• Russell Wiese

Are your house bills of lading misleading

In Australia Capital Financial Management Pty Ltd v Freight Solutions (Vic) Pty Ltd a freight forwarder was found to have issued bills of lading that were misleading to a finance company to who they were provided by the shipper. The freight forwarded appealed the decision to the NSW Court of Appeal and the result was that again the freight forwarder was found to have engaged in misleading conduct and was liable to the third party finance company.


The crucial takeaway from the appeal (known as Cro Travel Pty Ltd v Australia Capital Financial Management Pty Ltd [2018] NSWCA 153 following a name change by Freight Solutions) is that freight forwarders must assume that third parties will be provided with any shipping documents that they issue and care should be taken to consider how those documents would be interpreted by those third parties. It is important that your documents actually reflect the parties' rights and obligations and are not simply replicas of documents used by shipping lines.


The key problem for the forwarder in the Freight Solutions case was that it issued house bills with identical parties to the ocean bills and provided both the ocean and house bills to the shipper. In releasing both sets of documents to the shipper, the freight forwarder was said to have put into the world two sets of bills of lading which on their face gave a right to demand delivery of the goods. The Court held that it was reasonable for the finance company to assume that the house bills of lading were the only bills of lading that could be used to demand delivery of the goods.


More generally the Court held that it is reasonable for a commercial party to assume that an original negotiable bill of lading is the only such bill of lading and controlled the right to delivery of the goods. Courts will allow finance companies to view a bill of lading as the keys to the warehouse. Freight forwarders can only allow one key to be released.

An additional relevant issue was that the house bills of lading were signed as "agent for the carrier" by the freight forwarder. It will be very rare for freight forwarders to be agents of the shipping lines. Signing a house bill in this way will add to the risk of the bills being misleading. It can also create a cause of action of its own for breach of warrant of authority.


In our view this case supports the general use of house bills of lading. That is, the freight forwarder only provides the shipper with the house bill and not both the ocean bill and the house bill. By maintaining control of the ocean bill, the freight forwarder ensures that the house bills continue to control the release of the goods from the forwarder. This is the way that third parties will interpret these documents. If the house bill will not exclusively control the release of the goods to the consignee this needs to be noted on the house bills, otherwise such documents will be misleading.


The full case can be read here

#shipping

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