Freight Forwarders – Co-operation

1. We recently came across the latest legal updates of Kennedy’s in which they reported on an Australian case, Manassen Foods v Seaway Logistics : A salad dressing debacle decided as a matter of ‘undisclosed principal’ⁱ, which went right up to the Supreme Court of Victoria in Australia. The case review provided by Kennedy’s is an illuminating read, and we would recommend all who are involved in engaging third party agents / forwarders to read this so that they are aware of what can go wrong.
2. We have not sighted the Bills of Lading issued for the subject shipment and whether the Carrier (ANL) or for that matter SCM LLC (who issued an Agents BL) could have limited liability to a sum lower than the value of the cargo on the basis of the US Carriage of Goods by Sea Act 1936ⁱⁱ and which provides for a package limitation of US$ 500 per package.
3. We believe that much could have been avoided if
   1. The engagement of SCM LLC (AWA) by Seaway Logistics was by a written agreement with each party’s responsibilities and liabilities clearly listed.
   2. Additionally, the terms of engagement of Seaway Logistics could have been restricted to the terms provided in the Australian Industry (our web search suggests that the most of the Australian Freight Forwarders (FF’s) contract on Standard Trading Conditions (“STC”) for Freight Forwarders in Australia based on TT Condition Series 405) instead of on a “full value” basis. This would obviously be of assistance if limitation of liability could have been a defence.
4. It is a common practice that FF’s contact other FF’s to act as their agents in locations where they do not have an office or a representation. Usually, they would contact other FF’s based on recommendations from other FF’s and/or their Associations which they are members of. We would suggest that prior to proceeding with any engagement, FF’s should enter into a written agreement in which parties’ duties and responsibilities are clearly spelled out so as to avoid unnecessary legal costs/expenses at a later date.
5. We have always been advocating use of STC’sⁱⁱⁱ so that parties in the Transport and Logistics Industry can cap their exposures. One of the requirements for seeking liability coverage from Insurers is that they (FF’s) contract on terms which are approved by Insurers. While it is always possible to get full value coverage (such as terms on which Seaway Logistics contracted on), the general standard is to contract based on National FF Associations STC’s and which are generally considered as approved Terms. Any deviation on terms would mean that the terms of engagement would have to be provided to Insurers prior to binding cover and for which the Insurers would quote higher rates subject to there being a potential increase in risks.
6. In conclusion, FF’s must relook at
   1. the terms of engagement both with their customers and their service providers/agents.
   2. have checks and balances to ensure that proper instructions are received and acknowledged to avoid such mistakes as was in the above case.

^i. The full judgement can be viewed at https://jade.io/article/1116795?at.hl=Manassen
^ii. See Overview of Marine , Interstate and Intermodal Claims by Cozen O’ Connor, an American Law Firm and which can be viewed at cogsa.pdf
^iii. See our earlier article, Standard Trading Conditions – Time Bar & Limitation of Liability Clauses & Standard Trading Conditions and its importance to operators