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It often happens in tougher economic climates that two relatively innocent parties are left to litigate a dispute caused by a third company which has gone out of business. In a recent Federal Court of Canada decision the Court was faced with just this problem.

Mediterranean Shipping Company (“Mediterranean”), an ocean carrier, sought to recover from BPB Westroc Inc. (“Westroc”), the defendant shipper, the sum of $65,187 for freight in connection with the carriage of Westroc’s goods on three separate occasions. Westroc conceded that the cargoes were theirs and that Mediterranean had carried them to the correct destination in proper condition. However, Westroc denied any liability on the basis that the freight had already been paid to a freight forwarder, J.T. Knight Export Services (“J.T. Knight”), that Westroc believed had the authority to receive payment on Mediterranean’s behalf