Carrier liability for contaminated liquid bulk cargo – Contributory negligence of shipper

Facts

The claimant commissioned the first defendant with the inland transport of de-icing fluid for an airport. In addition, the claimant commissioned the second defendant to inspect the cargo upon loading. The actual transport was carried out by a sub-contractor (the intervening party) commissioned by the first defendant.

Prior to loading, the second defendant took samples from each of the vessel's four tanks (despite its contractual obligations extending to only the inspection of the cargo). No abnormalities were found and the second defendant issued a cleanliness report. However, subsequent to the loading, the second defendant found brown particles on the product surface, which were identified as remnants of the last product carried in the tanks (Hamino, a wheat-based natural product). On discharge, another type of particle was found in the de-icing fluid. This was identified as detached coating from the vessel's tanks. The claimant held the first and second defendant liable for the damage caused by the contamination.

The key issue to be decided by the Hamburg Higher Regional Court was whether the claimant had a control and inspection duty under Section 425(2) of the Commercial Code and if so, to what extent the damage should be reduced for reasons of contributory negligence.

Decision

The first-instance court ruled that the intervening party's failure to provide a vessel with clean tanks amounted to a qualified fault, depriving the first defendant of the right to limit liability. On the other hand, the first defendant was liable for only two-thirds of the damage, as the claimant had contributed to one-third of the damage by failing to adhere to its duty to inspect and control the tanks prior to loading. The court considered that the claimant was subject to such duty as it had failed to inform the first defendant that the product required a minimum degree of cleanliness. The first defendant and the intervening party appealed. The second defendant was not found liable, as its contractual obligations had not extended to inspection of the tanks. This part of the decision was not appealed.

The Hamburg Higher Regional Court upheld the operative part of the first-instance decision, but with a different reasoning.

First, it overruled the first-instance court's conclusion that the first defendant was liable without a right to limit liability. Neither the facts established by the first-instance court nor the content of the claim submissions led to the conclusion that the actual carrier had caused the damage through qualified fault. Among other things, it was neither argued nor proven that the actual carrier had had any knowledge of the flaking coating or remnants from the last cargo.

Second, the Hamburg Higher Regional Court rejected the appealing parties' argument that the first defendant was exonerated from liability under Section 427(1)(4) of the Commercial Code as the damage had been caused by the natural condition of the goods. The court concluded that it was obvious that contamination from the detached coating in the vessel's tank had nothing to do with the natural condition of the goods. This was regardless of whether there were other types of goods that would not suffer damage from such contamination, as argued by the appealing parties. As the defence had already been rejected for this reason, there was no need for the court to examine whether the natural condition of the de-icing fluid could be affirmed in relation to the remnants from the previous cargo (the appealing parties argued that this was the case due to how the fluid was misted with fine nozzles on the wings of aircraft and was as such sensitive to contamination).

Third, the Hamburg Higher Regional Court overruled the first-instance decision that the claimant had contributed to one-third of the damage by failing to adhere to its control and inspection duties. The court stated that it is primarily the obligation of carriers to ensure that goods are duly transported. Just as shippers can rely on carriers to provide a clean vehicle, they also rely on the fact that goods are transported in sound tanks and will not become contaminated by flaking coating. Shippers do not have to examine vehicles, except in cases of known or obvious defects. In the present case, it had not been demonstrated that the tanks' defects were evident at first sight. Further, even if the second defendant's negligence could be attributed to the claimant, in view of the carrier's obligation to know its vehicles used for transport, the negligence would not exceed 10% to 20%. For procedural reasons, the court did not have to make a final decision on this issue.

Comment

The decision clarifies that shippers can rely on carriers to provide a sound transport vehicle. In particular, shippers have no duty to inspect their cargo holds for cleanliness or flaky coating that may contaminate goods. An exception applies only if a defect is known to the shipper or evident at first sight. However, even then, in apportioning negligence between carriers and shippers, considerable weight should be attached to the fact that carriers must know their vehicles and as a result their contributory negligence is unlikely to exceed 10% to 20%.