Carriers avoided liability in damages despite incorrect release of goods

The case concerns a Danish business (Consignor) engaged in the sale and purchase of computer parts. In the case at hand, the computer parts sold by the Consignor were destined for an Italian customer.

The Consignor had for some time cooperated with Carrier 1 about consignments for delivery abroad. Carrier 1 had as a special arrangement allowed the Consignor to choose the procedure ”Hold for Pick-up” as an alternative to COD or similar arrangements. The procedure meant that the Consignor made the transport booking and completed a consignment note (in the form of an AWB), stating its customer as consignee. At the same time, the Consignor notified a special department at Carrier 1 that the consignment was to be sent as ”Hold for Pick-up”.

Carrier 1 then contacted its local office in the country of destination and informed them that the consignment was on its way and was to be ”Held for Pick-up”. Once the Consignor had received payment, the customer would get the AWB number to be used in connection with pick-up of the consignment from Carrier 1.

Because of dissatisfaction with Carrier 1, the Consignor had at some point concluded a parallel agreement with Carrier 2 which the Consignor then used concurrently with Carrier 1. The agreement with Carrier 2 involved a similar (but not identical) procedure as the one agreed with Carrier 1. The agreement with Carrier 2 used, among other things, the designation SHIP TO HOLD and Carrier 2 demanded that ”SHIP TO HOLD” or ”Hold for Pick-up” was explicitly stated in the consignment note. In the opinion of the Consignor, the liability of Carrier 2 under the agreement with Carrier 2 was more extensive than the liability of Carrier 1 under the agreement with Carrier 1 in the event of incorrect release.

The consignment incorrectly released

The consignment at issue was a consignment of 88 microprocessors worth around EUR 111,000 which the Consignor had sold to an Italian customer. The consignment was booked for transport with Carrier 1 by the Consignor, who used Carrier 1’s electronic system to complete an AWB. The Consignor entered SHIP TO HOLD on the AWB (i.e. the designation used in the agreement with Carrier 2) and the business name of the Italian consignee as well as the name and address of Carrier 2's agent in Italy were stated under consignee.

On the day of shipment, Carrier 1's office in Milan received a fax from the Italian consignee. The fax stated the consignee's business name as well as the name and address of Carrier 2's Italian agent, but no AWB number. The fax instructed Carrier 1 to hold back the consignment (i.e. that it was not to be transported to Carrier 2’s Italian agent) and it was stated that the consignment would be picked up directly at Carrier 1’s office in Milan on the next day. The consignment was picked up by the consignee at Carrier 1 as stated. As a result, the consignee took possession of the goods without having paid for them, and the Consignor did not subsequently succeed in recovering payment.

Claimed damages for incorrect release

The subject-matter of the case was then whether Carrier 1 and Carrier 2 were liable in damages towards the Consignor as a result of the incorrect release. The matter was brought before the Maritime and Commercial Court as the Court of first instance.

The Maritime and Commercial Court: Carrier 1 liable, Carrier 2 not liable

First of all, the Court found that Carrier 1 must have taken SHIP TO HOLD to mean that they were not to release the goods without permission from the Consignor. The Court took into account that prior to the consignment at issue, Carrier 1 had handled a large number of consignments where this expression had been used.

The Court further held that Carrier 1 had acted in a manner giving rise to liability by releasing the consignment to the consignee without the consignee being able to state the AWB number or other documentation proving that the consignee was entitled to have the goods handed over and without permission from the Consignor.

Therefore, Carrier 1 was ordered to compensate the Consignor for its loss.
The Court found for Carrier 2, one of the reasons being that the Court set aside the understanding of the agreement claimed by the Consignor. This understanding would in the Court's opinion mean that Carrier 2 had provided a guarantee against incorrect release of consignments in situations where Carrier 2 was not involved in the transport. The Court did not believe that the agreement could be understood in that way.

However, Carrier 1 appealed against this decision to the Supreme Court and the Consignor chose in that connection not to pursue the claim against Carrier 2. As a result, the Supreme Court only had to decide on the claim against Carrier 1.

The Supreme Court: Judgment in favour of Carrier 1

First of all, the Supreme Court concluded that the Consignor was not entitled to expect that the consignment would be held back and secured against release ”…merely due to the consignment note stating ’Hold for Pick-Up’ or the like”. The Supreme Court took into account that a special procedure had been agreed and this procedure was to be closely observed if the Consignor were to be protected against incorrect release.

Furthermore, the Supreme Court found that the specification ”SHIP TO HOLD” must be understood as an instruction to Carrier 2 and that the Consignor could not expect that Carrier 1 would hold back the goods on that basis, one of the reasons being that the Consignor had failed to observe the ”Hold for Pick-Up" procedure and to notify Carrier 1 separately about the consignment.

The Supreme Court took into account that the Consignor had itself entered the name of the consignee in the consignment note and therefore itself caused the risk of incorrect release.

IUNO's opinion

The decision is first of all interesting in that it emphasises that the liability for release is judged on the basis of the overall circumstances and not merely on the basis of the parts of the contract of carriage being repeated in the consignment note. However, the terms of the consignment note are still prima facie evidence of the conditions of the contract of carriage if not proven otherwise as follows from s. 100(1) of the Danish Aviation Act (luftfartsloven) and article 11, sub-article 1, of the Montreal Convention (Montrealkonventionen).

The decision is noteworthy in that the Supreme Court in its assessment of liability attaches importance to the ”Hold for Pick-up” arrangement not being a standard product of Carrier 1. The Supreme Court emphasises that the arrangement was not one of Carrier 1’s standard products but rather a special arrangement. This is an element indicating that the consignor could not expect that the consignment was secured against release ”…merely due to the consignment note stating ’Hold for Pick-Up’ or the like”. This is noteworthy because the issue of whether something is a special arrangement or not is usually of no importance if it is otherwise clear that an agreement has been made.

It is furthermore interesting whether it is possible to limit the liability for release. The Supreme Court dismissed the claim and therefore did not go into that issue. However, the grounds of the Maritime and Commercial Court indicate that it remains open to question whether the liability for release can in fact be limited by agreement.
Finally, the judgment shows that complex transport procedures may have very adverse consequences. Transport buyers must be very careful with the instructions given to the carrier and the agreements made. And if you operate with parallel supplier agreements, mistakes may easily occur, especially if the agreements use different procedures and terminology.

[Supreme Court judgment of 2 September 2011 in case no. 372/2008]