Breach of warranty of authority, section 53(bb) Trade Practices Act, misleading conduct:BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) [2009] FCA 1087 (25 September 2009)

October 4, 2009 |

When Finkelstein J puts down gavel he would serve the community mightily in picking up the pen. He is one of the word smiths of the bench. His decisions are invariably succinct and precise. Besides there are not many other judges who are so comfortable with their prose to describe a witness as a rogue! Now if he could only work in villein, ruffian and neer do well… well we would have all the 18th century argot and arcania covered. More power to him!


In BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) the fact situation while straightforward proceeds involves a detailed chronology. Taking the highlights, the Applicant (BHPB) owned a bulk carrier, the Global Hawk, which it purportedly chartered to NCI, a company. The charter negotiations were conducted through the First and Second Respondents. BHPB believed First Respondent acted as broker for NCI. In fact the First Respondent was dealing with a person Finkelstein J described as a rogue who represented himself as acting for NCI but had never done so (par 43). The ship was delivered by BHPB into service of another company Nera and not NCI. Nera paid only a portion of the agreed hire. BHPB sought the balance from the agents, in particular the First Respondent (Cosco).

The causes of action are summarised at par 38:

BHPB claims against Cosco that it (1) breached s 52 of the Trade Practices Act 1974 (Cth) (TPA) (by engaging in misleading or deceptive conduct); (2) breached s 53B(bb) (by falsely representing that a particular person had agreed to acquire services from BHPB); (3) breached s 53(d) (by representing that it had approval of or affiliation with NCI it did not have); (4) was negligent; and (5) wrongly warranted that it had the authority of NCI to conclude a charter party.

Regarding the breach of warranty of authority Finkelstein J summarised the principled thus (at par 40)

where a person (the first person) falsely represents that he has authority to act on behalf of another person in a particular transaction and the person to whom the representation is made (the second person) is induced to act on the faith of the representation and suffers loss, the second person may recover the amount of the loss from the first person in an action for breach of a collateral contract. It matters not that the first person acted in good faith, believing he had the authority which he purported to have.

The elements that the Plaintiff had to establish:

  • The First Respondent represented it had the authority to act on behalf of NCI (par 41);
  • the Applicant was was induced to act on the assertion that the First Respondent acted for NCI & but for the assertion it would not have so acted (par 47)

Furthermore, as Finkelstein J noted, “ is not necessary for the plaintiff to enter into a transaction with the supposed principal in order to establish an action for breach of warranty of authority. The cause of action is established even if the plaintiff enters into a transaction with another person..” (par 50).

The Court took a broad view of the operation of section 53(bb), false representation to acquire goods or services,in a concise analysis of the section and its history (par 52). Here the First Respondent falsely represented that it was supplying broking services to NCI.

The measure of the damage was the difference in position the Applicant would have been in had the representation been true and the actual position, which was where things stand because the representation was untrue. The measure of the damages under section 53(bb) of the TPA was similar.

The Applicant’s claim against the Second Respondent was unsuccessful, primarily on a finding of facts.


The claim against the brokers were grounded in both contract and section 53(bb) of the TPA. The usual issues surrounding whether there was actual or ostensible authority were not relevant because the “agent” did not in fact even act for the principal – so described.

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