Factory Direct Fencing Pty Ltd v Kong AH International Company Limited [2013] QDC 239

DISTRICT COURT OF QUEENSLAND CITATION: Factory Direct Fencing Pty Ltd v Kong AH International Company Limited [2013] QDC 239 PARTIES: FACTORY DIRECT FENCING PTY LTD (plaintiff) v KONG AH INTERNATIONAL COMPANY LIMITED (defendant) FILE NO: 3925/12 DIVISION: Civil commercial list PROCEEDING: Trial ORIGINATING COURT: District Court of Queensland DELIVERED ON: 27 September 2013 DELIVERED AT: 27 September 2013 HEARING DATE: 29 and 30 January 2013 JUDGE: Andrews SC DCJ ORDER: THE PLAINTIFF’S CLAIM IS DISMISSED ON THE COUNTERCLAIM JUDGMENT FOR THE DEFENDANT AGAINST THE PLAINTIFF FOR US$163,452.50 AND INTEREST ON THAT SUM FROM 15 SEPTEMBER 2012 PURSUANT TO S 58 OF THE CIVIL PROCEEDINGS ACT THE TRIAL IS ADJOURNED FOR FURTHER ORDERS RELATING TO COSTS, INTEREST AND SPECIFIC PERFORMANCE CATCHWORDS: Sale of Goods-Property, passing of-FOB contract-bill of lading-whether title passed to buyer on loading-whether seller in breach for failing to authorise delivery before payment Negligence-Duty of care-economic loss from fraudster‟s interference in email communications-whether seller had duty of care to buyer to guard against misdirecting emails Contract-implied term-where seller and buyer communicated by email-whether term implied that seller will send emails to correct recipient-where fraudster received emails intended for buyer-where fraudster tricked buyer into paying fraudster -- 1 of 37 -- 2 Civil Liability Act-concurrent wrongdoers-where seller misdirects emails to fraudster-where fraudster tricked buyer into paying fraudster-whether seller and fraudster “concurrent wrongdoers” Apportionment-where fraudster sending emails to buyer and seller-where fraudster tricked buyer into paying into bank account of fraudster-where seller unaware of trick-where buyer suspicious-where buyer sought email assurances from fraudster-where buyer failed to telephone seller for confirmation between fraudster and seller-where fraudster not a party to proceeding-apportionment between buyer and seller-apportionment between seller and fraudster Civil Liability Act 2003 (Qld), s 28, s 30 (1), s 32G; Sale of Goods Act 1896 (Qld), s 21 Rule 5 (1) and (2), s 22(1) and (2) James v Commonwealth (1939) 62 CLR 339 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 Perre v Apand Pty Ltd (1999) 198 CLR 180 Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258 National Australia Bank Ltd v Hokit Pty Ltd (1996) 39 NSWLR 377 Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] 1 AC 80. London Joint Stock Bank Ltd v Macmillan and Arthur [1918] AC 777 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Peter Pan’s Backpacker Adventure Travel Pty Ltd v Eye Jam Interactive Pty Ltd [2012] QSC 227 Meandarra Aerial Spraying Pty Ltd v GEJ Geldard Pty Ltd [2012] QCA 315 Perpetual Trustee Company Ltd v Ishak [2012] NSWSC 697 Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635 Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234 LexisNexis Halsbury‟s Laws of Australia 110 Contract (V) Doctrine of Substantial Performance [110-8140] -- 2 of 37 -- 3 COUNSEL: Dietz for the plaintiff Greinke with Brandon for the defendant SOLICITORS: Tucker and Cowen solicitors for the plaintiff Morgan Conley as Town Agents for Auyeung Hencent and Day for the defendant Background [1] The plaintiff is an Australian importer (“the Buyer”) of fencing products. The defendant (“the Seller”) is an exporter of fencing products from the People‟s Republic of China. They agreed to do business with each other and to communicate by email. They agreed that the Buyer would order aluminium fencing products by email; that the Seller would reply by email with its bank account details; that the buyer would send a deposit to the nominated bank account; that goods would be delivered by the Seller to a carrier in China and the carrier would transport them to Australia; that the Seller would advise the carrier when the Seller received the balance payment to the Seller‟s bank account and the carrier would then release the goods in Australia to the Buyer. They conducted business with each other in this way. A fraudster impersonating the Buyer and the Seller intervened in their email correspondence. The fraudster impersonating the Seller emailed the Buyer requesting payment to the fraudster‟s bank account. The Buyer paid to the fraudster‟s bank account 70% of the price being the balance due on the goods. The Seller remained unpaid. Goods arrived in Australia in the custody of the carrier. The Seller refused to authorise the carrier to release the goods to the Buyer, on account of non-payment. The Buyer and Seller obtained an interim consent order that the goods be held by the Buyer pending the outcome of this proceeding. That reduced the expense of holding the goods pending the findings in this trial. Issues [2] Did the fraudster‟s emails to the Buyer come from the Seller‟s employee? (No) Is the Seller in breach of contract for failing to provide original bills of lading to the carrier or to otherwise authorise the carrier to release of the goods to the Buyer? (No) Has title to the goods passed to the Buyer and is the Buyer entitled to immediate possession? (No and no) Is the Seller entitled to further payment? (Yes) If the Seller emailed invoices seeking the balance 70% only to the fraudster, and has not emailed invoices to the Buyer is the Seller‟s cause of action against complete? (Yes) Did the Seller owe a duty of care to the Buyer in tort to guard against misdirecting emails intended for the Buyer? (No) Did the Seller owe a duty of care to the Buyer in contract not to misdirect emails intended for the Buyer? (No) If economic loss were recoverable from the Seller for breach of duty, would the Seller and the fraudster be “concurrent wrongdoers” within the meaning of section 30 of the Civil Liability Act 2003 (Qld)? (Yes) If so, how would liability be apportioned between the fraudster and the Seller? (90% to the fraudster and 10% to the Seller) If economic loss were recoverable from the Seller for breach of duty, was there contributory negligence by the Buyer? (Yes) How would the hypothetical liability be apportioned between Buyer and Seller? What is the quantum of damage if the Seller had breached the contract by failing to authorise delivery? What is the -- 3 of 37 -- 4 quantum of damage if the Seller had breached a duty in tort by misdirecting emails? Is the Seller unjustly enriched in respect of detention charges paid and detention expenses incurred by the Buyer since the goods were delivered to Brisbane and is the Buyer is entitled to an order for restitution? (No and no) Is either of the Buyer or Seller entitled to specific performance? (The Seller is) What are the proper adjustments between the Buyer and Seller? The Facts [3] The plaintiff Buyer is an Australian corporation which imports aluminium fencing products from the People‟s Republic of China. The Seller supplies fencing products. On 17 November 2011 in the People‟s Republic of China representatives of the Buyer and Seller met. The Buyer was represented by Mr Glenn Hosking (“Mr Hosking”) and Mr Sutherland. Mr Sutherland is the Buyer‟s sales manager and Mr Hosking is its director. Ms Huang was the Seller‟s representative at the meeting and acted for the Seller in her subsequent dealings with the Buyer. There is a dispute as to whether the Seller was the manufacturer or only the exporter of the aluminium fencing products. Nothing turns on a resolution of that issue. [4] There is a dispute as to whether a contract was made at the meeting on 17 October 2011 or whether there were several agreements entered into from time to time. Nothing was identified as turning upon a resolution of that issue. I am not satisfied of the terms which were agreed on 17 October 2011. I accept that the terms may be ascertained by the documents used by the Buyer and the Seller and their course of dealing with each other. That course of dealing seems to be undisputed. [5] In and from December 2011 there was a consistent course of dealing between the Seller and the Buyer which took place in a consistent sequence. The course of dealing and its sequence follows. [6] The Buyer would email Ms Huang describing goods the Buyer intended to buy. Ms Huang would email the Buyer with: an electronic copy of the Seller‟s invoice detailing the products to be manufactured and to be supplied by the Seller to the Buyer with a demand for an amount to be paid by the Buyer as a 30% deposit with details of a bank account into which the deposit was to be paid; and an electronic copy of the Seller‟s “purchase order” form confirming the quantity and “FOB Price” of each of the products that the Buyer had requested the Seller to supply. [7] On receiving the Seller‟s invoice, the Buyer by Mr Hosking would pay the amount of the deposit in accordance with the amount and bank account for the Seller shown in the invoice and email the telegraphic transfer receipt to the Seller. [8] After confirming payment of the deposit by the Buyer to the Seller‟s bank account, the Seller would produce and deliver the products to the Buyer‟s nominated logistics company for shipping from the People‟s Republic of China to Australia, loading the products into containers provided by the carrier. The carrier nominated by the Buyer in the case of each supply was Mainfreight International Pty Ltd (“Mainfreight”). [9] When the Seller‟s products were loaded into the containers, Mainfreight would email to the Seller a copy of the bill of lading. [10] The status of a copy bill of lading differs from the status of an original. -- 4 of 37 -- 5 [11] Examples of a copy bill of lading are in evidence and their status as a copy is clearly designated by the words: COPY ORIGINAL BILL REQUIRED AT DESTINATION1 [12] The wording of each bill of lading would indicate that the consignee was the Buyer showing the Buyer‟s address in Queensland and its contact as Mr Hosking. It would not be expressly consigned “To order”. The bill of lading would also provide, so far as is relevant, “…one (1) original Bill of Lading has been signed…if required by the Carrier one (1) original Bill of Lading must be surrendered duly endorsed in exchange for the Goods or delivery order.” Condition 4(4) of each bill of lading provided, subject to any national law to the contrary, unless consigned “to order” the Shipper, (which was the Seller), was entitled to change the name of the Consignee, (which was the Buyer) at any time to the party claiming delivery of the goods after their arrival at Brisbane. [13] A feature of condition 4(4) was an agreement between Mainfreight and the Seller, permitting the Seller to change the name of the consignee. That feature seems to be consistent with the Seller‟s reservation of a right against Mainfreight which secured to the Seller a power to prevent delivery by Mainfreight to the Buyer even though the Buyer had been named in the original bill of lading as consignee. In addition, the Seller had the capacity to refrain from surrendering to Mainfreight any original bill of lading it had received, duly indorsed. If the Seller failed to surrender an original bill of lading then Mainfreight was at liberty to decline to deliver to the consignee. [14] Ms Huang‟s affidavit described the procedure followed in each case prior to the disputed invoices and she deposed that Mainfreight would email to the Seller a “copy” of the bill of lading. [15] Upon delivery of the products by the Seller to Mainfreight and receipt of the copy of the bill of lading, Ms Huang would email the Buyer with electronic copies of: the Seller‟s “packing list” form which detailed the products the Seller had packed into each shipping container, the container number and the seal number for the container; the Seller‟s invoice detailing the products manufactured and supplied with detail of the amount in US dollars to be paid by the Buyer as the 70% balance and details of the Seller‟s bank account into which the balance was to be paid by the Buyer; a packing declaration completed and signed by Ms Huang; a copy of the bill of lading issued by Mainfreight to the Seller detailing the shipper (identified as the Seller), the containers, the consignee (identified as the Buyer) and the terms and conditions under which Mainfreight agreed to transport the goods. [16] Then, after receiving the email from Ms Huang, Mr Hosking would pay the 70% outstanding balance to the bank account number shown in the invoice as the Seller‟s account and email a telegraphic transfer receipt to Ms Huang. [17] Then, Ms Huang would check the Seller‟s bank account and upon verifying that the 70% balance had been deposited by the Buyer, she would proceed to the next step. 1 Eg KA-1 pp 47 and 48 and KA-1 pp 71 and 72 -- 5 of 37 -- 6 [18] Then, the next step in the usual course of dealing is described differently by Mr Hosking and Ms Huang. Mr Hosking deposed2 that the Seller then: released the original bill of lading to Mainfreight, or if this had not occurred within a reasonable period after payment of the final pro forma invoice, Mr McGillivray would send an email to the (Seller‟s) address for correspondence requesting the release of the original bill of lading The Buyer pleaded3 consistently with Mr Hosking‟s affidavit that: Upon payment of the “balance” by the (Buyer)…the (Seller) would: (i) provide the original of the “Bill of Lading” … to the (Seller‟s) nominated logistics company (Mainfreight); or (ii) authorise (Mainfreight) to release the products manufactured and supplied by the (Seller) to the (Buyer). That pleading was not expressly pleaded to by the Seller and a consequence is that it is deemed to be admitted. That part of Mr Hosking‟s evidence was not expressly contradicted by Ms Huang. When describing the process in transactions prior to the disputed transactions, Ms Huang does not expressly depose to the Seller‟s receipt or release of the original bill of lading. Instead, she deposed that after payment of the balance 70% the steps were: (Seller)…instructs Mainfreight to release the goods to (Buyer) by way of telex release Mainfreight issues telex BOL to (Seller) after receiving instructions to release (Seller) provides telex BOL to (Buyer) as evidence of release and transfer of title (Buyer) presents telex BOL to Mainfreight and obtains the goods [19] Prior to the disputed transactions the Seller‟s method, after confirming payment to it, was to lodge a “REQUEST FOR TELEX RELEASE OF SHIPMENT AT DESTINATION” form at the office of Mainfreight in Shenzhen. The wording of the form was a request to Mainfreight to release the shipment to the Buyer upon settlement of all payable freight charges by the Seller and without presentation of the original bill of lading at destination. [20] It is not necessary to resolve the correctness of the apparently different suppositions deposed to by Mr Hosking and Ms Huang. Neither party made a submission about the difference or cross-examined the deponents to clarify the differences. The significant fact is that pursuant to the prior course of dealing between Seller and Buyer, after the Buyer had made payment of the final 70%, the buyer depended upon the Seller to provide authorisation to Mainfreight to achieve a release the goods to the Buyer. Each of Ms Huang and Mr Hosking deposed to a course of dealing whereby the right to require the release of the goods to the Buyer was conditional upon a step or steps to be taken by the Seller after full payment by the Buyer. The step was either the Seller‟s provision of the original bill of lading to Mainfreight or provision of a request for telex release to Mainfreight, or both and may also have included the Seller‟s provision of the telex bill of lading to the Buyer for presentation to Mainfreight. 2 Affidavit G Hosking sw 20 Jan 2013 par 35(g). 3 FASOC par 3(i) -- 6 of 37 -- 7 [21] For communication between the Buyer and the Seller, the Buyer requested that emails be used. Mr Sutherland accepted that reasons for that request included speed and convenience. I accept that they are two reasons for the request. [22] The email address used by Ms Huang was “[email protected]” and that was the address to which the Buyer successfully sent emails to Ms Huang. At least that was the case until about 17 August 2012. From about that date there is an issue as to whether emails sent to and from that address were sent to or by a fraudster or intercepted by a fraudster. The correct address can be distinguished from a similar but different “[email protected]”. The email address used by Mr Hosking was “[email protected]” and that was the address to which the Seller successfully sent emails to Mr Hosking. At least that was the case until about 17 August 2012. Mr Hosking‟s correct email address can be distinguished from a similar but different “[email protected]” from which a number of emails were sent to Ms Huang on and from 17 August 2012. [23] It is uncontested that a term of the agreements or the agreement was that the transactions were FOB or free on board. [24] The transactions were expressly on “free on board” or “FOB” terms. This arises from: 1. each of the purchase orders being quoted in “FOB Shenzhen Price”;4 2. each of the bills of lading refer to “Incoterms: FOB”, “Shipped on Board”.5 [25] Under a classic FOB contract, a seller places the goods on board the ship, and procures a bill of lading in terms usual in the trade. The buyer nominates the shipper (and often also the ship)6 and bears all the expenses associated with the vessel including port charges, freight, customs duties, storage and arrivals charges.7 [26] A consequence was that the Buyer would bear the cost of freight, customs and other costs from the time the cargo was accepted by Mainfreight. The relevance of this comes to determining which party must bear the cost of detention. If the Seller was in breach, it accepts that it must bear the costs of detention. If the Seller was not in breach, it contends that the Buyer must bear those costs. The Buyer does not submit otherwise. The Buyer does have other bases for claiming detention charges. It seems to me that the Buyer claims the detention charges as damages for negligence, as damages for breach of contract or as restitution for unjust enrichment. [27] The agreements are contracts for the sale of goods within the meaning of the Sale of Goods Act 1896 (Qld) (“SoGA”). There is no dispute between the parties that the provisions of the SoGA apply to the contractual relations agreed between the parties. There is no dispute between the parties that the court need not apply the provisions of the Vienna Convention to the contractual relations agreed between the parties. [28] The goods were “ascertained” within the meaning of SoGA s19 by the time they were described in the packing lists which detailed the products the Seller had packed into each shipping container after delivery to Mainfreight. 4 eg Exhibit KA-1 p 24; also found in 40-45, 60-65, 85-86, 97-98. 5 eg Exhibit KA-1 p 47; also found at 58, 71, 74, 89, 101, 103. 6 J & J Cunningham Ltd v Robert A Munro & Co Ltd (1922) 28 Com Cas 42. 7 Martin v Hogan (1917) 24 CLR 234; Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402. -- 7 of 37 -- 8 The relevant transactions [29] The transactions in dispute involved three orders: Order No. Date of Order Signed by Buyer Price Deposit Invoice No. (deposit) PO 115408 06.06.12 07.06.12 $155,405.009 $42,781.50 20120607 PO 1154010 08.06.12 08.06.12 $3,840.00 20120608 PO 32911 14.06.12 14.06.12 $31,225.0012 $9,114.00 20120614 Q1PO42213 28.07.12 28.07.12 $57,450.0014 $14,892.00 20120726 [30] The Buyer accepted the terms of each of the purchase orders and invoices for the payment of deposits by signing and returning the invoices as follows: Order No. Accepted by Buyer PO 11540 07.06.1215 PO 11540 08.06.1216 PO 329 14.06.1217 Q1PO422 28.07.1218 [31] The Seller arranged for the goods for each order to be manufactured and then shipped as follows: Order No. Date Shipped Container No. Bill of Lading Invoice No. 8 Exhibit KA-1 pp 10-12. 9 Affidavit of Boazhu Huang filed 14.01.13, [66]. 10 Exhibit KA-1 p 13. 11 Exhibit KA-1 p 16-19. 12 Affidavit of Boazhu Huang filed 14.01.13, [66]. 13 Exhibit KA-1 pp 21, 23-24. 14 Affidavit of Boazhu Huang filed 14.01.13, [66]. 15 Exhibit KA-1 p 13. 16 Exhibit KA-1 p 15. 17 Exhibit KA-1 pp 16-19. 18 Exhibit KA-1 p 24. -- 8 of 37 -- 9 (balance price) PO 1154019 19.08.12 CBHU8511349 CAXU9310628 CBHU9075933 CBHU8967658 CBHU8286504 CBHU5780724 SZBNE1132237 “ “ “ “ SZBNE1142686 20120818 ($108,783.50) PO 32920 CCLU7085188 SZMEL1143764 20120831 ($22,111.00) PO Q1PO42221 03.09.12 CCLU7410040 TCNU6690064 SZBNE1143761 20120828 ($32,558.00) [32] The payment details for the balance purchase price noted on the commercial invoices for each purchase order, PO 1154,22 PO 32923 and PO Q1PO42224 prepared by Ms Huang, stated the following bank details: Name of Beneficiary: Kong Ah International Company Limited Bank Address: Units 1208-18 Miramar Tower, 132-134 Nathan Road, Tsimshatsui, Kowloon Account No.: (Multi-Curreycy,e.g. USD,HKD,EUR) 470890070 Bank Name: DBS Bank (Hong Kong) Limited Bank Swift Code: DHBKHKHH (must fill in) Bank Code: 016 Branch Code: 494 [33] The Seller remains unpaid US $163,452.50 being the total for the three invoices 21120818, 20120831 and 20120828. The buyer has paid that sum to the Silvercord account. [34] The goods were transported to Brisbane. Mainfreight refused to release the goods to the Buyer in Brisbane without the Seller‟s authority. The Seller, from on or about 12 September 2012 refused the repeated demands of the Buyer to authorise 19 Exhibit KA-1 pp 33-49. 20 Exhibit KA-1 pp 100–106. 21 Exhibit KA-1 pp 82-90. 22 Exhibit KA-1 p 40. 23 Exhibit KA-1 p 103. 24 Exhibit KA-1 p 85. -- 9 of 37 -- 10 Mainfreight to deliver or release to the Buyer the disputed goods and refused to deliver the relevant original Bills of Lading. Facts relating to the fraud [35] The Buyer contends that the Seller directed it to make payments into a bank account, being HSBC Bank Hong Kong, account number 817-589104-838 in the name of Silvercord Corporation Limited (“the Silvercord account”). [36] This direction appears in the following emails, each purportedly from Ms Huang. In summary, the emails provided: 1. on 17 August 2012 an email stating that there was a problem with Kong Ah‟s bank account, and provided as an alternative the banking details for the Silvercord account;25 2. on 21 August 2012 two emails attaching electronic copies of commercial invoices showing the Seller‟s name in the letterhead and each of which nominated the Silvercord account as payee;26 3. on 22 August 2012 an email asking whether payment had been made into the Silvercord account;27 4. on 31 August 2012 an email attaching further commercial invoices showing the Seller‟s name in the letterhead and nominating the Silvercord account;28 5. on 5 September 2012 an email attaching another commercial invoice showing the Seller‟s name in the letterhead and nominating the Silvercord account.29 [37] As for the first of those emails: On 17 August 2012 Mr Hosking received it.30 So far as is relevant, the email as it appeared when Mr Hosking received it, read as follows: From: Jewel Huang [[email protected]] Sent: Friday, 17 August 2012 4:47 AM To: Glenn Hosking Subject: ??: FDF Order Hi Glenn, We have just been notified by Our Bankers that Deposit made to us for container loads of our products by a Customer/Buyer from Brazil was under investigation and his funds were believed to have come from suspected drug dealing. The customer instructed his business associates in Mexico to T/T the Funds for three 40ft container load to our Company account and now it is putting our account under investigation, so not until they finish this pending investigation before we will be able to use the account normally again. We would not want to make T/T to this our account at this time, pls make payment to this our Subsidiary Company account. Bank information: Beneficiary Bank: HSBC. Hong Kong. Swift Code: HSBCHKHHHKH A/C #: 817-589104-838 Beneficiary: Silvercord Corporation Limited 25 Hosking at [50] and GH-8 pp 68-69. 26 Hosking at [53], [57] and GH-8 pp 73-88, 89-94. 27 Hosking at [60] and GH-8 p 95. 28 Hosking at [64] and GH-8 pp 104-112. 29 Hosking at [73] and GH-8 pp 123-128. 30 The email is Exhibit GH-8 pg 68 to the Affidavit of G Hosking sworn 20 January 2013. -- 10 of 37 -- 11 Sorry for any inconvenience and hope you will make the payment for us as soon as possible and do please scan and email me receipt when the payment is made. Thank you, if you have any question, Pls feel free to contact me. Jewel … [38] Notable aspects of that email, in the form in which Mr Hosking received it, are that it purports to be from “Jewel Huang [[email protected]]” and it showed Ms Huang‟s correct email address in the “From” line. Several later emails from the fraudster to Mr Hosking showed a different email address in the header for the sender, namely, the similar but different “Jewel Huang [[email protected]]”. The Buyer argues that the difference supports its contention that the first email of 17 August and set out above was sent from [email protected] by Ms Huang. [39] The bank information provided was not for an account of the Seller. A fraudster was responsible for the form of email Mr Hosking received. The first issue is whether Ms Huang was the sender of the email in the form in which Mr Hosking received it. [40] Ms Huang is the only person in the Seller‟s employ who should have known her password to log in to the email account she had with Yahoo at relevant times. She had set the account up herself. Other employees of the Seller use different personal email accounts. [41] The Buyer relies particularly upon the appearance of Ms Huang‟s correct address in the line “Jewel Huang [[email protected]]”. The Seller‟s computer expert gave evidence that such addresses can be forged by a sender. I accept that such addresses can be so forged. After “preliminary testing” of the email headers, the expert reported that he did not find any evidence of such forgery. His failure to find evidence of forgery from preliminary testing is not to be understood as an opinion by him that there was no such forgery. [42] Despite evidence by the expert that in his preliminary testing he did not find any evidence of such forgery, it is more correct to conclude that he found some evidence consistent with forgery, though inconclusive. That evidence was of the Internet Protocol addresses of a number of emails purportedly sent from Ms Huang in The People‟s Republic of China and from Mr Hosking in Australia. Such emails as were essential to the fraud had IP addresses from Nigeria. It was the expert‟s evidence that the Internet Protocol address data for the email of 17 August and purportedly from Ms Huang, was not for an address within The Peoples‟ Republic of China but was for an address within Nigeria. He accepted that IP address data could also be forged. Thus, an email‟s IP address within the Peoples‟ Republic of China, might be forged to appear to be from elsewhere. An uncontentious email from Ms Huang and sent to Mr Hosking on 26 July 2012 had an IP address from the Peoples‟ Republic of China. [43] Emails‟ “headers” include a sender address line, such as “Jewel Huang [[email protected]]”. The disputed emails purportedly from Ms Huang had IP addresses purportedly from Nigeria. Several emails received by Ms Huang purportedly from Mr Hosking in Australia and consistent with being used to conceal the fraud from Ms Huang purported to have a Nigerian IP address. [44] Ms Huang deposed that she did not send the disputed emails which instructed the Buyer to pay funds to Silvercord account. She was made available for cross- examination. It was not suggested to her that she had sent the email of 17 August or -- 11 of 37 -- 12 any of the subsequent disputed emails. Ms Huang impressed me as an honest witness. Her evidence and the expert‟s are consistent with Ms Huang‟s being innocent of the fraud. When the email chains are examined, their contents are consistent with a third party becoming involved, who intercepted and retransmitted the critical emails, with amendments essential for the fraud. I find that is what occurred. [45] The fraudster interposed between Ms Huang and Mr Hosking by 17 August 2012. Shortly after that date the fraudster used the deceptively similar email addresses: 1. [email protected] for Ms Huang; 2. [email protected] for Mr Hosking. [46] I accept that Ms Huang did not send any of the disputed emails. It was not the Buyer‟s case that any servant or agent of the Seller other than Ms Huang was the author of the disputed emails purporting to be from Ms Huang. [47] I find that emails directing the Buyer to pay the Silvercord account were not sent by the Seller or for the Seller by its servant or agent. [48] It follows that the Seller did not direct the Buyer to pay into the Silvercord account, that payments by the Buyer to the Silvercord account do not constitute payment to the Seller or payment in accordance with the course of dealing between the Buyer and Seller. Further facts and findings relevant to failure to take reasonable care [49] To the email from the fraudster, Mr Hosking responded with an email which provided as follows:31 From: Glenn Sent: Friday, 17 August 2012 7:51 AM To: „Jewel Huang‟ Subject: RE: … : FDF Order Hi Jewel Are our orders complete? Can you please send me copies of the BOL and the balance owing. Can someone from your company also send confirmation of the Bank Details on a letterhead. Regards GLENN HOSKING // Managing Director T // 07 3827 8700 F // 07 3803 1647 E // [email protected] W // www.fdfencing.com.au [50] Mr Hosking was concerned that something might be amiss when he specifically requested confirmation of the change of banking details on the Seller‟s letterhead.32 [51] He explained in cross-examination:33 31 Exhibit GH-8 pg 70 to the Affidavit of G Hosking sworn 20 January 2013. 32 Hosking [52] and GH-8 pp 70-72. 33 T1-54 l45 et seq -- 12 of 37 -- 13 You don't normally receive emails from your suppliers talking about drug dealing investigations and they've-----?-- I've had two other suppliers who've sent us similar emails. It caused you some concern, didn't it, in relation to your dealings with Kong Ah?-- If the - something like the bank account changes then, yeah, I definitely want to confirm it. … I just don't accept changes to bank accounts unless it's on a proper commercial document. Mmm-hmm?-- We were just being careful. As I said, I've had this come up before with other suppliers, so we - we ask from the same previous times. And you also agree that you could have faxed that request rather than emailed it; yes?-- We could have, but we don't - we never corresponded them with by - with them by fax previously, so I saw no worries in this part then. And you also agree that you could have telephoned Ms Yuang to talk to her about it?-- Yeah. I - I could have, but I prefer not to. I like to have a - a written trail. And in relation to your email at page 70, you never received a direct response to that. And what I mean by "direct response" is you never received a reply which referred to this request; that's correct, isn't it?-- No. I received all the commercial documents in a pro forma invoice which had all the documents that we required, and it had the banking details. [52] He did not pursue it further by facsimile or by telephone to Ms Huang. He received no confirmation of the bank details from someone in the Seller‟s company using the Seller‟s letterhead. He had Ms Huang‟s telephone number but did not call it. Had Mr Hosking made a telephone inquiry at that point the fraud most likely would have been discovered, as occurred after 12 September 2012, when Mr Hosking sent Ms Huang copies of his emails with the fraudster. Ultimately, Mr Hosking received emails which appeared to him to be from Ms Huang attaching electronic copies of invoices showing the Seller‟s name at the top and the Silvercord account details at the bottom. He relied solely on email communications. [53] In response to that email Mr Hosking received from the fraudster the following email which read, so far as is relevant:34 From: Jewel Huang [[email protected]] Sent: Tuesday, 21 August 2012 12:34 PM To: Glenn Hosking Subject: ... B/L FOR PO 11540 Attachments: _2012_08_20.zip 34 The email is Exhibit GH-8 pg 73 to the Affidavit of G Hosking sworn 20 January 2013. -- 13 of 37 -- 14 Hi Glenn We have tried our best to loaded the rest the products of the order 11540 on the last day before the ship is leaving, but there is still one 20GP container can not be caught up with the last minutes of declaring at customs. This container has to be shipped this week with the rest orders. It is our responsibility that we haven‟t arranged the time of loading and we promise that it will never happen again. Pls check the attached files for the packing lists, commercial invoice, B/L copy, the packing declaration and the PI for the balance payment. In the following email, I will attached the documents for this 20GP container that will be shipped this week, including the packing list, commercial invoice, B/L copy and the packing declaration. Thanks Jewel [54] Attached to the email were a number of documents including an invoice which read, so far as is relevant: KONG AH INTERNATIONAL COMPANY LIMITED … PROFORMA INVOICE CUSTOMER: FDF FENCING SOLUTIONS P/I MO.: 20120818 P/O NO.: 11540 DATE: 18.08.2012 Product type: Aluminium Panels & Posts … 70% balance (USD) 108,783.50 … 4.Bank detail: Name of Beneficiary: Silvercord Corporation Limited. Bank Address: 1 Queens Road Central, Hong Kong Account No.: 817-589104-838 Beneficiary Bank: HSBC Hong Kong Bank Swift Code: HSBCHKHHHKH … 18.08.2012 [55] As well as that invoice, the email attached five other invoices which contained the Seller‟s name at the top and the Silvercord account details at the foot. Mr Hosking considered those invoices, observed the Seller‟s name in the invoices, observed Silvercord‟s bank account details in the same document and regarded those matters as confirmation of the Seller‟s intention to change bank account to the account in the name of Silvercord Corporation Limited. [56] It is notable that the email attaching the Silvercord bank account details from the person purporting to be “Jewel” also showed Ms Huang‟s correct email address in the “From” line. The expert witness‟s researches revealed to him that the IP address of the email appears to be from within Nigeria, though that appearance is inconclusive because the IP address is capable of forgery. [57] On 21 August 2012 at 12.40 pm Mr Hosking received another email attaching files which included invoices. The invoices again referred to the Silvercord account. The email‟s header showed Ms Huang‟s correct email address in the “From” line.35 It is 35 Exhibit GH-8 pp 89-94 to the Affidavit of G Hosking sworn 20 January 2013 -- 14 of 37 -- 15 the fact that the IP address of the email appears from expert inspection to be from within Nigeria, though that is capable of forgery. [58] On 27 August 2012 Mr Hosking applied to the National Australia Bank for a telegraphic transfer payment to the Seller of US$108,783.50. [59] On 28 August 2012 Mr Hosking received a call from the bank advising that the transfer had been declined as the beneficiary details, being those of the Seller, did not match the account number. He immediately resubmitted an application for payment to Silvercord Corporation Limited as the beneficiary. Mr Hosking directed the bank to pay funds to the fraudster and to its account because he was tricked by the fraudster. Through Mr Hosking, the Buyer was already alert to the risk that the Seller had not authorised payment to the Silvercord account. Through Mr Hosking the buyer failed to take care for its own safety by directing payment to the Silvercord account without first obtaining confirmation that this was the Seller‟s instruction from Ms Huang by telephone or by writing other than email, for instance by facsimile. [60] On 28 August the Buyer paid to the Silvercord account US$108,783.50. [61] On 31 August 2012 Mr Hosking received an email36 which purported to be: “From: Jewel Huang [[email protected]]” [62] Notably, the sender‟s address appearing in the email was different from prior emails which had purported to be from “Jewel Huang [[email protected]]”. The difference is slight, being the inclusion of a full stop between “Junfu” and “metal”. Mr Hosking did not observe the difference. If that failure to observe the difference was a failure to take reasonable care for the safety of the Buyer, it did not cause the loss of the US$108,783.5 which was paid to the Silvercord account several days before. The expert witness‟s researches revealed that the IP address of the email appears to be from within Nigeria, though that is capable of forgery. [63] A number of subsequent emails were received and sent by Mr Hosking relating to orders with the emails purporting to be from Ms Huang showing an address containing the words “Junfu.metal”. The words are part of a sham address not used by Ms Huang. [64] On 4 September 2012 the Buyer paid another US$32,558.00 to the Silvercord account. Mr Hosking had failed to observe that emails relating to this amount and preceding the payment were from “[email protected]”. [65] On 6 September Mr Hosking learned from Mainfreight that containers had arrived but that Mainfreight had not received the original bills of lading. Mr Hosking continued to send and receive emails in the belief that he was corresponding with Ms Huang. [66] On 12 September 2012 Mr Hosking telephoned Ms Huang‟s mobile because he was concerned that the Buyer had paid for two orders but the Seller would not provide the original bill of lading to Mainfreight. Though Ms Huang had contacted Mr 36 Exhibit GH-8 pp 104-112 to the Affidavit of G Hosking sworn 20 January 2013 -- 15 of 37 -- 16 Hosking using her mobile once in 2011 this was the first time Mr Hosking contacted Ms Huang by telephone. He spoke with Ms Huang who said that she had not received payment. Mr Hosking explained that the Buyer had paid US$108,000 and US$32,558 and had sent TT documents to evidence the transaction. Ms Huang said she had not received them. He offered to resend the documents. [67] Mr Hosking composed a new email and noticed that he had two email addresses for Ms Huang: “[email protected]” and “[email protected]”. So he sent the documents to both email addresses. He immediately followed up the emails with a telephone call to Ms Huang. She told him she had not received the emails and asked him to send documents to a third, different email address, the Baozhu address. That was successful. [68] At all relevant times before 13 September 2012, Ms Huang had not appreciated that there had been any change in the email address used by the sender of emails purporting to come from Mr Hosking since the address was not displayed on screen by her “email client”. I understand “email client” to mean the program operating to display an electronic copy of an email sent to Ms Huang and operating when Ms Huang opened her email program to type a message for emailing from her email address. She discovered the different address “[email protected]” only when she examined emails sent to her by Mr Hosking on 13 September 2012 as those emails had copies of email chains within them and the chains revealed the address.37Only in the few days following did she print copies of earlier emails for review. By printing them she discovered they too contained the fraudster‟s “[email protected]” address.38 [69] On 13 September Mr Hosking received an email purporting to be from the sham email address and stating that the Seller had received payment for the first and final orders and that telex releases would be sent to the Buyer. He sent to Ms Huang at the Baozhu address copies of the emails he believed he had been exchanging with Ms Huang including the documents which would prove payment. [70] When the fraudster sent false or altered emails to Ms Huang purporting to be from Mr Hosking, the fraudster sent emails from an address which was not Mr Hosking‟s. Instead the fraudster used the different, yet similar “[email protected]” to send emails to Ms Huang. An email reply from Ms Huang to that address would go directly to the fraudster and not directly to Mr Hosking. An issue arose as to whether Ms Huang should reasonably have noticed the change when receiving emails from the fraudster or when sending a reply. [71] At the time Ms Huang received emails from the fraudster she did not realise that there had been any change in the sender‟s email address. Her email client did not display a sender‟s address on screen but only the sender‟s name. Her email client did not display a recipient‟s address on screen but only the recipient‟s name. Only the name “Glenn Hosking” appeared on her screen as the sender or as the recipient.39Only if she had printed an email would the email address of the sender and recipient have appeared. Only if she had printed an email from the fraudster, would the sender‟s line of the header have revealed: Glenn Hosking 37 Affidavit of Jewel Baozhu Huang affirmed 15.01.13 par 5. 38 Affidavit of Jewel Baozhu Huang affirmed 15.01.13 par 6. 39 Affidavit of Jewel Baozhu Huang affirmed 15.01.13 at [4] and KA-2. -- 16 of 37 -- 17 <[email protected]>. The collapsing of the full sender‟s name and email address to just a sender‟s name was probably a feature of the email client. [72] When Ms Huang would begin to type the address “[email protected]” in her email progam, the program would automatically take over the typing and the name of the intended recipient would appear but without the recipient‟s email address. Accordingly, she would see displayed on screen “Glenn Hosking” but no email address. Honestly believing the recipient to be Mr Hosking, Ms Huang sent each of the relevant shipping documents for the orders the subject of this proceeding to “[email protected]”. Importantly, the invoices attached to these emails as prepared by Ms Huang contained the correct direction to pay to the Seller‟s true bank account. The proper inference is that the fraudster amended the invoices to add the Silvercord account details before sending fraudulent invoices to Mr Hosking. [73] Ms Huang did not suspect there might be a fraud being perpetrated on the Buyer. She was unaware that the Buyer had received an email direction to pay to a different bank account or that the account was in the name of a different beneficiary. By the time her suspicions were aroused it was too late; the payments had already been made. Did the fraudster’s emails to the Buyer come from the Seller’s employee? [74] The Buyer firstly submits that the Seller has not proved that the disputed emails were not sent by the Seller. On the basis of my findings of fact it follows that I am satisfied that the disputed emails were not sent by the Seller. Is the Seller in breach of contract for failing to provide original bills of lading to Mainfreight or to otherwise authorise Mainfreight to release of the goods to the Buyer? [75] On the hypothesis that the court would find that an independent fraudster sent the disputed emails, the Buyer secondly made a written submission that the Buyer has complied with all the terms imposing obligations upon it and as a result the Seller was obliged to either: 1. provide the original bills of lading to Mainfreight for each of the relevant orders; or 2. authorise Mainfreight to release the goods to the Buyer. [76] An element of the Buyer‟s submission required one to refer to the Buyer‟s further amended statement of claim and draw inferences as to the argument. I infer that the Buyer‟s argument is that by paying the Silvercord account it had made payment of the balance price in compliance with the terms of the contract; that this was because it had complied with the term of the contract (or the agreements) pleaded at paragraph 3(h) of that pleading, namely: “Upon receiving the (Seller‟s) „pro forma invoice‟…the (Buyer) would pay the „balance‟ in accordance with the terms of that invoice”. I accept that this was a term of the contract or the agreements and was consistent with the course of dealing. I do not accept that the invoices the Buyer received from the fraudster calling for payment to the Silvercord account were the Seller‟s pro forma invoices. They had been amended to insert a new beneficiary for payment and different bank account details. They were the fraudster‟s invoices. I do not accept that payment to the Silvercord account was payment in accordance with the terms of the Seller‟s pro forma invoices. -- 17 of 37 -- 18 [77] A payment to the Silvercord account on the basis of an invoice from the fraudster was not compliance with the contractual obligation of the Buyer. The Seller submits that a forgery is a void document with no legal effect. That may also be so. It is not necessary for me to consider. Those invoices were not the Seller‟s. [78] The Seller remained unpaid. [79] Whether a paid or unpaid seller must deliver documents to the buyer after loading the goods onto the ship, including the original bills of lading to secure delivery from the shipper, turns on the terms of the particular contract. [80] The course of dealing between the parties established that it was a term of each agreement in practical respects like that pleaded by the Buyer, namely: Upon payment of the “balance” by the (Buyer)…the (Seller) would: (i) provide the original of the “Bill of Lading” … to the (Seller‟s) nominated logistics company (Mainfreight); or (ii) authorise (Mainfreight) to release the products manufactured and supplied by the (Seller) to the (Buyer). [81] Mainfreight required that the original bill of lading, or telex release be provided to it by the Seller before Mainfreight would release goods to the Buyer in Brisbane. The term of the agreements between the Buyer and the Seller was that payment of the balance 70% was to be made before the Seller would provide that original bill of lading or authorise Mainfreight to release goods to the Buyer in Brisbane. [82] Section 20 of the SoGA relevantly provides: (1) When there is a contract for the sale of … ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intended it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard is to be had to the terms of the contract, the conduct of the parties, and the circumstances of the case. [83] Both parties accept that Rule 5, as set out in section 21 of the SoGA is a term to which regard must be had in this case for determining the intention of the parties as to when when property was intended to pass. [84] Rule 5, as set out in s 21 of the SoGA, provides: Rule 5 (1) When there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. (1A) Such assent may be express or implied, and may be given either before or after the appropriation is made. (2) When, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, the seller is deemed to have unconditionally appropriated the goods to the contract. [85] Rule 5(2) of s 21 of the SoGA is reinforced by the provisions of s 22 of the SoGA. Section 22 of the SoGA provides, so far as is relevant: -- 18 of 37 -- 19 (1) When there is a contract for the sale of specific goods or when goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. (1A) In such case, notwithstanding the delivery of the goods to the buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. (2) When goods are shipped, and by the bill of lading the goods are deliverable to the order of the seller or the seller’s agent, the seller is prima facie deemed to reserve the right of disposal… [86] The Buyer submits that the relevant clauses are Rule 5(1) and s 22(2). The Seller submits the relevant clauses are Rule 5 (2) and s 22(1). [87] Mainfreight‟s requirement that it be presented with the original bill of lading, or telex release and the Seller‟s contractual right against the Buyer to refrain from providing such authorisations before payment in full and the Seller‟s right as against Mainfreight to change the name of the consignee in the original bill of lading satisfy me that when the Seller delivered the goods to Mainfreight, it did not unconditionally appropriate the goods to its contract with the Buyer but instead it reserved the right of disposal until conditions had been fulfilled, namely payment of the final 70%. [88] The Buyer submitted that the “Seller had … delivered the Goods to Mainfreight to ship to the Buyer without reserving the right of disposal of the Goods.”40I reject that submission. [89] I reject the submission that the Seller breached the contract for failing to provide original bills of lading to Mainfreight or to otherwise authorise Mainfreight to release of the goods to the Buyer. [90] The Buyer submitted that the “Buyer is entitled to immediate possession of the Goods.”41 The submission is partly based upon a number of elements: that title in the relevant goods passed from the Seller when they were delivered by the Seller to Mainfreight,42 that the Buyer has title,43that the buyer is in possession as a result of the consent order, that because the Seller did not reserve the right of disposal when delivering to Mainfreight44the Seller has no right to retain possession45and accordingly the Buyer is entitled to immediate possession.46 [91] As the submission that title passed to the seller is lengthy and different from the submission that the Seller is in breach of contract it is worthy of separate treatment. Has title to the goods passed to the Buyer and is the Buyer entitled to immediate possession? [92] The Buyer seeks a declaration to that effect. 40 Written Submissions of the Buyer par 26 (c)(i). 41 Written Submissions of the Buyer pars 45 and 46. 42 Written Submissions of the Buyer par 29. 43 Written Submissions of the Buyer par 43. 44 Written Submissions of the Buyer par 26 (c)(i) 45 Written Submissions of the Buyer par 45 46 Written Submissions of the Buyer par 46 -- 19 of 37 -- 20 [93] The Buyer submitted: that it was the intention of the parties that title in the Goods would pass when the Seller delivered the Goods to Mainfreight for shipment … by reason of the following: (a) the Contract Terms, particularly that: (i) no term was agreed as to when property in goods would pass; (ii) goods were to be delivered by the Seller to Mainfreight before: (A) the Seller requested final payment from the Buyer; and (B) the Seller received final payment from the Buyer; and (iii) no term was agreed between the parties reserving the Seller‟s title in any goods delivered; (b) the conduct of the parties, namely: (i) that goods were in fact delivered by the Seller to Mainfreight before: (A) the Seller requested final payment from the Buyer; (B) the Buyer made final payment to the Seller; and (C) the Seller received final payment from the Buyer; and (ii) that Bills of Lading were always issued by Mainfreight upon delivery of goods by the Seller to them with the Buyer named as consignee and not “to order”; and (c) the circumstances of the case generally, including the provisions of Rule 5 of section 21 of the SoGA. [94] The Buyer also submitted that the Buyer bears the risks of loss or damage to goods from the time they have been placed on board the vessel nominated by the Buyer, pursuant to FOB terms of INCOTERMS® 2010 and accordingly “it was the intention of the parties that title in the Goods would pass when the Seller delivered the Goods to Mainfreight for shipment”. [95] I reject the conclusion that the parties intended that title would pass on delivery of the goods to Mainfreight. By the Seller‟s reservation the right of disposal of the goods delivered to Mainfreight, I find that title did not pass upon delivery to Mainfreight. [96] The Buyer relied upon James v Commonwealth,47 a case concerning the shipment of unascertained goods, submitting that Dixon J held that in an FOB contract, prima facie property passes to the buyer upon shipment.48 His Honour did acknowledge that prima facie proposition. The passage continued however to observe that the inference may be rebutted and the moment of passing postponed as for instance where the seller deals with the Bill of Lading in such a manner as to show that he did not intend to appropriate the goods to the contract, and that ownership did not necessarily pass with the risk of loss. Dixon J observed:49 Here, I think, the object of the plaintiff in dealing as he did with the shipping receipt or bill of lading was to secure payment of the price before he gave up title to the goods, and this means a reservation of the jus disponendi. The bill of lading was taken, or put, in a condition in which delivery of the instrument might give title to the goods. But, though this is consistent with the absence of intention to reserve 47 (1939) 62 CLR 339. 48 (1939) 62 CLR 339 at 385. 49 (1939) 62 CLR 339 at 385. -- 20 of 37 -- 21 control and disposition, there seems no reason to doubt the understanding of the parties that until payment the vendor should retain, and upon payment the purchaser should obtain, all the indicia of title and the title itself to the goods. I attach little or no weight to the plaintiff‟s … assertion … that ownership passed to them on shipment. Risk perhaps did, but ownership, in my opinion, did not. [97] The fact that this was a FOB contract does not persuade me that the parties intended that title passed to the Buyer when the goods were delivered to Mainfreight. The Buyer submitted that the risk of loss or damage passed to the Buyer once the goods were delivered to Mainfreight. That may be a relevant feature for determining the intention of the parties as to whether the Seller reserved a right of disposal. In this case I am satisfied that the Seller reserved a right of disposal until full payment, that it was a term of the agreement between the parties that it could do so. Because it was agreed, the Seller need not rely upon s 30 SoGA. [98] The Buyer submitted that the combined effect of an FOB contract and the fact that the bill of lading was not indorsed “to order” of the Seller but named the Buyer as consignee was decisive, that it meant that the Seller had not reserved the right of disposal. The submission was not supported by reference to any other specific words in the bill of lading and did not address the likely need for presentation of the original bill of lading to Mainfreight (or a telex release) to obtain a delivery of the goods. The submission did not explain why it was that Mainfreight did not deliver to the consignee, the Buyer, in Brisbane if that was Mainfreight‟s obligation or why the Buyer‟s Mr Hopkins regarded the procedure as one whereby the Buyer was obliged to pay the balance before the Seller would deliver an original bill of lading to Mainfreight. I am not satisfied that the Buyer had the contractual right to compel Mainfreight to deliver to it in Brisbane without first obtaining the cooperation of the Seller either to release an original bill of lading or to otherwise authorise Mainfreight to release the goods to the Buyer. [99] Title did not pass to the Buyer when the goods were delivered to Mainfreight. [100] But for the consent order, the Buyer had no right to possession of the goods. Is the Seller entitled to further payment? [101] It follows from the above that the Seller remains unpaid US$163,452.50 as follows: Order No. Invoice No. (balance price) PO 1154050 20120818 ($108,783.50) PO 32951 20120831 ($22,111.00) 50 Exhibit KA-1 pp 33-49. 51 Exhibit KA-1 pp 100–106. -- 21 of 37 -- 22 PO Q1PO42252 20120828 ($32,558.00) [102] The sum is due to the Seller by the Buyer, subject to the arguments for the Buyer which follow, and which I reject for the reasons following. If the Seller emailed invoices seeking the balance 70% to the fraudster only and has not emailed invoices to the Buyer is the Seller’s cause of action against the Buyer complete? [103] The Buyer submits: the Seller has not complied with the contract terms pleaded at paragraph 3(g) of the Statement of Claim (the term that the Seller would email to the buyer the Seller‟s pro forma invoice detailing the US$ amount owing and details of the bank account into which it was to be paid) in respect of each of the relevant orders because on the Seller‟s own case, it has never sent such emails to the Buyer. [104] The Buyer did not plead or submit that the alleged non-compliance by the Seller was a breach by it. I understand the submission to be that liability to pay has not arisen as no email has been received from the Seller. The point is not one which emerges expressly in the Buyer‟s pleadings. [105] It was clear from about 13 September 2012 that the Seller was demanding payment to its original bank account for the balance outstanding.53 In any event the Seller in this proceeding claims payment and has provided copies of the true invoices within its affidavit evidence served on the plaintiff.54 [106] In these circumstances the Buyer is liable for the outstanding balance notwithstanding that it has not received email copies of the pro forma invoices. [107] Alternatively, if it was a term of the contract that the Seller was obliged to make demand by such an emailed invoice, the Seller‟s nonfulfilment of the obligation was a technical nonfulfilment of a condition precedent to payment. I find that the Seller has subsequently, by delivery of copies of the relevant invoices and by demanding payment substantially performed its obligation to make demand by emailed invoice. The Buyer is liable to pay the outstanding balance.55The sum outstanding in respect of the three invoices is US $163,452.50. Did the Seller owe a duty of care to the Buyer in tort to guard against misdirecting emails intended for the Buyer? [108] The Buyer submits that the Seller owed it a duty to exercise reasonable care in and about and incidental to the sending of emails attaching the documents relating to and evidencing the manufacture and supply of products requested by the Buyer including the invoices directing the Buyer to make payment to a nominated bank 52 Exhibit KA-1 pp 82-90. 53 Exhibit GH-8 pp 188, 220. 54 Exhibit KA-1 pp 33-49, 67-72, 82-90, 100-106. 55 LexisNexis Halsbury‟s Laws of Australia 110 Contract (V) Doctrine of Substantial Performance [110-8140] -- 22 of 37 -- 23 account to the Buyer in respect of any reasonably foreseeable, in the sense of not far-fetched or fanciful, or alternatively not insignificant risk of loss or damage to the Buyer arising out of the Seller sending such emails. That duty is said to arise, broadly speaking, from the circumstances of this case.56 [109] As the Buyer‟s claim is one for pure economic loss, reasonable forseeability of loss is not sufficient to create a duty of care. [110] Particular principles are to be applied in ascertaining whether a claimed duty of care arises. Applying some of those principles set out in the judgment of Gleeson CJ, Gummow, Hayne and Heydon JJ in Woolcock Street Investments Pty Ltd v CDG Pty Ltd57to this case I should consider whether the Buyer was vulnerable, that is, unable to protect itself from the Seller‟s want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the Seller. [111] The posited duty is a novel one. After Woolcock, a judgment of the Court of Appeal in New South Wales has considered how to determine whether a novel duty of care exists. The case provides a non-exhaustive list of possible consideration relevant to deciding whether to find that a duty of care exists and the what is the scope and content of the duty. Vulnerability of the Buyer is fourth of many items in the list. In Caltex Refineries (Qld) Pty Ltd v Stavar, Allsop P observed:58 If, however, the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by references to the “salient features” or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury. These salient features include: (a) the foreseeability of harm; (b) the nature of the harm alleged; (c) the degree and nature of control able to be exercised by the defendant to avoid harm; (d) the degree of vulnerability of the plaintiff to harm from the defendant‟s conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself; (e) the degree of reliance by the plaintiff upon the defendant; (f) any assumption of responsibility by the defendant; (g) the proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant; (h) the existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff; (i) the nature of the activity undertaken by the defendant; (j) the nature or the degree of the hazard or danger liable to be caused by the defendant‟s conduct or the activity or substance controlled by the defendant; (k) knowledge (either actual or constructive) by the defendant that the conduct will cause harm to the plaintiff; (l) any potential indeterminacy of liability; (m) the nature and consequences of any action that can be taken to avoid the harm to the plaintiff; 56 See paragraph 45 of the Statement of Claim. 57 (2004) 216 CLR 515 at [23]-[24]. 58 [2009] NSWCA 258 at [101]-[104], Simpson J agreeing at [241]. -- 23 of 37 -- 24 (n) the extent of imposition on the autonomy or freedom of individuals, including the right to pursue one‟s own interests; (o) the existence of conflicting duties arising from other principles of law or statute; (p) consistency with the terms, scope and purpose of any statute relevant to the existence of a duty; and (q) the desirability of, and in some circumstances, need for conformance and coherence in the structure and fabric of the common law. [112] It seems to me that economic loss to the Buyer was foreseeable from providing a skilled criminal with email correspondence that revealed the email addressee of the Buyer, revealed that the Buyer had an obligation to pay an amount to the Seller‟s bank account and that revealed sufficient detail of the Seller‟s communications with the Buyer to enable the criminal to impersonate the Seller by email. [113] The Buyer submitted “the harm is not indeterminate in liability”. The salient feature “any potential indeterminacy of liability” is not about the indeterminacy of harm but of liability”. These salient factors noted by McHugh J in Perre v Apand as including:59 1. knowledge of the risk and its magnitude; 2. indeterminacy of liability; 3. autonomy of the individual; and 4. vulnerability. [114] The Buyer submits that the evidence also establishes: 1. the Seller was entirely able to exercise control to avoid the harm by checking the email address to which the documents were sent; 2. there was nothing that the Buyer could have done reasonably done to protect itself from the harm in the circumstances when it had no ability, having regard to the previous conduct of the parties, to expect that it should have to take any steps beyond those which it did in fact take (it requested confirmation on a letterhead) to protect itself; 3. the Buyer was entirely reliant upon the Seller to provide it with banking details; 4. the Seller assumed responsibility for providing banking details to the Buyer; 5. the parties proximity, by reason of their contractual relations; and 6. there was an inherent degree of some danger in the Seller emailing the relevant documents to the Buyer. [115] Precisely or generally what the Seller was able to do to protect the Buyer was not pleaded and was not the subject of evidence. The absent evidence was relied upon by the Seller as a reason for this court to refuse to find that a duty of care was owed. [116] The Buyer submitted “the Seller was entirely able to exercise control to avoid the harm by checking the email address to which the documents were sent”. Checking email addresses was more difficult than one might surmise. The evidence established that Ms Huang did not know that there had been any change in email address from [email protected] to [email protected] since she did not completely type Glen Hocking‟s email address when preparing the relevant 59 Perre v Apand Pty Ltd (1999) 198 CLR 180 at 220 [105]; also Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at 547-550 [74]-[87] per McHugh J. -- 24 of 37 -- 25 emails and the email address was not displayed on her computer screen by her email client. She discovered the address only when she examined emails sent to her by Mr Hosking on 12 September 2012.60It was not submitted that it was a breach of duty by Ms Huang to use a program which concealed email addresses from her. [117] Ms Huang might have been able to exercise control to avoid the harm of sending an email to a fraudster. The ways were not explored. I infer that one reason for the failure to explore them may have been because it was assumed until the end of Ms Huang‟s evidence in reply that she had been able to see a recipient‟s email address on her computer screen. [118] I infer that one way Ms Huang could have exercised control to safeguard the Buyer was, after sending an email, to have printed a copy of what she sent and checked the address of the recipient shown on the paper copy against a recorded or remembered email address which she knew to be Mr Hosking‟s. Even that method would not have prevented the sent email from going to the wrong address. It would simply have allowed Ms Huang to promptly discover that an error had occurred shortly before. There may have been other ways. How she should confirm that she had the correct address for Mr Hosking recorded or remembered may be problematic if there was a concern that at some unexpected time a fraudster may have insinuated itself in the email correspondence. The cost and practicality of taking such precautions for every email were not explored. The imposition of this duty would require similar precautions for every customer with whom communication was by email. [119] A difficulty with the duty proposed by the plaintiff is its open-ended consequences for what Kong Ah might need to do in order to discharge the duty. In another context, a similar difficulty was considered by the NSW Court of Appeal in National Australia Bank Ltd v Hokit Pty Ltd.61 [120] The Seller relied upon Hokit. The Seller drew an analogy between the relationship of banker and customer and the relationship between parties in the position of the Buyer and Seller. [121] Within the banker-customer relationship, there is a duty on a customer to notify the bank immediately the customer becomes aware of a fraud or forgery, but otherwise there is no wider duty requiring a customer to take reasonable precautions in the management of the accounts to prevent forged cheques being presented.62 [122] In cases where the customer fails promptly to notify the bank, the consequence is an estoppel in respect of the forged cheque, but not tortious liability for negligence.63 The Seller submits, analogously to the banking cases, that an estoppel would arise if the Seller knew of the fraud and did not immediately inform FDF. That is not the case here. Ms Huang did not suspect the existence any fraud until at the earliest 13 September 2012, which was after the Buyer had already made payments to the Silvercord account. 60 Affidavit of Jewel Baozhu Huang affirmed 15.01.13 and Exhibit KA-2. 61 National Australia Bank Ltd v Hokit Pty Ltd (1996) 39 NSWLR 377 at 390-391. 62 Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] 1 AC 80. 63 London Joint Stock Bank Ltd v Macmillan and Arthur [1918] AC 777; National Australia Bank Ltd v Hokit Pty Ltd (1996) 39 NSWLR 377 at 389 per Mahoney P. -- 25 of 37 -- 26 [123] In Hokit an employee of several family companies used to sign her employer‟s name, with his knowledge, on various cheques used for company purposes. She also signed his name without his knowledge on cheques for her own benefit. The companies‟ bank, when sued by the companies for monies debited from their accounts in respect of the forgeries, denied liability, citing the conduct of the employer, who besides allowing the writing of his signature had done very little in four years to check the accounts. The trial Judge found for the companies. On appeal the bank contended that it is unjust that the banker should bear the burden of forged cheques when, in a practical sense, the bank has little or no possibility, by ordinary precautions of detecting the forgery. At the trial the bank had submitted the customer‟s obligations in a general way. It submitted that the plaintiffs had owed it a duty: (a) to exercise reasonable precautions to prevent forged cheques being presented to the Bank; (b) to have in place, and implement, systems by which senior management of the plaintiffs could ascertain within a reasonable time whether their accounts were being debited with amounts not authorised by the plaintiffs; (c) if the plaintiffs‟ accounts were not audited by external accountants, to carry out audits or checks by appropriately qualified officers of the plaintiffs; and (d) if the directors of the plaintiffs were not sufficiently qualified or experienced to carry out an audit or check of the accounts, to engage external accountants to carry out audits.. [124] On appeal the Court of Appeal sought from the bank a statement of what the companies should have done and counsel for the bank confined the contention to “a check of the butts and the bank pass sheets”. The court observed that it may have been that such a precaution alone would, in the present case, have led to the early detection of many, most or perhaps all of the forgeries. However, Mahoney P continued:64 “But what I am here considering is whether it is appropriate that the suggested duty of care be imposed upon customers generally and what, generally, is apt to be the effect of the imposition of a duty framed in this way. Like all obligations framed in an indeterminate way, it would cast upon those who must bear it a number of practical burdens. Thus, the customer must determine what are the potential sources of forgery, that is, the various ways in which, in its organisation, forgery may take place … it would be necessary for the customer to make, and maintain, provision against each of these possible sources of forgery – at least all of them which were not „far-fetched‟: cf the obligations of a defendant in negligence as discussed by Mason J in Wyong Shire Council v Shirt … No useful purpose will be served by pursuing examples. The problem of deciding what precautions constitute „reasonable care‟ is one cast upon all potential defendants in negligence. And I am conscious that answers, partial or total, may be available in respect of any example taken. But the point remains that, to prevent the various kinds of forgery which may be envisaged, the customer would be required to take precautions of various kinds and of various degrees of complexity. The Court has no evidence to show what would be the cost to the customer of doing what such an obligation involves. That cost may be large or small 64 At 391 line c-d.with Wadell A-JA agreeing at 407 -- 26 of 37 -- 27 depending on, for example, the size and circumstances of the customer and its business. But the obligation, if it is to be imposed, is to be imposed on each customer, large or small. It is relevant to consider also what benefit would flow from the imposition of such an obligation on the customer. It is appropriate to consider the relationship between the burden imposed and the benefits likely to flow from the imposition. The evidence does not assist the making of such an assessment. But, in my opinion, it is proper to think that such reasonable precautions will not prevent all forgeries: some will occur despite what the customer does. The bank will continue to bear the burden of those forgeries. And the evidence does not assist in the quantification of what that burden will be.”(emphasis added) [125] The Seller submitted that it is not appropriate to look at the breach that might be alleged in this particular case, effectively a failure to check email addresses, because if a duty exists, it exists in a broad sense and imposes on a person in the shoes of Ms Huang a duty to take reasonable care, to consider the ways in which a fraudster might act and the steps which Ms Huang and the Seller could take to diminish the risks of fraud. It was submitted that a reasonable person would seek to assess the costs and burdens of those steps. The Buyer led no evidence that allows the court to determine whether there were reasonably practicable methods by which the Seller could conveniently secure electronic communications whether by encryption, tokens or digital signatures. [126] I do regard the absence of evidence as to how the Seller could protect the Buyer and how costly the protection would be as matters which weigh against imposing this novel duty of care in tort in this proceeding. [127] The Buyer submitted in reply to this argument that its case is not that the Seller owed it a duty to protect the Buyer from the risk of loss through fraud.65This was submitted as a reason to distinguish the present case from one like Hokit where a court might be reluctant to impose a duty. I do not accept the distinction. The Buyer‟s pleading of duty does not mention “fraud” or the risk of it. But it is the obvious inference that the risk of economic loss to the Buyer arises through the risk of fraud. No alternate risk was suggested. [128] I reject the Buyer‟s submission that there was nothing that the Buyer could have reasonably done to protect itself from the harm. Unlike Ms Huang, Mr Hosking did not suggest that he was unable to see the email address of a sender. Having received an invoice directing him to pay the Silvercord account he became suspicious. He requested confirmation on letterhead. It did not come. He received in response only invoices purporting to be from Ms Huang, though with the Seller‟s name at the top. He had Ms Huang‟s telephone number. He did not ring it because he prefers a paper trail. He had the bank‟s confirmation that the Seller was not the beneficiary of the Silvercord account. By ringing Ms Huang, the loss would have been avoided. There was no exploration by evidence to establish that a party in the Buyer‟s position could not protect itself. I do not accept that the necessary vulnerability of the Buyer existed. The telephone was one was the Buyer was able to protect itself entirely from the consequences of the Seller‟s want of reasonable care in addressing an email containing the Seller‟s product documents. I am not satisfied that there were not other ways. 65 T2-80 l 10 -- 27 of 37 -- 28 [129] Thus, I find that there was not the vulnerability of the Buyer required for imposing a duty of care. [130] The Seller submitted that “an important factor here is the interference with the commercial autonomy of the parties including Kong Ah to conduct business in a manner they choose. As both Mr Hosking and Mr Sutherland agreed in cross- examination, the use of e-mail for the communication of the relevant documents was requested by FDF. Mr Sutherland accepted that the reasons for that request included speed and convenience.” The submission would be more persuasive to counter an allegation that Ms Huang owed a duty not to use email. I do not see that it adds to the Seller‟s arguments. [131] I find that the Seller did not owe a duty of care in tort to the Buyer to exercise reasonable care in and about and incidental to the sending of emails attaching the documents relating to and evidencing the manufacture and supply of products requested by the Buyer including the invoices directing the Buyer to make payment to a nominated bank account to the Buyer in respect of any reasonably foreseeable, in the sense of not far-fetched or fanciful, or alternatively not insignificant risk of loss or damage to the Buyer arising out of the Seller sending such emails. Did the Seller owe a duty of care to the Buyer in contract not to misdirect emails intended for the Buyer? [132] The Buyer submits that the following term was implied in the Contract: “The Seller, when sending an email to the Buyer that attached any of the Product Documents (that is, documents relating to and evidencing the manufacture and supply of products requested by the Buyer, which included documents directing the Buyer to make a payment to the Seller pursuant to the Contract into a nominated bank account (for which account details were provided)), would only send such an email to an email address of the Buyer.”66The Buyer did not make a submission that there was the implied term pleaded as an alternative in the Further Amended Statement of Claim at paragraph 58. Accordingly I confine myself to considering the term submitted for. [133] The Seller submitted that the requirements for implication of a contractual term are those five found in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266. Because the contract in this case has not been reduced to written form I reject the Seller‟s submission and accept that I should take the approach held appropriate in Peter Pan’s Backpacker Adventure Travel Pty Ltd v Eye Jam Interactive Pty Ltd [2012] QSC 227 at [64]-[65] by McMurdo J. As I understand that decision, a term may be implied although it does not clearly satisfy all the requirements from the BP Refinery case though the criteria set out in that case are relevant, but that a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case. [134] I accept the Seller‟s submission that the implied term67 is unreasonable in seeking to secure a warranty of strict liability as against the defendant for sending an e-mail to an incorrect address, which would go well beyond reasonable care considerations. 66 See paragraph 61 of the Statement of Claim and par 87 of the Buyer‟s written submission. 67 FASOC [61]. -- 28 of 37 -- 29 [135] It is not a term which is necessary for the reasonable or effective operation of a contract between Buyer and Seller. The Buyer‟s “vulnerability” or lack thereof seems to me to be as relevant to this issue of whether a term is necessary for the reasonable or effective operation of the contract as it is to the issue of whether to impose a novel duty of care in tort. The Buyer is left with means to protect itself by the use of reasonable care from reasonably foreseeable risks arising from the Seller‟s sending of product documents to an email address different from the Buyers. A telephone is one means. If economic loss were recoverable from the seller for breach of duty, would the Seller and the fraudster be “concurrent wrongdoers” within the meaning of section 30 of the Civil Liability Act 2003 (Qld)? If so, by what percentage should the Seller’s liability be reduced? [136] These questions are unnecessary for me to decide because I find that the duties in tort and in contract were not owed. [137] If I am wrong in finding that there was no duty of care of the kind pleaded and owed by the Seller to the Buyer in tort or in contract then it would be necessary to decide these question of law and of fact. [138] The Seller makes a claim pursuant to Chapter 2 Part 2 of the Civil Liability Act 2003 (Qld) (“CLA”) for apportionment of any amount for which the Seller might be held liable. The Buyer submits that the Seller‟s claim: “is misconceived and must fail because the Defendant and the alleged imposter are not „concurrent wrongdoers‟ within the meaning of section 30 of the Civil Liability Act 2003 (Qld). In this regard, the Queensland Court of Appeal recently held in Meandarra Aerial Spraying Pty Ltd v GEJ Geldard Pty Ltd:68 “The appellants‟ additional argument that s 31 might apply where a defendant is the only person legally liable for an apportionable claim by the plaintiff does not take into account many textual indications to the contrary. Most obviously, the word “wrongdoer” in the term “concurrent wrongdoer” implies that the defendant and another person are legally responsible for the same loss or damage. Furthermore, s 11 of the Act treats causation as comprehending not only “factual causation” but also “scope of liability”, yet the appellants‟ argument construes s 30(1) as though it requires reference only to “factual causation”. It is also necessary to take into account the combined effect of the introductory words of s 31, which condition its application upon the existence of an “apportionable claim”, and the composite expression in s 31(1)(a) “the liability of a defendant who is a concurrent wrongdoer in relation to the claim…”. The relevant criterion is not that the defendant is a “concurrent wrongdoer”; the defendant must be a concurrent wrongdoer in relation to the plaintiff‟s 68 [2012] QCA 315 at [62] per Fraser JA; White JA and Mullins J agreeing at [73] and [74] respectively. -- 29 of 37 -- 30 apportionable claim. That suggests that the defendant and another person or persons are liable to the plaintiff for the apportionable claim. The same conclusion is suggested by the references in ss 31(1)(a) and 31(3) to the defendant‟s and any concurrent wrongdoer‟s “responsibility” for the plaintiff‟s loss or damage. In analogous contexts, an apportionment of “responsibility” for loss or damage has been regarded as requiring reference, not only to the relative significance of each person‟s acts or omissions in causing the plaintiff‟s loss or damage, but also to a comparison of each person‟s “culpability, i.e. of the degree of departure from the standard of care of the reasonable man…”. Another reason for rejecting the appellants‟ construction is that it would produce the remarkable result that a defendant who was liable to a plaintiff could reduce the extent of the liability by proving that the plaintiff‟s loss was partly caused by an act or omission of a different person who did not breach any obligation to the plaintiff.” (underlining added)” [139] The Buyer did not identify in written submissions why the fraudster and the Seller are not concurrent wrongdoers in respect of the Buyer‟s loss or damage. In oral submissions, the Buyer‟s counsel began to explain with the submission that the Buyer‟s claim against the imposter is not a tortious claim and that it would be a claim in restitution for moneys had and received. He accepted that argument was “perhaps … overstated” but, without further explanation, maintained that the imposter was not the Seller‟s “concurrent wrongdoer”. While the remedy for deceit may be restitution, it may alternatively be damages.69 A claim for damages for deceit would be a claim for damages in tort. The Buyer‟s loss arising from the imposter‟s deceit is likely to be identical with the Buyer‟s loss arising from the Seller‟s alleged breach of duties and the Buyer‟s counsel did not submit otherwise. [140] CLA s 30 provides, so far as is relevant: 30 Who is a concurrent wrongdoer (1) A concurrent wrongdoer, in relation to a claim, is a person who is 1 of 2 or more persons whose acts or omissions caused, independently of each other, the loss or damage that is the subject of the claim. [141] The Buyer‟s submission that the Seller and the fraudster would not be concurrent wrongdoers is not supported by reference to Meandarra. In Meandarra the two wrongdoers were a pilot and the pilot‟s employer. The employer could have been a “concurrent wrongdoer” within the meaning of CLA s 30 only if the employer‟s acts or omissions and the pilot‟s acts or omissions caused the loss or damage “independently of each other”. The employer‟s liability arose vicariously, from the relationship of employer and employee and it arose without any act or omission by the employer. The employer did not fall within the definition of concurrent wrongdoer in CLA s 30. The trial judge‟s explanation, approved in the reasons of 69 Mahesan (T) v Malaysia Government Officers’ Co-op Housing Society Ltd [1979] AC 374 -- 30 of 37 -- 31 the Court of Appeal was: “[t]he liability of a negligent employee and a vicariously liable employer is „joint‟ and not „independent‟.”70 [142] If the Seller was a wrongdoer whose acts or omissions caused loss and damage to the buyer, I do not regard Meandarra as preventing a finding that the Seller and the fraudster were “concurrent wrongdoers”. I am fortified by the approach taken in Perpetual Trustee Company Ltd v Ishak.71 Brereton J there considered proportionate liability for apportionable claims in the context of the legislation in New South Wales, the Civil Liability Act 2002 (NSW). A section in that statute is relevantly similar to CLA s 30. His Honour regarded a fraudster as a concurrent wrongdoer and collated several authorities which considered apportionments between negligent and fraudulent wrongdoers.72 [143] The Buyer‟s claim against the Seller for negligence or failure to take care under the implied term is an apportionable claim.73 The Buyer would have a claim against the fraudster for the loss and damage caused by the fraud and so, the fraudster behind the email communications is a concurrent wrongdoer.74 [144] Accordingly any liability of the Seller is limited to an amount reflecting the proportion of the loss or damage that is just and equitable having regard to the Seller‟s responsibility relative to the fraudster‟s.75 [145] In determining the relative responsibility of concurrent wrongdoers for a loss, it is necessary to compare the blameworthiness and causative potency of the conduct of each of them.76 Relevant factors include, but are not limited to, which of the wrongdoers was more actively engaged in the activity causing loss, and which was more effectively able to prevent the loss. [146] In this case the fraudster was a sophisticated fraudster who intercepted email communications, spoofed email chains and email addresses to give the appearance of genuine messages, and fraudulently altered the Seller‟s invoices to redirect payment to the Silvercord account. [147] If there was a departure from the standard of care of the reasonable person, it was at most a minor departure on the part of Ms Huang. Her conduct could not be described as grossly negligent. [148] The fraudster deceived both Ms Huang and Mr Hosking, and intended to do so for personal gain. The fraudster is the real and effective cause of the loss and damage to the Buyer. Brereton J discussed relevant comparative cases in Perpetual Trustee Company Ltd v Ishak.77 [149] If the Seller had been a wrongdoer, the Seller‟s counsel submitted that the court should apportion 90% to the fraudster and 10% to the Seller. I accept that 70 Meandarra Aerial Spraying Pty Ltd & Anor v GEJ Geldard Pty Ltd [2012] QCA 315 [65] 71 Perpetual Trustee Company Ltd v Ishak [2012] NSWSC 697 72 Perpetual Trustee Company Ltd v Ishak [2012] NSWSC 697 [194] 73 s 28 Civil Liability Act 2003 (Qld). 74 s 30 Civil Liability Act 2003 (Qld). 75 s 31 Civil Liability Act 2003 (Qld). 76 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 at [50]-[53]. 77 Perpetual Trustee Company Ltd v Ishak [2012] NSWSC 697 at [194]. -- 31 of 37 -- 32 submission. Because the Seller owed no duty to the buyer, the finding is hypothetical and relevant only in the event of appeal. [150] Any apportionment is to be made after the loss and damage has been reduced by reason of the contributory negligence of the Buyer.78 If economic loss were recoverable from the Seller for breach of duty, was there contributory negligence by the Buyer? [151] The Seller submits that, if there was a breach of duty by it causing loss to the Buyer, there was contributory negligence by the Buyer. The Buyer submits: There is simply no evidence that the Buyer was negligent in any respect by reason of the following: it did nothing wrong in accepting the matters set out in the emails sent to it, particularly since those emails stated that they came from the Seller‟s email address; it took positive steps to clarify the change in bank details by requesting the change be noted on the Seller‟s letterhead; and it received „confirmation‟ to its request, again from an email stating that it came from the Seller‟s email address. [152] I reject that. If the Seller by Ms Huang breached a duty to take reasonable care, or a breach of duty to detect the wrong email address, Mr Hosking for the defendant made an error of at least a similar kind by receiving correspondence from a fraudster and not checking the sender‟s email address and by sending emails to the fraudster without checking the email address. There was no evidence from Mr Hosking that his email client prevented him from reading the fraudster‟s email address on screen. That means Mr Hosking did not have the same difficulty as Ms Huang in seeing the address of an email‟s sender. That tends to call for a greater apportionment against the Buyer for those losses which could have been detected by looking at the screen to see that the sender was “[email protected]”. That would exempt the first invoice. However, Mr Hosking‟s failure to take reasonable care was more significant. He suspected something was amiss before making any payments. Rightly concerned by the risk of relying on an electronic document apparently from Ms Huang directing payment to an entity which was not the Seller, he emailed the fraudster directly about his concern over paying to the Silvercord account, requested confirmation in a document bearing company letterhead and he accepted another electronic document apparently from Ms Huang. He failed to use a facsimile and failed to call Ms Huang by telephone. When alerted by the bank that the account holder was not the Seller, he continued to be beguiled by electronic correspondence alone. Ms Huang remained unaware of any ground for suspicion and nothing apparent from her email screen could have alerted her. He had the means to protect the Buyer by using the phone in August, as he did, too late, on 12 September. [153] Counsel for the Seller submitted: (The Buyer) was a far more significant cause of the loss and damage than (the Seller). The contributory negligence should be assessed at 75% on the part of (The Buyer). I accept both submissions. [154] He submitted the consequence is that a consequence of the adjustment of responsibility between the Seller and the fraudster is that the Seller would be liable 78 s 32G Civil Liability Act 2003 (Qld). -- 32 of 37 -- 33 to pay 10% of 25% of the Buyer‟s loss, being 2.5% of the Buyer‟s loss. I accept that if the Buyer had succeeded against the Seller for breach of duty in contract or in tort, the Seller would have been responsible to pay for 2.5% of the loss. What is the quantum of damage if the Seller had breached the contract by failing to authorise delivery? [155] If I had found that the Buyer was entitled to immediate delivery of the goods, the Seller accepts that the Buyer would have been entitled to $38,081 and $39,970 from the Buyer‟s amended schedule of damages being $78,051, and accepts it would also have been liable for continuing daily costs upon which the parties would be able to agree. Accordingly, I have not assessed them. Otherwise I reject the claims for loss set out in the Buyer‟s Amended Schedule of Damages for the reasons following. [156] Mr Hosking accepted in cross-examination that the other items in the schedule of loss and damage at pp 23-24 of his second affidavit under the heading “Losses Arising from Preserving the Goods” were costs that would be incurred in any event had the goods been immediately released. [157] The one item Mr Hosking disputed (transport costs of $1,140.00) was not disputed by reason of its character but because of its amount. The character is, however, determinative. It also would not be recoverable. [158] I assess the damages on this hypothesis as $78,051 and continuing so as to include daily detention costs incurred by the Buyer. What is the quantum of damage if the Seller had breached a duty in tort by misdirecting emails to the fraudster? [159] It is unnecessary to assess this. In case the decision is reversed I will do so. The Seller submits that, if it was negligent, the only loss and damage caused by such negligence were the payments made by the Buyer to the Silvercord account. That sum was US$141,341.50. [160] The basis of the Seller‟s argument was explained thus: the only relevant loss from that breach of care, if there was one, is the amounts paid to the fraudster. Anything else on my client's case were not caused by that payment but caused by the actions taken by FDF in relation to how it chose to deal with the issue. One of the things it could've done was to accept my client's view that it was fraud, to pay for the goods to my client again and then maybe take steps to try and trace the fraudster. Instead, the steps taken by the plaintiff here were to assert that it had been paid - sorry, that it had paid the amount to my client, effectively either disagreeing that there was a fraud or if there was a fraud that my client is the one who has to bear the risk of that, and to assert its rights through this Court to restrain the goods and to put them into storage. Those costs don't -- 33 of 37 -- 34 flow from my client not being careful with its emails. Those costs are within the hands of the parties and at that stage FDF was well aware of my client's concerns that there was a fraud and had expressed their concerns to it, so it's not a case of having been in error about what my client believed was going on. [161] The Buyer made no submission as to the proper quantum for loss on the hypothesis that the title to the goods remained with the Seller but the Seller was negligent for misdirecting emails intended for the Buyer. I infer that it claims the amount in its amended schedule. [162] I reject the Seller‟s submission. I regard the Buyer‟s decision to litigate against the Seller, with the limited information available to it initially, as reasonable and a predictable consequence of the fraud which occurred. Before trial there appeared a reasonable prima facie case that the fraud was perpetrated by Ms Huang or someone operating on her email account because the first emails from the fraudster nominating the Silvercord account appeared to have been sent from “[email protected]”. To compromise with the Seller “and then maybe take steps to try and trace the fraudster” was not the only reasonable course for the Buyer. Incurring costs of detention rather than settling with the suspect Seller was also reasonable, at least until trial when the weakness of evidence of Ms Huang‟s misconduct emerged. The Buyer‟s choice to proceed against the Seller was caused by the hypothetical negligence of the Seller. At trial, evidence emerged that the fraudster was not Ms Huang or someone operating her email account and the Buyer declined to suggest that Ms Huang was responsible. From that time the hypothetical Seller‟s negligence was not a reason to decline to compromise with the Seller. Detention charges from that time were not caused by the hypothetical negligence of the Seller. They were caused by the Buyer‟s election to continue with the proceeding on other bases. [163] I assess the damages for the hypothetical negligence as being both the money paid to the Silvercord account, US$141,341.50 and the detention costs to trial of $78,051. Such hypothetical damages would require adjustment for the apportionments between Seller and fraudster and between Seller and Buyer. Is the Seller unjustly enriched in respect of detention charges paid and detention expenses incurred by the Buyer since the goods were delivered to Brisbane and is the Buyer is entitled to an order for restitution? [164] Though the Buyer had no entitlement to possession of the goods, the Buyer claims that it is nevertheless entitled to: 1. restitution in respect of the costs it has incurred in preserving the goods for the benefit of the Seller, with the Seller‟s consent, from being wholly eroded in value by detention charges; and 2. a declaration that any detention charges payable in respect of the goods are payable by the Seller. -- 34 of 37 -- 35 [165] The Buyer submits that such a claim in restitution was recognised by the High Court in Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635.79The court in that case did not consider a claim like the present one. The passage cited contained a reference to Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234.80That passage was: “ „The general principle is, beyond all question, that work and labour done or money expended by one man to preserve or benefit the property of another do not according to English law create any lien upon the property saved or benefited, nor, even if standing alone, create any obligation to repay the expenditure. Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will.‟ (emphasis added)” [166] The Buyer submitted that in this case, the general principle stated by Bowen LJ in Falcke does not apply and is distinguishable because: 1. the Buyer does not claim a lien upon the Goods; and 2. the costs incurred by the Buyer in preserving the Goods were not incurred “behind the back” of the Seller but with its consent. [167] One point of the Court‟s reference to Falcke was to demonstrate that historically, the mere fact that work is done by one who preserves the property of another without the other‟s request generally does not create the right to a lien. To submit that the Buyer here does not claim a lien does not improve the prospect of establishing a claim for restitution on the basis of unjust enrichment. The point is that the law generally does not recognise a claim to a lien for preserving property so the law is unlikely to order restitution merely because one person preserves the property of another, and particularly if it is done without the property owner‟s knowledge. [168] The Buyer submits the relevant circumstances are: 1. between the time that the goods landed in Australia and their being taken into the Buyer‟s possession, detention charges were accruing and eroding the value of the goods; 2. the Seller knew that detention charges were accruing and eroding the value of the goods; 3. had the Buyer not taken the goods into its possession, detention charges would have continued to accrue, and the value of the goods would have been eroded to the extent that the detention charges would have quickly exceeded the value of the goods; 4. the Seller consented to the Buyer taking the goods into the Buyer‟s possession in circumstances where the Seller knew that the Buyer was inevitably going to incur expenses in preserving the goods; 5. the Seller has been enriched by the Buyer‟s actions in taking the goods into the Buyer‟s possession in that the value of the goods has been preserved; 6. the Seller now has the benefit of the preserved value in the goods; and 7. the Buyer has incurred costs and expenses in preserving the value of the goods. [169] The costs incurred by the Buyer are set out in the attached Amended Schedule of Damages, namely: 1. $38,081.00 incurred in respect of detention charges; and 79 (2008) 232 CLR 635 at [80] per Gummow, Hayne, Crennan and Kiefel JJ. 80 (1886) 34 Ch D 234 at 248. -- 35 of 37 -- 36 2. $60,930.14 incurred in otherwise preserving the Goods. [170] To the extent that any further liability in respect of detention charges arises, the Buyer submits such liability is properly that of the Seller and not the Buyer‟s and the Buyer should have a declaration accordingly. [171] I accept that it was sensible for the Buyer to minimise detention charges by the Buyer‟s taking possession. There was certainly an advantage for the Buyer and possibly an advantage for the Seller. When the Buyer took possession pursuant to a consent order, it was possible that the Seller might have benefitted from consenting. On one hypothetical outcome of the proceeding it was in the Seller‟s interest for the Buyer to hold possession. That hypothetical outcome would be if the Buyer succeeded in its claim to immediate possession and had a right to pursue the Seller for detention charges incurred pending a declaration that the Buyer was entitled to possession. But, even on that hypothesis, it seems to me that there was a benefit for the Buyer in mitigating its own losses. On the alternate hypothesis that the Buyer had no right to possession until payment in full to the seller, there was the added benefit for the Buyer by minimising its potential loss from weekly detention charges. [172] I am not satisfied that the value of the goods has been preserved. Instead, the risks for the Buyer have been limited by its taking custody of the goods to reduce detention charges. As the proceeding has been decided against the buyer the decision should have resulted in some mitigation of loss. There was benefit for the Buyer in taking possession. It held the goods at less cost than Mainfreight would have charged. [173] The Buyer relies on the Seller‟s consent to the interlocutory order made as a result of which the Buyer paid monies for storage and detention. I do not regard that as the equivalent of a request by the Seller to the Buyer that it store the goods. I accept the Seller‟s submission that a consent order is not a basis for restitution, or any other claim against the Seller and whether the Seller consented to the making of the interlocutory order or the Court had imposed it after a contested hearing is immaterial. [174] The Buyer incurred detention and storage costs for its benefit. The Seller did not request it to do so. I am not satisfied that there was unjust enrichment of the Seller at the expense of the Buyer. [175] I reject the claim for restitution and for a declaration that the Buyer is entitled to restitution of detention charges. Counterclaim [176] It follows from the above that the Seller remains unpaid US$163,452.50 as follows: Order No. Invoice No. (balance price) -- 36 of 37 -- 37 PO 1154081 20120818 ($108,783.50) PO 32982 20120831 ($22,111.00) PO Q1PO42283 20120828 ($32,558.00) [177] The defendant was entitled to withhold its authority to release the goods until payment to its account of the balance of the price. [178] The Seller also seeks specific performance of the agreement, by an order for the Buyer to pay the Seller US$163,452.50 plus interest, in exchange for the Seller‟s authority to release the goods in detention to the Buyer. The Buyer claimed specific performance even if “this Court finds that the Buyer does not have title to the Goods and is not entitled to immediate possession of the Goods”.84The court has jurisdiction to give judgment on conditions or to make other orders to give practical justice to the parties.85 Specific performance is the appropriate course here since: 1. The Buyer is already in possession of the goods, subject only to the interlocutory orders of the Court; and 2. The Seller cannot resell the goods given the Buyer‟s asserted claim for infringement of intellectual property rights.86 Appropriate Orders [179] The plaintiff‟s claims should be dismissed. [180] On the counterclaim there should be judgment for the defendant against the plaintiff for US$163,452.50 with interest on that sum from the date payment was demanded being 15 September 2012 pursuant to s 58 of the Civil Proceedings Act. [181] The Seller is entitled to specific performance. [182] I accept the submission of the Seller that it is appropriate to publish reasons and permit the parties opportunity to agree the terms of order relating to specific performance or otherwise for the parties to make submissions as to the form of contested orders. I propose to hear from the parties on costs and calculation of interest which accrued from 15 September 2012. 81 Exhibit KA-1 pp 33-49. 82 Exhibit KA-1 pp 100–106. 83 Exhibit KA-1 pp 82-90. 84 Buyer‟s written submissions [47]. 85 s 53 Sale of Goods Act 1896 (Qld). 86 Hosking [103]. -- 37 of 37 --