UK: Recent Authority Of Particular Relevance In The Fields Of International Trade And Transport: Liability Of Freight Forwarders

Last Updated: 11 May 2010
Article by Nevil Phillips

Originally published in International Trade and Transport Law Newsletter, September 2009

In Matrix Europe Ltd v Uniserve Northern Ltd [2009] EWHC 919 (Comm), HHJ Mackie QC (sitting as a judge of the Commercial Court) considered inter alia the question of the extent to which a freight forwarder may rely upon its standard trading conditions in circumstances where there is loss of or damage to goods delivered to and accepted by it in error.

Key facts

A shipper of goods, Matrix, contracted with a carrier, Birkart, to transport the goods from Matrix's premises near Manchester directly to Manchester Airport and then onwards, by air, to the receiver in Hong Kong. That contract was on the standard BIFA terms, Birkart being a member of BIFA.

The carriage of the goods from Matrix's premises to Manchester Airport was sub-contracted by Birkart to another carrier. That carrier in turn sub-contracted the carriage to a further carrier, a Mr. Lancashire.

In error, Mr. Lancashire failed to deliver the goods to Manchester Airport as required under the contract between Matrix and Birkart. Instead, and without actual or ostensible authority, he mistakenly delivered the goods to a warehouse operated by Uniserve Northern Limited ("UNL") late in the course of a Friday afternoon.

Birkart had, in the past, occasionally contracted with UNL for the purposes of warehousing goods in respect of which Birkart was the contractual carrier.

UNL accepted the goods into the warehouse without seeking any formal documentation from Mr. Lancashire unequivocally confirming the identity of the shipper, the identity of the head-carrier, or the intended destination or method of carriage for the goods.

Having accepted the goods into its warehouse without such formal documentation, UNL then sought identify the goods and establish what was required to be done with them and for whose account. UNL were unable to establish anything in this regard. Accordingly, the goods were left in the warehouse overnight.

During the night, the goods were stolen from the warehouse.

The claim

Matrix pursued UNL in bailment for the value of the goods.

UNL contended that it was not in breach of any duty owed in bailment. It also contended that any (sub-) bailment of the goods which it had undertaken was on the BIFA terms and that, accordingly, it was entitled to limit its liability in accordance with those terms in any event.

UNL in turn sought an indemnity from Birkart. UNL contended that the circumstances in which the goods had come to be delivered to it gave rise to a relationship between UNL and Birkart which was governed by the BIFA terms. UNL therefore contended that, if it (UNL) was found to owe any liability to Matrix, Birkart was liable to UNL under those terms (either pursuant to express indemnity provisions, or – if it was found that the bailment relationship between UNL and Matrix was not governed by the BIFA terms - on the basis of a breach of warranty of authority contained in the BIFA terms to the effect that Birkart was authorised by its customer – Matrix – to contract with UNL on the BIFA terms).

The issues

The principal issue (other than that as to whether UNL was in breach of any obligation as a bailee – a question which caused the Court to comment upon the ordinary obligations of a bailee [paras.47-50]) was as to whether UNL could establish that its possession and handling of the goods was, as regards Matrix and as regards Birkart, the subject of the BIFA terms.

In this regard, UNL advanced a number of contentions, to the effect that:

(i) It was the sub-bailee of the goods as regards Matrix and that such sub-bailment was on the BIFA terms on the basis that Matrix had consented to a sub-bailment on those terms [paras. 60 and 92-93].

(ii) There was an express agreement between UNL and Birkart to the effect that any delivery of goods to UNL on behalf of Birkart was to be on the BIFA terms, whether that delivery was intentional or in error [para. 80].

(iii) There was an implied agreement (and/or an implied term therein) to the effect that any such delivery of goods would be on the BIFA terms [paras. 81-91]. Such implication arose out of the fact that an earlier agreement to which Birkart, a different Uniserve company, and other companies were party was on the BIFA terms, alternatively out of an alleged previous course of dealing between UNL and Birkart on the BIFA terms, alternatively because the BIFA terms were alleged to be the standard trading conditions universally and invariably in use between freight forwarders who are BIFA members.

The judgment

HHJ Mackie QC rejected all of UNL's contentions, finding them to have been in breach of their obligations in bailment as regards Matrix (inter alia by virtue of their failure to seek some formal documentation or other confirmation as to the identity of the shipper, the identity of the head-carrier, or the intended destination or method of carriage for the goods), and concluding that their possession and handling of the goods was not governed by the BIFA terms whether as regards Matrix or Birkart.

Specifically, the Judge held:

(i) There could be no sub-bailment to UNL on the BIFA terms unless (a) Matrix had consented to such a sub-bailment and (b) those terms were contained in a sub-contract between Birkart and UNL which encompassed UNL's possession and handling of the goods.

(ii) Matrix had not consented to any sub-bailment of the goods to UNL, let alone one on the BIFA terms, in circumstances where it was an express term of the contract between Matrix and Birkart that the goods should be carried directly from Matrix's premises to Manchester Airport (with no warehousing in between).

(iii) Moreover, there was no contract between Birkart and UNL relating to UNL's possession and handling of the goods – the goods had been delivered to UNL by mistake and without any authority on the part of Birkart; there was no pre-existing general express agreement between Birkart and UNL relating to goods delivered in such circumstances (although such an agreement might conceivably be concluded in practice [para. 85]), nor any specific agreement arising in relation to the goods in question; the relationship of the parties in circumstances of mistaken delivery was amply regulated by the law of tort and bailment, and there was no need for any contract (let alone one on the BIFA terms) to be implied (see The Aramis [1989] 1 Lloyd's Rep 213).

(iv) Accordingly, and in the absence of any contract between Birkart and UNL relating to the mistaken delivery to and acceptance of the goods by UNL, there could be no sub-bailment on terms as between Matrix and Birkart.

(v) Nor, in such circumstances, could there be any claim for an indemnity or associated relief by UNL against Birkart – if there was no contract between those parties, there was no basis upon which the BIFA terms can have applied as between them to the delivery in question.

(vi) In any event, even if there had been a contract between Birkart and UNL in relation to the particular goods, there was no basis upon which the BIFA terms could be said to form part of such contract – there was no express agreement as to their incorporation; there was no need to imply those terms into any such agreement in circumstances where such agreement would function adequately without such terms; there was no previous course of dealing sufficient to lead to the incorporation of such terms; the BIFA terms, while they may be standard as between an international forwarder and its customer (i.e. the shipper or sender of the goods), are not standard as between a forwarder and its sub-contractor (agreements between such parties commonly being subject to other terms and conditions including CMR, the Warsaw Convention, RHA terms, NAWK terms, and others); accordingly, the BIFA terms would not be applicable by virtue of their being industry standard terms.

(vii) Accordingly, UNL was unable to limit or exclude its liability to Matrix, and was not entitled to any indemnity or associated relief from Birkart.

Insight & analysis

The case provides salutary guidance for forwarders who are in the habit of accepting goods into their possession without due notice or warning.

It demonstrates that the delivery and acceptance of goods handed over in error may, in the absence of a prior express agreement to the effect that such goods are nonetheless to be treated by the parties as being subject to the normal contractual terms between them, be outside the scope of any contract and may leave the forwarder with unlimited liability and no means of redress.

The decision therefore emphasises the importance of ensuring that:

(i) The standing contractual arrangements of forwarders with their forwarding and carrier partners should contemplate expressly the possibility of mistaken, unintended or erroneous deliveries.

(ii) Forwarders should endeavour to ensure that, when accepting goods, they should at the very least seek some formal documentation or other confirmation as to the identity of the shipper, the identity of the head-carrier, or the intended destination or method of carriage for the goods.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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