Manassen Foods v Seaway Logistics (No 4) [2025] VSC 32

Introduction

In the case of Manassen Foods v Seaway Logistics (No 4) [2025] VSC 32 (Manassen Foods v Seaway Logistics), Manassen Foods Australia Pty Ltd (Manassen) contracted Seaway Logistics Pty Ltd (Seaway) to arrange the shipping of three salad dressing consignments from the United States of America (USA) to Australia. Seaway, in turn, engaged Intelligent SCM LLC (AWA) as its USA freight forwarder and ANL Singapore Pty Ltd (ANL) as the ocean carrier.

The shipments arrived spoiled due to the refrigerated containers being set at -10°C instead of the required +10°C. Manassen sued both Seaway and ANL for damages and while the claim against ANL was discontinued, the claim against Seaway was pursued until Seaway settled with Manassen in October 2021 after a discussion regarding AWA’s contractual liability and contribution to the settlement paid by Seaway to Manassen. The case is significant to direct focus on the application of implied contractual terms, and the apportionment of liability for multi-party contracts.

The Background and Key Facts of the Case

In March 2017, Manassen contracted with Seaway to import and export their shipping business for the next 12 months, entering into a Service Agreement which contained key clauses that provided Seaway would indemnify, defend, and hold Manassen harmless against any claims or losses arising from Seaway’s breach of the agreement. The Service Agreement included liability for negligence according to industry standards, and the actions of its subcontractors as if they were its own. Seaway held discussions with AWA via email regarding the shipment. Seaway signed a Carrier to Carrier Agreement (C2C Agreement) provided by AWA and in turn provided AWA with a Standard Operating Procedure (SOP) for the USA to Australia shipment from Manassen. In June 2017, AWA and ANL exchanged emails to arrange the bookings for the three shipments. Evidence was submitted that AWA’s booking requests correctly specified that the refrigerated containers should be set at +10°C, the correct temperature. However, the booking confirmation from ANL incorrectly recorded that the temperature should be set at -10°C instead of +10°C. In July 2017, the refrigerated containers were set to the incorrect temperature and were damaged in the journey from USA to Australia, arriving in spoiled condition in August 2018. Determining whether AWA had or had not exercised due care and skill in the Freight Forwarding Agreement (FFA) became a central issue in this case.

Manassen filed a claim against Seaway and as it was Seaway that Manassen claimed was responsible for AWA’s actions, Manassen did not make a separate claim against AWA. Seaway filed a third party notice joining AWA to the proceeding. In September 2021, Manassen and Seaway settled Manassen’s claim against Seaway. The case discussed issues of contractual liability and parties’ contribution to settlement.

Parties Submissions

Seaway argued that while it did not have a formal written contract with AWA, it submitted that the emails and exchange of documents evidenced binding legal relations between them, making AWA responsible for arranging freight forwarding within the USA for Manassen’s shipments to Australia. Seaway argued that the SOP and C2C Agreement evidenced both parties’ intention to create legal relations, and that all shipments were arranged by Manassen by engaging Seaway to be responsible for transport. Seaway asserted that there was sufficient evidence to confirm a contractual relationship with AWA.

Seaway further contended that an implied duty required AWA to exercise due care and skill, especially in specifying correct carriage temperatures. Seaway alleged AWA breached this duty through its representatives’ failure to review and confirm booking details, leading to incorrect shipping temperatures. Seaway maintained these errors were AWA’s responsibility and that it reasonably relied on AWA’s expertise.

Seaway further argued that its loss was not too remote because AWA knew it was arranging carriage of Manassen’s goods on an Ex Works basis, making Manassen responsible for the shipping arrangements, hence their contract with Seaway. They argued that it was foreseeable that a failure by AWA could lead to a claim against Seaway. Seaway argued that its settlement with Manassen was reasonable and that AWA had not shown the settlement or legal costs to be otherwise. Seaway also maintained that it did not contribute to its own loss, having reasonably relied on AWA’s expertise and contractual obligations when arranging the shipments.

In response, AWA argued that Seaway did not appropriately notify them of Seaway’s contractual obligations and engagements, and it would not be reasonable for them to expect that AWA would know liability for damages would fall on Seaway. Further, AWA denied any FFA or agency relationship, arguing both parties acted independently and only had a cooperative SOP, not a binding contract. AWA claimed its obligations did not extend to ensuring correct temperature settings and that any errors were Seaway’s or ANL’s responsibility. AWA also argued that, if found liable, any damages should be reduced due to Seaway’s own failures to provide proper instructions or check container settings, which would have prevented the loss.

Decision

There were two main issues for the Court to determine: firstly, what was the liability of AWA to Seaway in damages for breach of contract; and secondly, the liability of AWA to Seaway to contribute to the settlement sum.

Contractual Liability

In considering whether a contract existed, the Court cited Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd¹ where the Federal Court found that:

A contract may in certain circumstances be inferred from conduct…However the existence or otherwise of an enforceable agreement depends ultimately on the manifest intention of the parties, objectively ascertained…The evidence must positively indicate that both parties considered themselves bound by that agreement.

The Court in the current case found, despite the parties not formalising the FFA, based on the totality of the evidence, being the correspondence and the documents that were exchanged, there was a contractual relationship between Seaway and AWA, the terms of which could be inferred from the exchanges. Implied into that contractual relationship was a term that AWA had to perform its services with due care and skill. The Court found that AWA did breach that implied term by failing to detect and correct repeated errors in temperature settings for three shipments, including confirming the incorrect -10°C setting in multiple emails with ANL and booking documents, which directly caused the spoilage of goods.

Contribution to settlement

The Court held that AWA’s breach of duty caused Manassen’s loss and therefore, AWA was liable to contribute to the sum paid by Seaway to settle Manassen’s claim against it.

The Court also noted that despite how far AWA’s duty was placed from the original contract between Manassen and Seaway, AWA was in control of the process when the goods were damaged. AWA owed a duty to exercise due care and skill. Ultimately, the court found that AWA’s breach caused Manassen’s loss, making AWA liable to Seaway for a proportion of the amount Seaway paid to Manassen to settle the claim. AWA was ordered to pay $486,000 to Seaway.

Compliance Impact

Organisations should ensure that when engaging in conduct involving supply chains or multiple parties, that they understand their responsibilities including duties that may arise from implied terms. Training should cover the importance of checking details, working closely with subcontractors, and keeping clear records. There should be clear processes implemented which focus on regular reviews of any processes, clear communication of expectations, and thorough documentation of all decisions and instructions. By implementing these controls, organisations can better manage risk and ensure compliance with contractual obligations, including those obligations implied by the conduct of the parties.