Globalink Transportation & Logistics v DHL Project & Chartering
Globalink Transportation & Logistics Worldwide LLP v DHL Project & Chartering Ltd
English Commercial Court: Nicholas Vineall QC: 29 January; 19 February:  EWHC 225 (Comm)
Mr Arshad Ghaffar, instructed by Mitchell Simmonds, for the Claimant, Globalink.
Mr Emmet Coldrick, instructed by Barrett Solicitors Ltd, for the Defendant, DHL.
CONTRACT FOR FREIGHT FORWARDING SERVICES: WHETHER CLAIM FOR CARGO DAMAGE COULD BE OFF-SET AGAINST CLAIM FOR FREIGHT
Case Note contributed by Edward White BA(Hons), GDL, Associate at Penningtons Manches Cooper in Singapore.
This was an application for summary judgment brought by Globalink Transportation and Logistics Worldwide LLP (“Globalink”) for sums due under a freight forwarding services contract with DHL Project & Chartering Limited (“DHL”). The Court dismissed Globalink’s application on the basis that DHL had an arguable counterclaim which could be applied as a defence by way of set-off. The longstanding principle in English law preventing set-off against claims for freight did not apply to freight forwarding contracts which merely obliged the forwarder to arrange for the carriage of goods.
In September 2014, DHL engaged Globalink for the onward carriage of various units of refinery plant on two barges from Novorossiysk to a refinery in Kazakhstan. The parties entered into a “Freight-Forwarding Services Contract” (the “Agreement”) which referred to Globalink as the “Forwarding Agent” and DHL as the “Client”.
Under Clause 1.1 of the Agreement, Globalink’s obligations to DHL were (inter alia) to:
“[C]arry out or arrange the forwarding services of the Client’s cargo for remuneration and to the cost of the Client, related to the Client’s cargo transportation by truck, railway, sea, air shipment and/or any other kind of transport, hereinafter referred to as the ‘Forwarding Service’, and the Client shall pay the cost for Cargo Transportation…”
Under Clause 1.5, Globalink was to “act on behalf and at the expense of the Client” and would “have the right to involve the third Parties to fulfil its obligations…”.
One barge suffered delays on the initial leg of its voyage. By the time the barge reached the mouth of the Ural-Caspian canal on 15 November 2014, the water level had fallen too low to accept her loaded draught and she was denied passage. The canal was then closed for the winter.
Globalink and DHL entered into a separate agreement in April 2015 (the “Supplementary Agreement”) to make alternative arrangements for the shipment of the remaining units held up at the Ural-Caspian Canal. The Supplementary Agreement again referred to Globalink as a “Forwarding Agent”.
The application for summary judgment
Globalink brought an application for summary judgment under CPR (Civil Procedure Rules) Pt 24 for the sum of USD 1,647,780 due under the Agreement and Supplementary Agreement. DHL admitted that this payment was owing but sought to bring a counterclaim for the additional shipment costs for which it had become liable under the Supplementary Agreement, which (it argued) had only arisen as a result of Globalink’s breaches of the original Agreement.
If successful, DHL’s counterclaim would have extinguished Globalink’s claim in its entirety.
The entitlement to set-off
The Judge found that the counterclaim evidenced by DHL was well arguable and had a reasonable prospect of success. Globalink argued that the Court should nevertheless grant summary judgment because DHL were precluded from bringing a defence by way of set-off. Globalink’s counsel gave the following reasons:
1. The cross-claim was not sufficiently connected with the claim to operate as a set-off;
2. Globalink’s claim was for freight, from which as a matter of law no deduction could be made by way of set-off.
Globalink’s first argument was immediately dismissed. It was clear that the cross-claim had arisen from the same Agreement as the claim and was intimately connected to it.
Globalink’s second argument, however, required the Court to consider the limitations of a common law rule described by Lord Wilberforce in the The Aries  1 WLR 185, a rule which dated back at least two hundred years.
The rule in The Aries
In The Aries, Lord Wilberforce described the long established rule in English law “that a claim in respect of cargo cannot be asserted by way of deduction from the freight.” Whilst he acknowledged that the rule could be considered arbitrary, this was not in his view a reason to do away with a legal certainty that had applied to the shipping industry for over a century without difficulty.
The Judge in Globalink v DHL noted that the rule had since been expanded beyond cargo claims and indeed beyond the shipping industry to cover road carriage (RH&D International Ltd v IAS Animal Air Services Ltd  1 WLR 573) and air freight (Schenker Ltd v Negocios Europa Ltd  1 WLR 718). Notably, however, it had not been applied in the context of claims for hire under time charters (The Nanfri  QB 927).
The question for the Court to consider in this case was whether Globalink’s claim was indeed one for freight, to which the Aries rule would apply automatically, or, alternatively, whether the rule should be extended to cover Globalink and DHL’s particular contractual arrangement.
The Court held that the Globalink and DHL Agreement was not a contract of carriage, but a freight forwarding contract under which Globalink had agreed only to arrange transport of DHL’s cargo so as to achieve the promised delivery. It was open to Globalink to undertake the carriage itself under the terms of the Agreement, but this would not convert the Agreement from a “contract to arrange” to a contract of carriage or give Globalink the automatic benefit of the Aries rule.
It followed from the above, the Judge reasoned, that any decision to apply the Aries rule to the Agreement would amount to an extension of the principle beyond the concept of freight which had been established by the authorities. The Court found no justification to make such an extension and held that DHL would be entitled to set-off a proven counterclaim.
As regards the decision in Britannia Distribution Co Ltd v Factor Pace Ltd  2 Lloyd’s Rep 420, the Court also clarified that Globalink would be entitled to rely on the no set-off rule if it could be shown that Globalink was itself liable to make freight payments to third parties without deduction, and that it was simply passing this liability on to DHL.
This case offers a helpful clarification of the limitations of the Aries rule in the shipment of goods. It is interesting to note, however, that the Judge’s decision centred on the contract the parties had signed, rather than the nature of the shipment in question. Though primarily a freight forwarding contract, the Agreement allowed Globalink to take on the role of the carrier of the goods. However, doing so would not have rendered DHL’s payment for these services “freight” for the purpose of the Aries rule. Freight forwarders may therefore want to consider - in light if this decision - how they define their role and their clients’ payment obligations in their terms and conditions, particularly if it is envisaged that they may on occasion undertake the carriage of the goods themselves. Alternatively, parties to freight forwarding contracts may wish to allow or disallow set-off expressly, as the case may be.
Finally, this case also provides a helpful insight into the grounds for summary judgment and the way that the Courts will consider applications under CPR Pt 24. As was noted in his judgment, it would have been sufficient for Mr Vinneal QC simply to acknowledge that there was an argument to be heard on the scope of the Aries rule and dismiss the summary judgment application on this basis alone. He decided, however, to “grasp the nettle” and deal with the question in full.