Shippers to ensure air carriers informed of special handling requirements for sensitive cargo

Singapore Airlines Cargo Pte Ltd v Principle International Pty Ltd [2017]

NSWCA 216

What you need to know

Shippers/exporters must exercise care to comply with their regulatory requirements for cargo handling and ensure the air carrier is informed of any known special carrying conditions or instructions – such as positioning of cargo in the hold.

In this case an informational omission by the shipper about the required positioning of cargo in the aircraft’s hold led to a substantial reduction in the amount that was ultimately recovered against the carrier under the strict liability provisions of the 1999 Montreal Convention (Montreal Convention), on the basis that the shipper’s conduct was “primarily responsible” for its loss.

Implications

The case is the first Australian appellate authority to consider the interplay between Articles (Art) 18 and 20 of the Montreal Convention. It is of importance to cargo interests, freight-forwarders, carriers and their insurers in relation to the carriage of goods by air subject to the Montreal Convention, which is adopted by most of Australia’s major international trading partners including the United States, China, Japan, Indonesia and New Zealand.

The Circumstances

Principle International Pty Ltd (Principle), contracted with Singapore Airlines Cargo Pte Limited (SIA Cargo), for the carriage by air of cattle from Melbourne to Harbin, China. The contract of carriage was subject to the Montreal Convention, which has the force of law in Australia. Cattle transported in two industry-standard cattle crates (the Crates) were found dead on arrival. The cattle had been loaded in the Crates by Principle and then placed by SIA Cargo in the rear section of the lower deck cargo hold (the Rear Lower Deck).

The trial Judge found that the cause of death of the 18 cattle was inadequate ventilation to the Crates. Her Honour found SIA Cargo liable to Principle under Art 18(1) of the Convention, but then apportioned liability 40/60 Principle/SIA Cargo under Art 20. Principle was held to wear 40% of the loss on the basis that it failed to inform SIA Cargo that the Crates should not be stowed in the Rear Lower Deck given the lack of ventilation available in that particular position in the hold.

Questions on Appeal

The key appeal and cross-appeal points were:

Whether there was an “event” that caused the damage during the carriage by air so as to render SIA Cargo liable to Principle under Art 18(1)?
Whether SIA Cargo could relieve itself of liability under Art 18(2) on the basis that the damage resulted from “defective packing”?
Whether the trial judge correctly apportioned liability 40/60 to Principle/SIA Cargo under Art 20 having regard to the evidence?

Judgement

Was there an “event” that caused damage during carriage?

The Court of Appeal upheld the initial finding of SIA Cargo’s liability under Art 18(1).

SIA Cargo’s positioning of the Crates in the Rear Lower Deck so that there was inadequate airflow to the cattle was held to constitute an “event” or happening that occurred in SIA Cargo’s control.

The Court of Appeal said that enquiry for the purposes of Art 18(1) did not require the “event” to be something other than the ordinary conditions of carriage, as SIA Cargo argued. The enquiry was simply whether “the event which caused the damage”_took place during the carriage by air” (as distinct from the term “accident” referred to Art 17, which is directed at whether something occurred that was “unusual” or “unexpected”).

Defective Packing

SIA Cargo submitted that the “defective packing” exclusion in Art 18(2) required the Crates to be adequate or suitable to safely carry cattle regardless of where they were placed in the aircraft hold (upper or lower). In other words, SIA Cargo said the Crates were “defective” simply because they were unsuitable to transport cattle in the Rear Lower Deck. The Court of Appeal rejected this submission.

The Crates were industry standard and had been used for many years to transport cattle by air. Further, cattle contained in crates stored on the upper deck and even other areas of the lower deck of the aircraft survived the voyage, meaning that the problem was the positioning of the Crates in the Rear Lower Deck, not the Crates themselves. The Court of Appeal was therefore not persuaded that the damage resulted from “defective packing” as SIA Cargo submitted.

Apportionment: Art 20

The Court of Appeal’s point of substantial departure from the lower court decision was on the apportionment of liability between the parties having regard to Principle’s conduct.

The Court of Appeal essentially “flipped” the initial allocation and apportioned liability 80/20 to Principle/SIA Cargo (respectively). As an exporter of livestock Principle had a statutory responsibility to devise a loading plan dealing with the placement of crates in the aircraft. Principle did in fact prepare a loading plan specifying that the Crates were to be loaded on the upper deck, but failed to provide a copy to SIA Cargo or otherwise inform of its transit requirements.

Contrary to the trial judge’s finding, the Court of Appeal said that had Principle informed SIA Cargo that the Crates were to be placed on the upper deck, it was highly likely that SIA Cargo would have done so. SIA Cargo was not totally exonerated from liability. The Court of Appeal considered its conduct also contributed to the loss*, but only a comparably small proportion of 20% (versus the initial 60% awarded at trial).

Comment & Implications

The decision illustrates how strict liability imposed on a carrier under Art 18 is tempered by causes of loss outside the carrier’s control, such as inherent defects and defective packing (Art 18(2)(a) and (b)) or the contributory negligence of the shipper (Art 20). The language used in Art 20 allows some latitude for a carrier to reduce or in some circumstances even exonerate itself from liability by reference to other conduct of the shipper besides the four prescribed liability exclusions in Art 18(2)(a) – (d).

In this case Principle’s failure to notify SIA Cargo where to store the Crates in the hold made Principle primarily responsible for the deaths of the cattle, even though SIA Cargo was found strictly liable for breach of its obligations under Art 18.

While this particular case concerned the commercial carriage of cattle, the implications go beyond Australia’s livestock export industry. The key lesson in the case for any shipper/exporter of cargo and freight forwarders is to ensure the carrier is adequately informed of any known special carrying requirements that might adversely impact sensitive cargo – in this case the desired positioning of crates in the aircraft’s hold.

* Beazley P (Payne JA agreeing) criticised SIA Cargo for omitting to provide Principle with its pre-flight documentation to enable Principle to check the location of the crates, and referred to witness evidence that SIA Cargo’s loaders “probably know” that the Crates should not have been stowed on the lower deck [at 114]. Meagher JA (Payne JA agreeing) commented that SIA Cargo could have requested a copy of Principle’s Loading Plan before preparation of SIA Cargo’s pre-flight documentation [at 140]