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Your are here: Home >> Bulletins Accidental Bailment And The Application Of ConditionsThere have recently been some suggestions that a decision in the High Court will throw the freight forwarding industry into turmoil - we disagree! The decision of His Honour Judge Mackie in the London Mercantile Court in Matrix Europe Ltd v Uniserve Holdings Ltd & Others was handed down on 8th May 2009. Uniserve (Northern) Limited was found to have unlimited liability to Matrix for the loss of a consignment of mobile telephone adaptors. In several recent articles, it has been suggested that the court has been inflexible and that the decision is unworkable. However, as we shall explain, the case does not represent any significant alteration in the law. Indeed, if there are any industry wide lessons to be learned, the Judge's comments are probably more accurately described as being aimed at the legal profession than the freight forwarding industry! The theft of the adaptors occurred in January 2003. Matrix had instructed Birkart Globistics to transport the adaptors by air from the UK to Hong Kong. They were to be moved by road from Matrix's premises to the airport. Unfortunately, it would appear that a mix up in instructions lead to the sub-contracted haulier delivering the adaptors to the premises of Uniserve (Northern) Ltd ("UNL") rather than the airport. The goods were never meant to be delivered to UNL. Nevertheless, UNL accepted the goods in and assumed that they were to be processed for ocean carriage. The goods were stolen from UNL's premises. Matrix sued UNL for the value of the lost adaptors. UNL sought to rely upon the limits of liability within the British International Freight Association's standard trading conditions, 2000 edition (BIFA). The limit of 2 SDRs per kilo would substantially reduce the claim. Before the Judgment in May 2009, the parties submitted the case for a preliminary issue in January 2008. This was heard before Mr Justice Andrew Smith. Two questions were put to him. Firstly, the parties asked whether the delivery into UNL's premises of the relevant goods was, as a matter of fact, unintended by either party. Secondly, the court was asked to decide whether such delivery could have been subject to the BIFA terms. The Judge decided that Birkart did not deliver the goods intentionally although UNL intended to accept delivery. He also found that such a delivery could have been subject to the BIFA terms. However, he expressed the view that such a preliminary issue was of very limited use as it failed to raise the correct questions (namely whether the storage in question was, in fact, subject to those terms). At trial, His Honour Judge Mackie concluded that UNL was a bailee of the goods and owed the appropriate duties to Matrix. He also concluded that those duties had been breached by reason of the loss. The question therefore arose as to whether or not UNL could rely upon the limits of liability within the BIFA terms. The Judge said "UNL's approach to this aspect of its case has been chaotic". He referred to the 9 pleaded attempts by UNL to set out the case against Birkart. Attempts to raise other arguments at trial were rejected. UNL relied on the following to show that it could rely upon the BIFA terms:- a) Consortium arrangement Group 99 was a consortium of forwarders (which included Uniserve Ltd and Birkart) which entered into an agreement to consolidate freight for sea carriage to take advantage of economies of scale. However, any agreement under the Group 99 consortium would be between the freight forwarder concerned and the administrator of the consortium (at that time, Exel). Consequently, any contract under the Group 99 scheme would be between the forwarder and Exel. Moreover, there was no evidence that the BIFA terms had been incorporated into that agreement (a number of other standard terms were been referred to). Furthermore there was no evidence that UNL (as opposed to Uniserve Ltd, a separate legal entity) was a member of that consortium. b) Industry standard UNL sought to argue that the BIFA conditions were so widely used throughout the industry that they represent the industry standard. This is, perhaps, a surprising argument in circumstances where the freight forwarding industry trades on a multitude of standard trading conditions. It is assumed that UNL was trying to establish an almost universal acceptance of the BIFA conditions (such as that which was successfully argued in British Crane Hire v Ipswich Plant Hire [1975] QB 303). However, the court observed that there are many industry bodies throughout the freight forwarding industry (i.e RHA/UKWA) and each has its own set of standard trading conditions. None of these can be said to be so universally accepted as to be the industry standard. c) Prior course of dealing UNL sought to argue that it had traded with Birkart previously on its standard trading conditions. In order to establish incorporation by such a method, UNL would have to show that it had made it clear to Birkart that on each occasion the parties contracted, it intended to rely upon its standard trading conditions. The Judge found that there was no evidence to support such a contention. There was no evidence of the previous transactions or the terms upon which they had been conducted. d) Instructions to the Driver UNL sought to argue that the sub-contracted driver was instructed by Birkart to take the goods to UNL's premises and this created the agreement to which the terms could bind. However, the court found that this was contrary to all of the evidence and such an argument could not succeed. Lessons for the freight forwarding industry If, therefore, a forwarder accepts goods from a party with whom they have no previous agreement, there is indeed a risk that the forwarder may have a full liability if the forwarder fails to take proper care of those goods. However, this is unlikely to come as much of a surprise to much of the industry. Indeed, within the Matrix decision, prudent forwarders can take some comfort. In the preliminary issue before Mr Justice Andrew Smith, he concluded that it was possible for a bailment arising in such circumstances to be subject to limits of liability within standard trading terms. He gave an example of where this might apply:- "If Birkart and UNL made an umbrella agreement, the terms of which were that the BIFA terms should apply even if there was an unintended delivery by UNL to Birkart, the court will recognise and give effect to that agreement. If some manipulation of the wording of the BIFA terms is needed to give effect to the parties' bargain, that would be done". Moreover, Judge Mackie stated:- "One can see that in some circumstances cautious parties might wish to make express provision for what was to happen if goods were delivered despite the fact that neither they nor the transaction under which they were moved were within the scope of the contract". However, he made it clear that such a term would not be implied. It is, therefore, important that if parties have umbrella agreements with clients, these are drafted in terms which take into consideration unintentional deliveries. Furthermore, it is important that forwarders train their staff to appreciate that if goods are unexpectedly delivered in error by a party who is not a regular customer, such goods should be identified early on. If possible, the goods might be rejected. At the very least, one would expect the court to have far more sympathy for the forwarder's position if the forwarder identifies such goods early on and advises the party by whom the goods are delivered (a) that they have their goods and (b) that they hold them subject to limits of liability. As mentioned above, the Judge had a few words to say about the way in which the case had been conducted on behalf of Uniserve. The Judge noted that despite the fact that the litigation had been ongoing for 6 years, UNL had not managed to produce sufficient evidence to support any of its arguments. The Judge referred to a comment by Lord Templeman in a previous case whereby he reminded the legal representatives of their duty to co-operate with the court by "chronological, brief and consistent pleadings which define the issues and leave the Judge to draw his own conclusion about the merits when he hears the case? and to assist the Judge by simplification and concentration and not to advance a multitude of ingenious arguments in the hope that out of 10 bad points, the Judge will be capable of fashioning a winner". Although this quote predates the Civil Procedure Rules His Honour Judge Mackie QC considered that it applies equally today. In our opinion, this decision is not likely to throw the freight industry into turmoil. It may, however, serve to reinforce best practice and remind parties to establish clear procedures to ensure contract certainty and reliance upon standard trading conditions. The largely fact -specific findings serve as a useful reminder of the perils that may have faced when there is no evidence of incorporation of conditions. If you have any queries arising out of this bulletin, then please do not hesitate to contact Christopher Dunn or Christopher Chatfield. June 2009 Return to Bulletins |
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