Category: Road Carriage

Two days ago in JTI POLSKA Sp. Z o.o. and others (Respondents) v Jakubowski and others (Appellants) [2023] UKSC 19  the Supreme Court gave its judgment in a ‘leap-frog’ appeal from the decision of Judge Pelling KC [2021] EWHC 1465 (Comm) that the road carrier under CMR was liable for excise duty levied by HMRC on the owner of 289 cases of cigarettes which were stolen at a service station on the M25 during the course of carriage by road from Poland to England.

Article 23.4 of the CMR provides that in the case of the loss of goods the cargo claimant may claim “carriage charges, Customs duties and other charges incurred in respect of the carriage of the goods”, in addition to the value of the goods. Courts in CMR jurisdictions have interpreted the phrase “other charges incurred in respect of the carriage of the goods” in article 23.4 in two main but different ways. The “broad interpretation” is that it encompasses charges incurred because of the way that the goods were actually carried and lost, so that the cargo claimant can recover excise duty levied on goods stolen in transit. The “narrow interpretation” is that it is limited to those charges which would have been incurred if the carriage had been performed without incident and so does not include excise duty levied as a result of the loss of the goods in transit through theft. In James Buchanan & Co. Ltd v Babco Forwarding & Shipping (UK) Ltd. [1978] AC 141 (Buchanan), which also involved excise duty levied on goods stolen in transit, the House of Lords decided by a 3:2 majority that the broad interpretation should be adopted. Their Lordships’ interpretation was subsequently criticised in obiter dicta of the Court of Appeal in Sandeman Coprimar SA v Transitos y Transportes Integrales SL [2003] EWCA Civ 113; [2003] QB 1270.

The Appellants submitted that the narrow interpretation is to be preferred and that the Supreme Court should exercise its power to depart from Buchanan pursuant to the Practice Statement (Judicial Precedent) [1966] 1 WLR 1234 (“the 1966 Practice Statement”). In the light of the authorities on the 1966 Practice Statement, if the Supreme Court was to exercise its power to depart from Buchanan, the appellants to show that the decision was untenable or manifestly wrong.

The Supreme court found that Buchanan was tenable, which was supported by the fact that it reflected the conclusion of the judges at all levels in the case itself, other than the minority in the House of Lords and decisions reached by the Supreme Courts of Denmark, the Czech Republic, Lithuania and (arguably) Belgium as well as the Italian Court of Appeal.

As to the ordinary meaning of article 23.4, there was little doubt that the relevant wording is widely drawn. “In respect of” is commonly understood as equating to “in connection with”. It was very difficult to say that a loss which occurs during the course of road carriage and as a result of the way in which that carriage is performed is not connected with that carriage. Under art 23.4 the loss had to be a “charge” in order to be recoverable which excluded the most obvious form of consequential loss claim, such as a claim for loss of bargain or expectation loss or other lost profits, so giving content to the concluding words that “no further damage shall be payable”.

Even if the Supreme Court had concluded that Buchanan was wrong more would be needed to justify departing from that decision. There was no uncertainty created by contrary dicta of the Court of Appeal in Sandeman. It was the inappropriate statement by the Court of Appeal which should not have been made, which caused any uncertainty rather than the decision in Buchanan. Academic views on the decision were not unanimous in disapproval and the German and Swedish Supreme Court decisions applying the ‘narrow’ interpretation had to be balanced against the contrary decisions reached by, for example, the Supreme Courts of Denmark, The Czech Republic and Lithuania. There was no international consensus on the interpretation of art 23.4 of CMR. Nor had it been shown that Buchanan decision worked unsatisfactorily in the market place, as parties do not attempt to contract around the decision. Liability for excise duty is a recognised risk and insurers of both cargo interests and carriers underwrite on the basis of the full value of the cargo, including excise duty. Nor was it suggested that Buchanan produces manifestly unjust results. Despite the desirability of a uniform view as to the proper interpretation of article 23.4, that would not be achieved by reversing Buchanan. Uniformity would need an  amendment through a Protocol, as had been done for CIM, but that was a matter for the parties to the CMR.

So, as you were, with regard to recovery of excise charges on stolen goods under 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.