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Forwarders must be able to stop of goods in transit: Oz court

THE upshot of a recent Federal Court of Australia ruling involving Toll Holdings is a reminder to forwarders that they must be prepared to stop goods in transit and return them to the seller if the seller has not been paid, says lawyer Maurice Lynch writing in forwarderlaw.com, associated with PMlaw of Toronto.

"When asked to exercise a right of stoppage forwarders must have adequate procedures in place to determine whether or not they have delivered goods to the purchaser," he said.

The court ruled that they must understand their contractual obligations with the purchaser and the seller and/or their agents to ascertain when the parties contemplated that delivery from the seller to the purchaser will occur".

Mr Lynch said that they must "not blindly follow the usual procedures for the collection of goods from a port of discharge, even if the goods are being collected under bond".

The Australian case involves the exercise a right of stoppage by the Chinese seller of televisions to one Dick Smith. But Toll continued to adhere to the standard operating procedures it had under a master services agreement with Mr Smith.

This meant that despite having been requested to exercise a right of stoppage, Toll continued to issue delivery orders to Australian Container Freight Service which had been appointed by Mr Smith to collect containers from the wharf, and then transferred them under bond to ACFS's warehouse for local handling, unpacking, and redelivery to Mr Smith.

There was a dispute between the Chinese seller and the liquidator of Mr Smith as to who was entitled to the television sets. Accordingly, Toll commenced proceedings in the Federal Court to seek orders as to who was entitled to the televisions.

The court found that Toll had delivered the televisions to Dick Smith in violation of the Chinese seller's right of stoppage and was liable for damages.

When a forwarder is asked to exercise a right of stoppage, they should hold the cargo for the seller who has requested the right of stoppage be exercised and not undertake any act, which favours one party over the other in respect of the goods, said the article.