Granville Oils v. Davies Turner
Note: the English Court of Appeal, in a
decision dated 15 April 2003, has overruled the decision at first instance in
this case and held that the nine-months time limit for bringing proceedings in
Clause 30(B) of the British International Freight Association Standard Trading
Conditions satisfied the test of reasonableness under the Unfair Contract Terms
Act of 1977.
Davies Turner contracted with Granville to arrange for the packing and carriage of a consignment of return paint products from Kuwait to the UK. The court held that Davies Turner had contracted as principal, not as agent, and that the contract incorporated the BIFA 1989 Standard Trading Conditions. Davies Turner tried to rely on a nine-month limitation for suit provision in those terms. The judge held that this clause was unreasonably wide and draconian in its effect. Whilst some form of time bar might be reasonable for some forms of liability, it was not fair for a time bar of nine months to apply to 'all liability whatsoever howsoever arising in respect of services provided'. He held accordingly that the clause was void under the Unfair Contract Terms Act 1977 and that Davies Turner could not rely upon it.
DMC Category Rating: Developed
Davies Turner arranged insurance on the consignment on behalf of Granville. Davies Turner told Granville that the cover was on Institute Cargo Clauses – A- (‘all risks’ terms). In fact, this was a mistake; under the terms of the Davies Turner open cargo cover, against which this shipment had been declared, return cargoes were only insured under the A clauses, if they had been inspected prior to shipment. No inspection took place in this case; accordingly, the consignment was covered only on Institute Cargo Clauses – B. Under these clauses, the cargo was insured only in respect of specified (named) perils.
The paint was shipped from Kuwait in two 20 foot containers in late November/early December 1999 and arrived in Southampton, UK, early in January 2000. From there the consignment was delivered to Granville’s works in Rotherham. On arrival, the consignment was found to be damaged, the cause of the damage being, according to the cargo underwriters’ surveyor, "poor stowage and inadequate restraint within the containers". Granville held Davies Turner responsible; Davies Turner referred the claim to their cargo underwriters.
In June 2000, the cargo underwriters rejected the claim, as the
cause of damage was not an insured peril under the ICC B clauses. Davies Turner
did not, however, make this information available to Granville until late
August, by which time nine months had passed since the causative event. On 20 September 2000, Granville commenced proceeding against Davies
Turner. Davies Turner defended the claim on two principal grounds.
In reaching his conclusion, the judge named the following as the most important factors:
In considering clause 30(B) of the BIFA conditions, the judge noted that it had the following features:
In the circumstances of this case, the breach giving rise to the claim was the failure of Davies to insure the cargo on All Risk terms. The breach occurred on 4 November 1999; the nine-month time limit expired accordingly on 4 August 2000. At that time Granville were still unaware that the insurance had not been effected on ICC – A terms. Granville could never, therefore, have issued proceedings within the nine months time limit under the clause.
In considering the authorities, the judge referred to the substantial expert evidence given in the case of Shenkers v. Overland Shoes Ltd. [1998 1 Lloyd’s List Rep. 498. In that case the judge had accepted evidence that the BIFA Conditions had been drafted in consultation between the forwarding industry and representatives of cargo interests and were widely accepted as a reasonable and fair allocation of risk as between the parties. He had concluded that, "in a situation in which there was no significant inequality of bargaining position, the customs of trade were an important factor".
In the present case, the judge had no such expert evidence before him and, in the end, he favoured the approach of Judge Kenny in the Kingston County Court in the case of Overseas Medical Supplies v. Orient Transport  2 Lloyd’s Law Rep. 273, who had held unreasonable a clause in the BIFA conditions purporting to limit the forwarder’s liability for failure to insure.
Judge Behrens' conclusions were as
He accordingly found that it was not fair and reasonable for there to be a time bar of nine months for "all liability whatsoever and howsoever arising in respect of any service provided for the Customer". It followed that clause 30(B) was void under the Unfair Contract Terms Act 1977 and Davies Turner could not therefore ely upon it.
By its terms, the Unfair Contract Terms Act does not apply to
As regards the possibility of appeal, the judge said at the conclusion of his judgment that he is "provisionally not minded to grant permission to appeal."
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.