Manassen Foods v Seaway Logistics: A salad dressing debacle decided as a matter of ‘undisclosed principal’

This case review was co-authored by Natalia Nader, paralegal.

In this 6 year, salad dressing saga the Supreme Court of Victoria has navigated murky waters to clarify agency relationships and obligations within freight forwarding contracts. The dispute centred on the spoilage of three cargoes of ‘Newman's Own’ salad dressing due to an incorrect reefer temperature setting. The case highlights the complex interplay of various transport agreements and documents, and liability for damaged goods during international transport.

Background

• Manassen Foods, an Australian importer, had purchased bottled salad dressing from a manufacturer / supplier in the United States on Ex Works (EXW) basis.
• Manassen Foods contracted with Seaway Logistics, a freight forwarder, to ship the cargoes from California to Australia under a ‘Services Agreement’ under which Seaway Logistics agreed to indemnify Manassen and assumed liability for the negligence of its subcontractors.
• Seaway, in turn, engaged Intelligent SCM LLC (AWA), a freight forwarder in the US, to handle arrangements locally.
• AWA engaged ANL Singapore Pte Ltd for the shipment of cargoes.
• AWA issued house bills of lading (HBLs) naming the US supplier as the ‘shipper’.
• ANL issued combined transport bills of lading which named AWA as the ‘shipper’ and forwarding agent, and Seaway as the consignee. Both recorded the EXW Incoterm.

AWA’s booking requests noted that the bookings required the reefers to be set at +10°C, however the booking confirmations from ANL incorrectly recorded -10°C, at which temperature the cargoes were carried, thus arriving spoiled.

Manassen held Seaway responsible, and Seaway said that unless AWA could point to the US supplier having instructed AWA to set the temperature at -10°C, Seaway held AWA liable.

Legal proceedings

In 2018, Manassen sued Seaway and ANL, but eventually discontinued against ANL.  Seaway joined AWA to the proceedings, alleging that if Seaway was liable, its liability stemmed from AWA’s negligence, as Seaway’s agent, or alternatively, as its subcontractor. AWA denied it was an agent or subcontractor of Seaway.

In 2021, Manassen and Seaway settled the claim as between them for AUS$328,449.60 plus interest of AUS$104,833.92, plus costs (Settlement Sum).  Seaway pursued AWA for the Settlement Sum.

AWA alleged claims of contributory negligence by Seaway by reason of Seaway failing to inform AWA of the correct carriage temperature. Seaway denied this on grounds that it did not know, and could not know, the correct carriage temperature, and that it did not tell AWA, or any other person, what the carriage temperature was.

In 2023, after a number of interlocutory skirmishes, AWA was successful in being permitted to drag ANL back into the proceedings, as an alleged concurrent wrongdoer. AWA alleged ANL did not comply with its instructions to set reefers at +10°C.

The litigation primarily involved determining whether AWA was acting as Seaway’s agent, consequently, whether AWA owed and breached an implied contractual term to exercise due care and skill in performing its services, and ANL’s culpability.

Key issues

Key issues before the Court were whether there was a contractual relationship between Seaway and AWA, and whether it contained an implied term of due care and skill that was breached by AWA, and was that breach causative of Seaway’s loss, being its liability to pay the Settlement Sum. If so, there was a dispute as to whether ANL was a concurrent wrongdoer and/or whether Seaway was contributorily negligent.

Alternatively, did AWA owe to Manassen, as the owner of the cargoes, a tortious duty to take reasonable care to prevent the loss of the cargoes which it breached. Did ANL, as ocean carrier, also owe to Manassen and breach its tortious duties and duties in bailment. Were the claims apportionable? If so what respective proportions of liability should each bear, and if not, how much was AWA liable to pay Seaway, by way of contribution, to the Settlement Sum.

Court’s analysis of agency

The main point of contention between the parties was for whom was AWA was acting as agent.  In other words, who was the ‘undisclosed principal’?

AWA’s position was that Seaway was Manassen’s agent (ie Manassen’s freight forwarder) and that AWA was the US supplier’s agent (ie its freight forwarder).

Under, say, a CIF contract, it is for seller/supplier to contract or procure a contract of carriage for the carriage of the goods, but here Manassen had purchased the goods on an EXW basis.  Even though the HBLs named the US supplier as ‘shipper’,  it  did not require a contract of carriage with anyone.  The HBLs issued by AWA, at best, served as an authority to enter into contracts with ANL, as agent on behalf of Manassen, as undisclosed principal. 

The Court held when booking carriage services with ANL under the standard operating procedures (SOP), AWA was acting as agent for Manassen as an undisclosed principal. Furthermore, based on the totality of the evidence — that being the correspondence between the parties, the signing of a SOP , a Carrier-to-Carrier (C2C) Agreement, and the nature of the shipments themselves — AWA had a contractual relationship with Seaway (a ‘freight forwarding agreement’ (FFA) as pleaded by Seaway).

As the FFA had not be formalised the actual terms of the FFA were left to be inferred before the presumed or imputed intention of the parties could be assessed. 

Implied term of due care and skill and breach

A crucial legal discussion revolved around whether there was an implied term in the alleged FFA obliging AWA to exercise due care and skill in arranging the shipments. The Court noted that a forwarding agent inherently takes some responsibility, which at a minimum requires due care in making proper arrangements.

The Court agreed with Seaway, concluding that an implied term of due care and skill was essential for the FFA’s commercial efficacy. The Court held that this included ensuring that the instructions it gave to ANL were received, understood, and accurately reflected in the booking confirmations. This responsibility extended beyond communicating the correct temperature settings for reefer units. AWA was responsible for ensuring that the goods for which it arranged carriage were, for example, picked up from the correct location, headed to the correct destination, and of course, set at the correct temperature for transport.

Despite the Court acknowledging that the temperature error originated with ANL, it found that AWA was also responsible for issuing corrections to any mistakes made by the carriers with which it did business, including ANL. On the facts, it failed to do so, even when subsequently prompted by ANL as to certain discrepancies in the instructions it had received.

Remoteness

AWA tried to argue that the loss, being the Settlement Sum, was too remote because it was never on notice of Seaway’s assumed contractual liability to Manassen under the Services Agreement for the actions of its subcontractors, meaning that AWA could not have known that it might incur a liability to Seaway for the Settlement Sum paid to Manassen should Manassen’s goods suffer damage during transport.

The Court rejected this argument holding that a contracting party can be taken as having assumed responsibility for loss that, at the time when the contract was made, it knew or should have known would probably result from the breach in question

It was not surprising, or unusual, that the Services Agreement included a term making Seaway liable to Manassen for loss and damage caused to Manassen, including due to the conduct of Seaway’s sub-contractors. 

Mitigation

AWA argued that in light of the indemnity clause in the Services Agreement, Seaway failed to mitigate its loss by defending the proceedings by Manassen at all, and so should not be liable for the interest and costs component of the Settlement Sum.

The Court rejected AWA’s argument, noting that while the law encourages parties reaching settlements, it is also important that parties be free to pursue their interests in litigation.

Contributory negligence and proportionate liability

AWA argued that Seaway had a residual responsibility to watch over the booking process and make sure everything was done correctly, which included checking the booking confirmations, as they were sent by AWA to Seaway under the terms of the SOP.

The Court disagreed and held that under the FFA, Seaway has contracted for AWA to undertake such tasks and it was reasonable for Seaway to rely on AWA to perform the freight forwarding services in the US, which included ensuring that the reefer units were set to the correct temperature for the carriage of Manassen’s goods.

As to ANL’s proportionate liability, the Court held that ANL’s initial error was compounded by AWA’s subsequent failure to review the booking confirmations and correct the error, and was then exacerbated when discrepancies were specifically drawn to its attention. It was reasonable in those circumstances that AWA bear more of the responsibility than ANL. The Court found AWA 60% liable for the first and third shipments, amount to 80% of the overall Settlement Sum.

Contribution

As there was a breach of contract by AWA, it was not necessary to consider the alternate claim for equitable contribution between parties who would otherwise be liable to Manassen. However, the Court nonetheless did so, ultimately rejecting AWA’s argument, and finding that its breach of duty caused Manassen’s loss and that, therefore, AWA was liable to contribute to the Settlement Sum in any event.

Comment 

The Manassen Foods v Seaway Logistics decision provides a significant clarification on the nature and extent of agency obligations in freight forwarding arrangements. It highlights that implied terms of due care and skill are fundamental to such relationships, placing stringent expectations on agents to verify and communicate critical shipment details accurately.

This case serves as a stern reminder—and perhaps a cautionary tale—to freight forwarders and logistics operators to maintain clear procedural rigor and effective communication protocols, lest they find themselves, metaphorically, subject to a ‘dressing down’ in court.