Overseas Medical Supplies Ltd v Orient Transport Services Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Potter,Lord Justice Mantell |
| Judgment Date | 20 May 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J0520-17 |
| Docket Number | CCRTF98/1145/2 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 May 1999 |
[1999] EWCA Civ J0520-17
Lord Justice Potter
Lord Justice Mantell
CCRTF98/1145/2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COUNTY COURT AT KINGSTON
(HIS HONOUR JUDGE KENNY)
Royal Courts of Justice
MR. N. PHILLIPS (instructed by Messrs Holmes Hardingham Walser Johnston Winter) appeared on behalf of the Appellant/Defendant.
MR. R. DOWNEY (instructed by Messrs Chalker & Shaw) appeared on behalf of the Respondent/Plaintiff.
APPROVED JUDGMENT
INTRODUCTION
1. This is an appeal by the defendant Orient Transport Services Limited ("the appellants") against the judgment of His Honour Judge Kenny given in the Kingston County Court in which he held the appellants, who are a freight forwarding company, liable to the plaintiffs, Overseas Medical Supplies, for the loss and/or non-delivery of a quantity of medical equipment on its return journey to England from Teheran whither it had been dispatched by the plaintiffs for exhibition at the Iran Med 95 Exhibition. The judge also found the appellants in breach of their contractual duty to effect insurance of the goods on the plaintiffs' behalf so that, in the event of the loss which occurred, they would be duly indemnified under such insurance. He gave judgment for the full value of the goods in the sum of £8,589.66 with interest of £785.07 and the plaintiffs' costs of the action to be taxed if not agreed on Scale 2. In doing so he held that the appellants could not rely on Clause 13(B) of the British International Freight Association Standard Trading Conditions (1989) ("the Conditions"), which purported to limit the appellants' liability in respect of any claim arising from breach of duty on their part; the judge held that, in relation to their duty to effect insurance, the appellants had failed to demonstrate that Clause 13(B) and 29(A)(ii) of the Conditions satisfied the test of reasonableness imposed by the Unfair Contract Terms Act 1977 ("the 1977 Act").
THE FACTS
2. The plaintiffs carry on business as suppliers of medical equipment. The appellants specialise in the carriage of goods and associated services. A substantial aspect of their business is the provision of a specialist service importing and exporting exhibition equipment for customers, which frequently involves a "round trip" for the goods or equipment exhibited. The plaintiffs had employed the appellants for that purpose on an earlier occasion or occasions. In respect of the equipment for exhibition at Iran Med 95, they completed and signed the defendants "Freight & Handling Order Form" which contained or evidenced the arrangement between the parties. That document provided:
'We hereby place our order with you for the provision of freight and handling services in connection with this event.
We accept the adoption of BIFA '89 Trading Conditions as shown overleaf for this movement, and will ensure full insurance cover is held on our cargo either through Orient [i.e. the appellants] or another broker …
Please include the following services …
Insurance cover on our consignment to a total value of £Sterling – To be advised …'
I shall refer to the Conditions below.
3. There was a dispute before the judge about the arrangements for the transport, in particular as to whether it was to be for the round trip, and as to the insurance arrangements agreed. However, the judge held that the goods were properly specified and their value advised later by fax communications from Ms Chotalia of the plaintiffs to the appellants, following oral instructions which she had given over the telephone to the appellants' shipping clerk to insure the consignment for the invoice value of £11,400 at a charge of 1.97% of value for the round trip. For some unaccountable reason, as to which the defendants could give no explanation, no insurance was ever effected.
4. So far as the effecting of insurance and the appellants' limitation of liability were concerned, the Conditions provided as follows:
'13(A) No insurance will be effected except upon express instructions given in writing by the Customer and all insurances effected by the Company are subject to the usual exceptions and conditions of Policies of the Insurance Company or Underwriters taking the risk..
(B) Insofar as the Company agrees to arrange insurance the Company acts solely as Agent for the Customer using its best endeavours to arrange such insurance and does so subject to the limits of liability contained in Clause 29 hereof …
LIABILITY AND LIMITATION
26. The Company shall perform its duties with a reasonable degree of care, diligence, skill and judgement
29(A) Subject to … [certain clauses not relevant to this case].. the Company's liability howsoever arising and notwithstanding that the cause of loss or damage be unexplained shall not exceed
(i) in the case of claims for loss or damage to goods
(a) the value of any goods lost or damaged or
(b) a sum at the rate of two Special Drawing Rights as defined by the International Monetary Fund (hereinafter referred to as SDR's), per kilo of gross weight of any goods lost or damaged whichever shall be the least
(i) in the case of all other claims
(a) the value of the goods the subject of the relevant transaction between the Company and its Customer or
(b) a sum at the rate of two SDR's per kilo of the gross weight of the goods the subject of the said transaction, or
(c) 75,000 SDR's in respect of any one transaction whichever shall be the least ….
the value of SDR's shall be calculated as at the date when the claim is received by the Company in writing ….
(D) by special arrangement agreed in writing the Company may accept liability in excess of the limits set out Sub-Clauses (A)-(C) above upon the customer agreeing to pay the Company's additional charges for accepting such increased liability. Details of the Company's additional charges will be provided on request.
5. The relevant provisions of the 1977 Act are as follows:
Section 3 provides under the heading "Liability arising in Contract" inter alia that:
"(1) This section applies as between contracting parties where one of them deals … on the other's written standard terms of business.
(2) As against that party, the other cannot by reference to any contract of terms –
(a) when himself in breach of contract, exclude or restrict any liability in respect of the breach … except insofar as … the contract terms satisfies the requirement of reasonableness."
Section 11 provides inter alia that:
"(1) In relation to a contract term, the requirement of reasonableness for the purposes of this Part of this Act … is that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made …
(3) Where by reference to a contract term … a person seeks to restrict liability to a specified sum of money, and the question of arises (under this or any other Act) whether the term … satisfies the requirement of reasonableness, regard shall be had in particular … to –
(a) the resources which he could expect to be available to him for the purpose of meeting the liability should it arise; and
(b) how far it was open to him to cover himself by insurance.
(5) It is for those claiming that a contract term … satisfies the requirement of reasonableness to show that it does."
THE JUDGMENT BELOW
6. The judge held the defendants were in breach of their duty under Clause 13(B) to effect their best endeavours to arrange the insurance and that, subject to the question of the application of the limits on liability referred to in Clauses 13(B) and 29, such breach of duty caused loss of £8589.66 which there was no issue would have been the amount of the insurance indemnity had the plaintiffs' instructions been carried out. The effect of imposing a limit of recovery of two SDR's per kilo would have been to limit the plaintiffs' recovery to £600 instead of the £8500 – odd recovered. Before the judge, and indeed before this court, it has not been in issue that the provisions of Clause 13(B) were apt to impose a limitation in the circumstances of the case unless the appellants were precluded from relying on such limitation by the provisions of the 1977 Act which I have quoted.
7. Whereas the judge considered that the general limitation contained in Clause 29(A)(I) of the BIFA Conditions probably satisfied the test of reasonableness in relation to a direct claim for loss and damage and hence would be applicable to limit the plaintiffs' claim to £600 insofar as it had been put on the basis of non-delivery and/or loss of the goods by the appellants, he did not consider that the appellants had demonstrated that a similar limitation in respect of a failure to carry out the plaintiffs' express instructions to insure could be justified as reasonable. Having weighed various considerations urged upon him by the appellants as discharging the burden of reasonableness, to which I shall refer when I turn to summarise the appellants' arguments on this appeal, the judge's reasoning for differentiating between the limit imposed for loss and damage on the one hand and failure to insure on the other appears at paragraphs 25 and 26 of his judgment which read as follows:
"25.Comparing the limits of liability for loss of the goods and for failure to make insurance arrangements in respect of the goods is instructive, in my judgment. The default in each case is not to be equated. In the transport business, as I have said, losses are...
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