This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 79.— Where a bill of lading issued by a public carrier to the order of a shipper, signed by the usual officer, is obtained by fraud, can the carrier defend the claim of an innocent holder who has made an advance against the same by contending that their clerk exceeded his authority in giving a receipt for goods that do not exist?
Answer.—Under the circumstances stated in the question, the carrier would have a good defence to an action by the innocent holder of a bill of lading. The case of Erb v. Great Western Railway Company, reported in 5 Supreme Court Reports, page 149, is directly in point. The court (two judges dissenting), held that a railway agent giving a fraudulent bill of lading for goods not received by him was acting outside the scope of his employment, and that his action therefore did not bind the company.
For the present the point must be taken to be definitely settled by authority, although the views of the judges who decided the above case have been the subject of much adverse criticism among lawyers.
Since the above case was decided the House of Lords has held that even where there is no fraud, and only a mistake on the part of the master of a ship in signing a bill of lading for a stated quantity of goods, the owner, in the event of shortage, can relieve himself of his liability to the extent of the value of the goods which he is able to show were never delivered to the master. Smith v. Bedouin Steamship Company, 1896, Appeal Cases, 70.