Breaking limitation under the CMR?

The owner of two extremely valuable cars, a Mercedes Benz CLK GTR 97 and a 1948 Talbot-Lago T26 GS Franay Cabriolet claimed damages from the carrier, CARS, after they were damaged while in its possession. The carrier CARS was engaged through Peter Auto, a French events management company, to transport the two cars from the premises of their owner, Mr Knapfield, in Beaconsfield to the Chantilly Arts & Elegance Richard Mille Concours d’Etat (“Chantilly”), north of Paris, and back again after the event. During the return journey both cars were damaged when the Talbot – which had been stowed forward of the CLK 97 –  slipped backwards into the CLK 97, due to the front wheel straps attached to the Talbot becoming free, as a result of inadequate securing of its front wheel straps.

The central issue in Knapfield v CARS Holdings Ltd Company (No. 05481676) & Ors [2022] EWHC 1437 (Comm) (13 June 2022). was whether the owner’s damages were limited by the Carriage of Goods by Road Act 1965 which incorporates the CMR Convention (“CMR”).  The Convention’s provisions have the force of law “so far as they relate to the rights and liabilities of persons concerned in the carriage of goods by road under a contract to which the Convention applies” (s1) and a person concerned in the carriage of goods by road includes a consignee (s14(2)(b)). Under CMR the carrier’s liability would be limited to SDR 23,490.60, about $20,000, considerably lower than the diminution in value claimed by the owner of the two cars.

The CMR applied because there was a contract for the carriage of goods for the vehicles by road in the Transporter for reward, and because CARS took over the vehicles in France for carriage to the United Kingdom. The owner of the cars was not a party to that contract, but CMR applied because he was the consignee.  The failure of CARS to issue a consignment note did not affect the applicability of CMR due to article 4 which provides “The contract of carriage shall be confirmed by the making out of a consignment note. The absence, irregularity or loss of the consignment note shall not affect the existence or the validity of the contract of carriage which shall remain subject to the provisions of this Convention.” There was nothing in CMR which expressly placed the burden of issuing the consignment note on the carrier so that a claim for breach of contract could be made against the carrier for failure so to do.

The owner’s case was that the liability of CARS was not limited by CMR, due to three exceptions, all of which were rejected by Charles Hollander QC, acting as a Deputy Judge of the High Court:

a. Where the sender declares in the consignment note a value for the goods (Article 24 CMR).

The owner was not a party to the contract of carriage and was not the sender, who was the party that needed to make such declaration. Any discussion between the owner and the sender about the value of the vehicles, which was disputed, was oral and was not declared in the consignment note, as there was no consignment note. Any declaration of value needed to have been made with the agreement of CARS as the carrier and be evidenced in writing. There was no such agreement here.

b. Where the sender fixes the amount of a special interest in delivery in the consignment note (Article 26 CMR).

This argument failed for the same reasons as the Article 24 argument, with the additional reason being that “special interest” must provide for loss or damage which is not provided for in Articles 23, 24 and 25, such as consequential loss.

c. Where the damage was caused by the wilful misconduct of the carrier or its servants or agents (Article 29 CMR).

To establish wilful misconduct on the part of the carrier or its servants and agents, the Claimant needed to prove that:

a. There must have been misconduct.

b. The carrier, employee or agent either (a) must have committed the misconduct deliberately knowing that the conduct was wrongful, regardless of the consequences, or (b) must have committed the misconduct deliberately with reckless indifference as to whether what he or she was doing was right or wrong, where such misconduct was unreasonable in all the circumstances.

c. There must have been an increased real and substantial risk of damage to the goods resulting from such misconduct and the carrier, employee or agent must have been aware of that additional risk.

Such misconduct was not made good by negligence or even gross negligence. The case of wilful misconduct was based on the combination of an unjustified failure by CARS’ driver, Mr Constantinou, to follow instructions given by the owner to him and the use of an unsafe method of securing the Vehicles in circumstances. Responsibility and expertise in carrying the Vehicles lay with CARS rather than the owner and whilst a failure to do what the owner had proposed or advised might be evidence of deliberate or reckless conduct, it would not be a breach of any obligation to fail to follow the owner’s instructions,

The cause of the damage was the failure of Mr Constantinou properly to secure the front over-the-wheel straps on the Talbot on the return journey, so that in the course of that journey they worked loose. Although that failure could readily be described as negligent, perhaps even grossly negligent, there was no reason to think it was reckless, still less deliberate. Although Mr Constantinou had failed to follow company policy to use chocks were possible, there was a legitimate explanation for this – he did not do so because the Transporter had forward wheel wells sunk into the deck, and the Talbot was driven into the wells, which had already acted as chocks. Significantly, that method for transportation was the same as been used for the carriage to Chantilly without incident, which went against any suggestion that the method of carriage was reckless.

The owner also claimed by way of damages for misrepresentation under s2(1) of the Misrepresentation Act 1967, and by way of an alleged contract with CARS  whereby it agreed to reimburse him for the damage which had occurred in full, that contract being separate to CMR. The Misrepresentation claim could not succeed as this claim could not succeed because the misrepresentation would have been made to someone who was neither a contracting party or their agent. The claim based on the reimbursement contract could not succeed as there was no consideration for CARS’ promise, and if there were to be an enforceable promise to surrender the right to rely on the statutory limit of liability under CMR, there would have to have been express reference to the right to limit. Without such a reference, the promise would not be clear and unequivocal, which is a requirement for a contractual surrender of such rights of limitation.

IISTL Professor’s UNCTAD Report on “Legal and Practical Implications of Covid-19” Is Out

“CONTRACTS FOR  THE CARRIAGE OF GOODS BY SEA AND MULTIMODAL  TRANSPORT KEY ISSUES ARISING FROM THE IMPACTS  OF THE COVID-19 PANDEMICA” is now available at https://www.google.com/url?q=https%3A%2F%2Functad.org%2Fsystem%2Ffiles%2Fofficial-document%2Fdtltlbinf2022d1_en.pdf&sa=D&sntz=1&usg=AFQjCNGYpOUVQNY4G-u7Vkox_kWvDs8Nkw

This is a report for the United Nations Conference on Trade and Development and was  prepared by  Professor  Simon  Baughen,  with contributions  by  Regina Asariotis  and  Anila  Premti,  Policy  and Legislation  Section,  Trade  Logistics  Branch,  Division  on  Technology  and  Logistics  of  UNCTAD. The report forms  part  of  the  ‘International commercial transport  and  trade  law’  component of the  UN Development Account project (UNDA  2023X)  project on “Transport and trade  connectivity  in the  age  of pandemics”.  

This report examines some  of  the  key legal issues  arising from  the  pandemic  as  they  affect  contracts  for the  carriage  of  goods  by  sea, multimodal  contracts  of  carriage  that  (may)  involve  carriage  by  sea,  as well as voyage  and time  charters. 

Fear of Damage and the CMR

 

A recent decision from the court in Amsterdam, ECLI:NL:RBAMS:2019:10104, published 21 February 2020, is a reminder of two salient differences between the liability structure of the international road carriage convention, the CMR, and that under the sea carriage conventions: as regards what constitutes ‘damage’; as regards express contractual provisions varying the scheme of the convention.

Danone, were the shipper of dairy products from Germany to France. When the goods arrived in France it was found that the seal on the container had been broken and Danone destroyed the goods and claimed their full value and the cost of their destruction. The framework contract stipulated that Danone was entitled to destroy all goods in the case that the presence of persons in the trailer was suspected, and could invoice the full value of the goods plus destruction costs. The court decided that ‘damage’ in the CMR meant a substantial physical change in the state of the goods. The fact that the seal had been broken, which allegedly caused a decrease in the market value and marketability of the goods, was not characterised as ‘damage’ within the meaning of the CMR. Recovery of economic loss under CMR is restricted to the items referred to in art.23(4) “the carriage charges, Customs duties and other charges incurred in respect of the carriage of the goods”. By contrast, with carriage of goods by sea under the Hague Rules, a claim can subsist in relation to pure economic loss, such as the value of sound cargo destroyed due to fear of contamination by proximity to damaged cargo (The Ocean Victory Ltd. [1982] 2 Lloyd’s Rep. 88.).

Danone were also unsuccessful in referring to the specific provisions in their framework contract, due to art.41 of the CMR, because because they increased the mandatory liability of the carrier under the CMR.  Article 41 renders null and void derogations of CMR, whether for the benefit of the carrier or the sender. By contrast, art III(8) of the Hague Rules has only a one way effect in rendering null and void provisions which are for the benefit of the carrier, with art V preserving the effect of contractual provisions that benefit the shipper.

 

 

 

Are CMR consignment notes electric?

 

They will be soon. The UK has indicated its intention to accede to the e-CMR protocol allowing an electronic consignment note as an alternative to a paper consignment note. In 2008 the CMR protocol became part of the Convention and came into force in 2011 for accepting countries, of which there have been few to date. The UK intends to deposit its instrument of accession to the UN in September 2019, after which it will take 90 days for the Protocol to come into force in the UK. Next stop, extending COGSA 1992 to electronic bills of lading?

UK Referendum Result. Implications for shipping law?

As a result of the vote to leave the EU,  the UK will cease to be a member of the EU probably around November 2018 after the new prime minister has invoked article 50 and Parliament has repealed the European Communities Act 1972. How will this affect shipping law?

Substantively, not a great deal. English dry shipping is based on common law, and a few key statutes, such as COGSA 1992, and the implementation of international carriage conventions through domestic legislation – such as COGSA 1971 with the Hague-Visby Rules. Nothing European here, so no change.

With  wet shipping, the CLC and the Fund are part of our national law through domestic law implementing international conventions. Similarly,  the Wreck Removal Convention, the Salvage Convention, and the 1976 Limitation Convention. Again, nothing European here, so plus ca change.

However, procedurally,  we are very much affected by European legislation – and this is something we shall return to in a later post. As a starting point, bear in mind the two sources of EU legislation.

  • Directives which are implemented by and Act of Parliament. On our leaving the EU it will be up to Parliament to decide whether to repeal or amend the implementing legislation.
  • Directives which are implemented as statutory instruments pursuant to s.2 of the European Communities Act 1972. These will cease to be a part of national law once the European Communities Act 1972 has been repealed. If we want to keep them we need to enact them as part of our domestic law.
  • Regulations which have direct effect. These will cease to be a part of national law once the European Communities Act 1972 has been repealed. If we want to keep Regulations we need to enact them as part of our domestic law.

Piggy back jurisdiction under CMR? The Supreme Court answers ‘No’

Where jurisdiction is established over the first road carrier under the CMR, can proceedings against successive carriers be brought in that forum? In British American Tobacco Switzerland S.A. and Others v Exel Europe Ltd [2013] EWCA Civ 1319, [2014] 1 Lloyd’s Rep. 503, the Court of Appeal said ‘yes’. The Supreme Court has now reversed the decision, [2015] UKSC 65.

The cargo owner entered into a CMR contract of carriage with a carrier, based in England, and agreed exclusive English jurisdiction for disputes arising out of the contract of carriage. The claims arose out of thefts of cigarettes from two cargo containers while in the custody of Dutch sub-contractors, the first in Belgium, the second near Copenhagen. The cargo sued the first carrier and the two Dutch sub-carriers. An advantage of suing in England would be that recovery of customs duty is allowed in full under art. 23(4) CMR by the English courts.

Although it was entitled to bring proceedings in England against the first carrier, this was not the case as regards the successive carriers who did not fall within any of the grounds of jurisdiction in art. 31 of CMR. What about art. 34 which has the effect of joining a successive carrier to the contract of carriage on the terms of the consignment note? The jurisdiction clause did not appear in the consignment note and it would be contrary to principle to hold a party to a choice of court clause of which he had no express notice. Then there is art. 36, under which joint and several liability is imposed on the first, the last, and the guilty carrier. However, this was not to be interpreted to include an additional head of jurisdiction allowing for a defendant domiciled in one member state to be sued in the courts of the place where a co-defendant was domiciled. The 2001 Brussels Judgments Regulation did not provide any other basis for jurisdiction over the two sub-contractors or otherwise act as an aid to the interpretation of the CMR.

Lord Clarke and Lord Sumption both considered that the commercial logic of articles 34 and 36 points towards the recognition of a jurisdiction to receive claims against all three carriers in one set of proceedings. However, they agreed with Lord Mance that the language of the CMR clearly provides otherwise. The only way for a cargo owner to ensure that its claims against all the carriers that are potentially liable under art. 34 is to ensure that the jurisdiction clause in the head contract is expressly referred to in the consignment note.