Datec Electronic Holdings v UPS (HofL)
The House of Lords also upheld the Court of Appeal in finding that the cause of the loss was theft by the carrier’s employee(s). Although cargo interests had the burden of proving liability ‘on the balance of probabilities’, this principle did not mean that they had to identify specifically which employee(s) had committed the theft. Theft of the goods by the employee(s) of the carrier amounted to wilful misconduct under Art. 29(1) of the Convention. That in turn meant that the carrier could not take advantage of the limitations of liability provided in Art.23(3) and was accordingly liable to pay the full value of the loss.
The House also approved the approach of an appellate court to findings and inferences of fact made by a judge at first instance as set out in the case of Assicurazioni Generali SpA v. Arab Insurance Group  Lloyd’s Rep IR 131
DMC Category Rating: Developed
This case note is based on a text written by Peter Stockli, Legal Counsel for the Through Transport Club, and Editor of TT Talk, the e-zine published by the Club.
The claim between the parties concerned the carriage of three packages of computer processors, first by road from Milton Keynes in the UK to Luton Airport, then by air from Luton to Cologne in Germany, and finally by road from Cologne via the UPS Amsterdam hub to the consignee at Schipol South East in the Netherlands. These packages were typical ‘low weight high value’ cargo, weighing just 25kg, 25kg and 17 kg respectively, but in total worth some £241,241. The value of each of the three packages exceeded the amount specified in clause 3(a)(ii) of the UPS conditions.
Datec claimed that the three packages never arrived at their destination at Schipol and alleged that they were stolen while in UPS’s custody, probably at the UPS Amsterdam hub. UPS did not dispute that the three packages were handed over for carriage to a UPS driver in the UK but contended that, by reason of the value of the packages exceeding the amount set out in clause 3(a)(ii), the parties had not reached sufficient consensus for a contract of carriage to have come into existence between them.
At first instance, Mr Justice Andrew Smith held that the parties had concluded a CMR contract for the carriage of the three packages. Although the three packages had been handed over to UPS and had not been delivered to the consignee, Datec had failed to establish that the packages had been stolen by UPS employees. Without wilful misconduct on the part of UPS or their employees, Datec’s compensation was limited to a mere £658.
Judgment of the House of Lords
Lord Mance conceded that the issue whether a carriage contract came into existence was ‘not an easy one’, but concluded: ‘(…) the harsh, but clear-cut position will be that, where a carrier contracts unwittingly to carry non-conforming goods and chooses to perform internationally by road, CMR applies with its benefits and burdens, and that the carrier’s restrictions will be relevant only if and in so far as they may assist the carrier to avoid liability under article 17(2).’ So far as clause 3(e) purported to remove UPS’ liability for loss, damage or delay that UPS would otherwise incur under that Article, it was null and void by virtue of Art.41 of the CMR Convention.
As to the cause of the loss, Lord Justice Richards in the Court of Appeal had provided a systematic and meticulous analysis on the causation of loss in a situation without any direct evidence. He had concluded that theft by one or more UPS employees was the probable cause of the loss and that Datec had proved its case on the balance of probabilities. It was not necessary for them to identify the particular UPS employee(s) responsible for the theft. In the House of Lords, Lord Mance quoted large parts of Lord Justice Richard’s judgement and found that the reasons given by him for reversing Mr Justice Andrew Smith were ‘compelling’. Lord Mance concluded: ‘I share, without hesitation, the view which he formed overall that theft involving a UPS employee was shown on a strong balance of probability to have been the cause of the loss’. Lord Walker expressed reservations on the wilful misconduct point, but felt it unnecessary to press this doubt to the point of dissent.
The House of Lords confirmed that, in reversing the findings of the first instance judge, the Court of Appeal had not exceeded its proper role in reviewing the judge’s conclusions as to the cause of the loss. As the headnote to the case says: "The essential issue related to the inferences to be drawn from primary facts which were not in dispute. The situation was one where the Court of Appeal was entitled to reconsider for itself the judge’s findings as to what should or should not be inferred regarding causation from the primary facts found by him. The Court of Appeal was entitled to reverse the judge’s finding on causation. None of the possibilities mentioned by the judge afforded any plausible explanation of the disappearance of the three packages." The correct approach, said Lord Mance, in an appellate court to findings and inferences of fact made by a judge at first instance after hearing evidence, was as stated by Clarke LJ in the case of Assicurazioni Generali SpA v. Arab Insurance Group  Lloyd’s Rep IR 131, at paragraphs 14 to 17.
UPS had not presented the ‘no contract’ argument from the very outset of proceedings, and was unable to argue misrepresentation and/or mistake. Lord Mance felt it was ‘at least arguable’ that their conditions would enable UPS to cross-claim in respect of any excess exposure above US$50,000 per package, had UPS been permitted to raise new allegations of fact’. Another carrier who finds himself in UPS’s situation of carrying without its knowledge excess-value goods may want to exploit arguments of ‘no contract’, misrepresentation and/or mistake fully. This may mean that on this point Datec v UPS might not be as important as it appears at first sight.
Yet Datec v UPS is without any doubt highly significant for its approach to a claim without any direct evidence on the causation of the loss, in particular on account of Lord Justice Richard’s seminal judgment. It is true that Datec v UPS confirmed once again that the relevant test in cargo claims is ‘on the balance of probabilities’ and that the burden to establish this balance rests on the claimant cargo interests, but Datec v UPS also illustrated the limits of this principle, because Datec did not need specifically to identify the responsible employee or employees. It was somewhat paradoxical that evidence gained from UPS’s surveillance equipment was used in court to its disadvantage.
Back to Top
These Case Notes have been prepared with care, but neither the Editor nor the International and other Contributors can guarantee that they are free from error, nor that they contain every pertinent point. Reliance should not therefore be placed upon them without independent verification. The Editor and the International and other Contributors disclaim all liability for any loss of whatsoever nature and howsoever arising as a result of others acting or refraining from acting in reliance on the contents of this website and the information to which it gives access. The Editor claims copyright in the content of the website.