New Zealand: Limited Liability Regime For Domestic Carriers Further Confined

The strict liability / package limitation regime for domestic carriage in New Zealand which limits liability to $1,500 per 'unit of goods' has come under question in a recent New Zealand Court of Appeal case. In Southpac Trucks Ltd v Ports of Auckland Ltd [2008] NZCA 573, the Court overturned a blanket protection for all carriers party to the carriage, whether the negligent party was in possession of the goods at the time the damage occurred or not. As a result, subcontracting carriers who are not in possession of the goods but cause damage to them while acting in another capacity, can still be held fully accountable and the $1,500 limit will no longer apply. It's good news for cargo insurers and their insureds.

The decision will be most relevant for cases where (as in the case in point) the damage occurs in port or in warehousing facilities, and the same contractual parties are frequently undertaking different functions while under the carriage contract.

BACKGROUND

Kenworth Trucks and Southpac entered into a tripartite agreement for the carriage of six Kenworth trucks from Melbourne to Auckland with CP Ships (UK) Limited (CP Ships). Under the sea waybill, CP Ships had a responsibility to offload the trucks from the carrying vessel Rotoiti, to a corner of the wharf so that the consignee, Southpac, could collect the trucks. It was this short domestic part of the carriage within Ports of Auckland that was the subject of the current dispute. The claim was only worth about NZ$63,000, but the principle at issue in this case has broad application.

CONTRACT OF CARRIAGE

CP Ships, as the contracting carrier, subcontracted Ports of Auckland Limited (POAL) to unload the trucks and transport them across the Port.

POAL then subcontracted Southern Cross Stevedores Limited, who had in turn subcontracted with Wallace Investments Limited (Wallace), to carry out the stevedore services.

During transport from the Rotoiti to the designated corner of the wharf, one of the Kenworth trucks, being driven by an employee of Wallace, collided with a fork hoist driven by an employee of POAL, by fault of the POAL employee. The fork hoist was not being used by POAL to facilitate transport of the trucks.

Southpac brought proceedings against POAL for the damage to the truck. POAL contended it was entitled to limit its liability because it was acting, through its employee, as a 'carrier' in the terms of the New Zealand Carriage of Goods Act 1979 (CGA). POAL based this argument on the reasoning that they were providing stevedoring and marshalling services in relation to the truck at the time of the incident.

The question for the Court of Appeal was whether POAL, as party to the carriage, through its negligent employee, could limit its liability to the $1,500 package limitation.

Carriage of Goods Act 1979

Section 6 of the CGA provides:

1. Notwithstanding any rule of law to the contrary, no carrier shall be liable as such, whether in tort or otherwise, and whether personally or vicariously, for the loss of or damage to any goods carried by him except –

The following definitions under section 6 of the CGA are also relevant:

Actual carrier, in relation to the carriage of any goods, means every carrier who, at any material time, is or was in possession of the goods,...and includes the contracting carrier where he or she performs any part of the carriage.

Contracting carrier, in relation to a contract of carriage, means the carrier who, whether as principal or as the agent of any other carrier, enters or has entered into the contract with the contracting party.

The District Court held that POAL was a carrier, but that it was not an 'actual' or 'contracting' carrier as defined under section 6. The Judge found that the capacity of the carrier at the time of the accident was key. On this point the Court was unable to find a sufficient connection between the contract for carriage and the services being performed by the fork hoist driver. Southpac's claim was based on the negligence of POAL's fork hoist driver, who was not performing services 'incidental to the contract for carriage' at the time of the collision. POAL was not acting as a carrier 'as such', and so could not be afforded the protection of the limited liability regime.

On appeal Justice Allan in the High Court overturned the decision of the District Court. Justice Allan, taking a wider approach, held section 6 applied. His Honour found that because the accident occurred during the contract of carriage, while Wallace was performing stevedore services and POAL was providing wharfinger services (generally), POAL was a carrier 'as such' under section 6 given the physical and contractual connection.

THE COURT OF APPEAL'S FINDINGS

The central issue for consideration was whether the CGA applied to a particular class of 'carrying' activities, or whether it created a blanket charter for all parties to the contract of carriage.

The decisive issue was the capacity in which POAL was acting at the time of the collision. It was decided by the majority that the collision occurred because of the negligence of someone (the fork hoist driver) occupied in an activity wholly independent from the actual carrying activities of POAL.

Justices O'Regan and Robertson for the majority clarified an 'actual carrier' as a carrier in possession of the goods for the purpose of performing a stage of the carriage, or a service incidental to it. 'Actual carriage' required physical possession and that the CGA envisages only one carrier can be in possession at a time.

The majority of the Court found:

• POAL was a 'carrier'.

• But, POAL was not acting as a 'carrier' 'as such' when the collision occurred. The collision occurred when Wallace, not POAL was the 'actual carrier'.

• Section 6 simply limits the liability of 'actual carriers' when the goods in their possession are damaged. The CGA does not provide for a general limitation for all carriers' liability, regardless of possession.

• POAL, was not the contracting carrier or the actual carrier in respect of Southpac's truck and therefore not within the protection afforded by section 6.

IMPLICATIONS

This case shows that a carrier will only be entitled to limit its liability under the CGA if damage occurred while it was the actual carrier in possession of the goods, or the contracting carrier. A blanket limitation will not apply to a party to the contract of carriage for damage caused while that party is undertaking other activities not related to the carriage contract.

So the news is good for cargo interests and their insurers, particularly in the transport and storage of goods in ports and other large warehouse facilities. Now it is clear the many subcontractors involved in the various stages of carriage can be held accountable if they cause damage to the goods while performing activities unrelated to the carriage contract.

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