Rosewood Trucking Ltd. v Balaam

J U D G M E N T

Friday, 4th November 2005

1. LORD JUSTICE TUCKEY: This appeal raises a question as to the meaning and effect of Article 37 of the Convention on the Contract for the International Carriage of Goods by Road, better known as the CMR. This Article entitles one of successive carriers who has paid compensation "in compliance with the provisions" of the CMR to recover such compensation from the carrier responsible for the loss. It is a carrier who has simply paid compensation under the terms of his contract with another carrier, paid it in compliance with the convention so as to entitle him to recover it from the carrier responsible for the loss. Mr Recorder Pooles QC, sitting in the Norwich Crown Court, decided that he had not, but gave permission to appeal so that this court could consider whether he had answered the question correctly.

2. The facts are not now in dispute and can be stated shortly. P&O Ferrymasters contracted with consignors, described in the CMR as "the sender", to carry a consignment of television sets from Spain to England. The CMR applied to the contract and P&O issued a consignment note which was signed by the sender but did not contain all the particulars required by Article 6, although nothing turns on that omission. The entire carriage was sub-contracted by P&O to the claimant, Rosewood Trucking Ltd, by the claimant to another carrier and by the latter to the defendant, Brian Balaam. The consignment was collected in Spain by the defendant's driver, who signed the consignment note as the carrier on 25th April 2002. However, before delivery was made to the consignee in England, the television sets were lost when the defendant's truck, trailer and its entire contents were stolen from a yard near Norwich.

3. The defendant was the carrier solely responsible for the loss and the Judge held that he could not have relieved himself of liability under Article 17.2 on the ground that the loss was caused through circumstances he could not avoid.

4. The sub-contract between P&O and the claimant prohibited further sub-contracting without consent, but provided that in any event the claimant would remain liable to P&O "as if it had itself performed or failed to perform the carriage".

5. In due course, P&O paid the sender's claim for its loss and the claimant indemnified P&O, as it was bound to do under the terms of the sub-contract. In doing so, it did not take any assignment of any claim which P&O might have had and it is not contended that it became subrogated to any such claim. It simply sought recovery from the defendant of what it had paid P&O under Article 37.

6. The CMR became part of English law under the Carriage of Goods by Road Act 1965. Section 5(1) of that Act has the effect that where the CMR applies claims for contribution between carriers under what is now the Civil Liability Contribution Act 1978 are not possible. Chapter 6 of the CMR contains the provisions relating to carriage performed by successive carriers. Article 34 provides that in such a case, where the carriage was governed by a single contract, each carrier is responsible for the performance of the whole operation. The second and each succeeding carrier become parties to the contract of carriage on the terms of the consignment note on acceptance of the goods and the consignment note.

7. In our case, only one carrier, the defendant, actually carried the goods, but in Ulster-Swift Ltd v Taunton Meat Haulage [1977] 1 Lloyds Rep 346, this court approved a decision of Donaldson J reported at [1975] 2 Lloyd's Rep 502 that in such a situation the carrier who contracts with the sender is the first carrier, even if he does not undertake any stage of the carriage himself. The same reasoning must apply to sub and sub-sub-contractors of the first carrier who do not actually carry the goods, as in this case. The defendant was a sub-sub-sub-contractor of the first carrier, P&O, and was also therefore a successive carrier. Here also the carriage was governed under the single contract contained in the consignment notice.

8. Article 36 provides that the sender may only take legal proceedings against the first carrier, the last carrier or the carrier who was performing that portion of the carriage during which the event causing the loss occurred. That meant in this case that the sender could only have sued P&O or the defendant. The full text of the relevant part of Article 37 is as follows:

"A carrier who has paid compensation in compliance with the provisions of this Convention, shall be entitled to recover such compensation, together with interest thereon and all costs and expenses incurred by reason of the claim, from the other carriers who have taken part in the carriage, subject to the following provisions:

(a) the carrier responsible for the loss or damage shall be solely liable for the compensation whether paid by himself or by another carrier."

Sub-paragraphs (b) and (c) deal with the position where the loss has been caused by the action of two or more carriers and Article 38 with the position where one of the carriers is insolvent.

9. The only other directly relevant provision is Article 40, which says:

"Carriers shall be free to agree among themselves on provisions other than those laid down in articles 37 and 38."

10. After referring to a number of authorities, the Judge correctly observed that chapter 6 of the CMR establishes what is intended to be a complete regime in which a statutory quasi-contractual nexus is established between the sender and each of the carriers and their rights against one another are defined.

11. The defendant's argument was simple: the claimant could not have been sued by the sender because Article 36 proscribes such proceedings. P&O could have been sued and would have been liable for the sender's loss (Article 17 and 34), but under the Convention, P&O could only have claimed over against the defendant as the only carriers responsible for the loss (Article 37(a)). The compensation paid by the claimant to P&O was not therefore paid in compliance with the provisions of the Convention and could not therefore be claimed against the defendant with whom it had no privity of contract. Rather, its payment was made under its contract with P&O, which it was entitled to make (Article 40), but which contained terms which were different from those in Article 37. The Judge somewhat reluctantly accepted this argument.

12. Mr Bradley submits that the Judge was wrong. The CMR, he says, provides that where there are successive carriers, the carrier responsible for the loss should pay either the sender directly (Article 36) or the carrier who is not responsible for the loss but has had to pay it, as the claimant had to do in this case. Article 40, he submits, permits carriers to make contracts such as that between P&O and the claimant. Its payment to P&O was therefore in compliance with the provisions of the Convention because it was compelled to make payment in accordance with a scheme which was permitted by the Convention. On this analysis, Article 37 does not have the effect of preventing the claimant from recovering from the defendant, the person responsible for the loss.

13. I do not accept these submissions. Simply as a matter of language, the claimant did not pay P&O "compensation in compliance with the provisions of the Convention" but in compliance with the obligations it had assumed under its sub-contract with P&O. To allow the claimant to pass on that contractual liability would be doing something outside the scheme of the CMR, which is obviously intended to be self- contained. Under that scheme the claimant had no liability, either to the sender or to P&O. What is more, the liability which the claimant seeks to pass on to the defendant is under a contract to which he was not a party. The wording of Article 40 says nothing about this; it merely permits carriers to contract with one another on terms which differ from those contained in Articles 37 and 38.

14. Whilst I accept that it is unfortunate that the claimant is unable to pass on what it has paid to the defendant, who would have been liable to and have to pay had he been sued by the sender or P&O, the claimant could have protected itself by its own contract with its sub-contractor, by taking an assignment of P&O's claim against the defendant, or possibly, although this was not fully explored in argument, by way of subrogation. As it did none of these things, it is stuck with the loss, but that is not a reason for construing the CMR in a way which its language will not bear. For those reasons, I would dismiss this appeal.

15. LORD JUSTICE NEUBERGER: Mr Bradley, in his admirably clear and concise submissions, does not contend that the words "in compliance with the provisions of this Convention" in Article 37 only govern the word "compensation". In other words, he accepts that the Recorder was correct to proceed on the basis that the words govern the phrase "paid compensation" in that Article. On that basis, it seems to me it would be very difficult to say that a payment made pursuant to a provision such as clause 3.4 of the contract between P&O and the claimant was made "in compliance with the provisions of this Convention".

16. In agreement with my Lord, Tuckey LJ, I consider that such a construction would involve too great a straining of the words of Article 37, unless perhaps it resulted in a construction which was plainly required to give effect to the purpose of the Convention. In practice, there would have been various ways, as my Lord said, in which a party in the position of the claimant in this case could have protected itself, for instance, by the terms of its contract with its sub-contractor, LB Shipping, or by getting P&O to sue and joining other parties, or by taking an assignment of P&O's claim in return for payment, or, quite possibly, by claiming to be subrogated to P&O's claim, especially in the light of the terms of clause 3.4.

17. Returning to the wording of the Convention, the notion that, because Article 40 permits contracting out of Articles 37 and 38, payment of a contractually due sum, such as that paid by the claimant in the present case to P&O, falls within the opening words of Article 37, does not seem to me to meet the point as a matter of language or as a matter of principle. The fact that one can contract out of Article 37 does not mean that the payment made pursuant to such contracting out can be said to have been paid in compliance with the provisions of this Convention. Further, given that Article 40 expressly permits contracting out of Article 37, it is rather strange, at least on the face of it, to conclude that, having contracted out of Article 37, one can nonetheless rely, as the claimant seeks to do in this case, on the very Article out of which the parties have contracted.

18. Mr Bradley was, in my view, rightly minded to accept that, if P&O and Rosewood had in their original contract expressly contracted out of Article 37 in its entirety, then the claimant's present claim could not have been made. While perhaps a somewhat indirect point, I think it throws some light on the issue which the learned Recorder had to decide. In these circumstances, essentially for the same reasons as my Lord, I agree that this appeal should be dismissed.

(Costs assessed in the sum of £5,750, the reduction made as to the solicitors' rather than counsel's fees.)