Note: the Court of Appeal has overruled this judgment in a decision given on 29 November 2005. To access the note on the Court of Appeal's decision, click here 

DMC Category Rating: Confirmed

Facts
The claimants, consignor and consignee (Datec and Incoparts), sought damages for breach of contract against the defendant carriers United Parcel Service ("UPS"). In July 2002, Datec's distribution agents in the UK arranged for UPS to carry computer processors from Datec's warehouse in the United Kingdom, via Luton and Cologne airports and UPS’s "hub" premises in Amsterdam, to the L&A Freight warehouse at Schipol airport, Amsterdam. L&A Freight were the agents of Incoparts, the consignee.

The consignment comprised three packages. Despite UPS's standard terms of contract ("UPS terms"), which provided that UPS did not offer carriage of packages which did not comply with certain restrictions, one of which was "the value of any package may not exceed the local currency equivalent of US$50,000", it was not disputed that each of the packages contained goods worth considerably more than that sum. The goods, contained in three plain cardboard boxes, were duly collected by UPS from Datec in the UK. The accompanying documentation referred to their contents simply as "electronic components" and gave no indication of their value. No CMR consignment note was issued. The evidence confirmed that the packages were carried without incident as far as the UPS hub in Amsterdam. After that point, all trace of the goods was lost. The claimants maintained that the goods never arrived at the L&A warehouse and alleged that the goods had been stolen by UPS's employees.

Claimants asserted that the carriage of the goods from Cologne to the L&A premises in Amsterdam was subject to the Convention on the Contract for the International Carriage of Goods by Road, the schedule to the Carriage of Goods by Road Act 1965. The claimants argued that UPS's liability under Art.17.1 of the schedule to the Act, for the loss of the goods, was not limited by Art.23, as the loss was caused by the "wilful misconduct" of employees of UPS, acting within the scope of their employment, as per Art.29*. In consequence, UPS were to be held liable for the full amount of the loss, namely £241,241, rather than for the limit of liability under the CMR Convention of £658.

UPS disputed that they were liable for the loss at all, not accepting that they failed to deliver the consignment to L&A, and relied on the provision in the UPS terms to the effect that they did not offer carriage for packages the value of which exceeded US$50,000 and would "not meet any losses which the shipper may suffer arising out of UPS carrying packages which do not meet the [above] restrictions or conditions". The loss was therefore caused by Datec’s own wrong because, but for their breach of contract in presenting packages worth more than US$50,000, the packages would not have come into UPS's possession and would not have been lost in transit. Further, such conduct on the part of Datec amounted to a "wrongful act" for the consequences of which UPS was relieved of liability under Art.17.2 of CMR. Alternatively, if theses defences were unsuccessful, UPS maintained that their liability was limited to £658 in accordance with the CMR Convention.

The claimants countered these arguments by alleging that the manner in which the parties had conducted their business and the exchanges between them showed an intention that the US$50,000 restriction should not be incorporated into the contract of carriage or, alternatively, that UPS had waived reliance on the restriction as it was aware that Datec's consignments often included packages valued over the restricted amount.

As regards the UPS Terms, the judge held that they were incorporated into the contract of carriage in question; the contract was made under the terms of an "umbrella agreement" which incorporated the Terms and the documentation for the specific sending had been prepared under a computer system that required the shipper to answer "yes" to the question "Do you accept the UPS [Terms]?" But did that mean that the US$50,000 restriction provided UPS with a defence to the claim? In particular, were UPS aware by July 2002 that they were carrying Datec packages valued at over US$50,000 and could not therefore rely on the US$50,000 restriction? After a further detailed examination of the evidence, the judge rejected the claimants’ argument that "the parties’ conduct of their business and exchanges before July 2002 evinced an intention that the US$50,000 restriction should not be incorporated into the contract of carriage made [for these packages]; nor do I accept that UPS waived the restriction by their conduct or have precluded themselves from relying upon it."

But the judge was unable to accept the UPS argument that, by reason of the UPS Terms and, in particular, the US$50,000 restriction, there was no consensus between the parties and, in consequence, no contract of carriage for the consignment ever came into existence between them. The implication of the argument was that, in the absence of a contract, the claimants could not rely on the CMR Convention (which applies only if goods are carried under a contract) and that, in turn, Art.41 of the Convention – which renders null and void any stipulations in the contract derogating from the provisions of the Convention – could not apply either. The judge felt that this approach did not accord with commercial reality nor the business expectations of the parties. He relied in part on further provisions of the Terms which gave UPS the right either to refuse to carry non-conforming packages or to suspend their carriage if carriage was already in progress. The clear implication was that, unless and until UPS exercised their right, there was a contract that UPS would carry the offending packages.

In this case, therefore, UPS had entered into a contract with Datec to carry the packages in question and the CMR applied to the relevant stage of their carriage. The judge could not accept the submission of UPS that they were not liable under the CMR for the loss because the packages did not comply with the US$50,000 restriction. He did not accept that Datec, by presenting the goods for carriage, had warranted that the packages were within the scope of the service that UPS offered and specifically, that the value of the packages did not exceed the sterling equivalent ofUS$50,000. The loss was not, therefore, caused by Datec’s own wrong, in the sense that, but for their breach of contract, the packages would never have come into UPS’s possession and would not have been lost in transit. The US$50,000 restriction was, he held, an express contractual provision and the consequences of non-compliance were expressly stated in the Terms. There was no necessity or requirement to imply such a term in order to give business efficacy to the arrangement between the parties.

It followed from the fact that the CMR Convention applied to the contract for the carriage of the consignment that UPS could not protect themselves by relying on the provisions in the Terms excluding liability in respect of non-conforming packages. Those stipulations derogated from the provisions of CMR and were accordingly null and void.

Finally, the judge held that UPS did not have a defence under the Convention. UPS had argued that Datec were in breach of Art.17.2 of the Convention, which provides that "The carrier shall…be relieved of liability if the loss, damage or delay was caused by the wrongful act or neglect of the claimant…" The judge was not persuaded that it was a wrongful act of Datec, within the meaning of Art.17.2, to consign packages worth more than US$50,000 or that this had caused the loss. The judge was unable to conclude that the loss would not have occurred had the packages been worth less than US$50,000, or had the consignment been divided into more packages, each of which complied with the US$50,000 restriction. Nor did he think that UPS could take advantage of Art.17.4, which relieves the carrier of responsibility when the loss or damage "arises from special risks inherent" in matters relating to the goods. The judge did not think that there were "special risks" in the sense of Art.17.4 attached to the consignment, nor that the loss could be said to arise from them

Accordingly, Datec’s claim succeeded but the damages that the Claimants were entitled to recover were limited by Art.23 of the CMR to £658.

*Art.29

1. The carrier shall not be entitled to avail himself of the provisions of this chapter [which includes Art.23] which exclude or limit his liability... if the damage was caused by his wilful misconduct or by such default on his part as, in accordance with the law of the court or tribunal seized of the case, is considered as equivalent to wilful misconduct.
2. The same provision shall apply if the wilful misconduct was committed by the agents or servants of the carrier or by any other person of whose services he makes use for the performance of the carriage, when such agents, servants or other persons are acting within the scope of their employment.

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