Forwarder’s right to limit under Montreal Convention

When does the Montreal Convention 1999 cover loss or damage to a cargo under a multimodal contract when that occurs outside the airport? That was one of the questions  before the District Court of the Hong Kong Special Administrative Region in In Mozard v Dachser [2018] HKDC 574. A Hong Kong garment exporter engaged the defendant freight forwarder to carry 20 cartons of garments by air from Hong Kong to Lyon, France. The goods reached the buyer but the exporter did not receive payment of the price and argued that the carrier had been in breach of its contract in allowing delivery to be taken without production of the airwaybill which named a bank as the consignee. The exporter had signed the carrier’s shipper’s instructions which expressly incorporated ‘HAFFA’s Standard Conditions’ and received and AWB which was expressly subject to the rules relating to liability under the Montreal Convention. The forwarder accepted that is was liable, but argued that it could limit liability as per the limitations under either the Montreal Convention or the HAFFA standard conditions.

The first issue was whether the loss or damage was covered by the Montreal Convention. The alleged misdelivery had not occurred during actual air flight and it was for the defendant to prove that it occurred within an airport. This was not the case as the only evidence before the court was that the forwarder did not have a warehouse inside Lyon airport. Nor did the Montreal Convention apply to the loss by virtue of the contractual provision in clause 2/2.1 of the AWB: “Carriage is subject to the rules relating to liability established by the Warsaw Convention or the Montreal Convention unless such carriage is not “international carriage” as defined by the applicable Conventions.” The word ‘carriage’ bore the same meaning as in the Convention and therefore the Montreal Convention only applied in relation to loss or damage within the limits set by the Convention.

 

The forwarder’s liability was dealt with under the HAFFA conditions and the relevant liability and limitation provisions were to be found in cl.21. Cl. 21.1 a general exception from liability for damage to or loss or non-delivery of or misdelivery of the goods unless it was proved that this occurred while the goods where in the carrier’s actual custody and under its control and was due to the wilful neglect or default of the forwarder or its servants. In the event of liability being established Cl. 21.5 provided a limitation of HK$200 per shipping package or unit or HK$10.00 per kilogram, whichever is the least. The clause covered loss which was not covered by other clauses in cl.21 as well as causes of loss which were unknown or not capable of being defined or characterised. On the evidence there was no explanation of how the loss here had arisen. There was nothing in the contract or on the face of the AWB to show that the AWB had to be presented for delivery of the goods to be obtained. The AWB was marked ‘Not Negotiable’. Nor was a term to this effect to be implied as the AWB is not a document of title. There was no legal or factual basis to find that the loss here was a fundamental breach or deviation and its specific cause was unknown and fell within cl.21.5 which covered situations where explanation is lacking.

The court then found that the limitation clause satisfied the reasonableness test in  Hong Kong’s Control of Exemption Clauses Ordinance which is modelled on the UK Unfair Contract Terms Act 1977. First, the parties’ bargaining power were equal and the exporter could have engaged other freight forwarders and, indeed had done so: the reason why it engaged the defendant was simply due to their usual agent switching to work for the defendant. Second, clause 21.5 was inherently relevant to the rates charged by the forwarder as the exporter had the option under clause 21.7 to contract out of the clause 21.5 limits by paying additional charges. Third, the exporter could have effected insurance on the cargo and was in fact in a better position to do so as there was no evidence that the forwarder knew of the cargo’s value and it would be cheaper for the exporter to effect indemnity insurance than for the forwarder to effect liability insurance

 

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