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
P&O Ferrymasters contracted with consignors to carry a consignment of televisions from Spain to England. CMR applied to the contract. P&O subcontracted the carriage to Rosewood Trucking, Rosewood subcontracted with another carrier and that carrier subcontracted to Brian Balaam. Unfortunately, Balaam's truck and its contents were stolen from a yard near Norwich in the UK.

The subcontract between P&O and Rosewood prohibited further subcontracting without consent but provided that, in any event, Rosewood would remain liable to P&O "as if it had itself performed or failed to perform the carriage". P&O paid the consignors’ claim and Rosewood indemnified P&O, as it was bound to do under the terms of the subcontract.

Rosewood did not take any assignment of any claims P&O might have, nor did it argue that it became subrogated to such claims. It simply relied on article 37 of CMR to seek recovery from Balaam.

CMR
If the carriage of goods is performed by successive carriers, article 34 of CMR provides that, where the carriage is governed by a single contract, each carrier is responsible for the performance of the whole operation. Where only one carrier actually carried the goods, (as was the case here) the carrier who contracts with the sender is the first carrier (even if he does not undertake any stage of the carriage himself).

Under article 36, the sender may only take legal proceedings against the first carrier, the last carrier or the carrier who was performing that portion of the carriage during which the event took place. In this case, that meant P&O or Balaam.

Under article 37:
"A carrier who has paid compensation in compliance with the provisions of this Convention, (emphasis added) shall be entitled to recover such compensation, together with interest thereon and all costs and expenses incurred by reason of the claim, from the other carriers who have taken part in the carriage, subject to the following provisions:

(a) the carrier responsible for the loss or damage shall be solely liable for the compensation whether paid by himself or by another carrier…"

Judgment
The judge at first instance and the Court of Appeal held that Rosewood was not entitled to recover from Balaam under article 37.

Simply as a matter of language, Rosewood did not pay P&O compensation "in compliance with the provisions of the Convention". It paid in compliance with its contractual obligations. Under CMR, Rosewood had no liability either to the sender or to P&O. Its liability arose under a contract to which Balaam was not a party.

Rosewood could have protected itself by its own contract with its subcontractor, by taking an assignment of P&O's claims against Balaam or, possibly, by way of subrogation. As it was, it was stuck with the loss.