Unfortunately, damage to cargo or loss of goods during the transportation is very common. How to calculate the compensation due to the owner of the goods in such a case and does the carrier then have a right to receive remuneration for the freight?
Recently, one of Translawyers’ legal disputes over whether the carrier is entitled to freight for the carriage of cargo in the event of damage to goods has ended with a judgment of the District Court of Kraków. The case concerned the transport of pitted peppers from Spain to Poland. The goods got damaged because, as is sometimes the case in transport, too many pallets were loaded into the refrigerated trailer and its cooling system collapsed. During transport, a part of the goods weighing over 12,000 kg was damaged. It constituted about 60% of all the goods ordered for transport by the shipping company.
Damage through the fault of the carrier covered by OCPD policy
The carrier reported the damage to the insurance company in which it had a road transport operator’s liability insurance policy (OCP). The insurance company decided that part of the goods had been damaged due to the fault of the carrier and issued a decision on awarding compensation to the owner of the goods. This included the value of the goods at the purchase price in Spain, as indicated on the VAT invoice, and the cost of disposal of the damaged goods. After the compensation payment, the carrier issued a VAT invoice to the shipping company for the full amount of the freight. The owner of the goods charged the forwarding agent with an accounting note in which he claimed compensation calculated in accordance with the price of the peppers indicated on the sales invoice issued to his Polish customer. On the other hand, the forwarding agent, after deducting from the note the value of compensation already paid to the owner of the goods by the insurer, deducted this amount from the invoice issued by the carrier for the execution of the transport order.
The actual state of affairs is complicated, but it can be summed up simply – the owner of the goods demanded the return of lost benefits, i.e. profit that would have been obtained if it had not been for the damage and would have sold the goods in Poland. Was he entitled to it?
The provisions of the CMR Convention – Article 25 in conjunction with Article 23 define the method of calculating the value of compensation for partial loss of goods:
“Where, under the provisions of this Convention, the carrier is liable to pay compensation for total or partial loss of goods, such compensation shall be calculated by reference to the value of the goods at the place and time of their admission to the carriage.”
This means that the insurer properly calculated the value of the loss, which should be calculated according to the price in the sales invoice.
Is the carrier entitled to freight?
In such a case, is the carrier entitled to remuneration for the transport service provided? The provisions (Article 23(4) of the CMR Convention) are clear:
“In addition, freight, customs and other expenses incurred in connection with the carriage of goods shall be reimbursed in full in case of total loss and proportionately in case of partial loss; no other compensation shall be due.”
This means that in the case of partial damage, only part of the freight is due to the carrier.
In our case, where we represented the carrier, this reasoning was not accepted by the district court in Kraków, which dismissed the action and decided that the forwarding company could claim compensation according to the value that the owner would have obtained if there had been no damage.. It was only the higher court that changed this judgment, stating that the damage should be determined in accordance with the provisions of the CMR Convention, i.e. on the basis of a purchase invoice and not a sale invoice, and additionally the carrier should receive remuneration proportional to the number of undamaged goods (Judgment of the Regional Court in Kraków, Case No. XII Ga 320/18 – unpublished).
Finally, I would like to point out that the principles set out above do not apply in the case of gross negligence on the part of the carrier, in other words, in situations where the transport service was provided in breach of the basic principles of professionalism. Then the owner of the goods is entitled to a full refund, regardless of the limits indicated by the CMR Convention, including the return of lost profits.