T Comedy v E M T

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T. Comedy (U.K.) Limited v. E M T Limited
English High Court: Queen’s Bench Division: Commercial Court: Jonathan Hirst QC sitting as a Deputy Judge: 28 March 2007
Cameron Maxwell Lewis, instructed by Hugh-Jones & Co, for T. Comedy
Dominic Happé, instructed by Clyde & Co, for the Respondent EMT
On the facts of this case, the court held that the lien provisions of certain Road Haulage Association conditions were not included in the relevant contract of carriage and, if they had been, no general lien would have been applicable, since the Customers of the carrier, against whom the lien was being exercised, were not the owners of the goods consigned. But, the court held obiter, even if the contract of carriage had incorporated the relevant RHA Conditions, no right of general lien could have been effective since – in the context of carriage under the CMR Convention - it would have amounted to a derogation from the right of the consignee to obtain delivery under the Convention, on payment of the outstanding charges relating to that consignment only. Article 41 of the Convention applied. Further, in the case in question, the carrier had no right of particular lien under Article 13.2, since the charges in question had not been entered on the consignment note, as required by Article 6(1)(i).

DMC Category Rating: Developed

The Claimant ("TCL") designed and supplied ladies garments and accessories to a number of top fashion retailers. It did not manufacture the garments itself but sub-contracted the work to a number of countries, particularly Turkey, where the labour costs were low. One subcontractor that it used was Whisper London Limited, which had close links to a Turkish factory called Bates Istanbul. The Respondent ("EMT") was a haulier, with a depot and warehouse at Beckton, in the east of London.

Whisper and Bates had long-standing arrangements with the Respondent to transport material and accessories for the garments from London to Turkey and the finished garments back from Turkey to London. These arrangements related to a number of customers, including the Claimant. These arrangements were formalized in a tripartite contract between Whisper, Bates and EMT, dated 8 September 2005.

EMT’s delivery notes and invoices all referred on their reverse to the fact that "all goods are carried under RHA [Road Haulage Association] Conditions of Carriage 1988 and stored under RHA Conditions of Storage 1998, copies of which are available on application to EMT."

Clause 14 of the RHA Conditions of Carriage provides as follows:
"(1) The Carrier shall have a general lien against the Customer, where the Customer is the owner of the Consignment, for any monies whatever due from the Customer to the Carrier. If such lien is not satisfied within a reasonable time, the Carrier may, at its absolute discretion, sell the consignment or part thereof, as agent for the Customer and apply the proceeds towards the monies due and the expenses of the retention, insurance and sale of the Consignment…
(2) Where the Customer is not the owner of the Consignment, the Carrier shall have a particular lien against the said owner, allowing the Carrier to retain possession, but not to dispose of, the Consignment against monies due from the Customer in respect of the consignment."

Clause 14 of the RHA Conditions of Storage is in identical terms, save that the warehouseman is called the Contractor.

Given that the carriage from Turkey to the UK was international carriage by road, it was subject to the CMR Convention, to which both Turkey and the UK are signatories. For each consignment carried, EMT issued a consignment note, as required by CMR. For goods carried from Turkey to London, the consignment note named Bates as the sender and Whisper as the consignee. Whisper had an office in the EMT warehouse and was also entitled to the free storage of imported garments for up to one week, pending delivery to the retailer. The boxes in the consignment notes for entry of the carriage charges were left blank.

By the summer of 2006, Bares and Whisper were in severe financial difficulty. EMT was owed in the region of £90,000.00 by Bates and £5,000.00 by Whisper. On 3 August 2006, two trucks carrying TCL garments arrived at EMT’s warehouse at Beckton, the intention being that the garments would be dispatched from the warehouse the following day to the relevant retailer’s distribution centre in Yorkshire. The following day, certain other garments – also part of a TCL order – arrived at Beckton by airfreight and were stored there for the account of Whisper, pending onward forwarding to the retailer. That did not occur, as EMT exercised a lien on the garments, those carried by road and those by air, for all outstanding charges due from Bates and Whisper, amounting to some £92,800.00. On 4 August, TCL was notified of the exercise of the lien. It protested and argued that EMT only had the right to exercise a lien for the carriage charges relating to the particular road consignments.

On 16 August, on the application of TCL, a High Court judge ordered that the garments be released against an undertaking by TCL to pay compensation to EMT - if any were later found to be due – backed by a cash deposit of £25,000.00.

The Issues
Counsel for TCL argued that the RHA Conditions of Carriage were not incorporated into the agreement between EMT, Bates and Whisper. Even if they were, EMT had, at best, a particular lien for the carriage charges on the two consignments in-bound from Turkey, which TCL had already offered to pay – an offer that EMT had refused. Furthermore, a general lien was contrary to the CMR Convention. 

Counsel for EMT argued that the RHA Conditions were incorporated into the carriage contract and, at the time the lien was exercised, title to the garments was vested in Bates, EMT’s Customer. Similarly, title to the air-freight goods in storage for the account of Whisper was vested in Whisper. It therefore followed that, under both the RHA Conditions of Carriage and the RHA Conditions of Storage, EMT had a general lien for all the debts of their customers, Bates and Whisper.

The incorporation issue
The judge found, on close examination of the terms of the tripartite contract of 8 September 2005, that, although it could easily have referred to the RHA, in fact it did not. This was not surprising, the judge said, since the reality was, as the parties well knew, that each carriage by road contemplated by the contract was international, to which the CMR would apply. "CMR", he said, at paragraph 28, leaves little room for the application of the RHA Rules." Accordingly, he found it "impossible to construe the official agreement as incorporating the RHA Conditions, nor can they be incorporated by necessary implication." Had there been no tripartite contract however, the judge was satisfied that the RHA Conditions had been incorporated into the carriage contracts between the parties.

The ownership issue
After considering the Control Notes for the Clothing and Fashion Industry issued by HM Customs and Excise, written evidence on Turkish law and the considerable oral evidence he had heard, the judge concluded that ownership in the garments and accessories remained with TCL at all times, and did not in consequence ever pass to either Whisper or Bates, as Customers of EMT. He concluded, referring to the oral evidence: "In my judgment, it [the oral evidence] accurately reflected the custom and practice of the rag trade, here and in Turkey. It also makes good commercial sense. It would be surprising if TCL (or any other so-called manufacturer) was willing to surrender title in the goods to a factory, where it had supplied all the materials and accessories… and was receiving no payment for them from the factory." He was not impressed by the fact that the invoices issued by Bates to Whisper in respect of the make-up charges stated that all garments were sent CIF and that payment was cash against goods.

Are the RHA Conditions creating General and Particular Liens consistent with the CMR Convention?
The judge set out the relevant provisions of the CMR (taken from the Schedule to the Carriage of Goods by Road Act 1965) as follows:

"Chapter III
Article 6
1. The consignment note shall contain the following particulars:
(i) charges relating to the carriage (carriage charges supplementary charges, customs duties, and other charges incurred from making of the contract to the time of delivery);

Article 13
1. After arrival of the goods at the place designated for delivery, the consignee shall be entitled to require the carrier to deliver to him, against a receipt, the second copy of the consignment note and the goods. …
2 The consignee who avails himself of the rights granted to him under paragraph 1 of this article shall pay the charges shown to be due on the consignment note, but in the event of dispute on this matter the carrier shall not be required to deliver the goods unless security has been furnished by the consignee.

Chapter VII
Article 41
Subject to the provisions of Article 40, any stipulation which would directly or indirectly derogate from the Provisions of this Convention shall be null and void. The nullity of such a stipulation shall not involve the nullity of the other provisions of the contract."

He noted also that a leading textbook on the CMR Convention – Professor Malcolm Clarke’s International Carriage of Goods by Road: CMR, 4th edition – said in relation to Article 13.2, that "subject to this [Article 13.2] the CMR is silent on rights of retention available to the carrier and any such rights under national law will remain effective." But the judge did not find the reasoning in that sentence easy to understand. "It does not take into account," he said, "Article 41 of CMR. In my judgment, Article 13.2 of the CMR Convention creates a self-contained Code whereby the consignee has the right to require delivery of the goods on payment of the charges shown to be due on the consignment note – coupled with the 1965 Act it creates a statutory lien for the carriage charges. A general lien would derogate from the consignees’ right of delivery on payment of the charges, because the consignee could only obtain delivery on payment of additional sums due in respect of other carriages." He therefore found that a general lien is null and void under Article 41 of CMR.

By parity of reasoning, he held that, to the extent that the particular lien granted by the RHA Conditions of Carriage is wider than that granted by Article 13.1 of CMR, it too is null and void. "The carrier’s rights are confined to those granted by the Convention".

By this point in the judgment, the judge had concluded that EMT did not have a general lien for carriage charges because the RHA Conditions of Carriage had not been incorporated in the tripartite arrangement and, even if they had been, the garments were not owned by either Bates or Whisper, who were the Customers of EMT, and a general lien is void under CMR.

Did EMT have a particular lien and, if so, for what?
His reasoning thus far left open the question whether EMT had a particular lien under CMR for the carriage charges and a particular lien under the RHA Conditions of Storage for anything else. Article 13.2 of the Convention gives the carrier a particular lien, enforceable against the consignee, for the charges shown to be due on the consignment note. But in this case, contrary to Article 6(1)(i), the box for entry of the carriage charges on the relevant consignment notes had been left blank.

In the judge’s view, the fact that the charges box had been left blank was fatal to the carrier’s right to exercise a lien for them. "Article 13.2," he said, "only allows the carrier to retain the goods against payment of the carriage charges shown to be due on the consignment note. This ties in with Article 6(1)(i). The reference to the charges shown to be due on the consignment note cannot be ignored. The commercial purpose is to give certainty as to what must be paid to secure release of the goods, at a time when decisions may have to be made urgently and on the basis of limited information… If the carrier chooses not to record the carriage charges in the consignment note, then he will lose the right to exercise a lien."

The judge accepted that it might be rare for consignment notes to show the carriage charges but that did not, in his view, alter the principle laid down in the Convention. He also accepted that the exact figure for some charges, for instance customs duties and some supplementary charges, such as waiting time, may not be known at the time the consignment note is made out, but in his view, the consignment note can easily make a general reference to these. "It is not difficult," he concluded, "for the carrier to ensure that the consignment note complies with the Convention.

That then left the question whether EMT could exercise the particular lien under the RHA Conditions for Storage and, if so, for what. The judge held that, whilst EMT had no right to recover storage charges as such, on the principle that a person exercises a lien has no right to recover expenses he incurs in maintaining his security, it did have a right to lien in respect of certain handling charges that it had incurred in relation to the preparation of the garments for their on-carriage to the retailer. Furthermore, EMT was entitled to exercise this particular lien, not only against its Customers, Bates and Whisper, but also against TCL. TCL must be "treated as having consented to the goods being bailed to EMT for carriage both ways, and on the usual CMR terms which include a right of lien against the consignee for the carriage charges. It also consented to the goods being handled at EMT’s warehouse on usual terms, which would include RHA Conditions of Storage. It follow from the general principles established in [he then cites a number of authorities on ‘bailment on terms’] that, insofar as EMT was entitled as against Bates or Whisper to exercise a particular lien on the garments, it was also entitled to do so as against TCL."

TCL was accordingly ordered to pay EMT the modest sum of £2,626.00, which was itself subject to an offset of £600.00, representing extra haulage charges occasioned by EMT wrongfully detaining the garments in the first half of August 2006.

Whilst the judge’s conclusions in relation to the incorporation and ownership issues are in themselves unexceptional, given the particular findings of fact that the judge made, his rulings on the CMR issues are more controversial.

The requirement to complete the charges box on the consignment note as a pre-requisite to the exercise of the Article 13.2 lien may – or may not - be good law but it does not reflect current commercial reality. As the judge himself recognized, that box is rarely, if ever, completed, for the sound commercial reason that the carrier does not wish his charges to be generally known. It is true that a general reference, such as "charges as agreed with sender" could be inserted in the box,– indeed the judge himself suggested that this would be sufficient compliance with Article 6(1)(i) of the Convention; but this would present another administrative requirement for the trade to fulfill.

More serious still is the judge’s conclusion that any general lien clause is invalid in the context of a CMR movement, since it impinges upon the right of the consignee to obtain delivery of the goods at destination. Here he breaks new ground, since – as the quotation from Professor Clarke’s book reveals – it has been generally accepted in the trade that additional conditions are permissible in the CMR context, so long as they do not specifically clash with a provision of the Convention. Such conditions have hitherto been regarded as supplementing the Convention, rather than conflicting with it. If it is indeed the case that a general lien is outlawed for Convention traffic, this represents a significant worsening of trade terms for the road carrier, and a matter of concern to his trade association.

It must be noted, however, that this part of the judgment was not necessary for the judge’s decision in the case and is therefore obiter. His findings in relation to incorporation and the ownership of the goods were the key decisions in the case. Furthermore, the editor understands that the Article 13 points were first raised by the Deputy Judge himself, in the course of the hearing and were not therefore the subject of extensive oral or written submissions.

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