Note: In a judgment given on 17 May 2007, the House of Lords dismissed the appeal of UPServices against the judgment of the Court of Appeal in favour of Datec. To access the note on the House of Lords judgment, click here

DMC Category Rating: Confirmed

This case note is based on an Article in the December 2005 Edition of the ‘Marine Bulletin’, published by the Marine team at the international firm of lawyers, DLA Piper Rudnick Gray Cary. DLA Piper is an International Contributor to this website

Background
On 25 July 2002, Datec consigned three packages of computer processors to UPS for carriage from the UK to the Netherlands. The packages were to be carried by road to Luton airport, flown to Cologne and then carried again by road to UPS’ premises in Amsterdam and onward to the consignee’s warehouse at Schipol. The packages disappeared before they reached their destination and Datec and the consignee brought this claim against UPS for damages.

Datec argued that carriage of the goods on the international leg of the journey between Cologne and Amsterdam was subject to the Convention on the Contract for the International Carriage of Goods by Road (CMR). Under article 17.1, the carrier is liable for loss of or damage to goods. Article 23 sets a limit on compensation by reference to the weight of the consignment. In this case, if the limit under article 23 applied, the claim was worth only GBP£657.73.

However under article 29, the limit does not apply in a case of wilful misconduct by the carrier's agents or servants acting within the scope of their employment. Datec argued that the goods had been stolen by UPS’ employees. Consequently the article 23 limit did not apply and it claimed the full value of the goods at GBP£241,241.14.

It was not known what had happened to the packages. UPS denied its employees were responsible for the theft and did not accept that the goods had not been delivered to the consignee. It also relied on its own terms and conditions of carriage to argue there was no contract of carriage that fell within CMR, or if there was it excluded any liability in this case.

At first instance, the judge found that CMR applied. But, although the three packages had not been delivered to the consignee, Datec had failed to prove that they had been stolen by UPS employees. As a result, compensation was limited to GBP£657.73. Both parties appealed.

UPS’ terms
Clause 3 of UPS’ terms and conditions stated that UPS would not carry (amongst other things) packages with a value over USD 50,000. If it found out that a package breached this restriction, UPS could refuse to carry it, could hold it to the shipper’s order, or return it and claim the reasonable costs of so doing.

UPS said that, had it known the value of the packages, it would have refused to carry them. Consequently, there was no sufficient consensus between the parties to create a contract of carriage. Without a contract of carriage, the CMR could not apply. Even if there was a contract, the effect of the clause was to exclude its liability for the loss of a package that exceeded the value limit.

The judge and the Court of Appeal rejected both arguments. The standard terms did not suggest there would be no contract of carriage if a package was accepted but turned out to be over the limit. UPS had the right to refuse to carry it, but unless and until UPS exercised that right, there was a contract that UPS would carry the package.

To the extent the clause purported to exclude or limit UPS’ liability, it fell foul of article 41.1 of CMR, which provides that "any stipulation which would directly or indirectly derogate from the provisions of this Convention shall be null and void".

In order to protect its position more effectively, UPS could have required the consignor to sign a declaration that the goods complied with certain restrictions. If the consignor refused, UPS could refuse to carry the goods, and if the consignor gave a false declaration, UPS would in principle have remedies for misrepresentation.

Alternatively, UPS could have relied on the CMR regime to require more details to be given in the consignment note, including a declaration of value. Again, in the absence of such a declaration, UPS could refuse to accept the goods. If a false value were given, article 7 (which provides that the sender is responsible for loss and damage sustained by the carrier due to the inaccuracy of particulars given in the consignment note) would provide protection in the event of a claim.

Wilful misconduct
Without any direct evidence to prove what had happened to the packages, the question whether they had been stolen by UPS employees or by a third party, or had been lost in some other way, had to be decided on the balance of probabilities. Having heard the evidence, the judge took the view that Datec had not discharged its burden of proof.

On appeal, Datec made no complaint about the judge's overall approach, but took issue with the inferences he drew from the information before him. In particular, he had given too much weight to the possibility of the loss being caused by accident.

Where a judge's conclusion is one of primary fact and depends to a significant extent on oral evidence, the Court of Appeal will be very reluctant to interfere. In this case, however, the issue was not the findings of primary fact, but the judge's evaluation of primary fact. In such cases, the appeal court will more readily intervene (Assicuriazioni Generali Spa v Arab Insurance Group, (Practice Note) [2002] EWCA Civ 1642).

Having reviewed the judge’s conclusions, the Court of Appeal found he overstated the factors telling against theft by UPS employees and understated factors telling in favour of it. On the balance of probabilities, Datec had proved that theft by one or more UPS employees was the probable cause of the loss. Consequently, this was wilful misconduct and the limit imposed by article 23 of CMR did not apply.

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