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The High Court, on 9 March 2004, determined that a FIATA Air Waybill did extend protection to a freight forwarder where goods were damaged during the road leg following air carriage. Accordingly, Schenker was finally successful in this case following four separate Court hearings. (This article was published in the CBFCA's e-bulletin)

The Facts:

In 1996, Schenker collected some telecommunications equipment at Melbourne Airport on behalf of Siemens. Shortly after the truck left the airport, some of the equipment fell from the truck due to the negligence of the driver. The estimated loss to Siemens was roughly AUD$1.7m.

Questions the Court had to answer:

In essence, the Court has two main questions to answer, being:

  1. Did the House Air Waybill issued by Schenker Germany apply to the road leg of transport following air carriage?
  2. If so, did the terms of the Air Waybill in fact operate to reduce Schenker's liability.

It should also be noted that the relevant international convention covering air carriage, the “Warsaw Convention”, did not assist Schenker to limit its liability because this convention did not extend to carriage (other than by air) outside of an airport.

What the High Court decided:

Five judges heard this case and a majority of three decided in favour of Schenker and two were for Siemens. This demonstrates the difficulty of the issues and the fact that it could have gone the other way, depending upon the composition of the Court.

The Majority

As to Q1:

The majority in the end treated the House Air Waybill as a normal contract between parties. Accordingly, they examined the wording of the Bill to see whether it might apply to modes of transport other than by air. In particular, they relied upon a provision that stated that when the goods arrive at the place of destination (Melbourne Airport), delivery will be made in accordance with the instructions of the consignee. Further, they took notice of the definition of “carrier”, which included a party performing services incidental to air carriage.

As to Q2:

The majority found that the applicable limitation of liability clause in the Air Waybill did work to reduce Schenker's liability. The relevant parts of the clause read:

“….in carriage to which the Warsaw Convention does not apply carriers' liability shall not exceed USD20.00 or the equivalent per kilogram of goods lost, damaged or delayed…”

The majority therefore interpreted this to mean that this limitation applies in circumstances where the Warsaw Convention does not apply, such as after the goods leave the airport. The trial judge found exactly the opposite, being that this clause only worked where the Convention did not apply to entire journey, such as in domestic air carriage.

The Minority

McHugh and Kirby JJ delivered separate dissenting judgments. Their analysis centred on the first question outlined above. It is worth distilling their reasons to demonstrate the difficulty of this case and future issues that may arise.

The minority judges both concluded that the House Air Waybill only provided contractual coverage for air transport. McHugh J, principally relied upon the actual wording of the Bill. For example, he determined that the reference to “services incidental to such air carriage” only referred to land elements closely related to air carriage, such as loading, unloading and transhipment. His conclusion was that for an Air Waybill to cover “door to door” situations, it required clear words showing this intention.

Kirby J went into the history and context of Air Waybills. He found that an Air Waybill is not just another contract, but rather is a standard agreement based on and referred to in the Warsaw Convention that is designed to achieve uniformity. The Air Waybill serves a number of specific functions, such as, evidence of the carriage contract and its terms and it acts as a receipt for the goods. These functions relate to carriage of cargo by air. His assessment was that, in the end, Schenker was trying to stretch the application of the Bill beyond its intended use. In other words, Schenker was trying to make up for the fact that it did not have any solid written contract in place governing its relationship with Siemens.

Conclusion and issues arising:

There is no question that this is a good result for the freight forwarding community because it demonstrates the practical coverage of a standard House Air Waybill. However, if the freight forwarder had a written contract in place with its customer that clearly spelt out their respective rights and obligations, a long drawn out court case dealing with the nuances within an Air Waybill may have been avoided.

There are a number of issues that this decision does not address (because they it was beyond what the judges were required to deal with). Firstly, it is questionable whether, in the absence of an important and longstanding client relationship (such as between Schenker and Siemens), that the Court would have found that the Air Waybill covered the forwarder for into bond transfers. The majority relied very heavily on the documented movement of goods procedures known as “Richungsverkehr” or “Direct Traffic”. Secondly, the majority indicated that the Waybill would cover damage sustained in the course of Schenker complying with requirements necessary to effect delivery. This of course is a reference to entering the goods into bond. However, it is unclear whether that means that the Air Waybill extends to afford protection where the goods were damaged whilst in bond or after being released from bond and finally delivered to the customer.

Ultimately, these complications arise because of the reliance on standard transport documents, modelled largely around international conventions. These documents are essential for the wheels of commerce to turn quickly and efficiently. There is no substitute, however, for a simple written contract, where a forwarder is performing a significant volume of business for a customer or where extremely valuable goods are involved.

Louis Gross & Associates deals with tariff, subsidy, anti-dumping, sale of goods, transport and trade finance matters.

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