoGA relevantly provides:
(1)When there is a contract for the sale of … ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intended it to be transferred.
(2)For the purpose of ascertaining the intention of the parties regard is to be had to the terms of the contract, the conduct of the parties, and the circumstances of the case.
Both parties accept that Rule 5, as set out in section 21 of the SoGA is a term to which regard must be had in this case for determining the intention of the parties as to when when property was intended to pass.
Rule 5, as set out in s 21 of the SoGA, provides:
Rule 5
(1)When there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer.
(1A)Such assent may be express or implied, and may be given either before or after the appropriation is made.
(2)When, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, the seller is deemed to have unconditionally appropriated the goods to the contract.
Rule 5(2) of s 21 of the SoGA is reinforced by the provisions of s 22 of the SoGA. Section 22 of the SoGA provides, so far as is relevant:
(1)When there is a contract for the sale of specific goods or when goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled.
(1A)In such case, notwithstanding the delivery of the goods to the buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled.
(2)When goods are shipped, and by the bill of lading the goods are deliverable to the order of the seller or the seller’s agent, the seller is prima facie deemed to reserve the right of disposal…
The Buyer submits that the relevant clauses are Rule 5(1) and s 22(2). The Seller submits the relevant clauses are Rule 5 (2) and s 22(1).
Mainfreight’s requirement that it be presented with the original bill of lading, or telex release and the Seller’s contractual right against the Buyer to refrain from providing such authorisations before payment in full and the Seller’s right as against Mainfreight to change the name of the consignee in the original bill of lading satisfy me that when the Seller delivered the goods to Mainfreight, it did not unconditionally appropriate the goods to its contract with the Buyer but instead it reserved the right of disposal until conditions had been fulfilled, namely payment of the final 70%.
The Buyer submitted that the “Seller had … delivered the Goods to Mainfreight to ship to the Buyer without reserving the right of disposal of the Goods.”[40]I reject that submission.
[40]Written Submissions of the Buyer par 26 (c)(i).
I reject the submission that the Seller breached the contract for failing to provide original bills of lading to Mainfreight or to otherwise authorise Mainfreight to release of the goods to the Buyer.
The Buyer submitted that the “Buyer is entitled to immediate possession of the Goods.”[41] The submission is partly based upon a number of elements: that title in the relevant goods passed from the Seller when they were delivered by the Seller to Mainfreight,[42] that the Buyer has title,[43]that the buyer is in possession as a result of the consent order, that because the Seller did not reserve the right of disposal when delivering to Mainfreight[44]the Seller has no right to retain possession[45]and accordingly the Buyer is entitled to immediate possession.[46]
[41]Written Submissions of the Buyer pars 45 and 46.
[42]Written Submissions of the Buyer par 29.
[43]Written Submissions of the Buyer par 43.
[44]Written Submissions of the Buyer par 26 (c)(i)
[45]Written Submissions of the Buyer par 45
[46]Written Submissions of the Buyer par 46
As the submission that title passed to the seller is lengthy and different from the submission that the Seller is in breach of contract it is worthy of separate treatment.
Has title to the goods passed to the Buyer and is the Buyer entitled to immediate possession?
The Buyer seeks a declaration to that effect.
The Buyer submitted:
that it was the intention of the parties that title in the Goods would pass when the Seller delivered the Goods to Mainfreight for shipment … by reason of the following:
(a) the Contract Terms, particularly that:
(i) no term was agreed as to when property in goods would pass;
(ii) goods were to be delivered by the Seller to Mainfreight before:
(A) the Seller requested final payment from the Buyer; and
(B) the Seller received final payment from the Buyer; and
(iii) no term was agreed between the parties reserving the Seller’s title in any goods delivered;
(b) the conduct of the parties, namely:
(i) that goods were in fact delivered by the Seller to Mainfreight before:
(A) the Seller requested final payment from the Buyer;
(B) the Buyer made final payment to the Seller; and
(C) the Seller received final payment from the Buyer; and
(ii) that Bills of Lading were always issued by Mainfreight upon delivery of goods by the Seller to them with the Buyer named as consignee and not “to order”; and
(c) the circumstances of the case generally, including the provisions of Rule 5 of section 21 of the SoGA.
The Buyer also submitted that the Buyer bears the risks of loss or damage to goods from the time they have been placed on board the vessel nominated by the Buyer, pursuant to FOB terms of INCOTERMS® 2010 and accordingly “it was the intention of the parties that title in the Goods would pass when the Seller delivered the Goods to Mainfreight for shipment”.
I reject the conclusion that the parties intended that title would pass on delivery of the goods to Mainfreight. By the Seller’s reservation the right of disposal of the goods delivered to Mainfreight, I find that title did not pass upon delivery to Mainfreight.
The Buyer relied upon James v Commonwealth,[47] a case concerning the shipment of unascertained goods, submitting that Dixon J held that in an FOB contract, prima facie property passes to the buyer upon shipment.[48] His Honour did acknowledge that prima facie proposition. The passage continued however to observe that the inference may be rebutted and the moment of passing postponed as for instance where the seller deals with the Bill of Lading in such a manner as to show that he did not intend to appropriate the goods to the contract, and that ownership did not necessarily pass with the risk of loss. Dixon J observed:[49]
Here, I think, the object of the plaintiff in dealing as he did with the shipping receipt or bill of lading was to secure payment of the price before he gave up title to the goods, and this means a reservation of the jus disponendi. The bill of lading was taken, or put, in a condition in which delivery of the instrument might give title to the goods. But, though this is consistent with the absence of intention to reserve control and disposition, there seems no reason to doubt the understanding of the parties that until payment the vendor should retain, and upon payment the purchaser should obtain, all the indicia of title and the title itself to the goods. I attach little or no weight to the plaintiff’s … assertion … that ownership passed to them on shipment. Risk perhaps did, but ownership, in my opinion, did not.
[47](1939) 62 CLR 339.
[48](1939) 62 CLR 339 at 385.
[49](1939) 62 CLR 339 at 385.
The fact that this was a FOB contract does not persuade me that the parties intended that title passed to the Buyer when the goods were delivered to Mainfreight. The Buyer submitted that the risk of loss or damage passed to the Buyer once the goods were delivered to Mainfreight. That may be a relevant feature for determining the intention of the parties as to whether the Seller reserved a right of disposal. In this case I am satisfied that the Seller reserved a right of disposal until full payment, that it was a term of the agreement between the parties that it could do so. Because it was agreed, the Seller need not rely upon s 30 SoGA.
The Buyer submitted that the combined effect of an FOB contract and the fact that the bill of lading was not indorsed “to order” of the Seller but named the Buyer as consignee was decisive, that it meant that the Seller had not reserved the right of disposal. The submission was not supported by reference to any other specific words in the bill of lading and did not address the likely need for presentation of the original bill of lading to Mainfreight (or a telex release) to obtain a delivery of the goods. The submission did not explain why it was that Mainfreight did not deliver to the consignee, the Buyer, in Brisbane if that was Mainfreight’s obligation or why the Buyer’s Mr Hopkins regarded the procedure as one whereby the Buyer was obliged to pay the balance before the Seller would deliver an original bill of lading to Mainfreight. I am not satisfied that the Buyer had the contractual right to compel Mainfreight to deliver to it in Brisbane without first obtaining the cooperation of the Seller either to release an original bill of lading or to otherwise authorise Mainfreight to release the goods to the Buyer.
Title did not pass to the Buyer when the goods were delivered to Mainfreight.
But for the consent order, the Buyer had no right to possession of the goods.
Is the Seller entitled to further payment?
It follows from the above that the Seller remains unpaid US$163,452.50 as follows:
Order No.
Invoice No.
(balance price)
PO 11540[50]
20120818
($108,783.50)
PO 329[51]
20120831
($22,111.00)
PO Q1PO422[52]
20120828
($32,558.00)
[50]Exhibit KA-1 pp 33-49.
[51]Exhibit KA-1 pp 100–106.
[52]Exhibit KA-1 pp 82-90.
The sum is due to the Seller by the Buyer, subject to the arguments for the Buyer which follow, and which I reject for the reasons following.
If the Seller emailed invoices seeking the balance 70% to the fraudster only and has not emailed invoices to the Buyer is the Seller’s cause of action against the Buyer complete?
The Buyer submits: the Seller has not complied with the contract terms pleaded at paragraph 3(g) of the Statement of Claim (the term that the Seller would email to the buyer the Seller’s pro forma invoice detailing the US$ amount owing and details of the bank account into which it was to be paid) in respect of each of the relevant orders because on the Seller’s own case, it has never sent such emails to the Buyer.
The Buyer did not plead or submit that the alleged non-compliance by the Seller was a breach by it. I understand the submission to be that liability to pay has not arisen as no email has been received from the Seller. The point is not one which emerges expressly in the Buyer’s pleadings.
It was clear from about 13 September 2012 that the Seller was demanding payment to its original bank account for the balance outstanding.[53] In any event the Seller in this proceeding claims payment and has provided copies of the true invoices within its affidavit evidence served on the plaintiff.[54]
[53]Exhibit GH-8 pp 188, 220.
[54]Exhibit KA-1 pp 33-49, 67-72, 82-90, 100-106.
In these circumstances the Buyer is liable for the outstanding balance notwithstanding that it has not received email copies of the pro forma invoices.
Alternatively, if it was a term of the contract that the Seller was obliged to make demand by such an emailed invoice, the Seller’s nonfulfilment of the obligation was a technical nonfulfilment of a condition precedent to payment. I find that the Seller has subsequently, by delivery of copies of the relevant invoices and by demanding payment substantially performed its obligation to make demand by emailed invoice. The Buyer is liable to pay the outstanding balance.[55]The sum outstanding in respect of the three invoices is US $163,452.50.
Did the Seller owe a duty of care to the Buyer in tort to guard against misdirecting emails intended for the Buyer?
[55]LexisNexis Halsbury’s Laws of Australia 110 Contract (V) Doctrine of Substantial Performance [110-8140]
The Buyer submits that the Seller owed it a duty to exercise reasonable care in and about and incidental to the sending of emails attaching the documents relating to and evidencing the manufacture and supply of products requested by the Buyer including the invoices directing the Buyer to make payment to a nominated bank account to the Buyer in respect of any reasonably foreseeable, in the sense of not far-fetched or fanciful, or alternatively not insignificant risk of loss or damage to the Buyer arising out of the Seller sending such emails. That duty is said to arise, broadly speaking, from the circumstances of this case.[56]
[56]See paragraph 45 of the Statement of Claim.
As the Buyer’s claim is one for pure economic loss, reasonable forseeability of loss is not sufficient to create a duty of care.
Particular principles are to be applied in ascertaining whether a claimed duty of care arises. Applying some of those principles set out in the judgment of Gleeson CJ, Gummow, Hayne and Heydon JJ in Woolcock Street Investments Pty Ltd v CDG Pty Ltd[57]to this case I should consider whether the Buyer was vulnerable, that is, unable to protect itself from the Seller’s want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the Seller.
[57](2004) 216 CLR 515 at [23]-[24].
6. the Seller now has the benefit of the preserved value in the goods; and
7. the Buyer has incurred costs and expenses in preserving the value of the goods.
The costs incurred by the Buyer are set out in the attached Amended Schedule of Damages, namely:
1. $38,081.00 incurred in respect of detention charges; and
2. $60,930.14 incurred in otherwise preserving the Goods.
To the extent that any further liability in respect of detention charges arises, the Buyer submits such liability is properly that of the Seller and not the Buyer’s and the Buyer should have a declaration accordingly.
I accept that it was sensible for the Buyer to minimise detention charges by the Buyer’s taking possession. There was certainly an advantage for the Buyer and possibly an advantage for the Seller. When the Buyer took possession pursuant to a consent order, it was possible that the Seller might have benefitted from consenting. On one hypothetical outcome of the proceeding it was in the Seller’s interest for the Buyer to hold possession. That hypothetical outcome would be if the Buyer succeeded in its claim to immediate possession and had a right to pursue the Seller for detention charges incurred pending a declaration that the Buyer was entitled to possession. But, even on that hypothesis, it seems to me that there was a benefit for the Buyer in mitigating its own losses. On the alternate hypothesis that the Buyer had no right to possession until payment in full to the seller, there was the added benefit for the Buyer by minimising its potential loss from weekly detention charges.
I am not satisfied that the value of the goods has been preserved. Instead, the risks for the Buyer have been limited by its taking custody of the goods to reduce detention charges. As the proceeding has been decided against the buyer the decision should have resulted in some mitigation of loss. There was benefit for the Buyer in taking possession. It held the goods at less cost than Mainfreight would have charged.
The Buyer relies on the Seller’s consent to the interlocutory order made as a result of which the Buyer paid monies for storage and detention. I do not regard that as the equivalent of a request by the Seller to the Buyer that it store the goods. I accept the Seller’s submission that a consent order is not a basis for restitution, or any other claim against the Seller and whether the Seller consented to the making of the interlocutory order or the Court had imposed it after a contested hearing is immaterial.
The Buyer incurred detention and storage costs for its benefit. The Seller did not request it to do so. I am not satisfied that there was unjust enrichment of the Seller at the expense of the Buyer.
I reject the claim for restitution and for a declaration that the Buyer is entitled to restitution of detention charges.
Counterclaim
It follows from the above that the Seller remains unpaid US$163,452.50 as follows:
Order No.
Invoice No.
(balance price)
PO 11540[81]
20120818
($108,783.50)
PO 329[82]
20120831
($22,111.00)
PO Q1PO422[83]
20120828
($32,558.00)
[81]Exhibit KA-1 pp 33-49.
[82]Exhibit KA-1 pp 100–106.
[83]Exhibit KA-1 pp 82-90.
The defendant was entitled to withhold its authority to release the goods until payment to its account of the balance of the price.
The Seller also seeks specific performance of the agreement, by an order for the Buyer to pay the Seller US$163,452.50 plus interest, in exchange for the Seller’s authority to release the goods in detention to the Buyer. The Buyer claimed specific performance even if “this Court finds that the Buyer does not have title to the Goods and is not entitled to immediate possession of the Goods”.[84]The court has jurisdiction to give judgment on conditions or to make other orders to give practical justice to the parties.[85] Specific performance is the appropriate course here since:
[84]Buyer’s written submissions [47].
[85]s 53 Sale of Goods Act 1896 (Qld).
1. The Buyer is already in possession of the goods, subject only to the interlocutory orders of the Court; and
2. The Seller cannot resell the goods given the Buyer’s asserted claim for infringement of intellectual property rights.[86]
[86]Hosking [103].
Appropriate Orders
The plaintiff’s claims should be dismissed.
On the counterclaim there should be judgment for the defendant against the plaintiff for US$163,452.50 with interest on that sum from the date payment was demanded being 15 September 2012 pursuant to s 58 of the Civil Proceedings Act.
The Seller is entitled to specific performance.
I accept the submission of the Seller that it is appropriate to publish reasons and permit the parties opportunity to agree the terms of order relating to specific performance or otherwise for the parties to make submissions as to the form of contested orders. I propose to hear from the parties on costs and calculation of interest which accrued from 15 September 2012.
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