Citation(1992) 4 SAcLJ 133
Published date01 December 1992
Date01 December 1992

Like the protagonist in a series of B-grade horror movies, Grant v. Norway,1 decided a good one-and-a-half centuries ago, keeps coming back to haunt modern visitors who stray into its realm.

In that case, the master of a ship signed a bill of lading acknowledging that 12 bales of silk were shipped. The indorsees of the bill advanced money on the goods so represented to have been shipped. The goods were never shipped and the indorsees sued the shipowners to recover the amount they had advanced. The Court of Common Pleas held that a ship’s master had no authority to sign a bill of lading for goods not put on board. Jervis, C. J., delivering the judgment of the court, posed the question as:

[W]hether the master of a ship, signing a bill of lading for goods which have never been shipped, is to be considered as the agent of the owner in that behalf, so as to make the latter responsible.

His Lordship concluded that:

If, then, from the usage of trade, and the general practice of shipmasters, it is generally known that the master derives no such authority from his position as master, the case may be considered as if the party taking the bill of lading had notice of an express limitation of the authority; and, in that case, undoubtedly, he could not claim to bind the owner by a bill of lading signed, when the goods therein mentioned were never shipped.

The decision had an uneasy passage through time under the scrutiny of various 20th. century English judges and re-emerged in Singapore in the 1991 judgment of Karthigesu J. in Blue Nile Co. Ltd. v. Emery Customs Brokers (S) Pte. Ltd.2 The defendants in that case were freight forwarders who had issued the bills of lading in question. These bills falsely indicated that three shipments of black tea had been made. The plaintiffs who were the purchasers of the tea accepted these bills and later found out that there was no shipment as alleged in the bills of lading. They did receive a shipment of part of the contract amount from another ship and sued the defendants for the short-fall.

The plaintiffs alleged that the defendants at the time when they issued the bills of lading knew and/or ought to have known that the said representations contained therein were untrue and/or were made recklessly not caring whether they were true or false. In brief, this was a claim based on an allegation of fraud. The plaintiffs alternatively relied on an alleged negligent misrepresentation by the defendants. The ground of negligence was not dealt with substantively and may be disregarded for our purposes.

The defendants, in their defence, pleaded, inter alia, that the three bills of lading were fraudulently issued by one Alfred Tan, their employee, without their consent or authority. Accordingly, they denied making any representations by the bills of lading.

The plaintiffs managed to obtain summary judgment before the senior assistant registrar on the ground that there was no defence to the claim since the defendants had admitted their employee’s fraud.

The defendants appealed to the High Court. In Blue Nile Co. Ltd. v. Emery Customs Brokers (S) Pte. Ltd., Chan J. accepted the defendants’ argument that since the plaintiffs’ primary claim is based on an allegation of fraud, the plaintiffs were precluded by the terms of O. 14 r. 1(2)(b) of the Rules of the Supreme Court 1970 from applying for summary judgment (The relevant provisions have now been amended). However, Chan J. did not close the door on the plaintiffs’ claim entirely. He suggested that:

They could have applied for judgment on the ground that the defence did not disclose a defence in law in that the defendants were liable for the fraud of their servants, Grant v. Norway notwithstanding. They chose not to do so. Moreover, this judgment does not prevent them from doing so on that basis.3

Chan J. went on to indicate that he did not consider that Grant v. Norway had conclusively decided the issue:

Grant v. Norway, on the face of it, provides a defence in law. If Grant v. Norway is good law in Singapore and is applicable to the facts as alleged by the defendants, it provides a complete defence to the action.4

Thus prompted, the plaintiffs applied to strike out certain portions of the defence pursuant to O. 18 r. 19(1) of the Rules of the Supreme Court or under the inherent jurisdiction of the court and have judgment entered in

their favour against the defendants. The application was heard before Karthigesu J. The learned judge aptly summed up the issue thus:

It is not disputed that these paras of the defence support a defence founded on Grant v. Norway(1851) 10 CB 665; 138 ER 263. Accordingly, it is not disputed that should I decide that Grant v. Norway is not applicable to the facts of this case or that Grant v. Norwayis not good law in Singapore then the defence founded on Grant v. Norway must fail in limine.5

As it turned out, Karthigesu J. held that Grant v. Norway was good law in Singapore, but that it did not apply on the facts to offer the defendants a good defence. There were corollary points raised on the bank’s purported negligence in accepting the bills and also as to the effect of bills of lading issued by freight forwarders. These points detract from Grant v. Norway and will not be addressed.

A. The Non Sequitur

The liability of the shipowner in this area can arise in two ways. First, based on the idea of estoppel, a representation by his agent which is binding on him will preclude him from denying that the goods are in fact received on board. That being so, the shipowner will have to account for any short delivery of the goods so represented to have been shipped. Secondly, any loss suffered by the party who rely on the representation may be recoverable from the shipowner based on either fraudulent or negligent misrepresentation.

It is not proposed to dwell on nice distinctions between these two possible sources of the shipowner’s liability. In either case, the question is whether the representation of the agent can be treated as that of the principal so that the principal is held responsible for the statement.6

The premise on which Grant v. Norway was decided was indisputable. The master had no authority to sign bills of lading for goods that are not put on board. Such lack of authority was perhaps well known to people in the trade. However, by coming to the conclusion that when the master had no

authority in a particular transaction the other party must be taken to have notice of it, Jervis J.’s reasoning created a catch—22 situation.

The hitch is that, on the Grant v. Norway approach, a person must know first of all whether the statement is true before he can decide whether the agent has authority or not. This is surely a fallacy. If the person can already determine whether something is true or false, the agent’s statement serves no purpose. If the word is binding only if it is true, what is the purpose of reliance on the agent’s word? This is tantamount to saying: “Yes, you may rely on what he says, unless it is false.”

Grant v. Norway does not fit easily among other decisions on the effect of representations in bills of lading. In the earlier case of Howard v. Tucker in 1831, it was held that a bill of lading signed by a captain representing that freight had been prepaid would bind his principals the shipowners although freight was never paid.7 In later cases, the courts also held that statements in the bill of lading about the condition of the goods would estop the shipowner from proving otherwise.8 As pointed out by Scrutton:

The rule is unsatisfactory, for a person making payments against tender of the bill relies just as much, if not more, on the representations as to quantity as he does on the representations as to good order and condition. The theoretical distinction may be that in the latter case the owner is bound by the contract of carriage made by the master, and is therefore bound by all its terms; whereas in the Grant v. Norway situation the owner cannot be bound by a contract to carry goods, when in truth there are no goods to carry. This explanation is not convincing. In the first place, the question is not whether there is a contract of carriage, but whether there is an estoppel. Secondly, the explanation does not cover the case where some goods are shipped, albeit not as many as are stated in the bill.9

Scrutton went on to make the additional point that the common law rule that the bill of lading is nevertheless prima facie evidence of the quantity shipped “makes the principle of Grant v. Norway even more anomalous, since there seems no reason why the master should have authority to make the representation prima facie evidence, if he has no authority to create an estoppel or otherwise to make the owner liable.”10 He was referring to the enigma illustrated by Lord Watson’s statement in Smith v. Bedouin:

The master of a ship has no authority to grant bills of lading for goods

which were not put on board his vessel; but, when he signs a bill acknowledging the receipt of a specific quantity of goods, the shipowner is bound to deliver the full amount specified, unless he can shew that the whole or some part of it was in fact not shipped.11

On a more sympathetic view, it has been said that Grant v. Norway was decided before developments in the law of agency and related rules on vicarious liability rendered it an anomaly.12 Perhaps a look at the relevant rules will highlight how awkwardly Grant v. Norway is perched among the body of case law on agency.

B. The Principles of Agency
1. The categories of authority

The authority of an agent may be classified under three categories: express, implied and ostensible. While the first two categories are authority which the agent actually possesses, the third category, which is sometimes referred to as “apparent” authority, is neither real nor...

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