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29 November 2017
A European medical corporation (A) entered into a framework agreement with a Danish carrier (B) for the carriage of medicine between A's European affiliates.
On May 5 2017, when undertaking to perform the carriage of a consignment of different types of medical product from Oranienburg, Germany, to its destination in Polva, Estonia, B issued a Convention on the Contract for the International Carriage of Goods by Road waybill without inserting any qualifications or remarks concerning the condition of the goods.
The consignee (C), an affiliate of A, confirmed receipt of the goods on May 7 2015. C took delivery of the goods and signed the waybill without inserting any qualifications or reservations concerning the quantity or condition of the goods.
Shortly after taking delivery of the goods, C's employees noticed that the entire consignment gave off a smoky odour. C's warehouse manager issued a notice to B by email two hours later stating that the consignment smelled very intensely of something resembling tobacco. The email was sent to C's key account contact at B.
C later considered the consignment a total loss.
C claimed to have made several attempts to mitigate the damages, including airing and repackaging the medicine, to no avail. C made a claim of €210,998.75 with its cargo insurer for a total loss due to smoke contamination. The insurer subrogated C's claim, holding B liable in accordance with the rules regarding carrier limitation for 86,865.24 special drawing rights.
The subrogated insurer argued that B had taken the goods into its custody without making any remarks that they gave off a smoky odour. In the insurer's view, the presumption therefore prevailed that the goods had been taken into B's custody in sound condition under Section 11(2) of the Carriage of Goods by Road Act. Further, the insurer argued that as the odour did not constitute apparent or visible damage, the email sent by C's warehouse manager shortly after taking delivery constituted proper notice.
On the other hand, B pointed out that the alleged contamination constituted visible damage under Section 38(1) of the act (Article 30(1) of the Convention on the Contract for the International Carriage of Goods by Road). Consequently, C had failed to give notice no later than the time of delivery. C's omission to make a reservation in the waybill constituted prima facie evidence that B had delivered the goods to C in the condition stipulated in the waybill. In B's view, it was on the insurer to rebut the presumption that B had delivered the goods in the sound condition stated in the waybill.
The question of whether the smoke contamination constituted visible damage under the act became of decisive importance to the Maritime and Commercial High Court in Copenhagen.
The court first ascertained that B had taken the goods into its custody without any reservation or qualification regarding their condition. Therefore, the court found that the goods were presumed to have been in sound condition (ie, not contaminated by smoke on leaving A's premises).
The court then applied the test set out under Section 38(1) of the Carriage of Goods by Road Act.
When taking delivery of the consignment without joining the carrier in checking the goods or issuing a notice to the carrier with a general indication of the damage, a consignment should prima facie be considered delivered as stated in the waybill. In the case of visible damage, such notice must be given no later than the time of delivery.
The court showed no hesitation in construing 'visible damage' under Section 38(1)(2) of the act to mean damages noticeable by other senses (including smell). In reaching this conclusion, the court relied on:
Given that C had failed to give notice of visible damages no later than taking delivery of the goods, it was up to C to rebut the presumption that the consignment had not been delivered in the condition described in the consignment note.
The court found that the insurer had not succeeded in carrying the burden of proving that the contamination had occurred while the consignment was in the carrier's custody. In reaching this conclusion, the court considered:
The decision underlines the importance of inserting reservations when a consignee has reasonable grounds for doing so and illustrates the dire consequences of failing to do so. The Maritime and Commercial High Court's decision arguably affirms established law.
Particular to this case was the intensity with which the smoke was described by the warehouse manager (ie, the decision does not necessarily dictate that any level of odour on taking delivery will prejudice a consignee that fails to insert a reservation into a waybill).
The objective wording of Section 38(1) of the Carriage of Goods by Road Act relies on the term "losses or damages, which are visible" instead of the Convention on the Contract for the International Carriage of Goods by Road's reference to "apparent loss or damage". Nonetheless, the preparatory work to Sections 10 and 11 of the act note that the commission chose the term 'visible' as the shorter translation. The term should therefore not be construed narrowly as to exclude experiences that may be obtained through other senses.
For further information on this topic please contact Jesper Windahl or Rósing Rasmussen at Windahl Sandroos & Co by telephone (+45 3525 3800) or email (email@example.com or firstname.lastname@example.org). The Windahl Sandroos & Co website can be accessed at www.wsco.dk.
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