Does a typhoon constitute force majeure and exempt the carrier from liability for cargo damage?

Recently, the Qingdao Maritime Court released the top ten cases of 2022 on its public platform. One of the cases dealt with the legal issue of whether a multimodal carrier can claim exemption from liability for cargo damage on the ground that a typhoon constitutes force majeure.

Facts

The plaintiff entrusted a logistics company (the defendant) to transport 12 containers of denim from Zouping, Shandong to Zengcheng, Guangdong. The scope of services was door-to-door which involved carriage by sea and in-land road transportation. The contract contained an exemption provision which stipulated that "the commissioned party is not responsible for losses due to natural disasters (heavy rain, typhoons, etc.)".

The goods were first transported by the first carrier to Jingtang Port and then by the second carrier to Nansha Port, where the goods were discharged and deposited at the port on 11 September 2018. On the same day, the meteorological department issued a typhoon warning, which was followed by successive typhoon warnings. On 16 September 2018, super typhoon "Shanzhu" made landfall along the coast of Guangdong. On 18 September 2018, the goods were shipped out of Nansha Port by the third carrier and delivered to the consignee on 25 September 2018.

At the process of unpacking and handover, it was found that eight containers with a total of 474 pieces of denim had suffered water damage. It was determined that the damage was caused by water ingress into the bottom of the container due to improper stacking and failure to take any precautionary measures during storage at the Nansha port.

Decision

The Court held that as the case concerned disputes over a multimodal transport contract which involved the carriage of goods by sea between Chinese ports, Contract Law was applicable⁽¹⁾ rather than Chapter IV of the Maritime Code which does not apply to the carriage of goods by sea between Chinese ports. As the cargo damage occurred during storage at the Nansha port and the defendant's position is as a multimodal transport operator, its period of responsibility lasted from the time it took delivery of the goods to the time it delivered the goods. Therefore, it was be held liable and obligated to compensate the plaintiff for the losses.

In this case, Typhoon Shanzhu did not meet the elements of force majeure which are "unforeseeable, unavoidable, and insurmountable" under Chinese law.⁽²⁾

First, the goods in question were transported to Nansha port on 11 September 2018, the day when the level IV emergency response to meteorological disasters (typhoons) was activated. Since then, the meteorological departments at all levels have continuously upgraded their emergency response to Typhoon Shanzhu and made rolling forecasts, all of which predicted that it would seriously affect Guangdong on 16 September.

Thus, that the typhoon would probably cause damage to the goods was foreseeable. In addition, the fact that defendant had informed the plaintiff about the eight containers stacked at the bottom might be wet damaged and in need of inspection before the container were delivered to the consignee also proved that the defendant actually did foresee the possibility of cargo damage.

Second, the multimodal transport contract between the plaintiff and the defendant contained neither transit to Nansha Port nor transshipment by the third carrier. The goods in question were transported to Nansha port on 11 September 2018 and were remained at the port until 18 September 2018. There was a five-day gap between the arrival of the good at Nansha port and the time when Typhoon Shanzhu had a serious impact on Guangdong. In fact, Nansha Port was less than 100 kilometers away from the final destination and place of receipt. The defendant had sufficient time to transport the goods to the final destination and place of receipt by in-land road transportation or other means and could have also notified the port to take necessary measures to re-stack the constrainers to avoid potential flooding. Therefore, the loss of goods was entirely avoidable and surmountable.

Third, although the contract between the plaintiff and the defendant contained an exemption provision which stipulated that "the commissioned party is not responsible for losses due to natural disasters (heavy rain, typhoons, etc.)" the Court viewed this provision not to be a statutory defence. The application of this exemption clause is subject to the premise that the damage to the goods was caused exclusively by natural disaster and that the carrier did not have any willful intent or gross negligence regarding the damage to the goods. If the carrier had had any willful intent or gross negligence with respect to the occurrence of the damage to the goods, it could not invoke this exemption clause.

Thus, as far as this case is concerned, Typhoon Shanzhu did not meet the constitutive elements of force majeure under Chinese laws and the defendant could not be exempted from liability.

The defendant later appealed against the judgment of the first instance on the ground that Typhoon Shanzhu constituted force majeure. The High Court of Shandong Province rejected the appeal and upheld the original judgment. The defendant's application to the Supreme Court for a retrial was also rejected.

Comment

In the carriage of goods by sea, it is not uncommon for carriers to claim exemption from liability for cargo damage on the grounds that typhoons constitute force majeure. However, where, as in this case, there are alternative means to transport the goods or protect the good from wet damage, the carrier cannot claim exemption from lability on the ground of force majeure if it had not taken the most efficient means.

This case reaffirms and clarifies that natural disasters such as typhoons are not ipso facto force majeure, but they should be determined in a comprehensive manner in terms of both the objective characteristics of the event and the subjective behavior of the carrier. For typhoon to be recognised as force majeure it must be unforeseeable, unavoidable and insurmountable. However, if the carrier omitted to take actions or was grossly negligent in performing its duties regarding proper cargo care, it cannot invoke force majeure to exempt itself from liability.

The similar rule also applies when the carrier invokes the statutory defence of exemption under article 51 of Charter IV of the Maritime Code. The law stipulates that "the carrier shall not be liable for the loss of or damage to the goods occurred during the period of carrier's responsibility arising or resulting from act of god and sea perils". In legal practice, typhoons are generally not recognised as an act of God or sea perils, as the wind, the duration and extent of a typhoon are usually predictable. However, if a typhoon brings abnormal and unforeseeable risks, and the carrier has fulfilled its duty of care, the carrier may be exempted from liability for damage to the goods.