Arnold Van Steenderen, Van Steenderen Mainport Lawyers, Rotterdam
The court of Amsterdam recently held that the word ‘damage’ in art. 17 paragraph 1of the CMR presumes substantial physical change to the state of the goods and ruled out, in this case, that a broken seal on a container without any visible substantial physical change of the goods represented damage.
REF: DANONE PRODUITS FRAIS FRANCE SA , DANONE GMBH, and DANTRADE B.V., versus AUTOSERVIZI BIZZARRO S.P.A.
Bizzarro and Dantrade have concluded a framework contract as from 1 January 2016 relating to the transportation of Danone products. The framework agreement contains the following provisions, to the extent relevant here:
“(…) 21 LIABILITY
Carrier agrees to indemnify and hold harmless DanTrade and Client and each of Client’s officers, agents, employees and contractors, from and against any and all losses, claims, demands and actions (…) liabilities, damages, costs and expenses (…) resulting from any breach of this Agreement or fault or negligence of Carrier or any of its Affiliates or subcontractors. Any Product loss or damage caused by the acts, omissions or negligence of Carrier will be the responsibility of Carrier, including where (without limitation):
(…)
(b) any substance or person in the proximity of the Products has led to loss of product quality; or
(c) the Products cannot be marketed due to Sanitary risks
(…)
If any of the above circumstances occurs, Client will invoice Non-Marketable Products and the costs in relation to the destruction of such Non-Marketable Products, to Carrier and Carrier will pay such invoice (…)
23 INSURANCE
Carrier shall take out and maintain in force during the Term adequate levels of insurance with a duly licensed insurance company to cover all potential liabilities (…) under this Agreement and the Orders, even if the damage is not covered under the CMR, on condition that the damage results from Carrier’s fault or negligence. (…)”
Article 9(b) of Appendix I, annexed to the framework agreement, reads as relevant here:
“b. Damaged goods / Distresses Load
Event that might cause damage to products include (but are not limited to) (…) the presence or evidence of persons in the trailer (…) When presence of persons in the trailer is suspected, the Client will consider the product could have been subjected to malicious tampering creating a food safety risk. In these circumstances, the Client will apply the precaution principle and the Distressed Load will be unable to be sold. In these instances the Client will not have no option but to ensure the entire Distressed Load is destroyed. (…) Client will invoice Non-Marketable Products and the costs in relation to the destruction of such Non Marketable Products to Carrier. (…)”
On or about September 22nd, 2016 Bizzarro commissioned by Danone transported a consignment of dairy products by road from Ochsenfurt (Germany) to Fretin (France). For this transport, a consignment note dated 22 September 2016 has been issued. The goods were loaded in Ochsenfurt on 22 September 2016, after which the doors were sealed. The cargo was received by Bizzarro on September 22, 2016 and on September 23, 2016 delivered.
During a break in the night of 22 to 23 September 2016 the driver heard noises and when he went out to look he discovered someone had messed with his truck. He found that the seal was broken.
Upon arrival at destination, a surveyor carried out an assessment of the cargo. In the expert’s report dated 8 February 2017 it is reported:
“(…) 3) (…) Prior to unloading, no anomalies were found on the boards at the rear end of the pallets, and not on top of the load either. After unloading, it was found that the top of the pallets had no trace of trampling which is in accordance with the first results of sighting. (…)
4) (…) Temperature checks and measurements of ambient temperatures inside, showed no abnormalities. (…)”
Danone then destroyed the entire truck load of cargo.
Bizzarro has reported the incident to its carrier’s liability insurer. According to the insurer there is no cover under the policy because no damage to the cargo had been reported.
Danone et al. does not accept this and bases its claim on the following.
From the survey it follows the cargo appeared not to be damaged, but as a precaution, had rejected the cargo and had it destroyed because of hygiene rules. The quality and integrity of the cargo could no longer be guaranteed because the seal had been broken. This had prejudiced the market value and marketability of the cargo, which constitutes damage within the meaning of Article 17(1) in conjunction with Article 23(2) CMR.
Furthermore, according to Danone Bizzarro acted in breach of its obligations under the framework agreement by not to preventing unauthorised access to the cargo space (Article 21.2 b and c), because it makes the cargo non-negotiable due to health risks which may have a negative impact on the reputation of of Danone (Article 9(b) Appendix I. Bizzarro is primarily liable for the damage suffered as a result on the basis of Article 17 paragraph 1 CMR and alternatively on the basis of Article 6:74 of the Dutch Civil Code (BW).
The court’s decision
There is no dispute between the parties that the CMR Convention (‘CMR’) applies to the present dispute. is mandatory. Furthermore, it is not disputed between the parties that this court has jurisdiction to take this case on and that Dutch law shall be applicable.
Bizzarro i.a. puts forward the defence that there is no damage within the meaning of Article 17(1) CMR, now that there is no substantial physical change in the condition of the goods on that ground, so that she is not liable for the damage suffered by Danone.
Article 17 paragraph 1 CMR stipulates that the carrier is liable for total or partial loss and for damage to the goods caused between the time of acceptance of the goods and the time of delivery. The court agrees with Bizzarro that on the basis of domestic and foreign literature as well as cited case law, damage within the meaning of the above provision supposes a substantial physical change in the condition of the goods. This means that it must first be established that in fact there is such a substantial physical change in the goods and if so quantum of the damage should be determined. Therefore, there is no room for the explanation suggested by Danone et al., which boils down to the fact that as a result of the breaking of the seal reduced market value/tradability of the goods will qualify as ‘damage’ within the meaning of the aforementioned provision. In other words: Danone did indeed suffer damage, but this was not damage because the goods have been damaged, but damage as a result of Danone not willing to take the risk that the goods could have been compromised in a non-visible way by the intruder. However, the latter is not damage within the meaning of Article 17 CMR. Danone et al. argues in the alternative that Bizzarro did not act in compliance with its obligations under the framework agreement. In particular failure to preventing the presence of unauthorized persons in the proximity of the cargo (Article 21.2(b) and (c) of the framework agreement and Article 9(b) of Appendix I to the framework agreement).
The court finds that Bizzarro on the basis of those provisions would be obliged to make a full reimbursement of the value of the destroyed goods and the destruction costs. Since this would entail acceptance by the carrier of a broader liability in respect of the carrier’s core obligation this result would conflict with the mandatory provisions of CMR and the aforementioned provisions will therefore be null and void pursuant to article 41 of the CMR.