Freight forwarder unlimitedly liable for delay in carriage to Russia

A Danish manufacturer of steel tanks (the consignor) had sold a number of brewery tanks to a brewery in Russia (the consignee). The goods were to be carried by sea to Latvia by a Danish shipping company (the freight forwarder), and from there, they were to be carried by road to the final destination in Maykop in southern Russia.

The consignor and the freight forwarder only agreed on an expected date of delivery. But in relation to the consignee, the consignor had undertaken to deliver the goods on or before 1 February 2010. In case of late delivery, the consignor had agreed to pay a monthly penalty of EUR 100,000. During the carriage of the goods, various problems arose which meant that at the end of March, only two out of six tanks had been delivered.

Around 27 March, the consignor let a new carrier take over the carriage of the remaining tanks. Consequently, the consignee did not receive all tanks until 21 May, and the consignor had to pay the agreed penalty to the consignee due to the delay.

The consignor then raised a claim for compensation for his loss against the freight forwarder. The loss was assessed at expenses for extra customs clearance, new transport licenses, agreed penalty to the consignee, etc. The consignor claimed full compensation and submitted that the freight forwarder had forfeited the right to limit his liability due to gross negligence.

Intermediary or carrier?

The freight forwarder attempted to assert the rules on an intermediary's liability contained in the General Conditions of the Nordic Association of Freight Forwarders (NSAB 2000). The Court clearly dismissed this claim as the freight forwarder had inter alia notified the consignor of his own price.

CMR or NSAB?

The Court further dismissed the claim that the freight forwarder could rely on NSAB 2000 even though these terms had been applied in previous agreements between the parties. And because the delay occurred in connection with the carriage by road between the Baltic countries and Russia, the case was to be decided in accordance with the rules of the CMR Convention.

Gross negligence, therefore, no right to limit liability

The Court found that the delay was primarily caused by the circumstances of the freight forwarder. Even though the parties had agreed on an expected date of delivery, the delay exceeded what could reasonably be expected.

The Court attached weight to the fact that in the process the freight forwarder had been made aware of the significance of punctual delivery and that a delay would make the consignor obliged to pay the agreed penalty. The Court also attached weight to the fact that the freight forwarder uncritically passed on the information forwarded by the sub-carrier regardless that the information proved to be incorrect on several occasions. It was also of importance that the freight forwarder was aware of the sub-carrier's failure to obtain transport licenses and the documents required to perform the carriage in the proper manner.

The freight forwarder had exercised gross negligence, and therefore, he could not limit his liability for the delay. Consequently, the consignor recovered his loss from payment of penalty to the consignee, replacement carriage and certain consequential losses. However, the claim was slightly reduced as a result of some wrong drawings of the goods.

IUNO's opinion

The decision shows that even in connection with carriages to Russia which are frequently delayed, a carrier may be held liable for a delay.

Depending on the circumstances, the carrier may even forfeit the right to limit his liability. This risk is present if gross negligence on the part of the freight forwarder is the primary reason for a material delay and if the freight forwarder is aware that punctual delivery is of material importance.

The decision further shows that a carrier must be careful to act on signs of a sub-carrier's unreliability as the carrier may otherwise end up being held liable for the sub-carrier's errors.

[Judgment rendered by the Maritime and Commercial Court on 16 January 2012, case no. S-70-10]