In the case of Datec Electronic Holdings Limited & another v United Parcels Service Limited the House of Lords unanimously rejected UPS’ appeal against a Court of Appeal decision holding them liable for the full value of goods lost from their custody. The case arose from the loss in transit of three packages of high value but low weight goods being carried by UPS from the UK to Germany by air and then to the Netherlands by road. Although evidence was provided to show that the goods had arrived at UPS’ hub in Amsterdam and that their barcode details had been scanned “out for delivery” by UPS truck, the packages could not be traced from that point.
The main question before the Court was whether the Convention on the Contract for the International Carriage of Goods by Road (“CMR”) would apply to goods that did not conform to the “umbrella” carriage agreement by virtue of being above the standard US$50,000 limit which UPS would agree ordinarily to carry.
At first instance the High Court held that the CMR applied, and that the Claimants had not proved on the evidence that the loss resulted from the wilful misconduct of the Carriers (particularly theft by an employee) and so they were entitled to rely on the applicable CMR Article 23 limits of just £657.73. Although unnecessary at that stage, Carriers’ alternative argument that they were only liable up to their US$50,000 limit was rejected.
In the Court of Appeal, the first instance Judge’s inferences from the findings of fact were overturned and it was held that there was actually sufficient evidence of theft to amount to wilful misconduct by the Carriers. Accordingly the CMR limits were “broken” and Carriers’ argument to uphold the US$50,000 limit again failed as being contrary to Article 41, the anti-derogation provision within the CMR.
Upon appeal to the House of Lords, Carriers were unsuccessful in seeking to argue that due to non-conformity by not declaring the value either the consignments were not “goods”, alternatively that there was no contract at all, or that it was a contract of bailment but not a contract of carriage to which the CMR could apply.
The House of Lords held that the CMR did apply and, despite UPS’ conditions stating that it did not agree to carry cargoes exceeding US$50,000 per package, this did not prevent the formation of a contract of carriage. In fact, it was noted that their standard terms expressly contemplated the event of non-conforming packages being put forward for carriage, with options to refuse to carry the goods or, if carriage was in progress, to suspend carriage. In such circumstances it was not possible to infer that the parties intended no contract to result. The Court also rejected Carriers’ contention that the excessive value of the cargo caused the loss so as to amount to a wrongful act by consignors for the purposes of the CMR. No contradiction was perceived between the loss not being attributed to their individual value and the judicial recognition that they may have been targeted specifically due to their value.
On the factual issue of wilful misconduct their Lordships affirmed the Court of Appeal’s conclusion; that it was proper to infer from the evidence presented to the Court that theft had been shown to have been the probable cause of the loss. This involved the approval of overturning the inferences made from the facts by the Judge at first instance, although the primary findings of fact themselves were not challenged. The Court also stated the limits of the role of appellate courts in considering appeals from findings of fact.
The experts had prepared a joint memorandum outlining a range of seventeen possible causes of loss covering the goods being variously misplaced, mis-delivered, labelling issues and theft. In reaching its conclusion the House of Lords was particularly wary not to fall into the trap of merely undertaking a process of elimination leading to “no more than a conclusion regarding the least unlikely cause of loss” 1. Even though a particular culprit could not be identified, the Court agreed that the theft by one or more of the Carriers employees “was shown on a strong balance of probability to have been the cause of this loss” 2.
The outcome was strict on the Carriers in a situation where the cargo’s value had not been properly declared, resulting in the Carrier being unwittingly liable for the full value. However, there were suggestions that UPS may have been able to counter-claim to the extent that they were liable in excess of the US$50,000 limit or alternatively sue for misrepresentation or misstatement.
Ultimately these points were not tested. The decision means that carriers may be liable for the entire value of goods, even though they did not conform to the carriage contract. As a result carriers may need to revisit their processes for cargo receipt as well as their standard terms and conditions.
1. Lord Mance at paragraph 50
2. ibid
