The new Sentencing Guidelines represent the biggest shake up to the Regulatory landscape in recent years, with fines up to 10 times higher (or more in some cases), than their previous levels. With respect to individuals we are expecting to see cases of imprisonment of directors and managers in cases where that would have been unheard of before.
According to the Health and Safety Executive’s (HSE) statistics, every year there are over 5000 accidents involving workplace transport. In September 2014, the HSE released revised guidance: “a guide to workplace transport safety” to provide advice for employers on what they need to do to comply with the law.
Picture this: your haulage company has a longstanding agreement with a major logistics business which sub-contracts jobs to you. You carry goods throughout Europe pursuant to this agreement. The cargo owner will also have a contract directly with the logistics company.
One morning you get a call. Your lorry was parked at Frankley services on the M5 when a theft occurred. A load of popular laptops has been stolen from one of your trailers whilst the driver slept in the cab overnight. The load was en-route from Frankfurt to a distribution centre near Birmingham. The lost goods are valued at over £6 million. Clearly, the cargo owner will be anxious to recover all of its losses, but who picks up the tab?
In this scenario, as the haulier undertaking the transport of the cargo when it was stolen, you may be liable for some or all losses sustained. That said, the question of liability will need to be looked at in the context of:
- the Convention on the Contract for the International Carriage of Goods by Road (‘CMR’); and
- the contractual relationship between each of the parties in the carriage chain.
In the first instance, let’s look at the CMR.
The CMR is a convention which applies to almost every contract for the carriage of goods by road from one country to another. It applies to 55 countries, including most of Europe.
The CMR provides that where a carrier has been guilty of what is known as ‘wilful misconduct’, (which, as detailed below, is effectively intentional gross negligence) the cargo owner can seek to recover the full value of the goods lost or damaged. However, if the cargo owner cannot establish wilful misconduct, then its recovery is limited to approximately £8 per kilo of stolen goods.
In many cases, the difference between the two figures can be significant, particularly where, say, the electronic goods you are carrying are high value but lightweight. For example, in the above scenario, if the £6 million-worth of electronic equipment was of a popular brand of laptop computer, if the cargo owner could not establish wilful misconduct, it may only recover in the region of £80,000 or £90,000.
As a carrier, you will obviously be keen to ensure that wilful misconduct is not made out. The burden of proving wilful misconduct will be on the cargo owner, but what will amount to wilful misconduct differs from country to country. As a result of these different standards, some countries (such as the UK) are known as ‘carrier-friendly’ (because it is harder for cargo owners to establish wilful misconduct), whereas other countries are known as ‘cargo-friendly’ (because it is easier to establish wilful misconduct).
The contract between the various parties will often give them a choice as to where to commence court proceedings, with it generally being possible to sue in any of the following:
- The country where the carrier is ordinarily resident or has its principal place of business;
- The branch or agency through which the contract of carriage was made;
- The place where the goods were taken over by the carrier; or
- The place designated for delivery of the goods. .
Therefore, when a carriage chain involves both carrier-friendly and cargo-friendly countries and something goes wrong with the transport, there is often a ‘race for jurisdiction’. That is, the cargo owner will want to ensure that any claim is dealt with by the courts of a cargo-friendly country, whereas the carrier will want to ensure that any claim is dealt with by the courts of a carrier-friendly country. The cargo owner’s claim will be for damages for the lost or damaged goods in a cargo-friendly country; the carrier on the other hand will normally seek a declaration in a carrier-friendly country that it is not liable at all or that its liability is limited to £8 per kilo. In such a situation, time is of the essence because whoever wins the race for jurisdiction by suing first, will clearly have a significant advantage.
There are certain circumstances in which the party which loses the race for jurisdiction can still challenge the jurisdiction of the other court. However, in the recent case of Cartier Parfums v Ziegler, concerning compensation for damage sustained by Cartier as a result of the theft of goods during an international transport, he European Court of Justice has restricted the situations in which you can seek to do this. More than ever, therefore, parties should not delay if they are bringing or being faced with a CMR claim.
As indicated above, what amounts to wilful misconduct often differs from country to country. In England, wilful misconduct has been defined as:
- an intention to do something which you know to be wrong; or
- a reckless act in the sense that you are aware that loss may result from your act and yet you do not care whether loss will result or not.
This is an extremely high hurdle. For example, the English courts have held that a driver who fell asleep at the wheel of a lorry he was driving, which resulted in a crash and a loss of goods, was not guilty of wilful misconduct even though he was aware that he was sleepy.
The position differs in other jurisdictions, where the notion of wilful misconduct can have a much wider scope. For example, even where a driver is subjected to violence, leaving a load in open country in Italy can still amount to wilful misconduct.
It is often the case that the cargo owner will issue proceedings against all people in the carriage chain including the sub-contractor who has actually performed the carriage, and leave it to those parties to fight out their positions.
The extent to which you can seek to limit your potential liability as a carrier, taking into account the contractual position, should be clarified at the earliest opportunity. You should check the terms and conditions; what the CMR note and transport order says; whether the consignment complied with the contractual obligations, such as any restrictions on the nature or value of goods, or obligations to transport the goods using a certain class of container or with a security device; and any obligations to park in specific areas.
If the contractual obligations have not been complied with, there is also a risk that your insurers may attempt to refuse to compensate the loss under your insurance policy.
As soon as any incident occurs, carriers should take prompt steps to protect their position insofar as possible, bearing in mind the potential ‘race for jurisdiction’: being just one day slower than your opponent can make all the difference.
Finally, as a carrier, you should also take preventative measures to ensure that your drivers are adequately trained and that you have appropriate procedures in place. This can assist to counter any allegations of wilful misconduct should they arise, and reduce any risk that your insurers will refuse to pay out on relevant insurance policies.
DWF has a number of specialist lawyers with extensive experience of CMR claims who can advise on issuing protective court proceedings. We provide bespoke training and policies, and can review insurance policies to identify issues that might pose a risk to your company in the event of CMR claims in future.