Australia: Ocean carrier obtains compensation for delivery of goods by misrepresentation

In a recent decision in the Federal Circuit Court of Australia,¹ the notify party to a bill of lading who obtained delivery of goods from an ocean carrier by misrepresentation was ordered to indemnify the ocean carrier for its losses in defending and settling the claims of the rightful owner of the cargo.

Mitsui OSK Lines (Thailand) Co Ltd (MOL) carried two containers of bagged jasmine rice from Bangkok, Thailand to Sydney, Australia. The bill of lading was consigned 'to order' and named Jack Fair Pty Ltd (Jack Fair) as notify party. MOL delivered the cargo to Jack Fair on production of a colour copy of a non-negotiable bill of lading which was 'endorsed' on the reverse side with the corporate seal of Jack Fair and signed by a director of Jack Fair. MOL mistakenly assumed the 'endorsed' colour copy to be an original bill of lading and issued a delivery order for the release of the goods. In fact, Jack Fair did not hold the original bill of lading, had not paid for the goods and had no entitlement to them.

MOL was sued by the rightful owner of the goods for misdelivery, which claim it settled. MOL sought an indemnity from Jack Fair for its misrepresentation.

The Court found that Jack Fair engaged in misleading and deceptive conduct. The misrepresentation committed by Jack Fair involved Jack Fair printing a colour copy of the bill of lading marked non-negotiable and 'copy', which contained blue print on its face as well as MOL's logo, stamping the reverse side of the bill of lading with a corporate seal of Jack Fair, having the bill of lading signed by a director of Jack Fair and presenting the copy bill of lading in order to obtain delivery orders in relation to the cargo that Jack Fair had not paid for.

The Court also found that MOL exercised reasonable care and had implemented a "sound system" which involved carefully inspecting documents to ensure that only original, correctly endorsed bills of lading were accepted prior to releasing goods. The Court concluded that MOL made the mistake as to the true nature of the copy bill of lading only as a result of the misrepresentation by Jack Fair.

The Court ordered Jack Fair to indemnify MOL for the settlement that MOL had to pay to the rightful owner of the cargo for wrongfully misdelivering its goods and also ordered Jack Fair to pay MOL's legal costs on an indemnity basis.

The decision suggests that carriers will be entitled to an indemnity for losses arising from such a misrepresentation and possibly similar misrepresentations, providing that they have not negligently contributed to the loss and have reasonably settled and/or mitigated any claims.

Footnote

¹ Mitsui OSK Lines (Thailand) Co Ltd v Jack Fair Pty Ltd [2015] FCCA 558.

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