A judgment of the District Court of NSW (Australia) has just been published which held a forwarder liable for misleading and deceptive conduct and breach of warranty of authority for issuing house bills which were:

  • headed ‘Bill of Lading’ (i.e. not House Bill of Lading or House Bill)
  • marked ‘Original’ (i.e. suggesting that they were negotiable documents of title)
  • made out ‘To Order’ (i.e. suggesting that presentation of the bill would entitle the holder to delivery of the goods)
  • signed off ‘as agent for the Carrier’ (and named the ocean Carrier).

What happened was that the bank financing the purchase of the goods requested the original shipping documents from the Shipper as security, before advancing funds; the Shipper provided the bank with the house bills; because of the above four factors, the bank mistakenly assumed them to be original ocean bills/documents of title; the bank allowed the Shipper to draw down on the finance and then went unpaid when the Shipper encountered financial difficulty.

The financing bank then sued the forwarder.

The Judge held that it was misleading and deceptive for the forwarder to have issued bills which had all the markings of original ocean Carrier bills of lading which acted as documents of title. The Judge found that the forwarder should have known that banks may receive such documents as part of the trade finance system and wrongfully consider them to be original ocean Carrier bills of lading which acted as documents of title.

The Judge also found that the forwarder did not have the authority of the ocean Carriers to issue bills of lading (in particular, where the ocean Carriers had issued their own original ocean Carrier bills of lading which acted as documents of title) and that designating this further caused the bank to rely on the document as a valid form of security.

The Judge found that it was reasonable for the financing bank to rely on the misrepresentations and accordingly held the freight forwarder liable for the full value of the unpaid financing advances, plus interest of AU$845,456.93 and ordered the forwarder to pay the financing bank’s legal costs.

For any freight forwarders and logistics providers in Australia or forwarding to Australia, you should consider what form your bills take.

If they bear any of the above four features, it might be an idea for you to consider whether you are running the risk of being slapped with similar liability.