The Dolphin 1

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DMC/SandT/10/12

The Netherlands

Maersk B.V., formerly “P&O Nedlloyd” and before that called Nedlloyd Lijnen B.V., Rotterdam, the Netherlands v. Irano European Co. Ireco S.A., Luxembourg - The “Dolphin I”

Court of Appeal of The Hague (The Netherlands). J.M. van der Klooster, J.E.H.M. Pickaers, J.H.J. Teunissen, 29 September 2009, Case number 105.002.543/01 (unpublished)

CARRIAGE OF GOODS BY SEA: HAGUE RULES: RECEIVED FOR SHIPMENT BILL OF LADING: CARGO DAMAGE: PERISHABLE GOODS: GROSS NEGLIGENCE: CARRIER’S KNOWLEDGE OF GOODS IN CONTAINERS: ‘BEFORE AND AFTER’ CLAUSE: LIMITATION OF APPLICABILITY OF CONTRACTUAL CLAUSES: REASONABLENESS AND FAIRNESS

Summary

After the carrier had received containers of pistachio nuts for shipment, it left them on the quay in hot sun for three weeks. On arrival at destination, the pistachio nuts were found to be infested by insects. The cargo interests argued that the carrier had not properly cared for the cargo and that that lack of proper care had caused the insect infestation. Cargo interests held the carrier liable for the cargo damage. To avoid liability, the carrier invoked the ‘before and after’ clause in its bill of lading (that is to say, a clause by which the carrier sought to excuse any liability for loss of or damage to the cargo occurring before the cargo was loaded on board the ship or after it was discharged from the ship). The cargo interests argued that under Dutch law, to which the bills of lading were subject, it was unacceptable in the circumstances of the case and by the standards of reasonableness and fairness, for the carrier to be allowed to rely on the before on after clause (art. 6:248 Dutch Civil Code (“DCC”)). The court of first instance (that is, the Court of Rotterdam) held that the rules of reasonableness and fairness indeed prevented the carrier from relying on the before and after clause. On appeal, the Court of Appeal reversed the Court of Rotterdam’s judgement and held that there were no circumstances that prevented the carrier from relying on the before and after clause, because it could not have known that the six containers were already infested by insects/ insects’ eggs when it received them for shipment.

Case Note contributed by Nigel Margetson, Advocaat in the Rotterdam law firm of Hampe Meyjes Advocaten and an International Contributor to this Website

Facts

As proven by 31 clean received for shipment bills of lading made out by Maersk to order and dated on 16 March 1991, Maersk received on that date at Bandar Abbas, Iran, 31 shipper-packed containers stuffed with pistachio nuts for carriage by sea to Rotterdam on board of the m.v. “Dolphin I”. The pistachio nuts had been fumigated at Teheran on 13 March 1991 and were subsequently transported in bales/bags by lorry from Teheran to Bandar Abbas over a distance of 1,100 kilometres.

On 22 March 1991 25 of the 31 containers were loaded on board of the “Dolphin I” (Voyage 26/91) at Bandar Abbas and carried to Dubai, from where they were carried by the “Al Manakh” to Rotterdam. Subsequently these containers were transported – not by or under the responsibility of Maersk - by lorry to Luxemburg and delivered to Ireco. Counted from the day of fumigation on 13 March 1991 until the date of delivery at Luxemburg the journey took between 41 and 45 days.

On 22 March 1991 the other six containers remained at Bandar Abbas. On 16 April 1991 they were loaded on board of the “Dolphin I” (Voyage 27/91) and carried to Dubai where they arrived on 23 April. On 24 April the containers were loaded on to the “Al Isha’a” for carriage to Rotterdam. After discharge of those containers at Rotterdam on 16 or 17 May 1991 these containers were – not by or under the responsibility of Maersk - transported by lorry to Luxemburg where they arrived between 17 and 28 May 1991. Counting from the day of fumigation on 13 March 1991 until the date of delivery at Luxemburg the journey took between 65 and 75 days.

After arrival of these six containers at Luxemburg it was found that the pistachio nuts were infested with insects in different stages of development.

The Hague Rules applied to this carriage. Additionally, by article 25 of the bill of lading conditions Dutch law applied. Article 5 of the bill of lading conditions contained a “before and after” clause which, insofar as relevant, provided as follows:

“(…) unless and to the extent that any applicable compulsory law provides to the contrary,..., the Carrier shall be under no liability whatsoever for loss or damage to the Goods, howsoever occurring, if such loss or damage arises prior to loading onto or subsequent to discharge from the vessel”.

The bill of lading holder (Ireco) commenced proceedings at the Court of Rotterdam against Maersk to obtain compensation for the damage that it had suffered.

Court of first instance (Court of Rotterdam)

In its judgment of 20 June 2002, the court of Rotterdam held that it had been proven that the pistachio nuts in the 25 containers had been delivered to Ireco in good order and condition and that it therefore followed that the infestation of the six containers of pistachio nuts was caused by the delay at Bandar Abbas. Furthermore, the court held that it had been proven that the delay at Bandar Abbas meant that a reasonable voyage period had been exceeded and that Maersk, as a professional carrier, reasonably should have understood that that would quite probably lead to infestation damage. The court of Rotterdam concluded that, in the given circumstances, the carrier could not rely on the “before and after” clause in good faith and that Maersk was liable for the damage that Ireco had suffered. Maersk appealed.

Court of Appeal of The Hague

The Court of Appeal recognised that in this case Maersk completely excluded its liability in the before and after clause. But, as was the case with every contractual clause in which a party excluded or limited its liability, so also the exclusion clause in this case should not be applied if, in the given circumstances, by standards of reasonableness and fairness, it would be unacceptable to apply it (article 6:248 paragraph 2 Dutch Civil Code (“DCC”)). The fact that the Hague (Visby) Rules contained uniform rules in the area of the international carriage of goods was no bar to applying this “restricting effect” of Dutch law, to which the bill of lading was otherwise subject, as here the Court was not dealing with an exclusion clause that formed part of the (compulsory) liability regime of the Rules, but with a contractual clause that the Hague (Visby) Rules and the internal Dutch law allowed parties to enter into without any restriction.

Ireco argued that Maersk could not rely on the “before and after” clause because the damage to the pistachio nuts was caused by gross negligence of Maersk because Maersk, after it had received the containers for shipment on 16 March 1991, left them - without notifying Ireco - on the quay side at Bandar Abbas for three weeks before transporting them. As regards this argument, the Court of Appeal said that, in general, by the rules of reasonableness and fairness, an exclusion of liability clause was unacceptable if the damage was caused by intent or intentional recklessness of the debtor or persons who are responsible for the management of the debtor’s company. When considering whether or not such a case had occurred the judge had to consider all the circumstances invoked by the party who does not want the clause to be applied.

In this respect, it was important that it had not been alleged or found that the management of Maersk was involved with or knew of the decision to leave the six containers behind on the quay at Bandar Abbas until the “Dolphin I” would again put into Bandar Abbas.

The Court of Appeal held that Maersk was indeed to blame for the fact that when, apparently on 22 March 1991, it was found that the six containers could not be loaded on board of the “Dolphin I”, it left those containers until 16 April 1991 – therefore 25 days - in the open air in the weather conditions that prevailed in Bandar Abbas and only informed Ireco about this fact on 18 April 1991. Regardless of the question whether or not a reasonable voyage period had been exceeded, this action of Maersk constituted a lack of proper care for the cargo that it had received. However, this was not enough to deny Maersk the right to invoke the “before and after” clause. It was necessary to investigate whether or not the court of Rotterdam was correct to hold proven that Maersk, as a professional carrier, reasonably should have understood that the delay at Bandar Abbas, considering the prevailing conditions at Bandar Abbas and the type of the cargo, would very likely have led to infestation damage occurring.

In this regard, it was particularly important whether Maersk should have understood that the pistachio nuts in the containers (most likely) were already contaminated. The reason for this was that, if the nuts had been free from insects when they were received by Maersk, then it would not have been possible, as Maersk argued, for (eggs of) insects to develop and the infestation damage would not have occurred. The statements, letters and reports that were submitted in these proceedings did not prove that Maersk should have known or reasonably should have understood that the pistachio nuts were most likely infested.

The Court of Appeal did not consider any other circumstances to exist that, if proven by Ireco, would mean that Maersk could not rely on the “before and after” clause.

The court of appeal quashed the Court of Rotterdam’s judgment and that Ireco’s claim failed.

Comment

The operation of clause 6:248 DCC has been discussed in the Comment under the Dutch Supreme Court’s case The “NDS Provider” (DMC/SandT/09/13). This case (The “Dolphin I”) is interesting because it shows what circumstances the Court of Appeal considers relevant when applying clause 6:248 DCC in a carriage of goods by sea case.