Cro Travel Pty Ltd v Australia Capital Financial Management Pty Ltd

1. [1]

   MEAGHER JA: I agree with Ward JA.

2. [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. [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. [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. [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. [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. [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. [8]

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

Background

1. [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).

2. [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:

3. [11]

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

4. [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:

5. [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):

6. [14]

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

7. [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.

8. [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”.

9. [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

1. [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.

2. [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).

3. [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.

4. [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]):

5. [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]):

6. [23]

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

7. [24]

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

8. [25]

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

9. [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).

10. [27]

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

11. [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]).

12. [29]

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

13. [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”).

14. [31]

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

15. [32]

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

16. [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).

17. [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)):

18. [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):

19. [36]

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

20. [37]

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

21. [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.

22. [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).

23. [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.

24. [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.

25. [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).

26. [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.

27. [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).

28. [45]

    Handley JA concluded (at 752):

29. [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:

30. [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.

31. [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).

32. [49]

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

33. [50]

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

34. [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.

35. [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).

36. [53]

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

37. [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:

38. [55]

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

39. [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.

40. [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

1. [58]

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

2. [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).

3. [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).

4. [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:

5. [62]

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

6. [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:

Pleading at first instance

1. [64]

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

2. [65]

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

Primary judgment

1. [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.

2. [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.

3. [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]).

4. [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]).

5. [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.)

6. [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].

7. [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]).

8. [73]

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

9. [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.

10. [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]).

11. [76]

    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]).

12. [77]

    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.

13. [78]

    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]).

14. [79]

    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]).

15. [80]

    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]).

16. [81]

    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).

17. [82]

    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]).

18. [83]

    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.

19. [84]

    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

1. [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:

2. [86]

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

3. [87]

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

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

1. [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.

2. [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]).

3. [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):

4. [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.

5. [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.

6. [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”.

7. [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.

8. [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

1. [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.

2. [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.

3. [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

1. [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).

2. [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.)

3. [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.

4. [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]).

5. [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.

6. [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.

7. [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).

8. [106]

   CRO argues that the assertion in the bills of lading that it was acting as an agent for the carriers could not change whether the bills of lading were understood to be house bills or ocean bills (as found by the primary judge at [169]), as that was a statement on the face of the bill taken into account by the joint experts. CRO argues that, in determining whether conduct is misleading or deceptive or likely to mislead or deceive, the conduct must be considered by reference to the class of consumers likely to be affected by the conduct and that, in issuing the bills of lading, CRO was making representations to classes of persons likely to receive a bill lading in the course of their business (which class it accepts included ASSH, an export company, and ACFM, a finance company). It is submitted that no reasonable person in such a class would be deceived into characterising the bills of lading as ocean bills because they were stated have been issued as agent for the carrier. That is said to be particularly so because the present bills lading stated at their foot that they were “applicable only when this document is used a combined transport bill of lading”. Hence, it is submitted that these bills of lading did not purport to be an ocean bill of lading or trading bill of lading.

9. [107]

   CRO submits (AT 5.26-5.31):

10. [108]

    Thus, CRO submits that the primary judge erred in finding that it had engaged in misleading or deceptive conduct within the meaning of s 18(1) of the Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Schedule 2).

11. [109]

    ACFM submits that an original “To Order” bill of lading necessarily conveyed to those commercial parties to whom it was provided that it gave the shipper, or a person to whom rights were transferred, title to the goods. It is said that, commercially, it was the “key to the warehouse” and that practically it represented a right to claim possession of the goods from the contractual carrier who was a party to that bill of lading.

12. [110]

    ACFM maintains that the critical conduct in the present case was that CRO had provided both negotiable bills of lading to ASSH (i.e., both CRO’s bill of lading and the ocean carrier’s bill of lading); both bills of lading: naming ASSH as shipper; referring to the same goods; and being negotiable “TO ORDER” bills of lading. It is submitted that both bills of lading represented that they conferred a right to demand delivery of the goods from the named carrier. ACFM argues that the primary judge was correct in concluding that this conduct was misleading and deceptive because the conduct necessarily permitted ASSH to use CRO’s bills of lading to obtain finance and to use the ocean bills of lading to obtain the goods in China. It is submitted that, equally, a commercial arrangement of this kind could have deceived a buyer of the goods and in other circumstances it could be an instrument for fraud (though this was not alleged in the present case). It is said, alternatively, that if the CRO bills of lading had been issued with authority, the ocean carrier would have been exposed to a liability for conversion.

13. [111]

    It is submitted by ACFM that the misleading and deceptive conduct was not simply the issuing of a “house” bill of lading: rather, it was putting into the world two sets of negotiable documents in respect of the same goods.

14. [112]

    ACFM maintains that the labels used commercially were not determinative (referring to his Honour’s decision at [85]; [163]); and that, rather, the issue was whether the bill of lading evidenced a contract of carriage, was a document of title and was a receipt for the goods. ACFM submits that, in the present case, the form of the CRO bills of lading was not that of a simple “house bill” because the bills purported to bind the ocean carrier to a contract of carriage; albeit that CRO had no authority to do so. (ACFM points to the evidence of Mr Chen that he did not rely on that form of execution (see T 32.33-34.65).)

15. [113]

    ACFM argues that a negotiable bill of lading, marked “original”, necessarily conveyed that the lawful holder could present the bill of lading to the carrier to obtain delivery of the goods (submitting that even a non-negotiable or straight bill of lading – as opposed to one marked “copy” or “non-negotiable” or marked as a mere receipt – would give the named consignee a right to obtain delivery on presentation of a bill of lading). Accordingly it is submitted that the CRO bills of lading, without more, conveyed a right to obtain delivery.

16. [114]

    ACFM argues that the form of the documents (particularly the use of the “original” stamp and the consignment of the goods “to order”), indicated that the bills of lading were evidence of the contract of carriage, gave title to the goods and were a receipt. It submits that CRO’s conduct in providing the corresponding negotiable ocean bills of lading to ASSH at the same time created a risk of commercial parties being misled and deceived because the ordinary commercial assumption was that the CRO bills of lading exclusively controlled delivery from the carrier. It is submitted that no commercial party would contemplate the existence of two original negotiable bills of lading on different forms in circulation in respect of the same goods. (In this, the argument appears to be supported by the joint experts’ opinion that it would not be standard procedure for a freight forwarder to sign its own bill of lading “as agent only” of the named ocean carrier (see [63] above).

17. [115]

    ACFM argues that the position would have been different if CRO had stamped all of its bills of lading “non-negotiable copy” or if the ocean bills of lading had nominated CRO as the consignee on a non-negotiable or “straight” bill; or if CRO had maintained possession of the negotiable ocean bill of lading until the CRO bills of lading had been surrendered. ACFM’s submission is that the conduct of CRO in putting two negotiable bills of lading into circulation for the same goods necessarily created the risk of someone (most likely a financier) would be deceived. It is submitted that this was the “additional conduct” relied on by the primary judge.

18. [116]

    As to the submission by CRO that the primary judge did not rely on any representation or conduct relevant to the CRO bills of lading being “ocean” or “liner” bills of lading, ACFM says this issue only arose in respect of the breach of warranty of authority claim (by reason of the form of execution “as agent only”). ACFM says that it did not advance a case, nor did Mr Chen give evidence, that the form of execution as an agent for the ocean carrier was a discrete aspect of misleading and deceptive conduct. It is argued that the statement by the primary judge (at [169]) as to the falsity of the bills of lading being that they were ocean bills of lading issued as authorised agent of each ocean carrier was a statement not causally related to the drawdown of the loans.

19. [117]

    As to the submission by CRO that no reasonable person would be deceived into characterising the bills of lading as ocean bills, and the submission that the bills were not combined transport bills, ACFM maintains that both submissions are incorrect. As to the first, ACFM says that any objective reading of the CRO bills of lading suggests that CRO is issuing the bills as an agent for the ocean carrier, and therefore that the bills would be ocean bills even though they are on a freight forwarder’s form. (ACFM describes CRO’s bills as bills purporting to be ocean bills of lading on a freight forwarder’s form, but issued without the authority of the ocean carrier.) As to the second, ACFM argues that a reference to “combined transport” bills refers to a contract of carriage which also includes inland carriage to a place to delivery different to the port of discharge.

20. [118]

    ACFM argues that there would be no commercial circumstance when two original negotiable bills of lading should be in circulation (since this creates a risk of fraud and exposes the contractual carrier to liability in conversion). ACFM submits that, necessarily, commercial parties would always be assumed to believe that an original negotiable bill of lading is the only such bill of lading. ACFM notes that an essential aspect of a bill of lading is the requirement to surrender an original to obtain delivery of the goods. It submits that, in respect of a negotiable bill of lading which has been traded or where payment has been effected by letter of credit, it is that original negotiable bill of lading that controls the right to delivery and discharges the carrier’s obligations as bailee.

21. [119]

    Insofar as it is suggested by CRO that an intention to issue a non-negotiable document can be inferred, ACFM says that: such an intention was not the subject of evidence below; it is contrary to the finding of the primary judge at [88]-[90] by reference to contemporaneous documents; and it is inconsistent with the words used in the consignee box on the bills of lading.

Determination

1. [120]

   Section 18(1) of the Australian Consumer Law provides:

2. [121]

   The principles to be applied were not in dispute between the parties; nor was it alleged that the primary judge had erred in the statement of the guiding principles at [102]-[109]. Conduct will be misleading or deceptive if it induces or is capable of inducing error (Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 at [15] per French CJ and Kiefel J, as her Honour then was (“Miller v BMW”)). This is a question of fact to be determined in the context of the impugned conduct and the relevant surrounding facts and circumstances (Skinner v Redmond Family Holdings Pty Ltd [2017] NSWCA 329; (2017) 123 ACSR 593 at [85] per Gleeson JA (Macfarlan JA and Barrett AJA agreeing)). The focus is on the impact of the impugned conduct on the person alleged to have been misled or deceived (Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12 at [63]).

3. [122]

   As noted earlier, the primary judge found as a fact (at [138]) that when Mr Chen approved each drawdown he held the belief that each bill of lading issued by CRO was an original negotiable bill of lading which gave the holder a right to demand delivery from the carrier who then held the goods in China.

4. [123]

   CRO has not, in my view, succeeded in its challenge to his Honour’s reasons. It did not ultimately dispute (nor could it have) that the relevant bills of lading were issued without the authority of the ocean carrier (though Mr Bearman did qualify this at various times by reference to “ostensible” authority and sought to introduce a temporal element to the concession) nor that this was in circumstances where two sets of (original) bills of lading were put into the world. In my opinion, the primary judge rightly considered that conduct to be misleading or deceptive.

5. [124]

   CRO relied heavily on the manner in which ACFM’s case was pleaded below, focussing on [11] of the amended statement of claim (extracted above at [65]). However, as Mr Cox correctly submitted for ACFM, this was not simply a case of misrepresentation by the documents alone. More broadly, it was the conduct involved in putting two sets of bills of lading into the commercial system which was found to be misleading and deceptive.

6. [125]

   CRO accepted (see AT 8.37-8.40) that:

7. [126]

   There was a finding at first instance that this was not normal practice (AT 8.46-8.47). CRO put the effect of the duplication as being that it created “a potential of priorities” (AT 9.1-9.2), yet there was said to be no other effect. This was linked to a submission as to the difference between title and delivery (AT 9.5).

8. [127]

   ACFM referred in this regard to the broader notion of conduct described by McHugh J in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [99]ff. (I note that although his Honour was in dissent in that case, his reasoning in this regard has been subsequently endorsed on many occasions; see, for example, Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [102] per Gummow, Hayne, Heydon and Kiefel JJ.)

9. [128]

   CRO’s argument in effect appears to be that this broader “conduct” was not pleaded as misleading and deceptive. However, that does not take into account the full import of the pleading in the amended statement of claim under the heading “Misleading and Deceptive Conduct”, which comprises, in addition to [11], the pleading at [14], which encompassing all the matters pleaded from [3] as going to the defendant’s engagement in misleading and deceptive conduct. CRO’s narrow view of ACFM’s pleaded case is not supported by the text of the pleadings.

10. [129]

    Even if the impugned “conduct” were to be confined to the representations pleaded in [11], the assessment as to whether those representations constituted misleading and deceptive conduct necessarily entails an examination of the circumstances in which they were made (see, in this regard, Miller v BMW at [20] per French CJ and Kiefel J; Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209] per Sackville AJA (Beazley and Campbell JJA agreeing), cited with approval in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [192] by Barrett JA, Bathurst CJ and Beazley P agreeing; and in OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120 at [178] by Gleeson JA, Macfarlan and Leeming JJA agreeing).

11. [130]

    Those circumstances include the fact that CRO had put out into the world two sets of “original” bills of lading (one set of which purported to have (but in fact lacked) the authority of the ocean carrier). True it is, that ACFM was not aware of the existence of the “authorised” set of bills of lading. However, it was reasonable (as the primary judge found) for ACFM to assume, as Mr Chen in fact did, that the bills of lading which it held were original authorised bills of lading which would have enabled ACFM to obtain delivery of the goods.

12. [131]

    CRO put into circulation bills which appeared to be binding on the carrier (by virtue of the express statements to that effect in the signature clause). There was no serious case advanced by CRO in the Court below that the freight forwarder undertook to the shipper to carry the goods itself, as was held to have happened in Comalco (and which, as is suggested in the passage cited earlier at [3.21] from Girvin’s text, could always be a “question of construction”).

13. [132]

    On a reading of the whole of the primary judge’s reasons, the issue of the CRO bills, expressly as agent for the carriers, with the knowledge that persons in the commercial world would rely on them taking effect in that way, and at the same time also circulating ocean bills of lading for the same cargo, was the conduct which his Honour held to be misleading and deceptive.

14. [133]

    Another way in which CRO mounted its challenge to the primary judge’s reasons was the argument that the bills carried precisely the rights they purported to carry and gave a “perfectly good security” (AT 5.29) because, had the bills been endorsed to ACFM and had it sued the ocean carrier, CRO would have been joined “without doubt” and would have been liable on the bills – the argument being that the person who issued the bill and assumed the obligation (CRO) would ultimately be liable on the bill. There are two problems in my opinion with this argument.

15. [134]

    First, it overlooks that the purpose of ACFM requiring possession of the original bills of lading was to obtain security over the goods, rather than from CRO itself. It may be, as CRO submitted on appeal, that the primary judge found that the unauthorised bills of lading would, if endorsed, carry some rights – but the point is that those “rights” fell short of a right to obtain delivery. In other words, there may have been a right of suit against CRO (or a claim of some kind against the carrier), but neither is a right to obtain delivery. And, as the primary judge found, the bills were obtained by ACFM precisely because it regarded them as giving control over the goods and a right to obtain possession of the goods (see, for example, at [154]-[158]).

16. [135]

    Second, in the situation postulated by CRO, CRO would not have been liable “on the bill” as a document of title, or a contractual document but, rather, would have been liable in, for example, misleading and deceptive conduct or misrepresentation or breach of warranty of authority.

17. [136]

    Yet another limb of the argument put for CRO on appeal was, in effect, that because these were bills of lading to which the Sea-Carriage Documents Act applied, they carried or transferred rights, and hence did transfer the rights they purported to transfer. I do not consider that reference to the Sea-Carriage Documents Act advances matters in respect of the misleading and deceptive conduct claim. The fact that ACFM might have been in a position to become the lawful holder of the CRO bills does not alter the fact that, as found by the primary judge, the issue of unauthorised bills of lading (in circumstances where another, authorised set had been issued) which purported to confer a right to delivery (but did not in fact confer that right) constituted misleading and deceptive conduct (though it may, as will be discussed shortly, be relevant to the question as to what loss was suffered by reason of the impugned conduct).

18. [137]

    CRO also challenged some aspects of the primary judge’s reasoning at [78]. At [77]-[79], the primary judge said:

19. [138]

    A submission was made for CRO that ACFM would “not necessarily” have been told to “go away” had it presented in China with the CRO bills of lading having been endorsed (and therefore, it was submitted, the bills may have enabled ACFM to obtain delivery in China – presumably, only if ACFM had presented them prior to the presentation of the authorised ocean bills of lading). In my view, this submission overlooks the fact that the relevant question is not whether, as a matter of chance (or practice) on the ground in China, ACFM would have obtained delivery had it acted differently but, rather, whether the ocean carrier would have been bound to deliver the goods to ACFM in these circumstances, as a matter of the rights conferred by the bills of lading. As was ultimately conceded by CRO, the documents held by ACFM did not confer a right of delivery (AT 27.1ff).

20. [139]

    As to CRO’s suggestion that no reasonable person would have made the assumptions that Mr Chen made relating to the bills of lading, I accept ACFM’s submission that an objective reading of the bills of lading indicates that CRO purported to issue the bills as agent for the ocean carrier, with authority to do so, and that it was reasonable in those circumstances to rely on the bills as Mr Chen did. ACFM submitted – correctly in my view – 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 controls the right to delivery of the goods.

21. [140]

    Therefore, I would dismiss ground of appeal 5.

Ground 5A – causation

1. [141]

   CRO argues that (the CRO bills of lading taking legal effect in accordance with their tenor) only their lawful holder could call upon their performance or hold CRO liable for their non-performance and, hence, that for ACFM to have any claim against CRO under the bills, it was necessary for the bills to have been endorsed by ASSH either in blank or to the order of ACFM (which they were not). It is further argued that the bills of lading only rendered CRO liable to their lawful holder because of the assertion by CRO on the bills that it acted as agent for the carriers (and that if the bills of lading had been issued in the name of CRO as freight forwarder alone, they would have been house bills of lading which not have been negotiable instruments and hence, presumably, not acceptable to ACFM by way of security).

2. [142]

   CRO argues that it follows from this that any loss or damage suffered by ACFM from its inability to claim on the bills of lading arose solely by its failure to obtain the endorsement of ASSH (a request with which the primary judge found ASSH would likely have complied, had such a request been made) prior to it lending moneys to ASSH.

3. [143]

   As to the finding by the primary judge (see [168]) that, even without endorsement, if each CRO bill of lading had been issued with authority (presumably as the only ocean bills – see [170]), it would have given ACFM a lien as pledgee over bills which would have the practical effect of ACFM being empowered to prevent any other party taking delivery of the cargo, CRO maintains that the practical effect of any such lien or pledge was not established by evidence. CRO points to the agreement by the expert witnesses that it was not necessary for CRO to provide an original bill of lading for customs in China; and that the provision of original documents would not be standard practice (referring to [87] of his Honour’s reasons).

4. [144]

   CRO maintains that the security of the issue of bills of lading that are negotiable instruments lies in the entitlement of the lawful holder to the title to the goods (and hence the liability of the issuer to the lawful holder for the loss if the goods are not produced in accordance with the bill). CRO notes that here, because the bills were not endorsed by ASSH, ACFM was not the lawful holder.

5. [145]

   CRO relies on Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 at [47]-[59]. There, in the passages cited, McHugh, Hayne and Callinan JJ were concerned with “loss said to be suffered by the making of [a] contract” (at [48]). Their Honours said (at [50]-[51]):

6. [146]

   Mr Bearman, for CRO, submits that (see AT 29.12):

7. [147]

   ACFM points to the fact that there was no cross examination of Mr Chen in relation to the need for endorsement and to Mr Chen’s evidence (as accepted by the primary judge at [30]-[41]; [125]) that Mr Chen understood that possession of the original bills of lading gave ACFM a right to delivery and a viable security. ACFM submits that this challenge to reliance and causation should have been put to Mr Chen. It says that the reason why ACFM did not have the bills of lading endorsed, as ASSH was contractually required to do, was not explored at first instance. (In that regard, Mr Cox points to the enforcement provisions in the Loan Agreement to the effect that endorsement may not occur until the borrower is in default as providing an explanation for the fact that endorsement was not effected – see AT 37.27ff; AT 38.1.) But in any event, ACFM argues that the loss it sustained was in advancing the moneys – and hence the absence of a claim against the cargo by obtaining endorsement and seeking delivery are all at a time after the loan suffered by advancing the moneys in the first place (hence the primary judge’s finding as to interest) (see AT 38.7ff).

8. [148]

   ACFM argues that, in any event, a reasonable misunderstanding as to the nature of the rights ACFM had when it relied on CRO’s misleading and deceptive bills of lading was not determinative, noting that the primary judge accepted that any such misunderstanding did not break the causal chain (see [99], [125] and [161]-[163]). ACFM says that the primary judge correctly recognised that the Australian Consumer Law was intended to protect parties who may reasonably, or even negligently, misunderstand their rights, applying Henville v Walker (2006) 206 CLR 459; [2001] HCA 52 at [13] (see [105]).

Determination

1. [149]

   The primary judge accepted Mr Chen’s evidence that if three copies of bills of lading stamped “ORIGINAL” had not been provided to ACFM, he would not have allowed ACFM to lend the funds the subject of each application for drawdown (primary judgment at [34]). His Honour reiterated this finding at [155] and [157].

2. [150]

   CRO’s appeal on this ground can be dealt with quite briefly. The essence of the challenge to the primary judgment in this regard was that any loss or damage suffered by ACFM from its inability to claim on the bills of lading arose solely from its failure to obtain the endorsement of ASSH. Although the primary judge found that the bills were capable of endorsement, as noted above, even if endorsed the CRO bills of lading would not have conferred upon ACFM the right to obtain possession of the goods because they were unauthorised.

3. [151]

   I have already addressed CRO’s submission that, had ACFM had the bills endorsed, ACFM would have obtained a right of suit. ACFM relied on the bills (as the primary judge found) not as providing a right of suit against the freight forwarder but as providing security by means of a right to take delivery and obtain possession of the goods. But in any event, the loss suffered is as a result of having lent moneys that ACFM would not otherwise have lent but for the misleading or deceptive conduct. The fact that it might possibly have been able to avert the ultimate loss it sustained does not mean that the misleading or deceptive conduct was not the operative cause of its loss. Ground 5A is not made good.

Ground 6 – breach of warranty of authority did not cause loss

1. [152]

   As framed, ground 6 of the grounds of appeal goes to the issue of damages for breach of warranty, not to the finding that ACFM had a claim for breach of warranty of authority.

2. [153]

   It was common ground (at trial and on appeal, though as noted earlier CRO did not accept that this would have been the case at earlier times) that CRO did not have authority from any of the carriers nominated on the CRO bills of lading for the issue of those bills of lading (see, as to the trial, T 183.39ff and [16] of the primary judgment; as to the appeal, AT 29.36; AT 38.22; CRO’s written submissions at [17]).

3. [154]

   Turning to the primary judge’s reasons, at [111] his Honour said:

4. [155]

   His Honour then (at [112]) quoted a passage from Lord Esher MR’s reasons in Firbank’s Executors v Humphreys (1886) 18 QBD 54 at 60, as follows:

5. [156]

   His Honour also referred to two more recent authorities for the proposition that it is not necessary for the plaintiff to enter into a transaction with the supposed principal in order to establish an action for breach of warranty of authority, being BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2009] FCA 1087 (“BHPB Freight”) and Commonwealth Bank of Australia v Hamilton [2012] NSWSC 242 at [288]-[297].

6. [157]

   Where there is some scope for confusion (and this is the issue to which CRO’s sixth ground of appeal is addressed) is that (at [180]), the primary judge found that, 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]), suggestive of an assessment of damages on the tortious basis.

7. [158]

   CRO’s submissions in this Court make clear that it does not deny that it did not have the authority of the carriers to issue the CRO bills of lading and that it thereby acted contrary to its warranties of authority; but CRO’s complaint is that the primary judge erred in finding that CRO was liable for the breaches of warranty of authority on the basis that the breaches were a cause of ACFM advancing moneys which it would not have lent but for the breach.

8. [159]

   CRO maintains that the correct approach to determining loss and damage for a breach of warranty of authority in a bill of lading is to examine the position of plaintiffs “on the basis that the defendants in truth had the authority [they] warranted they had” (referring to V/O Rasnoimport v Guthrie & Co Ltd [1966] 1 Lloyd’s Law Rep 1 at 14). It was held in that case that, “[if] on that basis the plaintiffs could have recovered the appropriate damages from the owners for non-delivery of the 135 bales, then they have plainly suffered detriment and damage by reason of the breach of warranty since, the breach having occurred, they are without remedy against the owners”.

9. [160]

   CRO submits that, in the present case, because the CRO bills of lading were not endorsed ACFM was not their lawful holder and, hence, if CRO in truth had the authority that it warranted it had ACFM would nevertheless have had no claim against the carriers; and thus no loss and damage arose to ACFM as a result of the breach of warranty of authority.

10. [161]

    ACFM’s primary submission on appeal is that the primary judge correctly calculated damages (on the basis that the warranted authority existed), notwithstanding the finding at [180], because his Honour in fact calculated the damages for breach of warranty of authority on the basis of the sound arrived market value of the goods in China against which his Honour brought into account certain repayments that had been made by the guarantors (see AT 39-40).

Determination

1. [162]

   This issue can be disposed of relatively quickly. There is no dispute that the appropriate question to be postulated in assessing damages for breach of warranty of authority is to ask what would have happened if the purported agent had the authority it held itself out to have (see V/O Rasnoimport v Guthrie & Co Ltd at 14). That is, one considers an hypothetical situation and asks what would the position have been had the authority in fact existed at the relevant time.

2. [163]

   It was in that hypothetical context that ACFM argued at first instance that when assessing damages for breach of warranty of authority consideration was required as to whether the contracting party would have been contractually obliged to meet the contract; and hence the argument was raised at first instance as to whether the contracting party would have had a valid contractual defence to a claim made upon it (see the explanation by Mr Cox at AT 41.25-36 of the way in which the argument had been put and that the case had not been run at first instance that the question of damages for breach of warranty of authority should be assessed on the hypothetical basis as to whether it would have sought and obtained the endorsement at an earlier time (had it been proceeding against the ocean carrier for mis-delivery of the goods)).

3. [164]

   Mr Cox notes that it was accepted at the hearing at first instance that there was an actionable warranty of authority claim (see AT 44.50) and that the way in which the issue was litigated at first instance was consistently with the following passage from FMB Reynolds, Bowstead and Reynolds on Agency (18th ed, 2006, Sweet & Maxwell) at [9-077] (see now, P Watts and FMB Reynolds, Bowstead and Reynolds on Agency (21st ed, 2018, Sweet & Maxwell) at [9-080]):

4. [165]

   The argument advanced for CRO before the primary judge was in essence that what ACFM lost was a contract with the shipping company that had a complete defence, namely the absence of endorsement. Therefore, it argued, there was no loss.

5. [166]

   The primary judge found, as a matter of fact, that it was probable that ACFM would have received the necessary endorsement if it had called for it: see primary judgment at [167] (see also [152]-[154]).

6. [167]

   In BHPB Freight (to which the primary judge referred), Finkelstein J said at [40]:

7. [168]

   The primary judge’s reasons at [111] and following make clear, in my view, that his Honour was proceeding upon the basis that damages for breach of warranty of authority were assessed contractually. Despite what his Honour says at [180], his Honour’s statement at [182] is, in my opinion, an application of the correct principle. His Honour there says:

8. [169]

   That is, if the warranted authority had existed and assuming (as his Honour had found earlier in his judgment would have been the case had ACFM made the request) the CRO bills of lading had been endorsed, the position would have been that ACFM had an action against the ocean carrier for mis-delivery of the goods, by which it could have obtained the “sound arrived value” of the goods.

9. [170]

   His Honour then went on to reason that, as ACFM could only have retained sufficient moneys from the sale of the goods to compensate it for an actual loss and any residual value under the securities would have been returned to ASSH under the Loan Agreement, ACFM was entitled to recover the net loan amount plus interest owing to it under the Loan Agreement: see at [182]-[183]. This is consistent with the approach to assessment of damages for breach of warranty of authority adopted by Price J in Commonwealth Bank of Australia v Hamilton (see at [338]) where the fact that the bank had mitigated its loss by sale of certain properties was taken into account, such that the bank did not recover more than it had in fact lost by reason of the breach of warranty of authority.

10. [171]

    Thus there was no error in the conceptual approach to the assessment of damages for breach of warranty of authority (assuming the CRO bills of lading had been endorsed); and there was no complaint by CRO that the primary judge erred in the arithmetical calculation of the damages on that basis.

11. [172]

    However, the problematic part of the primary judge’s reasoning lies in the proposition that a contractual entitlement to have the bills endorsed would suffice to preclude a defence by the contracting party (on an action for mis-delivery of the goods) based on the lack of endorsement. This is the issue that is raised by ACFM’s notice of contention (expressed in oral argument as being whether the carrier would have had a defence assuming authority for a claim brought on the putative contract by the holder as a pledgee of an unendorsed bills (see AT 40.2)).

12. [173]

    Therefore, insofar as ground 6 goes to the conceptual approach when determining damages for breach of warranty of authority (leaving aside the issue raised by the notice of contention), it is not made good.

13. [174]

    Before turning to the notice of contention, in the course of argument on the appeal it was suggested that an issue might have arisen as to whether, when considering what the hypothetical position would have been had the authority existed at the time the CRO bills of lading were issued, one might also in the context of the damages claim hypothesise that ACFM would have sought and obtained the endorsement had it been proceeding with a claim for mis-delivery at the earlier relevant time (a proposition put to Mr Cox by the presiding judge and adopted by him, albeit noting that this was not the way the case was put at the hearing or in written submissions) (see AT 41.18ff). Rather, the case as put for ACFM was that it was a necessary part of the claim for damages for breach of warranty of authority to consider whether the contracting party would have been contractually obliged to meet the contract or whether the contracting party had a contractual defence. ACFM’s submissions on appeal, as to whether a contractual entitlement to have the bills endorsed would have been a defence, are on the assumption that the primary judge erred in approaching the question of a defence in the way his Honour did.

14. [175]

    On the assumption (that ACFM does not accept) that the primary judge erred in considering this question by reference to the contractual entitlement to obtain an endorsement, ACFM submits that the issue must be approached by assuming that the CRO bills of lading were made with authority, and that ACFM had sued the ocean carrier, and asking whether the ocean carrier would be able to plead as its defence the absence of title to sue (because ACFM could not meet the definition in s 8 of the Sea‑Carriage Documents Act) and whether the availability of such a defence on the part of the ocean carrier would defeat a claim for breach of warranty of authority. In other words, ACFM says this issue becomes whether the primary judge was correct in saying that a contractual entitlement to compel the endorsement is sufficient in circumstances where ACFM had not complied with the statutory pre‑condition necessary to become the lawful holder of the bills of lading under the Act.

Notice of contention

1. [176]

   ACFM accepts that it was on the basis that the CRO bills of lading were not bearer bills and were not endorsed in blank or to ACFM that the primary judge found that there was no transfer of the contract of carriage evidenced by those bills of lading pursuant to s 8 of the Sea-Carriage Documents Act (see [71]-[73]). ACFM notes that similar issues have been considered in the United Kingdom and Singapore on similarly worded legislation in relation to unendorsed bills of lading where there was a transfer of possession of the bills of lading (referring to Standard Chartered Bank v Dorchester LNG (2) Ltd [2016] QB 1 at [13]-[28] and Keppel Tatlee Bank Ltd v Bandung Pte Ltd [2003] 1 Lloyd’s Law Rep 619 at [28]).

2. [177]

   ACFM submits that the primary judge’s descriptions of ACFM’s rights against the ocean carrier (assuming authority for CRO to execute the bills of lading) without an endorsement were of a practical commercial right to exercise a lien ([168]). ACFM accepts that those circumstances are not sufficient to support the breach of warranty of authority claim, which is necessarily contractual (see [111]-[113]).

3. [178]

   ACFM submits that the primary judge erred in approaching the question as to whether the holder would have had a contractual entitlement to obtain the endorsement (AT 41.42); ACFM says that the relevant issue is whether (had the contract been made with authority and had ACFM sued the carrier) the carrier would have been able to plead as its defence the absence of title to sue (because ACFM could not meet the definition in s 8 of the Sea-Carriage Act). In other words, would a contractual entitlement to compel endorsement suffice where there was non-compliance with a statutory precondition (AT 42.10).

4. [179]

   By its notice of contention, ACFM argues, first, that the transfer of possession of bills of lading (even though unendorsed) can in certain circumstances be sufficient to permit the holder of the bills of lading to sue upon them. ACFM does not accept that there would have been an absence of endorsement at the relevant time in the past but, in the alternative, argues that where there is an assent to the transfer but no endorsement that may be sufficient in some circumstances (combined with possession) to enable the holder of the bill of lading to sue on the contract even though there has been no compliance with s 8 of the Act (and hence the first ground raised on its notice of contention).

5. [180]

   It is in this context that ACFM turns to the question whether the rights of a pledgee would have included rights to be able to obtain repayment. This raises the question whether a possessory pledgee’s lien would suffice if the carrier pleaded privity of contract by reason of non-compliance with s 8.

6. [181]

   ACFM submits that the primary judge found that, by reason of the transfer of possession of the bills of lading by ASSH to ACFM pursuant to the Loan Agreement there was a possessory pledgee’s lien (referring to what was said at [151]). I have already noted that this finding was expressed conditionally, premised on the assumption that the CRO bills of lading had been the only original negotiable bills. The primary judge’s finding at [168] may be the more relevant in this context:

7. [182]

   ACFM refers to Westpac Banking Corp v The “Stone Gemini” (1999) 110 FCR 47 at 57; [1999] FCA 434 where there was a claim in conversion by a financier in respect of bills which became bearer bills by endorsement in blank. ACFM notes that authorities under the Bills of Lading Act 1855, 18 & 19 Vic, c 111, which applied prior to the Sea-Carriage Documents Act and equivalent legislation in the United Kingdom, suggest that the existence of a pledgee’s lien accompanied by endorsement, and the consequent transfer of rights, are a question of intention. ACFM submits that, absent a valid endorsement, an undertaking to procure a proper endorsement is capable of passing the property, referring to Scrutton on Charterparties (the relevant passage is at [10-010]); Dick v Lumsden (1793) Peake 250; 170 ER 146; Meyer v Sharpe (1813) 5 Taunt 74; 128 ER 614; and Nathan v Giles (1814) 5 Taunt 558; 128 ER 808. ACFM argues that once the pledgee’s lien is recognised then (even absent endorsement strictly to comply with s 8 of the Sea-Carriage Documents Act), the pledgee would still have a sufficient possessory interest to seek delivery up and sue in conversion for non-delivery (referring to Chabbra Corporation Pte Ltd v Jag Shakti (Owners) (The “Jag Shakti”) [1986] AC 337 at 345, 348 (“The ‘Jag Shakti’”); and Norman Palmer, Palmer on Bailment (3rd ed, 2009, Sweet & Maxwell) at [22-021]).

8. [183]

   The starting point for this argument is to note that, before the passage of the 1992 legislation in England, the authorities made clear that a pledgee did not meet the conditions in the 1855 legislation and that the only way that a pledgee could enforce a security against the goods was to present the bill it held (not by acquiring rights by a statutory transfer) to the carrier and invoking an implied contract of the kind considered in Brandt v Liverpool, Brazil and River Plate Steam Navigation Company Ltd [1924] 1 KB 575 (Brandt v Liverpool) or by suing in detinue or conversion for the goods or their equivalent if the goods were not delivered (see Borealis AB v Stargas Ltd (The “Berge Sisar”) [2002] 2 AC 205, though there the pledgee had an endorsed bill). (In this context reference was made to The Law Commission and The Scottish Law Commission, Rights of Suit in Respect of Carriage of Goods by Sea, (19 March 1991) at [2.30]-[2.31].)

9. [184]

   Mr Cox accepts that there are authorities in United Kingdom and Singapore that suggest the primary judge’s approach (i.e., that a contractual entitlement to have the bills endorsed would suffice) might be in error but relies on some of the analysis in those cases to support an argument that transfer of possession where there is an entitlement to procure endorsement may suffice.

10. [185]

    First, ACFM referred to the decision of the Court of Appeal in England in Standard Chartered Bank v Dorchester LNG (2) Ltd, which concerned ss 2(1) and 5(2)(b) of the Carriage of Goods by Sea Act 1992 (UK) (which supports the conclusion that there is no transfer of any contractual rights in the absence of an endorsement of the bills relating to the contract of carriage).

11. [186]

    There, the issue was whether Standard Chartered Bank had obtained title to sue in respect of what it said was a mis-delivery of the cargo. The Bank sought to establish it had title to sue in circumstances where Gunvor International BV had shipped some 17,000 metric tonnes of gasoil on board two vessels in Benin in May 2010; bills of lading were issued providing for carriage of the goods to Takoradi; and the bills were consigned to Société Générale (the bank of Gunvor International BV) or order.

12. [187]

    The litigation centred on a letter of credit which Standard Chartered Bank issued on 6 April 2010 in favour of the purchaser, which was later transferred to favour the vendor, Gunvor International BV. On 4 June 2010, Gunvor International BV through its bank, Société Générale, sought to draw upon the letter of credit. Société Générale presented to Standard Chartered Bank at its London offices a set of bills of lading covering the cargo, endorsed to the Standard Chartered Bank. The cargo at that time was still on board the Mt Erin Schulte. Standard Chartered Bank rejected the documents, saying they did not comply with the letter of credit. It retained the documents, but expressly stated that it was holding them to the order of Société Générale only.

13. [188]

    Discharge of the cargo was subsequently made, in the absence of the bills of lading, in exchange for an indemnity. The vendor subsequently succeeded in obliging Standard Chartered Bank to pay it under the letter of credit. Standard Chartered Bank then sued the owner of the vessel for mis-delivery, on account of it having discharged the goods without production of the bills of lading. The issue was whether Standard Chartered Bank had title to sue by reason of the statutory assignment of the contract of carriage effected by s 2(1) of the Carriage of Goods by Sea Act 1992 (UK) (the equivalent to s 8(1) of the Sea-Carriage Documents Act).

14. [189]

    Section 2 (as set out in the judgment of Moore-Bick LJ at [10]) materially provided:

15. [190]

    Relevant to s 2(1) was s 5(2) of the Carriage of Goods by Sea Act 1992 (UK) which provided:

16. [191]

    By comparison see s 5 of the Sea-Carriage Documents Act (set out above at [53]).

17. [192]

    Moore-Bick LJ held that Standard Chartered Bank was not a “holder” of the bill of lading at the material time, because there had been no transfer of possession to it. Moore-Bick LJ said at [28]:

18. [193]

    Accordingly, in that case there was an endorsement of the bill but no unconditional transfer of possession.

19. [194]

    Next, reference was made by ACFM to Keppel Tatlee Bank Ltd v Bandung Pte Ltd, where the Singapore Court of Appeal said (at [28]) (emphasis added):

20. [195]

    On the question of the transfer of contractual rights pursuant to the Sea-Carriage Documents Act, ACFM also referred to East West Corpn v DKBS AF 1912 A/S [2003] QB 1509 (“East West Corpn”). There, the shippers (claimants), East West Corpn and Utanika Ltd, sued the carriers for losses of goods in containers which were cleared through customs and delivered to a Chilean company (Gold Crown) without presentation of the bills of lading. The shippers had engaged the defendants to ship the goods from Hong Kong to Chile. The bills of lading were issued by the defendants and named the claimants as shippers, and (initially) named Gold Crown as the notify party. (Later, a different purchaser was named as the notify party on some of the bills.) The shippers arranged with their Hong Kong bankers to pass the bills of lading to two Chilean banks (Banco Credito and Banco de Chile), “for them (as the claimants’ agents or sub-agents) to collect the price due to the claimants from Gold Crown” (at [3]). As Mance LJ set out (at [3]):

21. [196]

    Relevantly, as Mance LJ set out (at [3]):

22. [197]

    The primary judge held that the claimants had parted with all contractual rights under the bills, and any right to immediate possession of the goods, when they endorsed the bills to the banks (at [8] per Mance LJ); and that the redelivery of the bills to the claimants did not transfer any rights of suit back to the claimants, because the bills were not endorsed back. Although ultimately successful on other grounds at first instance, on its response to the appeal, the claimant/respondent contended that the primary judge erred on the question of title to sue. That contention failed.

23. [198]

    Mance LJ rejected an argument for the claimant that, because the Chilean banks received the endorsement in the capacity of agent for the claimants, the claimants were the “holders” of the bills of lading within the meaning of the Carriage of Goods by Sea Act 1992 (UK). However, Mance LJ did say (at [16]):

24. [199]

    Although considered in passing in East West Corpn, the claimant there ultimately abandoned its contention based on a transfer of the contract of carriage (see [19] of the judgment of Mance LJ).

25. [200]

    Although in Standard Chartered Bank (at [22]) Mobic J expressed some qualifications about the proposition put by Mance LJ in East West Corpn, Mr Cox submits that on a proper reading of Mance LJ’s reasons at [16] and [17] (with whom the other members of the Court agreed) there was an acceptance that notwithstanding that there may be some non‑compliance with the Carriage of Goods by Sea Act 1992 (UK) the contract of carriage may be enforceable; such that it may be concluded that where there is assent to the transfer but no endorsement this may be sufficient in some circumstances. Thus in ACFM’s notice of contention it seeks to affirm the primary judge’s finding at first instance on the basis that the agreement to give the endorsement amounts to an assent to the transfer by endorsement, even though the endorsements had not occurred, and that this, combined with possession, would be sufficient even though there was non-compliance with s 8 of the Sea-Carriage Documents Act. Alternatively, ACFM submitted that upon presentation to the carrier of the unendorsed bill of lading, there could be a contract with the carrier of a Brandt v Liverpool kind.

26. [201]

    The alternative way that ACFM puts its argument under the notice of contention is that the primary judge’s approach of regarding the security of a pledgee’s lien as being able to be perfected is consistent with broader equitable principles and was not an error of law (reference being made by way of example to the analogy to an equitable assignment).

27. [202]

    As to the argument that ASSH’s transfer of possession of the CRO bills of lading was enforceable in equity and/or as an equitable assignment, ACFM refers to the following matters.

28. [203]

    First, that CRO’s bills of lading were prepared at ASSH’s request for the purpose of satisfying Special Condition 1 of the Loan Agreement between ASSH and ACFM ([23]-[26]). ACFM submits that ASSH’s intention to assign its contractual rights under the bills of lading is reinforced by Special Condition 1, which also required ASSH to deposit with ACFM, in addition to all original bills of lading, the invoice, customs declaration, packing slip and insurance documents such that ACFM could put itself into ASSH’s position vis-a-vis Freight Solutions/the carrier. Reference is also made to cl 24(a) of the Loan Agreement, which provides for a “right of collection” in an event of a default. ACFM argues that this supports a finding that the Loan Agreement was not merely creating a right of security, but included a right to seize possession of the goods upon ASSH’s default.

29. [204]

    Second, that CRO was aware that the purpose of issuing its bills of lading was for provision to a financier ([88]-[90]).

30. [205]

    Third, ACFM relies by way of analogy on the proposition that an assignment of a legal or equitable chose in action for good consideration is a valid assignment in equity, even where the assignment does not comply with the statutory requirements (referring to Olsson v Dyson (1969) 120 CLR 365 at 375-376; [1969] HCA 3), such as where there is an absence of writing or no notice to the debtor; and that in such a circumstance, the assignor holds the relevant right on trust for the assignee as a constructive trustee (see Last v Rosenfeld [1972] 2 NSWLR 923 at 933-934). It is submitted that, by way of analogy, the absence of a formal endorsement should not defeat ACFM’s security.

31. [206]

    Fourth, it is noted that no particular form is required to constitute a valid equitable assignment of a chose in action – all that is required being a clear intention on the part of the assignor to divest him or herself of the relevant contractual right so that it becomes property of the assignee (citing Comptroller of Stamps (Vic) v Howard Smith (1936) 54 CLR 614 at 619-620; [1936] HCA 12; Kuzmanovski v New South Wales Lotteries Corporation [2010] FCA 876; 270 ALR 65 at [27]); and that notice of the assignment to the debtor is not necessary for the assignment to be effective (citing Thomas v National Australia Bank [2000] 2 Qd R 448; [1999] QCA 525 at [18] and [25]). ACFM accepts that any equitable assignment is subject to all other equities that have matured at the time of notice to the debtor, but says that is not relevant in the present case.

32. [207]

    Finally, ACFM points to the fact that it provided significant consideration by providing the loan funds upon receiving each of the CRO bills of lading. It notes that on transfer of possession of the bills of lading, ASSH delivered the bills of lading but failed to endorse the bills. Accordingly, it is submitted that equity should treat the assignment of ASSH’s contractual rights to ACFM as valid despite the failure to meet the statutory requirements under the Sea-Carriages Documents Act. Further it is submitted that the equitable assignment of ASSH’s contractual rights should bind CRO in equity because it caused two sets of bills of lading to be issued to ASSH in respect of the same goods, upon which ACFM relied to its detriment.

33. [208]

    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.

34. [209]

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

35. [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.

36. [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.

37. [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.)

38. [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.

39. [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):

40. [215]

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

41. [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.

42. [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.)

43. [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.

44. [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).

45. [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.

46. [221]

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

47. [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.

48. [223]

    The Privy Council said (at 345):

49. [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.

50. [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.

51. [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]).

52. [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.

53. [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).

54. [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).

55. [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.

56. [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

1. [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.

2. [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.

3. [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.

4. [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.

5. [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).

6. [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):

7. [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]).

8. [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).

9. [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.

10. [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.

11. [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.

12. [243]

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

13. [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”.

14. [245]

    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:

15. [246]

    Later at 90, Judge Diamond observed:

16. [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).

17. [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]):

18. [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.

19. [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:

20. [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):

21. [252]

    Mance LJ concluded (at 1538):

22. [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):

23. [254]

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

24. [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.

25. [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.

26. [257]

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

27. [258]

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

28. [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.

29. [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”.

30. [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:

31. [262]

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

32. [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”.

33. [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.

34. [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:

35. [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

1. [267]

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

2. [268]

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