Simon Church of TM Law discusses a recent Aviation decision regarding rights and responsibilities in connection with the payment of airfreight.
SCHENKER LTD v NEGOCIOS EUROPA LTD (2017); QBD (Merc) (Moulder J)
In a Mercantile Court decision handed down this month, the English High Court has finally considered whether the age old common law rule in English shipping law that cargo interests have no right to set their claims against carriers off against sums due in freight should be applicable to contracts for carriage by air.
In this case the Defendant cargo interests employed the services of the Claimant, Schenker Ltd for the carriage of a cargo of chia seeds from Bolivia to Japan by air.
The Defendant claimed loss or damage arising from delay to the delivery of the cargo and withheld freight due under the Claimant’s invoice on account of its own claims. The Claimant responded by issuing proceedings in the Mercantile Court in London and applied for summary judgment on its US$58,000 claim, but this was refused by the Court on the grounds that the decision would create a new precedent and the Court decided the question should instead be dealt with as a preliminary issue.
At the hearing the Claimant sought to persuade the Court that cargo interests could make no deductions from airfreight on the following principal grounds;
- That the common law rule applicable to contracts for carriage of goods by sea that there was no right of set-off against freight, was, as a matter of industry practice, assumed to apply to carriage of goods by air. Expert evidence to this effect was adduced by the Claimant in the form of a report from a specialised insurance broker. The Claimant’s expert also advised that if this understanding was contradicted by a decision of the Court this would only serve to disrupt the existing basis for contractual allocation of risk between parties to multi-modal freight contracts with the attendant uncertainties this would introduce.
- It had already been determined that the common law rule applicable to contracts of carriage of goods by sea was applicable to contracts of carriage by road in RH&D International Ltd v IAS Animal Air Services Ltd  1 W.L.R. 573 and United Carriers Ltd v Heritage Food Group (UK) Ltd  1 W.L.R. 371.
- Although there was no English authority directly on point, the Hong Kong cases of Emery Air Freight Corp v Equus Tricots Ltd  2 H.K.L.R. 554 and RAF Forwarding (HK) Ltd v Angela (t/a JMT Co) [unreported] had established that, since no logical distinction could be drawn between carriage of goods by different modes of transport, it was appropriate to apply the established common law freight rule to air freight.
In his Judgment, Moulder J held that decisions such as those in Henriksens Rederi A/S v Centrala Handlu Zagranicznego (CHZ) Rolimpex (The Brede)  Q.B. 233 and Aries Tanker Corp v Total Transport Ltd (The Aries)  1 W.L.R. 185 confirmed the principal accepted for over 100 years that there should be no right of set-off against freight. In the United Carriers decision on the rule applicable to road haulage contracts the Judge had assumed that the same rule would apply to air freight. Whilst neither this obiter assumption nor the decisions of the Hong Kong courts were binding they were persuasive and it would be anomalous to treat contracts for carriage by air differently. The common law rule that claims cannot be off-set against freight was equally applicable to freight due under contracts of carriage by air.
For further discussion of the issues arising out of this decision please contact the author or Hamish Cotton of the Thomas Miller Law Sydney office.