A freight forwarder had to pay full damages to a shipper because the carriage had been several months delayed and the freight forwarder had remained passive in relation to problems with his sub-contractor. According to the contract, six tanks were to be transported from Denmark to Russia within the course of three weeks but after four months some of the tanks still remained to be delivered. Due to the delay, the shipper sustained a loss of 294,040 EUR. The Danish Supreme Court decided that the freight forwarder had to compensate the loss.
The shipper had hired a freight forwarder to transport six tanks from Denmark to a brewery in Russia. According to the plan the tanks were expected to arrive at the brewery 1 February 2010. However, by 1 February none of the tanks had arrived. The last tank reached the destination three and a half months later than expected.
As a result of the delay, the shipper suffered a loss of 294,040 EUR of which 131,500 EUR was due to an agreed penalty to the brewery. The Supreme Court ruled that the freight forwarder had shown wilful misconduct by not acting in order to prevent the delay, and because of this, he was not allowed to limit his liability to the freight amount according to the CMR Convention.
The Freight Forwarder Remained Passive
According to the plan, the carriage should commence 11 January 2010, but the subcontractor did not pick-up the tanks until 19 and 20 January. Around the time when the tanks were expected to arrive at the brewery, the tanks still remained in a port in Lithuania. The subcontractor, who was supposed to carry the tanks from Lithuania to Russia, stated that public regulation had been changed which affected the transit permissions and that the tanks could not be delivered until five to six weeks after the agreed date. During February and March more problems arose, which delayed the delivery further.
The freight forwarder was alerted to the problems with transit permissions, lack of suitable equipment and missing payment to the sub-contractor. At the same time the manufacturer had drawn the freight forwarders attention to the fact that the Russian brewery imposed daily penalties for the delay. In spite of all this, the carriage from Lithuania to Russia was not initiated before March – one month after the agreed delivery time – and this only in relation to five of the six tanks.
By the end of March two of the six tanks had reached the brewery, while the last tank did not reach the destination until 21 May – a delay of three and a half months.
The Maritime and Commercial High Court: 250.000 EUR in Compensation for Delay
The Maritime and Commercial High Court applied the CMR Convention to the dispute. Compensation for delay can only exceed the amount of freight – in this case 72,500 EUR – if the freight forwarder has shown wilful misconduct. According to the Maritime and Commercial High Court, the freight forwarder had done just that, and the compensation was estimated to the amount of 250.000 EUR.
The Supreme Court: The Freight Forwarder had Shown Wilful Misconduct
The Supreme Court also reached the conclusion that the freight forwarder was to pay full damages in connection to the delay. The statement of loss and compensations was slightly adjusted compared to the ruling of the Maritime and Commercial High Court, but the shipper was still awarded damages of 224,332 EUR.
Among other factors, the Supreme Court emphasized that the carriage was initiated a week later than agreed, that the tanks still remained in the Baltics shortly prior to the expected delivery date, and that the freight forwarder had remained passive to the information from the subcontractor and also when the shipper informed about the daily penalty imposed by the Russian brewery.
It was the opinion of the Supreme Court, that the freight forwarder had shown wilful misconduct by setting aside the basic standards that must apply to a forwarder that engages sub-contractors to perform the carriage.
When a freight forwarder uses a subcontractor to perform a carriage, the freight forwarder is still responsible that the carriage is carried out safely and in accordance with the agreed time.
IUNO recommends that a freight forwarder engages subcontractors who are capable of fulfilling the task accordingly, and that the freight forwarder reacts instantly if any problems arise. The freight forwarder must take action immediately if any delay occurs, and must as a minimum make sure that the shipper is duly informed about the circumstances. If the freight forwarder remains passive, he may be liable for the shipper’s full loss.
Ref: Supreme Court judgment of 23 January, 2014. Case no. 68/2012