Rights & Duties
Cases
Datec Electronics Holdings Ltd & Ors v. United Parcels Services Ltd (HL)
[2007] UKHL 23
Lord Mance
The contractual issue
UPS’s conditions provide as follows:
“UPS TERMS AND CONDITIONS OF CARRIAGE
1 Introduction
A These terms and conditions (‘terms’) set out the basis on which United Parcel Service (‘UPS’) will transport packages, letters and freight (‘packages’). These terms are supplemented by the service details appearing in the current applicable UPS Service and Tariff Guide (‘the Service and Tariff Guide’) relating to the particular service the shipper has chosen. The Service and Tariff Guide contains important details about the services of UPS which the shipper should read and which form part of the agreement between UPS and the shipper.
B Where carriage by air involves an ultimate destination or stop outside the country of origin the Warsaw Convention may apply .…. Notwithstanding any clause to the contrary, international carriage by road may be subject to the provisions of the Convention on the Contract for the International Carriage of Goods by Road signed at Geneva on 19 May 1956 (‘the CMR Convention’).
C Depending on the country where the shipment is presented to UPS for carriage, the terms ‘UPS’ will mean and the shipper’s contract will be with whichever of the following companies is applicable. That company will also be the (first) carrier of the goods for the purposes of the Conventions referred to in paragraph B.
UK – UPS Limited; …..
D UPS may engage sub-contractors to perform services and contracts both on its own behalf and on behalf of its servants, agents and sub-contractors each of whom shall have the benefit of these terms.
In these terms, ‘Waybill’ shall mean a single UPS waybill/consignment note or the entries recorded against the same date, address and service level on a pick-up record. All packages covered under a Waybill shall be considered a single shipment. A shipment may be carried via any intermediate stopping places that UPS deems appropriate.
2 Scope of Service
Unless any special services are agreed, the service to be provided by UPS is limited to the pick up, transportation, customs clearance where applicable and delivery of the shipment. The shipper acknowledges that shipment will be consolidated with those of other shippers for transport and that UPS may not monitor the inbound and outbound movement of individual shipments at all handling centres.
3 Conditions of Carriage
This section sets out various restrictions and conditions which limit and govern the extent of the service UPS offers. It also explains what the consequences are of the shipper presenting packages for carriage which do not meet these requirements.
(a) Service Restrictions and Conditions
UPS does not offer carriage of packages which do not comply with the restrictions in paragraphs (i) to (iv) below.
(i) Packages must not weigh more than 70 kilograms (or 150 lbs) or exceed 270 centimetres (or 108 inches) in length or a total of 330 centimetres (or 130 inches) in length and girth combined.
(ii) The value of any package may not exceed the local currency equivalent of USD 50,000. In addition the value of any jewellery, other than costume jewellery, in a package shall not exceed the local currency equivalent of USD 500.
(iii) Packages must not contain any of the prohibited articles listed in the Service and Tariff Guide including (but not limited to) articles of unusual value (such as works of art, antiques, precious stones, stamps, unique items, gold or silver), money or negotiable instruments (such as cheques, bills of exchange, bonds, savings books, share certificates or other securities) and dangerous goods.
(iv) Packages must not contain goods which might endanger human or animal life or any means of transportation, or which might otherwise taint or damage other goods being transported by UPS, or the carriage, export or import of which is prohibited by applicable law.
The shipper shall be responsible for the accuracy and completeness of the particulars inserted in the Waybill and for ensuring that all packages set out adequate contact details for the shipper and receiver of the package and that they are so packed, marked and labelled, their contents so described and classified and are accompanied by such documentation as may (in each case) be necessary to make them suitable for transportation and to comply with the requirements of the Service and Tariff Guide and applicable law.
(b) Perishable and temperature sensitive goods will be transported provided that the shipper accepts that this is at its risk. UPS does not provide special handling for such packages.
(c) Refusal and Suspension of Carriage
(i) If it comes to the attention of UPS that any package does not meet any of the above restrictions or conditions or that any COD amount stated on a COD Waybill exceeds the limits specified in paragraph 8, UPS may refuse to transport the relevant package (or any shipment of which it is a part) and, if carriage is in progress, UPS may suspend carriage and hold the package or shipment to the shipper’s order.
(ii) UPS may also suspend carriage if it cannot effect delivery at the third attempt, if the receiver refuses to accept delivery, if it is unable to effect delivery because of an incorrect address (having used all reasonable means to find the correct address) or because the correct address is found to be in another country from that set out on the package or Waybill or if it cannot collect amounts due from the receiver on delivery.
(iii) Where UPS is entitled to suspend carriage of a package or shipment, it is also entitled to return it to the shipper at its own discretion.
(d) The shipper will be responsible for the reasonable costs and expenses of UPS (including storage), for such losses, taxes and customs duties as UPS may suffer and for all claims made against UPS because a package does not meet any of the restrictions or conditions in paragraph (a) above or because of any refusal or suspension of carriage or return of a package or shipment by UPS which is allowed by these terms. In the case of the return of a package or shipment, the shipper will also be responsible for paying return transport charges calculated in accordance with the prevailing commercial rates of UPS.
(e) UPS will not meet any losses which the shipper may suffer arising out of UPS carrying packages which do not meet the restrictions or conditions set out in paragraph (a) above and, if UPS does suspend carriage for a reason allowed by these terms, the shipper shall not be entitled to any refund on the carriage charges it has paid.
(f) UPS reserves the right, but is not obliged, to open and inspect any package tendered to it for transportation at any time.
……
9 Liability
9.1 Where the Warsaw or CMR Conventions or any national laws implementing or adopting these conventions apply (for convenience referred to as Convention Rules) or where (and to the extent that) other mandatory national law applies, the liability of UPS is governed by and will be limited according to the applicable rules.
9.2 Where Convention Rules or other mandatory national laws do not apply, UPS will only be liable for failure to act with reasonable care and skill and its liability shall be exclusively governed by these terms and (save in the case of personal injury or death) limited to proven damages of:
(a) £75 … per shipment, or
(b) if greater, £10 … per kilo of the goods affected up to a maximum per shipment of the local currency equivalent of USD5,000
unless a higher value has been declared by the
shipper under paragraph 9.4 below.
…..
9.4 Subject to the provisions of paragraph 9.5, UPS operates a facility for the shipper to obtain for a shipment the benefit of a greater limit of liability than UPS provides under paragraph 9.2 above or than is provided by Convention Rules or other mandatory national law. The shipper may use this facility by declaring a higher value on the Waybill and paying an additional charge as stated in the Service and Tariff Guide. The value of the goods concerned shall not in any event exceed the limits specified in paragraph 3(a)(ii).
…..
15 Governing Law
These terms and any contract concluded which incorporates these terms shall in all respects be governed by the laws of the country where the shipment is presented to UPS for carriage.”
UPS’s Service and Tariff Guide, referred to in clause 1A of UPS’s conditions, contains further references to the $50,000 restriction. Under the heading “Sending and receiving shipments. Declared value charge for insurance”, the Guide mentions the facility to increase the limit of UPS’s liability by declaration, but adds that “The value of the goods concerned should not however in any event exceed US$50,000 (US$500 in the case of jewellery other than costume jewellery) …. as UPS does not offer carriage for goods with values above these amounts”. A later provision headed “Service restrictions” reads: “The maximum value or declared value per package is US$50,000 ….”. A further statement headed “Prohibited articles” lists various articles as “prohibited from shipment to all countries” including “Articles of exceptional value (e.g. works of art, antiques, precious stones, gold and silver)” and “Dangerous goods/Hazardous materials”.
There was originally common ground on the pleadings that UPS had entered into a contract for the carriage of the three packages of processors. But, by amendment at the trial, UPS pleaded that under their conditions they did not offer, and so had never agreed, to carry these packages, which were accordingly not “goods” for the purposes of CMR. The amendment was permitted on the basis that it involved no new allegations of fact. The judge emphasised the limited ambit of the new argument [2005] 1 Lloyd’s Rep 470, para 116:
” ….. it is directed only to the effect of the UPS terms. No argument was advanced about the authority of any person making a contract on behalf of UPS, nor was it said that a contract was vitiated for mistake on UPS’s part, nor that the contract should be rescinded for misrepresentation (although UPS do plead that the claimants and T&B misrepresented that the packages were in compliance with the UPS terms and that otherwise UPS would not have carried them).”
The first issue is ultimately a short one. Under section 1 of the Carriage of Goods by Road Act 1965, the provisions of CMR have the force of law
“so far as they relate to the rights and liabilities of persons concerned in the carriage of goods by road under a contract to which the Convention applies”.
Article 1 of CMR states:
“This Convention shall apply to every contract for the carriage of goods by road in vehicles for reward, when the place of taking over of the goods and the place designated for delivery, as specified in the contract, are situated in two different countries, of which at least one is a Contracting country, irrespective of the place of residence and the nationality of the parties”.
Here, UPS had discretion as to the route and means (cf clause 1D of their conditions), and they chose to perform as an international road carrier between Cologne and the final destination in Amsterdam. The $50,000 question apart, it is common ground that CMR would apply as between UPS and the respondents to the international road carriage which UPS was entitled, and chose, to undertake: cf Quantum Corpn Inc. v. Plane Trucking Ltd. [2002] EWCA Civ 350; [2002] 2 Lloyd’s Rep 25. Whether CMR in fact applied thus depends on whether there was any “contract for the carriage” of these packages from Milton Keynes to Amsterdam.
The umbrella agreement did not cover the despatch of particular packages – indeed it did not oblige Datec to despatch any packages at all. In the case of packages conforming to UPS’s conditions, a contract for carriage would come into existence either when a shipment was booked by computer or at latest when it was collected pursuant to such a booking. That some form of contract was intended by UPS’s conditions even in respect of packages not meeting UPS’s restrictions seems clear. The “consequences” of a shipper presenting non-conforming packages for carriage were stated to involve rights on the part of UPS to suspend carriage (clause 3(c)(i) and (ii)), to retain any carriage charges paid (clause 3(e)) and to open and inspect any package tendered to it for transportation (clauses 3(c)(i) and (ii) and (f)). The conditions also include a positive obligation on the part of the shipper to be responsible for costs and expenses, for losses, taxes and customs duties suffered and for claims made against UPS because of the non-compliance (clause 3(d)). This last is an obligation which one can well envisage UPS wishing to be able enforce against a shipper – for example, in the case of dangerous goods damaging other goods or damaging the carrying vehicle itself, or in the case of goods prohibited for import, which resulted in UPS incurring a customs penalty or costs. The critical question is to my mind whether the contract was for carriage subject to such rights and obligations, or was for some form of bailment capable of conversion into a contract for carriage only if UPS discovered the non-conformity and decided to proceed with, rather than suspend, the actual carriage.
Short though the issue is, it is not an easy one. But I have come to the conclusion that the courts below were correct. I would adopt the reasons given succinctly by Andrew Smith J in paras 118-119 of his judgment, when he said:
“118. …. I acknowledge that paragraph 3 of the UPS Terms refers to restrictions upon the service that UPS ‘offers’, and to a lawyer this terminology has connotations of the rules about contracts being concluded through an offer and acceptance, and of the need for them to correspond. However, the issue is about the meaning of the UPS terms in a commercial contract made between businessmen, and they are to be interpreted in that context. I consider that UPS’s submission places too much weight upon the reference to what UPS ‘offers’, and, more importantly, the UPS terms expressly state that paragraph 3 explains the consequences of the shipper presenting packages that do not meet UPS’s restrictions and conditions. The paragraph does not explain that there will be no contract of carriage if such a package is presented and accepted: on the contrary, sub-paragraph (c) provides that the effect of the shipper presenting a package that does not meet the restrictions is that UPS have the right to refuse to carry it or, if carriage is in progress, to suspend carriage. The implication is that unless and until UPS exercise their right, there is a contract that UPS will carry the package. It does not seem to me that UPS’s argument is assisted by paragraph 9.4: that provision is directed to placing a limit upon the value that a shipper may declare under a waybill. Nor, in my judgment, does the Guide provide any support for UPS’s argument: it reflects the UPS terms in referring to ‘Prohibited articles and Service restrictions’, but it does not purport, as the UPS terms do, to stipulate the consequences if the shipper does not observe those restrictions.
119. I consider that this interpretation of the UPS terms is in accordance with commercial reality and the business expectations of the parties. After all, UPS’s argument would, I think, apply by parity of reasoning even if the consignor and UPS were both unaware that the consignment contained a package worth more than US$50,000 and understood that the consignment complied with the UPS terms.”
To these reasons, I would add that the assumption behind the concluding words of clause 3(e) is that, where carriage occurs without the non-conformity being detected or the carriage being suspended, carriage charges are without more due contractually. An argument that they are due as reward for carriage inadvertently performed under a bailment which was not for carriage seems to run into the commercial unreality which the judge had in mind in para 119. To the case of mutual ignorance which the judge postulated in the second sentence of para 119, one may also add that many situations can be conceived in which there was room for disagreement or mistake about whether some of the restrictions applied. Differences of view or mistakes could well arise as to whether articles were of “unusual value” or “might …. taint or damage other goods being transported by UPS”. Finally, it is material to note that clause 3 regulates some situations where there is on any view a contract for carriage: cf the concluding sentence of clause 3(a), clause 3(b), clause 3(c)(ii) read with (iii) and the last words of clause 3(e) as well as clause 3(f). The more natural inference is, in my view, that the whole of clause 3 provides a contractual regime governing carriage of non-conforming goods.
It is well to remember that, in many circumstances, particularly in cases of domestic carriage and carriage not subject to mandatory rules, this conclusion, and the first issue, would not be significant. There would be no problem about UPS restricting its liability, whether or not there was a contract for carriage. Whether clause 3(e) would be sufficient to do this is a different matter. Mr Reeve for the respondents submitted that it would not be, because loss by failure to take due care or worse cannot be regarded as loss “arising out” of UPS carrying non-conforming packages. The word “loss” was not amplified by the usual phrases to embrace loss caused “howsoever” or by negligence, still less by employee misconduct or theft (cf Canada Steamship Lines Ltd. v. The King [1952] AC 192, 208, per Lord Morton). However, I would reserve any opinion on the correctness of Mr Reeve’s submission, at least in relation to loss or damage by negligence, in circumstances where, under clause 9.2 and apart from situations governed by Convention or mandatory national rules, UPS would not anyway be liable except for negligence. I should mention that Mr Flaux QC representing UPS disclaimed any submission that clause 9.2 could apply if there was no contract for carriage. UPS’s argument that there was no contract for carriage of the three packages was aimed solely at invoking clause 3(e).
UPS’s difficulties in relying on clause 3, if there was a contract for carriage of the three packages, arise from the application to international carriage of the Warsaw Convention in the case of air transport and (more pertinently in this case) of CMR in the case of road transport. These Conventions regulate the liability of international carriers by air and road for loss of or damage or delay to goods in terms from which no derogation is permissible: cf in particular Chapters IV and VII of CMR. For the benefit of carriers, they also include certain exclusions and strict limits on the extent of liability (8.33 units of account, about £10, per kilogram in the case of CMR: article 23(3)); and these apply in relation to extra-contractual as well as contractual claims against the carrier, its servants and agents and others of whose services the carrier makes use: article 28(1) and (2). In most situations, therefore, the application of the CMR regime to the carriage of non-conforming packages would not expose UPS to unlimited exposure. But the CMR exclusions and limits are not available if the claimant is able to prove wilful misconduct or its equivalent: article 29(1). The carrier is then exposed to unlimited liability. Hence, in the present case, UPS’s concern to establish that CMR is inapplicable.
Exposure to unlimited liability in respect of wilful misconduct of its servants or agents is not normally a matter in respect of which a carrier can expect sympathy. But a carrier is entitled to refuse to carry particular goods or to require the shipper to give an undertaking as to the nature or qualities of goods which it agrees to carry. A carrier who unwittingly receives and carries goods which do not comply with stated restrictions is unlikely to be the ordinary carrier whom the drafters of CMR had in the forefront of their mind. It is relevant to consider whether the fact that goods did not conform to the carrier’s restrictions retains any relevance if CMR applies. There are various ways in which it might do so, some of them discussed before the judge.
First, if the non-conforming nature of the goods (e.g. excess weight) itself led to damage to the goods themselves, this could be relevant under article 17(2) of CMR both to show that the damage occurred through circumstances which the carrier could not avoid and, quite possibly, to show that it was caused by wrongful act or neglect of the claimant. In the present case, UPS advanced before the judge the more ambitious contention that the loss was caused by wrongful act or neglect of the respondents through despatching goods worth more than US$50,000. The judge at para 127 was not persuaded that the despatch of excess-value packages was a “wrongful act” by Datec, and he did not regard it as necessary or permissible to interpret the contract as containing an implied undertaking not to despatch such packages. I have considerable doubts about this part of the judge’s reasoning. But the judge also rejected UPS’s contention for the more persuasive reason that the excessive value of the packages did not in any way cause the loss. The packages were not, in other words, lost because of their individual value (although, as will appear, they may well have been targeted because of the value of their contents). The judge further found that, had Datec not ignored the package value restriction, it could and would in any event have despatched the contents of the packages (that is the eight boxes each having a value of less than US$50,000) as separate packages via UPS.
Article 41 of CMR renders null and void “any stipulation which would directly or indirectly derogate from the provisions of this Convention”, adding that “the nullity of such a stipulation shall not involve the nullity of the other provisions of the contract”. So far as the first part of clause 3(e) of UPS’s conditions purports to remove liability for loss, damage or delay which UPS would otherwise incur under article 17 of CMR, clause 3(e) is null and void. But CMR does not supersede all aspects of the contractual or legal relationship between a carrier and those contracting for the carrier’s services. It is at least arguable that clause 3(d) of UPS’s conditions would enable UPS to cross-claim, against those contracting for UPS’s services, in respect of any excess exposure over and above US$50,000 per package which UPS could show that they only incurred as a result of the shipment of non-conforming packages. Before the House, the possibility that there might be or have been some relief based on an implied misrepresentation or misstatement of the characteristics of the packages being despatched was also raised. The limited scope of the first issue (cf paragraph 21 above) means that the validity of these arguments has not been tested. But, if they are not sound, the harsh, but clear-cut position will be that, where a carrier contracts unwittingly to carry non-conforming goods and chooses to perform internationally by road, CMR applies with its benefits and burdens, and that the carrier’s restrictions will be relevant only if and in so far as they may assist the carrier to avoid liability under article 17(2).
I would therefore reject UPS’s challenge to the application of CMR to the carriage of the three packages. The issue of wilful misconduct thus arises for consideration.
Wilful misconduct
Some further facts need stating. The three packages bore barcode labels with separate identification numbers. These labels were all twice scanned at about 7.30 a.m. on Friday, 26 July 2002 shortly after the packages arrived at UPS’s hub premises in Amsterdam. The hub premises consisted of a yard surrounded by a 3 metre fence with one pedestrian and two vehicular gates. Inside the yard was a large secure warehouse, with gates on one side against which incoming vehicles reversed in such a way as to make it “virtually impossible” for anyone to enter or leave the warehouse along either side of the vehicles. Short feeder conveyors were extended into the backs of incoming vehicles, and staff called “unloaders” used these to discharge packages to a main conveyor belt inside the shed. The barcodes were scanned first on “import” and then, on reaching the main conveyor belt, as “out for delivery”. Staff called “splitters” manually directed packages off the main conveyor onto one of two conveyor belt spurs, alongside each of which between five and perhaps ten loading vehicles destined for different delivery areas were backed up. Packages were unloaded from the spurs either by the driver for the relevant vehicle or by “pre-loaders”. Loading was a quick operation giving very little time to assess what packages contained or their value (although Mr van Beusekom of UPS said in his written statement that a driver loading his own vehicle “might have more of an opportunity to assess” such matters). Loaded vans left the warehouse through roll-doors opened by “proximity” card. The vans had automatic locks on the doors between the cabin and their rear, as well as padlocks to their rear doors. Drivers were instructed to apply these padlocks whenever they left the van, including when making a delivery. Drivers carried a electronic “DIAD” board to obtain the recipient’s signature for each package delivered. The information on each DIAD board was down-loaded to UPS’s mainframe computer each day. Any package not delivered should have been returned by the driver to the hub, where it should on “import” have been scanned and then placed in a secure “overgoods” area inside the warehouse, for identification and delivery as appropriate as soon as possible. There was some, but not complete, CCTV coverage inside the warehouse.
L&A’s premises were in the Schiphol South East area about 15 km from the UPS hub. On 26 July 2002 the van due to make deliveries there was driven by a Mr Kadim. The last recorded sighting of the three packages was by a UBS employee, Mr Kharbouche, at the hub. He saw the packages stacked behind Mr Kadim’s vehicle and checked their barcodes to make sure that they had been correctly sorted. But Mr van Beusekom, gave evidence that this did not mean that the packages were necessarily loaded into Mr Kadim’s van. Being large packages, they might have been stacked there for stowage in an accessible part of the vehicle, or because there was no space for them on the vehicle, or in order to be loaded onto another vehicle.
Mr Kadim delivered only one package not the subject of these proceedings to L&A on the morning of 26 July 2002. By about mid-day, L&A were complaining of non-delivery of the three packages. L&A later also complained of non-delivery of a fourth package consigned by Datec to L&A as agents for Axxis Hardware BV (“Axxis”). UPS started their enquiries as soon as L&A complained about the missing three packages. Mr Kadim was telephoned on the evening of 26 July. He told UPS to contact their other drivers, some of whom, he said, had taken packages from his lorry. At trial, UPS did not call any evidence about the outcome of any such enquiries.
On Sunday, 26 July 2002 Mr Kadim flew back to his country of birth, Morocco. He already had a poor attendance record, and, when he did not appear for work on Monday, 29 July, UPS issued a notice dismissing him. Mr Kadim returned to Holland in late September 2002. After being informed by a friend that the police were looking for him, he went to the police, and in interview explained that he had gone to Morocco as a result of an urgent call from his mother at 11.30 p.m. on Friday, 26 July informing him that his father had been seriously ill. He said that he “did not think it necessary to notify” UPS that he was in Morocco because he “knew that [his] contract was not going to be extended”. He said that his van had been loaded on 26 July by pre-loaders, Sebastian (Roux) and Rob (Wiegant), and repeated that other drivers – three, whose names he did not know – had on 26 July taken parcels from his lorry to deliver themselves. Asked how he knew what was on his lorry and where to go, he said that he would look to see just before he set out, but that “since I no longer have the Sloterdijk route, I no longer know my way around very well”. The evidence is that the Sloterdijk route had been his regular route, and he was not the regular driver for the Schiphol South East route which he was due to take on 26 July 2002. Mr van Beusekom’s inspection of the CCTV footage and enquiries of the pre-loaders, Mr Roux and Mr Wiegant, yielded nothing relevant or abnormal. The loading of Mr Kadim’s van could not be directly observed on the footage and Mr van Beusekom was not aware what the three packages looked like.
The judge had to consider whether the three packages, and so far as relevant the Axxis package, had been delivered to L&A. He was satisfied that they had not been. No DIAD signature existed for any of the packages except the fifth package which Mr Kadim did deliver, and it was improbable that the relevant barcodes had (all) been damaged in their pouches or become illegible. The nature of L&A’s premises and procedures added to the unlikelihood of any loss occurring after delivery to L&A. The judge’s finding of non-delivery was not appealed before the Court of Appeal or therefore the House.
On the basis that there was non-delivery, the judge turned to consider the likelihood of theft by an employee of UPS. Mr van Beusekom’s evidence was that the hub had lost only eighteen packages due to theft between 1998 and 2002, with “17 of them being lost to a crime ring that was broken in March 2001”, and that UPS’s security systems were sound and UPS’s approach to theft that it was always prosecuted. He also said that the hub lost 41 packages in July 2002 alone, an average of around 1 in every 2712 packages handled, and gave various possible explanations as to how packages could go missing “inexplicably” (as the judge put it). They included delivery without any record being made, mis-delivery and theft from a van on its rounds. So far as Mr van Beusekom in his witness statement expressed opinions as to what might have happened to the three packages, Mr Reeve did not cross-examine, taking the view that this was a matter for the experts called on either side (and the judge in a comment during cross-examination endorsed this approach).
Experts were called and examined on both sides, Mr Holmes for the respondents and Mr Heinrich-Jones for UPS. But it was for the judge to decide whether, in the light of all the evidence, any and if so what probable cause of loss could be determined. In the event, the judge found their evidence “of limited value”. He went on
“inevitably, they had formed their views on the basis of the material put before them, … whereas I must assess the evidence presented at trial. Although their information apparently largely coincided with the evidence, it was not entirely the same and in these circumstances I hesitate to place great weight upon their opinions.” (paragraph 13)
The judge said later (in para 57):
“57. Both expert witnesses agreed the paucity of evidence is such that it is difficult to say how the three packages came to be lost. Mr Heinrich-Jones concluded that, while it was possible that they were stolen by, or with the assistance of, an employee of UPS, it is impossible to conclude that that is the most likely cause of the loss. Mr Holmes thought it most likely that the packages were stolen by Mr Kadim or another UPS employee but his opinion was properly guarded: indeed, in cross-examination he acknowledged that he could not say that this was ‘the probable cause of the loss'”.
So far as the last sentence is relevant, I do not regard it as an accurate summary of the effect of Mr Holmes’ evidence under cross-examination on 18 November 2004 (transcript pp. 76-80 and 85). Mr Holmes went on to make clear that he believed that he had said that the probable cause was theft by Mr Kadim or another UPS employee and that this was indeed both “highly likely” and the probable cause, although “one cannot be 100% certain”. He was also plainly, and rightly, unhappy about being asked to decide questions on a balance of probabilities which he understood were “for the court to decide”.
Mr Julian Flaux QC for UPS stressed in his submissions that, based on an original list by Mr Heinrich-Jones, the experts had in a joint memorandum identified a range of 17 possibilities, grouped under four headings: (I) Misplaced, (II) Delivery Issues, (III) Labelling Issues and (IV) Theft. Two such possibilities, “Delivered but no proof of delivery” under head II and “Bar code problems” under head (III). fall out of the picture in the light of the judge’s finding that the packages were not delivered to L&A. There is nothing in Datec’s or UPS’s documentation or in the course of known events to suggest any likelihood of the remaining possibilities listed as “Labelling Issues” under head III, that is Incorrectly labelled, Incorrectly addressed or Over labelled. This is particularly so when (a) it would be a remarkable coincidence if three or four packages due for delivery to the same place all went astray on 26 July 2002 for such a reason, (b) all four packages were satisfactorily scanned both on import and as “out for delivery” at UPS’s hub on the morning of 26 July 2002, and (c) Mr Kharbouche checked the labels on the three packages and found them visually in order just before they were due for loading on 26th July. Two possibilities under head IV (Theft by UPS Delivery Driver and by Unknown UPS Employee) involve wilful misconduct. The remaining possibilities listed under head IV were Third party theft from the hub, Theft following forcible entry, In transit theft from delivery vehicle and Theft by deception. Mr Heinrich-Jones considered that the security and operations at the hub effectively precluded the first two, that the third could not be eliminated as one of the likely causes of the loss, and that the last (in the form of deception persuading the driver to deliver the packages to unconnected third parties) was “possible”. However, as he observed, there was no DIAD signature to suggest that Mr Kadim or any other driver was innocently deceived into any such mis-delivery. There was also no positive support for the possibility of theft from the delivery vehicle without the complicity of the driver. Even if one confines attention to the three packages (and the loss of the Axxis package would involve a remarkable coincidence, if due to some entirely different cause to that causing the loss of the three packages), an untargeted, adventitious theft of three heavy packages during an unguarded moment would be unlikely. It is far more likely, as Mr Heinrich-Jones recognised in paragraph 6.78 of his report, that any theft “would be a clear example of theft of high value targeted items”. But, if these packages were targeted, it is also highly likely that there was collaboration or information as to their movement from within UPS. Consistently with this, the judge accepted (at paragraph 59) that “if they were stolen, it is probable that an employee of UPS was responsible for the theft”.
The judge concluded that the probable cause of loss was not theft, but was accidental, so falling within one of the three possibilities given as under head I, Misplaced (viz Missorted, Mislaid or Damaged then thrown away) or within one of the remaining two possibilities under head II, Delivery issues (viz Failed delivery, Mis-delivery or Delivered in error). He said, [2005] 1 Lloyd’s Rep 470, 481:
“65. Once it is recognised that there are grounds to think that the packages might well not have been loaded in Mr Kadim’s vehicle, but set aside with a view to being delivered by another driver, it seems to me that the claimants’ argument that the packages were stolen by an employee of UPS loses much of its force. Of course, it is possible that they might have been stolen from the hub and never loaded on a delivery vehicle, but, although Mr Holmes described the hub as ‘fertile ground for potential thieves among the employees’, it does not seem to me that it would have been at all easy to smuggle such large packages out of the hub building. Again, it is possible that another driver loaded the packages and stole them from his van, knowing that there would be no record that they were loaded on it, but there is no evidence indicating this. It would have been extraordinary risky for another driver to plan such a theft: to offer to carry the valuable parcels to assist Mr Kadim with a delivery in Schipol South East and then to steal them. If, on the other hand, another driver had the goods for delivery by chance and stole them opportunistically, he was remarkably lucky either to be able to infer their value from the L&A address or to happen upon such valuable goods.
66. Having considered how the goods might have disappeared as a result of theft to which an employee of UPS was party, it seems to me more likely that they were lost accidentally: that, for example, the packages were delivered to the wrong address by a driver other than Mr Kadim; or that they were put into the hub’s ‘overgoods’ either because they were returned by a driver who had failed to deliver them and they went astray, or because they were for some reason never loaded in any delivery vehicle.”
Richards LJ gave the principal judgment in the Court of Appeal with which Brooke LJ agreed: [2006] 1 Lloyd’s Rep 279. Richards LJ summarised the criticisms made of the judge’s approach by Mr Reeve in his submissions as follows, at p 295:
“55. [The claimants’ submission is that] the judge asked himself the right question at para 59, namely ‘whether the claimants have shown that theft by a UPS employee is more likely than accidental loss’.
56. The claimants’ case, however, is that the judge went wrong in answering the question he asked himself. The primary focus of the argument is on para 66 of the judgment, where the judge stated that ‘[h]aving considered how the goods might have disappeared as a result of theft to which an employee of UPS was party, it seems to me more likely that they were lost accidentally: for example, the packages were delivered to the wrong address by a driver other than Mr Kadim; or that they were put into the hub’s ‘overgoods”. It is said that, although the judge considered how the goods might have disappeared as a result of employee theft, he did not consider how they might have disappeared as a result of either of the two accidental causes to which he referred. He made no attempt to analyse the series of steps required for either of those causes to have operated, or how his other findings and the undisputed evidence impacted on the likelihood of those steps having occurred. In fact, the cumulative improbability is such that neither cause can be regarded as plausible. The judge failed in this respect to take into account relevant factors. In addition, the judge was wrong in his assessment of the factors relevant to employee theft: he overestimated the extent to which they made it less likely and underestimated the extent to which they made it more likely. On any reasonably complete and balanced assessment, employee theft was more likely than any other cause and was proved on the balance of probabilities. The judge was therefore wrong to conclude in para 68 that it would be too speculative to hold that the goods were taken by or with the assistance of an employee of UPS, and to state in para 69 that there was not proper evidence to support the claimants’ allegation.
57. As regards misdelivery, the points made in support of the implausibility of such a hypothesis are these: (1) The driver would, mistakenly, have had to have taken the packages to the wrong address despite the fact that each package bore a typed label displaying the true consignee and a unique UPS barcode: the judge found it improbable that all three labels were damaged or that the barcodes on all three were illegible (para 50). There was no separate delivery plan and the drivers had to read the labels. (2) If the label was legible, the driver would have been forced to read it when deciding where and whether to deliver it. If the labels had been illegible, the packages would have been returned to the warehouse. (3) A coincidental mistake would also have to have been made in respect of the Axxis package which was due for delivery to L&A: the judge found that the package was scanned ‘out for delivery’ at the hub soon before its loss and it is therefore highly unlikely that the label was defective. (4) The chances of such a mistake being made in respect of four separate packages in two separate consignments are even less than in respect of the claimants’ three packages. (5) The recipients would have had to make a similarly unlikely series of mistakes in accepting the packages when they were not the consignees named on them and had no reason to expect delivery. (6) The driver would have had to make further and coincidental mistakes in failing, contrary to his training, to obtain proofs of delivery for any of the packages. (7) As UPS’s expert witness, Mr Heinrich-Jones, accepted in cross-examination, recipients of misdelivered goods usually re-deliver them or require them to be collected by the carrier. It is therefore a further improbability that they would have held on to them. (8) UPS called none of its drivers at the trial to say that they had carried the packages, let alone that they had misdelivered them or made such mistakes. (9) As the judge found (at para 40), UPS was put on notice on the day of loss that the claimants’ three packages were missing. The claimants were told that they might have been loaded in error onto another delivery vehicle, but this was uncertain because some vehicles had not returned to the hub. Mr Kadim also suggested the same day that inquiries be made of other drivers. It is to be inferred that UPS contacted the returning drivers while their memories were still fresh and that no-one could recall these packages having been delivered or misdelivered. The fact of early inquiry and investigation makes the hypothesis of misdelivery even more remote.
58. As regards the overgoods area, Mr Reeve submits that there is uncertainty about the judge’s precise hypothesis but that he was probably contemplating the possibility of loss from the overgoods area. In any event the points made in support of the implausibility of a hypothesis involving the overgoods area are these: (1) On the judge’s findings and the undisputed evidence, the overgoods area is a secure area – ‘a locked cage’ (para 22). It would be a non sequitur to suggest, without further analysis of how the security might have failed, that an accidental loss from the overgoods area was plausible. (2) As the judge held (also at para 22), goods placed in the overgoods area were the subject of inquiries and investigation to see if they could be delivered or returned; and it was only if they could be neither delivered nor returned that they were eventually sold at auction. In any event, goods sold at auction would have been accounted for. (3) UPS did not suggest, or call evidence to show, that there were any weaknesses in the system in respect of the overgoods area. (4) It was improbable that the packages went into the overgoods area in the first place. If the packages had been returned undelivered by one of the drivers, they would have been scanned on their return to the warehouse before they went into overgoods. There was no evidence of any such scans. (5) Furthermore, since UPS had been alerted before the drivers returned from their rounds on the day of the loss, it is implausible in the extreme that the three packages slipped into overgoods, past the staff whose responsibility it was to ensure the proper treatment of undelivered packages and despite the inquiries being made on that day. (6) The loss of the Axxis package as well as the claimants’ three packages adds to the implausibility of the hypothesis of loss from the overgoods area.
59. In relation to the above points, Mr Reeve also emphasises the weight and size of the claimants’ packages. These were substantial packages and it would have required a conscious decision to move them.”
At paras 67 to 76, Richards LJ accepted the substance of Mr Reeve’s criticisms. He said:
“67. In my judgment the case advanced by the claimants has considerable force to it. There is sufficient evidence about the three Datec packages and the surrounding circumstances to enable the court to engage in an informed analysis of the possible causes of the loss and to reach a reasoned conclusion as to the probable cause. The fact that the experts were unable to reach a conclusion of their own does not preclude the court from reaching such a conclusion on the totality of the evidence and in the light of the findings of fact.
68. I think it particularly important that the packages were recorded as reaching UPS’s hub and as being ‘out for delivery’ on 26 July, and that they were identified by the floor supervisor as being stacked behind a delivery vehicle. Those established facts greatly reduce the scope for uncertainty, and the inferences that can be drawn from them as to the condition of the packages and in particular as to their labelling assist in the assessment of the subsequent fate of the packages.
69. I also think it important that there was detailed consideration at the trial of all possible explanations for the loss. It was not suggested that there might exist any realistic possibility that the experts had failed to canvass. The court was in a position to look closely at the evidence for and against each of the possible explanations. In practice that could be done largely by reference to the broad possibilities identified by UPS’s Mr van Beusekom.
70. In relation to those possibilities the judge gave compelling reasons for finding, first, that the packages had not been delivered to L&A (paras 49-53 of his judgment). That finding did not depend on where the burden of proof lay; and although the judge did not dismiss the possibility that the packages had been delivered to L&A and mislaid or stolen within L&A, he evidently and rightly considered it to be unlikely. His finding was firmly grounded on evidence not only about the Datec packages and UPS’s delivery procedures, but also about L&A’s own operation at Schipol.
71. The judge also gave compelling reasons for finding that theft by a third party was improbable (para 59 of his judgment). He dealt only briefly with third party theft from the hub itself, concentrating on the difficulty of gaining access without being recorded by the CCTV cameras (as to which, see paras 23 and 42 of the judgment). I would add that the overall security arrangements at the hub, as summarised at para 14 of the judgment, also militate strongly against the possibility of a third party gaining access and removing the packages undetected. As to theft by a third party from a delivery vehicle, I agree with the judge that it is improbable – I would say highly improbable – that a casual thief would have found by chance a delivery vehicle left accidentally unlocked (there was no evidence of any vehicle being broken into), have picked out three packages of the weight and size of these packages, and have removed them without detection.
72. The two examples of accidental loss mentioned by the judge at para 66 of his judgment were delivery to the wrong address (by a driver other than Mr Kadim) and placement of the packages in the overgoods area.
73. In my view the hypothesis of misdelivery is highly implausible, for all the reasons given by Mr Reeve in his submissions (para 57 above). It would require a most improbable combination of events for the packages to have been lost in this way, involving multiple errors by the UPS driver, errors by the recipient and a subsequent failure by the recipient to return the packages when the mistake was detected. The fact that prompt inquiries within UPS about the whereabouts of the packages produced nothing to support this hypothesis is a further factor telling against it.
74. The judge’s second example, of placement of the packages in the overgoods area, provides an even less plausible explanation for the loss. Again I agree with the reasons advanced by Mr Reeve in his submissions (para 58 above). It is difficult to see how the packages might have got to the overgoods area in the first place, given the evidence that they had labelling sufficiently intact and legible to be scanned ‘out for delivery’ and to be identified by the floor supervisor. But if they had got to the overgoods area, the strong probability is that they would have been identified and delivered or returned or that they would have been sold and accounted for. The system does not admit of any sensible possibility of their simply disappearing accidentally and without trace.
75. Although the judge referred to those two possibilities of accidental loss as examples, there does not seem to me to be any other realistic way in which packages of this size and weight might have been lost accidentally, either from the floor of the hub or from one of the delivery vehicles.
76. That leaves for consideration the possibility of theft by one or more UPS employees. It should be noted at the outset that there is nothing inherently implausible about such an explanation: far from it. Although there were only 18 cases of established theft from the Amsterdam operation between 1998 and 2002, there was a large number of losses the causes of which had not been established (41 in July 2002 alone); and it would need only a relatively small proportion of such losses to be attributable to employee theft for the total losses from employee theft to run into the 100s over the same period. There was also evidence to support the view that the Datec packages might be targeted for theft or identified as containing high value items. Although there was no direct information about their value on their labelling or accompanying documentation, the contents were described as ‘electronic components’. Moreover, L&A was known to handle high value items of this sort, so that the delivery address would have been significant to anyone ‘in the know’. The experts acknowledged the possibility of targeted theft by organised criminals and agreed that, if the packages were stolen, it was probably a case of targeted theft.”
It is right at this point to say a word about Mr Kadim’s position, although I agree with Richards LJ that it is not ultimately critical. The judge in addressing Mr Kadim’s position treated four considerations as casting “real doubt” on any contention that he had stolen the packages: the fact that Mr Kadim went voluntarily to the police, the fact that it was not obvious from the labelling and documentation that the packages were particularly valuable (and there was no evidence that Mr Kadim knew that they were, although it was “possible” that he did), the fact that he did deliver one package to L&A on 26 July 2002 and the absence of any convincing evidence that the packages were loaded on his vehicle. Richards LJ commented:
“77. I am inclined to agree with Mr Reeve’s submissions (para 60 above) concerning Mr Kadim’s subsequent conduct and explanations to the police, and to place less weight on them than the judge did. But the explanation of employee theft does not depend for its cogency on putting the blame specifically on Mr Kadim or on other otherwise identifying the responsible employee or employees. The explanation fits well with the known facts even though the employee or employees concerned cannot be identified.”
I agree with Richards LJ’s comments. I do not regard either Mr Kadim’s voluntary visit to the police, when he knew they were seeking to arrest him, or his delivery of one package to L&A as any particular indication of innocence. Mr Kadim’s statement (quoted in paragraph 35 above) was also not that he was not on 26th July familiar with the Schiphol South East route – all that is known is that this had not been his regular route. But, as the judge said, the respondents’ case does not depend on putting the blame on any specific employee of UPS. If Mr Kadim is right in suggesting that another unscheduled UPS driver may have taken these three (or presumably all four) missing packages for delivery, the questions arise why this driver took the packages and why he never delivered them.
Mr Flaux for UPS submits that the Court of Appeal, in concluding that employee theft was the relevant cause, paid insufficient attention to the primacy of the judge’s findings, that it was lured into a process of elimination (which could at best arrive a conclusion as to which of many possible causes was the least unlikely, rather than a conclusion as to any cause which was more probable than all the others viewed together) and that, despite lip service to the need for clear and cogent evidence, it found wilful misconduct when there was an absence of any such evidence.
As to the correct approach in an appellate court to findings and inferences of fact made by a judge at first instance after hearing evidence, there was no disagreement between counsel. In Assicurazioni Generali SpA v. Arab Insurance Group [2003] 1 WLR 577, Clarke LJ summarised the position, referring also to a passage in a judgment of my own:
“14. The approach of the court to any particular case will depend upon the nature of the issues kind of case determined by the judge. This has been recognised recently in, for example, Todd v Adam (trading as Trelawney Fishing Co) [2002] EWCA Civ 509, Lloyd’s Rep 293 and Bessant v South Cone Incorporated [2002] EWCA Civ 763. In some cases the trial judge will have reached conclusions of primary fact based almost entirely upon the view which he formed of the oral evidence of the witnesses. In most cases, however, the position is more complex. In many such cases the judge will have reached his conclusions of primary fact as a result partly of the view he formed of the oral evidence and partly from an analysis of the documents. In other such cases, the judge will have made findings of primary fact based entirely or almost entirely on the documents. Some findings of primary fact will be the result of direct evidence, whereas others will depend upon inference from direct evidence of such facts.
15. In appeals against conclusions of primary fact the approach of an appellate court will depend upon the weight to be attached to the findings of the judge and that weight will depend upon the extent to which, as the trial judge, the judge has an advantage over the appellate court; the greater that advantage the more reluctant the appellate court should be to interfere. As I see it, that was the approach of the Court of Appeal on a ‘rehearing’ under the Rules of the Supreme Court and should be its approach on a ‘review’ under the Civil Procedure Rules.
16. Some conclusions of fact are, however, not conclusions of primary fact of the kind to which I have just referred. They involve an assessment of a number of different factors which have to be weighed against each other. This is sometimes called an evaluation of the facts and is often a matter of degree upon which different judges can legitimately differ. Such cases may be closely analogous to the exercise of a discretion and, in my opinion, appellate courts should approach them in a similar way.
17. In Todd’s case [2002] 2 Lloyd’s Rep 293, where the question was whether a contract of service existed, Mance LJ drew a distinction between challenges to conclusions of primary fact or inferences from those facts and an evaluation of those facts, as follows, at pp 319-320, para 129:
‘With regard to an appeal to this court (which would never have involved a complete rehearing in that sense), the language of “review” may be said to fit most easily into the context of an appeal against the exercise of a discretion, or an appeal where the court of appeal is essentially concerned with the correctness of an exercise of evaluation or judgment – such as a decision by a lower court whether, weighing all relevant factors, a contract of service existed. However, the references in rule 52. 11 (3) (4) to the power of an appellant court to allow an appeal where the decision below was “wrong” and to “draw any inference of fact which it considers justified on the evidence” indicate that there are other contexts in which the court of appeal must, as previously, make up its own mind as to the correctness or otherwise of a decision, even on matters of fact, by a lower court. Where the correctness of a finding of primary fact or of inference is in issue, it cannot be a matter of simple discretion how an appellant court approaches the matter. Once the appellant has shown a real prospect (justifying permission to appeal) that a finding or inference is wrong, the role of an appellate court is to determine whether or not this is so, giving full weight of course to the advantages enjoyed by any judge of first instance who has heard oral evidence. In the present case, therefore, I consider that (a) it is for us if necessary to make up our own mind about the correctness or otherwise of any findings of primary fact or inferences from primary fact that the judge made or drew and the claimants challenge, while (b) reminding ourselves that, so far as the appeal raises issues of judgment on unchallenged primary findings and inferences, this court ought not to interfere unless it is satisfied that the judge’s conclusion lay outside the bounds within which reasonable disagreement is possible. In relation to (a) we must, as stated, bear in mind the important and well-recognised reluctance of this court to interfere with a trial judge on any finding of primary fact based on the credibility or reliability of oral evidence. In the present case, however, while there was oral evidence, its content was largely uncontentious.’
In the same case Neuberger J stressed, pp 305-306, paras 61 to 64, that the question whether there was a contract of service on the facts involved the weighing up of a series of factors. Thorpe LJ agreed with both judgments.”
The judgment of Ward LJ in the Assicurazioni Generali case may be read as advocating a different test, which would equate the approach of an appellate court to findings of fact with its approach to decisions taken in the exercise of a discretion. As Waller LJ correctly pointed out in Manning v. Stylianou [2006] EWCA Civ 1655, that is not the correct test, and it is the judgment of Clarke LJ in the paragraphs quoted above from his judgment that gives proper guidance as to the role of the Court of Appeal when faced with appeals on fact.
In the present case, the judge’s findings of primary fact have not been challenged. One or two small points have been made on factual matters, but they are of no or minor relevance and do not justify Mr Flaux’s submission that the Court of Appeal exceeded its proper role in reviewing the judge’s conclusions. Essentially, what have been in issue have been the inferences with regard to the causation of loss to be drawn from primary facts which are not in dispute. Mr Flaux, in my view correctly, accepted this was a correct analysis of the central issues, when opening the appeal. I note in parenthesis that Richards LJ appears to have treated as applicable the steeper appellate hurdle that would have applied if the appeal had been related to an evaluation or judgment or a decision analogous to the exercise of a discretion; even so he arrived at the conclusion he did on the basis that the judge had in his paragraph 66 failed to take into account relevant considerations; in particular the judge had failed to follow through the two examples he gave of accidental loss and to consider what each involved and how plausible each might be (cf paras 85 to 87). I do not disagree with Richards LJ’s latter comments, but in my view the situation is one where an appellate court is well placed and entitled to re-consider for itself the judge’s findings as to what should or should not be inferred regarding causation from the primary facts which he found.
Nor do I accept Mr Flaux’s submission that Richards LJ was lured, by a process of elimination, into accepting as the probable cause the least unlikely of a range of possibilities all of them unlikely. That was the error the House identified in the approach taken by the judge at first instance in Rhesa Shipping Co SA v. Edmunds (The “Popi M”) [1985] 1 WLR 948. The reasoning of Sedley LJ in the present case may be open to criticism both for suggesting that sufficient was known for the court to base its conclusions on the least improbable cause and for doing this. But that of Richards LJ, with whom Brooke LJ agreed, is not.
Richards LJ summarised his conclusions as follows:
“79. Looking at the matter overall, it seems to me that the judge did overstate the factors telling against employee theft and understate the factors telling in favour of it. I consider employee theft to be a much more likely explanation than the judge found it to be. Perhaps more importantly, I regard as implausible and improbable the explanations of accidental loss to which the judge referred when concluding that accidental loss was more likely than employee theft.
80. If conducting the exercise of evaluation for myself, I would conclude that theft by one or more UPS employees was the probable cause of the loss and that the claimants’ case had therefore been proved on the balance of probabilities. That conclusion would lead in turn to a finding of wilful misconduct within article 29 of the CMR and the consequential disapplication of the limit imposed by article 23 on UPS’s liability. (I should mention, for the sake of clarity, that I agree with the approach of Andrew Smith J at para 68 of his judgment towards In re H (Minors) [1996] AC 563 and its application to the standard of proof in this case. In the circumstances the burden on the claimants to prove their case is not a particularly heavy one.)
81. My conclusion does not depend on the separate loss of the Axxis package, but I accept the submissions by Mr Reeve that the loss of the Axxis package adds to the improbability of other possible causes and makes employee theft all the more probable.
82. I have borne very much in mind the observations of Brooke LJ in Lacey’s Footwear (Wholesale) Ltd v Bowler International Freight Ltd [1997] 2 Lloyd’s Rep 369 with which I am in respectful and total agreement, as to the need for a properly rigorous approach to the available evidence. It is the evidence, properly analysed, which in my view leads to the conclusion. That is also why I disagree with the judge’s description of the claimants’ case as ‘too speculative'”.
I find the reasons given by Richards LJ for reversing the judge compelling. None of the possibilities mentioned by the judge in para 66 affords any plausible explanation of the disappearance of the three packages, still less of all the four that were due for delivery to L&A on 26th July 2002. In their joint memorandum the two experts were in fact agreed that the possibilities of loss, Missorted, Mislaid and Damaged/thrown away/sold at auction, under head I were each “less likely than others”, in view of the sighting of the packages by Mr Karbouche correctly stacked and labelled on the spur shortly before loading. None of these possibilities anyway offers any comprehensible explanation for the disappearance of three (or in fact four) large and valuable packages. The possibilities, Mis-delivered and Delivered in error, under head II run up, as previously stated, against the inherent implausibility of three or four separate packages due for delivery to L&A all being innocently misdelivered on the same day without any DIAD signature being obtained from anyone. The possibilities floated before the judge (but not even mentioned by him in his paragraph 66) under head II, Labelling issues, are remote in the extreme for the reasons given in paragraph 27 above. As to head IV, Theft, the joint memorandum categorised all the possibilities as “less likely”, except for those involving a UPS driver or employees, and the judge found that, if the packages were stolen, it was probably by a UPS employee. Inevitably, any systematic consideration of the possibilities is subject to a risk that it may become a process of elimination leading to no more than a conclusion regarding the least unlikely cause of loss. But, as I have said, I do not consider that Richards LJ fell into that trap. I share, without hesitation, the view which he formed overall that theft involving a UPS employee was shown on a strong balance of probability to have been the cause of this loss.
In agreement with the reasoning of the majority contained in the judgment of Richards LJ in the Court of Appeal, I would therefore dismiss this appeal.
LORD NEUBERGER OF ABBOTSBURY
My Lords,
I have had the privilege of reading the draft opinion of my noble and learned friend Lord Mance and agree that this appeal should be dismissed.
Datec Electronic Holdings Ltd & Anor v United Parcels Service Ltd (CA)
[2005] EWCA Civ 1418
Richards LJ
This case concerns the loss of three packages of computer processors that were consigned to United Parcels Service Limited (“UPS”) on 25 July 2002 for carriage from the United Kingdom to the Netherlands. The consignor was Datec Electronic Holdings Limited (“Datec”) and the consignee was Incoparts BV (“Incoparts”), one of Datec’s customers. Carriage was arranged by Tibbett and Britten Ltd. (“T&B”), Datec’s distribution agents. The consignment was to be carried by road from Datec’s warehouse at Bletchley to Luton, by air from Luton to Cologne, and by road from Cologne to UPS’s premises in Amsterdam (referred to as UPS’s “hub”) and onward to the warehouse at Schipol of Incoparts’ agent, L&A Freight BV (“L&A”). It was collected by a UPS driver from Datec’s warehouse on 25 July for delivery in Schipol by 10.30 a.m. on 26 July. Datec and Incoparts alleged that it did not reach its destination, and they brought a claim for damages against UPS as carrier.
The claimants contended that carriage of the goods on the international leg of the journey between Cologne and the Netherlands was subject to the Convention on the Contract for the International Carriage of Goods by Road (“the CMR”), as set out in the schedule to the Carriage of Goods by Road Act 1965. Article 17.1 of the CMRprovides for the liability of the carrier for the loss of, or damage to, the goods. Article 23 sets a limit on compensation by reference to the weight of the consignment. By article 29, however, that limit does not apply in a case of wilful misconduct by the carrier’s agents or servants acting within the scope of their employment.
In this case the limit on compensation if article 23 applied was £657.73. The claimants contended, however, that the loss had been caused by wilful misconduct on the part of UPS’s servants, in that the packages had been stolen by an employee or employees of UPS, so that the article 23 limit was disapplied by article 29. On that basis they sought to recover the full value of the goods, which was agreed to be £241,241.14.
UPS disputed liability altogether. It did not accept that it had failed to deliver the consignment to L&A. It also relied on its terms and conditions of carriage for a series of arguments to the effect that there was no contract of carriage falling within the CMR at all or, if there was, it was on terms that excluded any liability in the circumstances of this case. Those matters were said to provide a complete defence to the claim.
In a commendably clear and detailed judgment, Andrew Smith J found that the three packages had not been delivered to L&A but that the claimants had failed to prove that non-delivery was the result of theft by an employee or employees of UPS. Accordingly he held that the compensation recoverable under the CMR was subject to the limit in article 23. He rejected UPS’s contention that the CMR did not apply at all and held that UPS could not rely on the relevant provisions of its terms and conditions of carriage since they derogated from the CMR and were rendered null and void by article 41 of the CMR. In the result he gave judgment in favour of the claimants in the sum of £657.73.
The claimants appeal against the judge’s finding that the compensation was subject to the limit in article 23. UPS cross-appeals against the judge’s rejection of the defences advanced by reference to UPS’s terms and conditions of carriage.
I think it sensible to deal first with the issues raised by UPS’s cross-appeal since they go to the question whether UPS is liable at all. If the cross-appeal fails, it will be necessary to consider the extent of UPS’s liability as raised by the claimants’ appeal.
UPS’S CROSS-APPEAL: DEFENCES TO LIABILITY
The applicability of UPS’s terms
UPS’s case on its cross-appeal is based on the UPS terms and conditions of carriage which came into effect on 4 February 2002 (“the UPS terms”). As explained below, the UPS terms include a restriction in respect of packages with an individual value in excess of US $50,000. Each of the three packages that made up the 25 July 2002 consignment had a value considerably in excess of that sum. UPS contends that in those circumstances the UPS terms provide it with a defence.
The UPS terms provide, in material part:
“1. Introduction
A. These terms and conditions (‘terms’) set out the basis on which United Parcel Service will transport packages, letters and freight (‘packages’). These terms are supplemented by the service details in the current applicable UPS Service and Tariff Guide (‘the Service and Tariff Guide’) relating to the particular service the shipper has chosen. The Service and Tariff Guide contains important details about the services of UPS which the shipper should read and which form part of the agreement between UPS and the shipper.
B. … Notwithstanding any clause to the contrary, international carriage by road may be subject to the provisions of the Convention on the Contract for the International Carriage of Goods by Road ….
…
D. … In these terms, ‘Waybill’ shall mean a single UPS waybill/consignment note or the entries recorded against the same date, address and service level on a pick-up record ….
2. Scope of Service
Unless any special services are agreed, the service to be provided by UPS is limited to the pick-up, transportation, customs clearance where applicable and delivery of the shipment ….
3. Conditions of Carriage
This section sets out various restrictions and conditions which limit and govern the extent of the service UPS offers. It also explains what the consequences are of the shipper presenting packages for carriage which do not meet these requirements.
(a) Service Restrictions and Conditions
UPS does not offer carriage of packages which do not comply with the restrictions in paragraphs (i) to (iv) below.
(i) Packages must not weigh more than 70 kilograms (or 150lbs) or exceed 270 centimetres (or 108 inches) in length or a total of 330 centimetres (or 130 inches) in length and girth combined.
(ii) The value of any package may not exceed the local currency equivalent of USD 50,000. In addition the value of any jewellery, other than costume jewellery, in a package shall not exceed the local currency equivalent of USD 500.
(iii) Packages must not contain any of the prohibited articles listed in the Service and Tariff Guide including (but not limited to) articles of unusual value (such as works of art, antiques, precious stones, stamps, unique items, gold or silver), money or negotiable instruments (such as cheques, bills of exchange, bonds, savings books, share certificates or other securities) and dangerous goods.
(iv) Packages must not contain goods which might endanger human or animal life or any means of transportation, or which might otherwise taint or damage other goods being transported by UPS, or the carriage, export or import of which is prohibited by applicable law.
The shipper shall be responsible for the accuracy and completeness of the particulars inserted in the Waybill and for ensuring that all packages set out adequate contact details for the shipper and receiver of the package and that they are so packed, marked and labelled, their contents so described and classified and are accompanied by such documentation as may (in each case) be necessary to make them suitable for transportation and to comply with the requirements of the Service and Tariff guide and applicable law.
(b) Perishable and temperature sensitive goods will be transported provided that the shipper accepts that this is at its risk. UPS does not provide special handling for such packages.
(c) Refusal and Suspension of Carriage
(i) If it comes to the attention of UPS that any package does not meet any of the above restrictions or conditions or that any COD amount stated on a COD Waybill exceeds the limits specified in paragraph 8, UPS may refuse to transport the relevant package (or any shipment of which it is a part) and, if carriage is in progress, UPS may suspend carriage and hold the package or shipment to the shipper’s order.
(ii) UPS may also suspend carriage if it cannot effect delivery at the third attempt, if the receiver refuses to accept delivery, if it is unable to effect delivery because of an incorrect address (having used all reasonable means to find the correct address) or because the correct address is found to be in another country from the set out on the package or Waybill or if it cannot collect amounts due from the receiver on delivery.
(iii) Where UPS is entitled to suspend carriage of a package or shipment, it is also entitled to return it to the shipper at its own discretion.
(d) The shipper will be responsible for the reasonable costs and expenses of UPS (including storage), for such losses, taxes and customs duties as UPS may suffer and for all claims made against UPS because a package does not meet any of the restrictions or conditions in paragraph (a) above or because of any refusal or suspension of carriage or return of a package or shipment by UPS which is allowed by these terms. In the case of the return of a package or shipment, the shipper will also be responsible for paying return transport charges calculated in accordance with the prevailing commercial rates of UPS.
(e) UPS will not meet any losses which the shipper may suffer arising out of UPS carrying packages which do not meet the restrictions or conditions set out in paragraph (a) above and, if UPS does suspend carriage for a reason allowed by these terms, the shipper shall not be entitled to any refund on the carriage charges it has paid.
(f) UPS reserves the right, but is not obliged, to open and inspect any package tendered to it for transportation at any time.
…
9. Liability
9.1 Where the Warsaw or CMR Conventions or any national laws implementing or adopting these conventions apply …, the liability of UPS is governed by and will be limited according to the applicable rules.
…
9.4 Subject to the provisions of paragraph 9.5, UPS operates a facility for the shipper to obtain for a shipment the benefit of a greater limit of liability … than is provided by Covnention Rules …. The shipper may use this facility by declaring a higher value on the Waybill and paying an additional charge as stated in the Service and Tariff Guide. The value of the goods concerned shall not in any event exceed the limits specified in paragraph 3(a)(ii).”
The Service and Tariff Guide does not add materially to those terms, though it does serve to underline the restrictions in clause 3.
The judge held that the UPS terms applied to the consignment in question. From time to time UPS and T&B had entered into an “umbrella” agreement which specified the services that UPS was to provide, the documentation required for shipments, when payment was to be made and what discounts were available to T&B. The umbrella agreement in force in July 2002 stated expressly that “All goods are carried subject to the UPS Terms and Conditions of Carriage effective at the date of shipment as amended by UPS from time to time”. Moreover, the documentation for the consignment on 25 July 2002 was prepared by T&B on a “Worldship” computer system provided to T&B by UPS to create the shipping documents; and in order to operate the system T&B had to answer “yes” to a question whether it accepted the UPS terms. For those and other reasons the judge found (para 82):
“If necessary, I would hold that similarly the UPS terms were incorporated into the contract that they made with Datec on 25 July 2002, but it does not seem to me that UPS need resort to arguments of this kind: the contract of 25 July 2002 for the carriage of the three packages was made under, and governed by, the umbrella contract, which provided for the UPS terms.”
The judge also rejected an argument by the claimants that the parties’ conduct of their business and exchanges before July 2002 evinced an intention that the US $50,000 restriction should not be incorporated into the contract of carriage made on 25 July 2002 or that UPS waived the restriction by its conduct or had precluded itself from relying upon it.
Was there a contract of carriage?
The first submission by Mr Flaux QC for UPS is that the three packages were not the subject of a contract of carriage at all. By the UPS terms, in particular by clause 3(a), UPS made clear that it did not offer to carry packages with a value in excess of US $50,000. The value restriction had been the subject of discussion and was known to T&B. Had UPS known that the packages were over the value limit it would have refused to carry them. As it was, UPS believed that they were within the limit and had no reason to believe otherwise. In those circumstances, it is submitted, there was no sufficient consensus between the parties for a contract of carriage. There was at most a bailment of the goods.
If that submission were correct, it would take the transaction outside the scope of the CMR, which applies by article 1 only to a “contract for the carriage of goods by roadin vehicles for reward …”.
The judge rejected the submission, or a more elaborate version of it, stating:
“118. … I acknowledge that paragraph 3 of the UPS Terms refers to restrictions upon the service that UPS ‘offers’, and to a lawyer this terminology has connotations of the rules about contracts being concluded through an offer and acceptance, and of the need for them to correspond. However, the issue is about the meaning of the UPS terms in a commercial contract made between businessmen, and they are to be interpreted in that context. I consider that UPS’s submission places too much weight upon the reference to what UPS ‘offers’, and, more importantly, the UPS terms expressly state that paragraph 3 explains the consequences of the shipper presenting packages that do not meet UPS’s restrictions and conditions. The paragraph does not explain that there will be no contract of carriage if such a package is presented and accepted: on the contrary, sub-paragraph (c) provides that the effect of the shipper presenting a package that does not meet the restrictions is that UPS have the right to refuse to carry it or, if carriage is in progress, to suspend carriage. The implication is that unless and until UPS exercise their right, there is a contract that UPS will carry the package. …
119. I consider that this interpretation of the UPS terms is in accordance with commercial reality and the business expectations of the parties. After all, UPS’s argument would, I think, apply by parity of reasoning even if the consignor and UPS were both unaware that the consignment contained a package worth more than US$50,000 and understood that the consignment complied with the UPS terms.
…
121. … The agreement between UPS and Datec made on 25 July 2002 was for the carriage of the packages accepted by the UPS driver. Their value does not mean that UPS did not agree to carry those packages. …”
I agree entirely with the judge. In my view this was plainly a contract of carriage, concluded at the latest when the UPS driver accepted the goods. It may be that the UPS driver would have declined to take the goods had he known that they exceeded the value limit, but the fact remains that he accepted them. The UPS terms did not negative the existence of a contract. They governed the contract that was made, defining the rights and liabilities of UPS in relation to, inter alia, goods that did not comply with the restrictions in clause 3(a). The effect of the CMR on those contractual provisions is a separate question, to which I now turn.
Is UPS entitled to rely on clause 3 of the UPS terms as excluding its liability?
Mr Flaux’s alternative submission, and one on which he puts greater weight, is that, if there was a contract of carriage, clause 3 of the UPS terms was effective to exclude UPS’s liability for the loss of the packages.
One of the obstacles that UPS has to overcome in seeking to rely on clause 3 is article 41.1 of the CMR, which provides:
“Subject to the provisions of article 40 [which concerns agreements between carriers], any stipulation which would directly or indirectly derogate from the provisions of this Convention shall be null and void. The nullity of such a stipulation shall not involve the nullity of the other provisions of the contract.”
The judge held that article 41 defeated the various arguments advanced by UPS in reliance on clause 3 of the UPS terms. It was argued before him that by presenting the goods for carriage, Datec, through T&B, impliedly gave a warranty that the packages were within the scope of the service that UPS offered and, more specifically, that the value of the packages did not exceed the sterling equivalent of US $50,000; and that the loss was therefore caused by Datec’s own wrong because, but for the breach of contract, the packages would not have come into UPS’s possession and would not have been lost in transit. The judge held that no such warranty was to be implied. He also rejected an alternative argument that T&B made an implied representation about the value of the packages. He went on:
“124. I should add that the claimants submit, and I agree, that they have a further answer to this part of UPS’s case in article 41 of the CMR: any such stipulation in the contract of carriage would be null and void in that it derogates from the provisions of the CMR. …
125. If I am right that the CMR applies to the contract for carriage of the consignment (so far as is relevant: that is to say from Cologne to L&A’s premises), then UPS cannot protect themselves from liability by relying upon paragraph 3(e) of the UPS terms, nor can they rely upon paragraph 3(d) to argue that under it Datec, and not UPS, are to bear that loss. Those are stipulations that derogate from the provisions of the CMR, and so are null and void.”
The judge also rejected a more general argument to the effect that there is nothing in the CMR that prevents a carrier from limiting the scope of the service that he provides and that it would be surprising and unbusinesslike to conclude that the CMR effectively prevents carriers from choosing not to carry and be responsible for particular kinds of packages, in view of their value or for other reasons. In relation to that argument the judge observed:
“126. … The CMR regime does indeed allow carriers to define their obligations with regard to the extent of the service that they are to perform, in that, for example, they can stipulate that they are not obliged to load or to unload goods: the CMR does not settle who has responsibility for this. That is very different from saying that a carrier is free to define whether he is responsible for goods that he does accept for carriage under a contract to which the CMR applies. Here the scope for the parties to define or limit their duties, responsibilities and liability is governed by the CMR. For example, I have already referred to the articles of the CMR that contemplate that there should be a consignment note and that it might include a declaration of the value of the goods, so that the carrier can thereby protect himself from expenses, loss and damage if he accepts a package and the sender has given inaccurate particulars of its value. UPS did not avail themselves of this protection.”
It is that last, more general line of argument that Mr Flaux has developed before us in his submissions on this aspect of the case. He submits that it must be open for a carrier to say that he will not carry goods in a particular category and that he will not be liable if, unknown to him, goods within that category are consigned to him. The particular case concerns valuables, where there are good reasons (such as lesser security and lesser temptation for employees) why a carrier may wish to limit the value of packages carried; but the same principle applies to size, weight, dangerous content and so forth. The effect of clause 3, in making clear that UPS does not offer to carry packages which do not comply with the stated restrictions, is to define the scope of the contract service rather than the terms on which the contract service is to be performed. Thus the contract service is the carriage of goods complying with the clause 3 restrictions. The CMR does not define the scope of the service that a carrier may offer: there is nothing in the CMR that requires a carrier to take goods that he does not want to carry. Accordingly, clause 3 does not amount to a derogation from the CMR so as to fall foul of article 41.
In support of that argument, Mr Flaux cites observations of Devlin J in Pyrene Co. Ld. V. Scindia Navigation Co. Ld. [1954] 2 QB 402 on the provision in article 3, rule 2 of the Hague Rules that “the carrier shall properly and carefully load … the goods carried”:
“The phrase ‘shall properly and carefully load’ may mean that the carrier shall load and that he shall do it properly and carefully: or that he shall do whatever loading he does properly and carefully. The former interpretation perhaps fits the language more closely, but the latter may be more consistent with the object of the rules. Their object … is to define not the scope of the contract service but the terms on which that service is to be performed. … I see no reason why the rules should not leave the parties free to determine by their own contract the part which each has to play. On this view the whole contract of carriage is subject to the rules, but the extent to which loading and discharging are brought within the carrier’s obligations is left to the parties themselves to decide.”
Mr Flaux submits that clause 3 applied in any event to the carriage of the packages as far as Cologne, since the CMR was engaged only by the international road haulage leg from Cologne. The CMR should not be held to deny a carrier all protection in circumstances where the carrier has made clear the limits of what he is willing to carry and the consignor, through its distribution agent, is aware of the restrictions yet ignores them. If, in those circumstances, the carrier unwittingly ends up carrying goods that do not comply with the restrictions, he should be able to say that he is under no liability in relation to them. Clause 3(e) is sufficiently wide to confer that protection.
In my judgment that line of argument is fallacious. I accept, of course, that the CMR does not define the scope of the service that a carrier may offer, in the sense of compelling him to carry goods that he does not want to carry. But that is not what this case is about. The reality here is that UPS agreed to carry the three packages in question. As I have already held, it entered into a contract of carriage in respect of them. It was not compelled to do so, whether by the CMR or otherwise, but it did so. The contract service is one of carriage of the goods that it accepted for carriage. It is plain that clause 3 defines the terms on which that contract service is to be performed; and it follows that, by virtue of article 41, it is null and void in so far as it contains stipulations which would directly or indirectly derogate from the provisions of the CMR.
The particular stipulation relied on in Mr Flaux’s submissions to us was clause 3(e). There was some argument as to the precise meaning and effect of that provision, but I think it unnecessary to deal with the detail of that argument. It seems to me that, in so far as UPS relies on clause 3(e) as displacing the liability to which UPS would otherwise be subject under article 17.1 of the CMR (whether compensation is on the limited basis defined by article 23 or on the unlimited basis arising out of the application of article 29), it necessarily derogates from the provisions of the CMR and is to that extent null and void. It cannot lawfully operate as an exclusion of the liability to which UPS is otherwise subject under the CMR. The same applies to any other provision of clause 3 on which UPS may continue to rely as excluding its liability in the circumstances of this case. (Mr Reeve, for the claimants, contended that the entirety of clause 3, including for example the power to suspend carriage, derogated from the provisions of the CMR and was null and void. I see no need to rule on that wider contention. It is sufficient that any provisions of clause 3 that are relied on as excluding liability in the circumstances of this case must in my view yield to article 41.)
Accordingly, I agree with the judge’s conclusions on this issue.
I do not consider that such an outcome leaves a carrier without protection or forces him to carry goods of a kind that he does not choose to carry. Much more could be done than UPS has sought to do by clause 3. At the simplest level, it is open to a carrier to require a consignor to sign a declaration that the goods comply with the restrictions laid down by the carrier: for example, to reflect clause 3(a)(ii) of the UPS terms, a carrier could require a consignor to sign a declaration that the value of any package did not exceed the local currency equivalent of US $50,000 or, in the case of jewellery other than costume jewellery, did not exceed the local currency equivalent of US $500. In the absence of such a declaration the carrier could refuse to accept the goods for carriage. If the carrier were induced to accept the goods by a false declaration of their value, he would in principle have remedies for misrepresentation that were not available on the facts of the present case.
More particularly, however, reliance could be placed on the regime laid down by the CMR itself. As Andrew Smith J observed at para 27 of his judgment: “Had the parties, intending to have a contract of carriage that was to be subject to the CMR, used the system of documentation contemplated by the CMR, some of the disputes in this litigation might not have arisen.” Thus:
(1) Article 4 provides that the contract of carriage shall be confirmed by the making out of a consignment note (though lack of a consignment note does not affect the validity of the contract of carriage). Article 5 requires the consignment note to be made out in three original copies signed by the sender and the carrier, and lays down certain other requirements. Article 6 deals with the particulars to be contained in a consignment note. Those referred to in paragraph 1 are mandatory. Paragraph 2 provides that “[w]here applicable, the consignment note shall also contain the following particulars: … (d) a declaration of the value of the goods”. Paragraph 3 provides that “[t]he parties may enter in the consignment note any other particulars which they may deem useful”. Thus it is open to a carrier to require that a declaration of value (or of maximum value) along the lines that I have indicated be included in the CMR consignment note.
(2) In the absence of a satisfactory declaration of value in the consignment note, it would be open to the carrier not to accept the goods for carriage.
(3) If there were a false declaration of value in the consignment note and the carrier could show that he would not have accepted the goods for carriage but for that declaration, article 7 would provide him with a strong counter-argument in the event of a claim by the consignor. Article 7 reads:
“The sender shall be responsible for all expenses, loss and damage sustained by the carrier by reason of the inaccuracy or inadequacy of:
…
(b) the particulars specified in article 6, paragraph 2;
(c) any other particulars … given by him to enable the consignment note to be made out ….”
I accept that the application of article 7 would not be altogether free from doubt or difficulty. Mr Flaux drew attention to a not dissimilar issue that arose in the present case. UPS contended that the loss was caused by the “wrongful act” of the claimants, within the meaning of article 17.2, in sending packages in breach of the article 3 restrictions. In rejecting that contention, the judge held not only that it was not a “wrongful act” but also that UPS had failed to prove that any such act had caused the loss. His reasoning was that if the claimants had not sent three packages each worth more than US $50,000, they would probably have sent a consignment of smaller packages each worth less than US $50,000; and that UPS had failed to prove that the loss would not have occurred if there had been a larger number of smaller packages. Those were findings on the particular facts – findings which are not the subject of appeal. Mr Flaux was entitled to rely on them as an example of the kind of issue that can arise in practice, but I do not regard them as being of general application or as seriously undermining the protection that article 7 is capable of providing to a carrier who makes proper use of the consignment note provisions of the CMR.
(4) A false declaration would also strengthen the carrier’s case that there had been a wrongful act by the consignor under article 17.2, though there would again be an issue of causation as considered in (3) above.
(5) It is true that the CMR applied only to one stage of the journey in this case and that another leg of the journey involved international carriage by air. But we have been shown nothing to suggest that compliance in this respect with the CMR regime would produce an inconsistency with other applicable rules or would otherwise be unworkable.
THE CLAIMANTS’ APPEAL: WILFUL MISCONDUCT
Introduction
Having rejected UPS’s arguments that it is not liable to the claimants at all for the loss of the goods, I must turn to consider the claimants’ case as to the extent of UPS’s liability. The sole issue on the claimants’ appeal is whether the judge was correct to reject the claimants’ contention that article 29 of the CMR applied to their claim and that the limit to compensation under article 23 was therefore disapplied.
Article 29 reads:
“1. The carrier shall not be entitled to avail himself of the provisions of this chapter [which include article 23] which exclude or limit his liability … if the damage was caused by his wilful misconduct or by such default on his part as, in accordance with the law of the court or tribunal seized of the case, is considered as equivalent to wilful misconduct.
2. The same provision shall apply if the wilful misconduct was committed by the agents or servants of the carrier or by any other persons of whose services he makes use for the performance of the carriage, when such agents, servants or other persons are acting within the scope of their employment. …”
The claimants’ case was that the packages were stolen by one or more of UPS’s employees and that the loss was therefore caused, within the meaning of article 29, by wilful misconduct of UPS’s servants acting within the scope of their employment. Initially the claimants appeared to single out one driver, Mr Mouloud Kadim, to whom the relevant delivery from UPS’s hub to Schipol was allocated and whom UPS itself at first suspected of theft of the packages. But the case as ultimately put was on a broader basis as to employee theft as the most likely cause of the loss. (References in this judgment to “employee theft” or to theft “by” employees are intended to include the involvement of employees as accomplices to theft.)
In order to understand that case and the criticisms made of the judge’s rejection of it, it is necessary to set out a considerable amount of factual detail. For that purpose I shall gratefully adopt extensive passages from Andrew Smith J’s judgment, with the addition of some points made in the course of argument before us. The judgment makes reference to the evidence of Mr Tailor, Mr Worrall and Mr Appelman, all of whom were witnesses for the claimants. It also refers to the evidence of Mr van Beusekom, a security investigator employed by UPS, whose factual evidence was largely unchallenged and was accepted by the judge. I will need to deal separately, however, with certain opinion evidence of Mr van Beusekom, as well as the evidence of the parties’ respective expert witnesses, Mr Holmes and Mr Heinrich-Jones, on the possible causes of the loss.
The consignment and its progress to the hub
The judge described the consignment as follows:
“24. The consignment that is the subject of this claim comprised three packages, weighing 25kg, 25kg, and 17kg respectively. They were brown cardboard boxes, and they bore no Datec logo or other such indication that the goods were from Datec. The boxes had a transparent pouch on one side, and in the pouch of at least one of the boxes was a shipping document produced on UPS’s ‘Worldship’ computer system; and the other two had either a similar document or at least an address label and a UPS tracking label. …”
In addition to the substantial weight of each package, our attention has been drawn to their substantial size. Each was made up of a number of smaller boxes the dimensions of which were 38 cm x 33 cm x 12 cm. Two of the packages comprised three such boxes, the third package comprised two such boxes.
The documentation that accompanied each package was the subject of more detailed discussion at paras 25-26 of the judge’s judgment. He found that, whatever its precise form, it contained no more specific description of the goods than “electronic components” and gave no indication of their value. It is clear from a similar form that we have seen, and from other evidence, that the documentation included the shipper’s address and the delivery address, together with a barcode which could be scanned so as to enable the progress of the packages to be tracked.
The tracking system established that the packages all reached UPS’s hub. As the judge stated:
“28. The progress of the consignment to the hub is not controversial. It was carried by road to Luton airport, where it was recorded at 7.24pm on 25 July 2002. It was taken by air from Luton to Cologne, Germany, where it was recorded at 1.59 am and 2.08am on 26 July 2002. It was then transported by road from Cologne to Amsterdam, and was recorded at the hub at 7.30am on 26 July 2002. These times are known because UPS scanned the bar codes of the tracking labels and so recorded the progress of the packages on their computer system. …”
Before continuing with the judge’s account, I shall turn to his description of the hub itself and of the procedures at the hub and for delivery from the hub.
The hub and UPS’s procedures
The judge’s findings were as follows:
“14. The UPS warehouse is surrounded by a wire mesh fence of some 3 metres in height, through which there are two vehicular entrances and one pedestrian entrance. There is another warehouse building within the fenced area, but it was not being used in July 2002. Staff have ‘Proximity’ cards, which allow them access to the premises at permitted times. Vehicles delivering packages to the hub are reversed into off-loading gates at the side of the warehouse building, and Mr van Beusekom gave unchallenged evidence that it is virtually impossible to enter or leave the warehouse between the sides of the building and vehicles as they unload. Otherwise, all receiving, sorting and loading operations are done inside the building and behind closed doors.
15. On a typical morning in 2002 UPS would receive, sort and load some 5,000 packages at the hub. Vehicles arrived there from about 4.00am to 8.00am to deliver consignments, and workers called ‘pre-loaders’ unloaded them. (Packages were also handled in the evening between about 5.30pm and 10.00 or 11.00pm.) There would have been up to 15 members of staff handing packages in the warehouse at this time, and in addition there were, say, six administrative staff who worked flexible hours and might come in either before or after 8.00am. The pre-loaders place the packages on to conveyor belts that extend into the back of the trailers or vans. The belts carry packages from the off-loading bays into the building to the main conveyor belt, a distance of about 1.5 metres. The main conveyor belt then takes them to the delivery or despatch area of the building. As the packages are unloaded on to the main conveyor belt, the bar codes on their labels are scanned with hand-held scanners and the packages are recorded as being ‘out for delivery’.
16. There are two spurs off the main conveyor belts, and as packages come down the main belt, a sorter directs them manually to the appropriate spur. Loaders, who might also work as drivers, pull the packages for his or her area from the spur belts, and load them in delivery vehicles, which have been parked beside the spurs. UPS usually have some 40 to 50 vehicles waiting to take goods to various parts of the Netherlands and each is allocated a delivery area.
17. Generally packages are loaded directly into the back of delivery vehicles, and are stowed on racks and, as far as practicable, grouped according to their delivery address. However, for various reasons a package might be stacked on the warehouse floor before being loaded: for example, larger packages might be put there so that the loader can later place them in the vehicle where they could be conveniently handled; or the racks of the vehicle might be too full to take a package, which might then have to be delivered by another vehicle; or a package might have been mis-sorted and have to be redirected to another point on the loading spurs.
18. Mr van Beusekom’s evidence was that the speed and scale of the operation is such that staff in the hub have no time to ascertain what packages contain, and certainly are not in a position to assess their value. Indeed packages, at least if they are for delivery within the European Community, are not accompanied by documentation indicating their value. I accept Mr van Beusekom’s evidence about this.
19. Thus, delivery vehicles are loaded inside the warehouse. Packages are not scanned at this state of the operation, and drivers are not provided with a list of what had been loaded on their vehicles. The vehicles leave through doors on the side of the warehouse, which are automatically operated by a ‘Proximity’ card, and which lead into a yard, and from there they leave the hub through a gate in the perimeter fence.
20. The vans do not lock automatically when their doors were closed, only the door between the driver’s cabin and the body of the van having automatic locking. Drivers are instructed to lock the vehicles themselves when they make deliveries and also to secure the back doors with a padlock.
21. When UPS drivers deliver goods, they are supposed to obtain from the recipient a signature by way of a ‘Proof of Delivery’. Each driver has a ‘DIAD’ board, a portable machine that enables him to make a record of the packages that he is carrying and the addresses that he visits on a delivery round. The DIAD system is also used to obtain a recipient’s signature when a delivery is made. One signature should be obtained for each package, and so if a consignment comprises more than one package, several signatures are required. UPS should therefore have on the DIAD system a record of the number of packages delivered, and when they were delivered.
22. When he completes his round, the driver returns the DIAD recorder to a rack at UPS’s premises, and the information from it, including any signatures obtained by way of proof of delivery, is loaded into UPS’s mainframe computer system. If for any reason a driver does not deliver a package, he should bring it back to the hub. Upon return, it should be scanned and then placed in a locked cage area in the warehouse referred to as ‘overgoods’. Any packages that arrive at the hub and cannot be delivered because of inadequate labelling are also placed in ‘overgoods’. If after inquiries and investigation they can be neither delivered nor returned, these package are eventually sold at auction.
23. UPS have CCTV cameras at the hub covering both the inside of the building and the receiving and despatch yards outside. Inside the building there were in July 2002 nine cameras in operation, eight recording in colour and one recording in black and white. There was a further camera which was not recording at all because UPS’s system could not accommodate another operational camera, but it was thought to deter wrongdoing because only the manager and a few others knew that it was not working. Mr van Beusekom was cross-examined about the precise extent of the CCTV coverage in the building. It suffices to say that he accepted that it was not complete for two reasons: first, although the cameras covered most of the inside of the building, they missed some areas; and secondly, the view of a camera might be obstructed, in particular by delivery vehicles.”
The loss of the packages after they reached the hub
I can now return to the judge’s account of the progress of the consignment, from the point when the packages were scanned into the hub at 7.30 a.m. on 26 July:
“28. … The last scanning record of the consignment shows it ‘out for delivery’ at the hub at 7.31am on 26 July. However, Mr van Beusekom gave evidence that the Floor Supervisor, Mr Lofti Kharbouche, reported seeing the packages stacked behind a delivery vehicle and ‘checking’ them: one of his responsibilities was to check the details of packages stacked behind vehicles or under the belt because packages were put there when they were to be re-directed to other areas, and Mr Kharbouche wanted to make sure that the three packages had been sorted properly. Mr van Beusekom commented that it would have been ‘not unusual’ for packages as large as these to be stacked behind a delivery vehicle during loading. As I have explained, they might be put aside in order to stow them in an accessible part of the vehicle, or because there was no space on the racks, or in order for them to be loaded on to another vehicle. Mr van Beusekom also stated that Mr Kharbouche was not sure which vehicle was to carry these three packages. No doubt was cast upon the evidence about what Mr Kharbouche reported, and I accept it.
29. L&A premises were in UPS’s Schipol South East delivery area. On 26 July 2002 UPS allocated Schipol South East to their driver Mr Mouloud Kadim. This was not Mr Kadim’s usual assignment; indeed, he did not always drive a delivery vehicle for UPS, and he did not have a fixed delivery area when he did so. When his vehicle was parked for loading one of the loading spurs in the hub, there were five or more other vehicles loading at the same time by that spur. …
30. Mr Kadim, as well as being a driver, assisted in loading packages on to vehicles on 26 July 2002. There is, however, no evidence that he sorted and loaded the packages for the particular route and vehicle that he was to drive, and such evidence as there is suggests that he did not do so: when Mr Kadim was interviewed by the Dutch police about the missing packages, he said that he had not loaded his own vehicle, not by his own decision because ‘the planning department’ decided who loaded vans. He said that his vehicle had been loaded by ‘Sebastian’ and ‘Rob’, presumably referring to two employees called Sebastian Roux and Rob Wiegant. When Mr van Buesekom had earlier interviewed those two workers, they had told him that they did not know whether or not they had loaded the vehicle that Mr Kadim drove. There is no direct evidence whether the three Datec packages were in fact loaded on to any vehicle and if so whether they were loaded on to the vehicle that Mr Kadim drove. As I shall explain, Mr Kadim told the police that he was not the only UPS driver to carry parcels for the Schipol South East area that day.”
In a later passage of his judgment (at para 34) the judge found that Mr Kadim did deliver one package to L&A on 26 July 2002. Datec was not the consignor and Incoparts was not the consignee, but otherwise there was no evidence about the package. The finding was based on evidence from Mr van Beusekom about information printed out from the DIAD board used by Mr Kadim on that day.
The investigation into the missing packages
The salient parts of the judge’s account of the subsequent investigation into the missing packages are as follows:
“40. At the end of his round on 26 July 2002 Mr Kadim returned to the hub at about 1.00pm (or possibly a little earlier: he told the police he finished work at around 12.15 or 12.30 pm) and handed in his DIAD board. It had apparently not yet been reported to UPS that Datec packages were not delivered, and Mr Kadim was asked nothing about them. Later that day UPS learned that the three parcels were missing. Initially, as it appears from Mr Worrall’s report, Mr Tailor was told that the three packages might have been loaded in error on to another delivery vehicle, but this was uncertain because some vehicles had not returned to the hub. The source of this information is unclear. However, UPS did, as appears from the documents, contact L&A. I infer from the evidence of Mr van Beusekom and from what Mr Kadim told the Dutch police that UPS later telephoned Mr Kadim at home to ask about the packages and that he responded that other drivers had carried parcels for delivery in the Schipol South East area, and suggested that enquiries be made of them.
41. On the following Monday, 29 July 2002, Mr Kadim did not come to work and did not contact UPS to explain his absence. As a result and in view of his work record, UPS dismissed him by letter sent that day. (He had been employed by UPS since 1 March 2002 and had been away from work on a number of occasions.)
42. On 30 July 2002 Mr van Beusekom learned of the loss of the three packages from, as he believes, Datec’s insurers, and he began an investigation. … Mr van Beusekom viewed the CCTV footage recorded at the hub on the morning of 26 July 2002. It showed nobody in the warehouse who should not have been there, and nothing else of significance. It showed the front of Mr Kadim’s van but there was no film showing the back of the van or the area behind it because the angle of the camera was obstructed by the vehicle itself.
43. Mr van Beusekom thought on the basis of the DIAD records that Mr Kadim had been the driver who had carried the Datec packages. He was not able to interview Mr Kadim, but he spoke to other employees, including loaders who had assisted in loading the delivery vehicles on 26 July 2002. Mr Kharbouche told him about seeing the packages and checking their delivery details. On 1 August 2002 he reported to the police that the three packages were lost and that he suspected that Mr Kadim might have stolen them: in the words of the agreed translation put before me, he told the police, ‘I have good reason to suspect that [Mr Kadim] embezzled the parcels’. On 6 August 2002 Mr van Beusekom learned of the loss of the Axxis package, and he reported that loss to the police.
44. In the course of his investigation Mr van Beusekom spoke to Mr Appelman about the missing Datec packages, but, as appears from Mr Appelman’s evidence, he did not suggest to L&A that the consignment had been delivered to them, and so L&A did not themselves investigate whether they might have received it, for example by viewing their CCTV security films.
…
46. On 30 September 2002, Mr Kadim went to the Dutch police. He explained that he had been absent from work on and after 29 July 2002 because late on Friday 26 July 2002 his mother had telephoned from Morocco to tell him that his father was seriously ill, and therefore he had gone to Morocco on Sunday 28 July 2002. He said that he did not contact UPS because he thought that his employment with UPS was going to be terminated anyway. He did not return to the Netherlands until 25 September 2002, and then, on learning that the police were looking for him, he went to the police station. He was arrested and interviewed, and he denied involvement in the loss of the packages. The police released Mr Kadim without charge on 1 October 2002, concluded their investigation and apparently took no further action over the loss.
47. In his interview with the police, Mr Kadim said that on 26 July 2004 he arrived at work at 4.00am and assisted in loading vehicles, and then he worked as a driver on a delivery round. As I have mentioned, he said that he had not loaded his own van, and he also said that he had not known before 26 July 2002 which route he was to drive. He was not familiar with the route for the Schipol South East area, and three other drivers, whom he did not know by name, took packages to assist him with deliveries there. According to Mr Kadim, none of the ‘customers’, (meaning, I infer, consignees) complained to him that day that he had not delivered all their goods.”
The loss of the Axxis package
In para 43 of his judgment, quoted above, the judge refers to “the loss of the Axxis package”. The Axxis package is peripheral to the argument but is not without significance. On the same day as the Datec consignment, 26 July 2002, UPS was due to deliver to L&A a consignment of computer chips sent by Platinum Components in the United Kingdom to Axxis Hardware BV in Amsterdam. The value of that package was said to be US $141,696. UPS’s records showed that it arrived at the hub in Amsterdam on 26 July and was “out for delivery” at 6.14 a.m. Axxis alleged, however, that it was not delivered to L&A; and, although UPS did not admit non-delivery, it was clear that no signature acknowledging delivery had been obtained from L&A.
The loss of the Axxis package was the subject of proceedings by Axxis against UPS in the Netherlands. In a judgment dated 25 May 2005, UPS was held to be liable under the CMR for the full amount of Axxis’s loss. The terms of that judgment do not assist. I mention it only as part of the history.
The case before the judge as to the possible causes of loss of the Datec packages
As already stated, the claimants’ case was that the probable cause of loss of the Datec packages was employee theft. Through the witness statement of Mr van Beusekom, UPS accepted that theft, whether by Mr Kadim or other employees, was a possible explanation for the loss. But Mr van Beusekom stated that on reflection it was at least as likely that Mr Kadim did not steal the packages. Only 18 packages had been lost from the hub as a result of theft (i.e. established theft) between 1998 and 2002, whereas 41 packages had been lost (i.e. without an established cause) in July 2002 alone. Mr van Beusekom put forward a number of other possible explanations for the loss of the three packages: theft by a third party from the delivery vehicle; delivery to the wrong address; delivery to L&A and theft within L&A; and placement of the packages in the “overgoods” area following a failed delivery.
Although he expressed opinions about those possibilities and was an experienced security investigator for UPS, it is to be noted that Mr van Beusekom was strictly a witness of fact rather than an expert witness and he was not cross-examined on the opinions he expressed. In my view that was an appropriate course for the claimants’ counsel to adopt, and I would attach no weight either to Mr van Beusekom’s opinions as such or to the lack of cross-examination in relation to them. The possible causes identified by Mr van Beusekom did, however, provide a convenient structure for consideration of the issues, and Mr van Beusekom’s factual evidence in respect of them was of course highly relevant.
The reports, including a joint report, of the expert witnesses (Mr Holmes for the claimants and Mr Heinrich-Jones for UPS) provided a commentary on a number of possible causes of the loss. Those causes were broken down into a large number of headings: missorted, mislaid, damaged / thrown away / sold at auction, failed delivery / returned to hub, mis-delivered, delivered in error, delivered but no proof of delivery, over labelled, incorrectly labelled, incorrectly addressed, bar code problems, theft from hub by a third party, theft following forcible entry at hub, in transit theft from delivery vehicle, theft by unknown UPS employee, theft by UPS delivery driver, theft by deception. It seems to me, however, that the only substantive addition they made to the broad categories mentioned by Mr van Beusekom was that of third party theft from the hub itself. Some of the possible causes were considered by the experts to be less likely than others, but in their joint report they concluded:
“6.19 It was agreed that it was difficult to pinpoint the most likely cause of loss given the elapsed time and limited information. It was further agreed that the Court should decide the most likely cause of loss on the balance of probabilities.
6.20 It was further agreed that if the court decided that the loss was caused by theft then it would most probably be targeted theft by organised criminals.”
Both experts were cross-examined (day 3, in particular at pp. 75-101 and 104-129). In the course of cross-examination Mr Holmes accepted that he could not pinpoint as the single probable cause of the loss any one of the explanations given in the joint report (though he did appear, at the same time, to consider theft by Mr Kadim or another UPS employee to be more likely than the other possibilities). Mr Heinrich-Jones adhered to the position expressed in the joint report.
Andrew Smith J evidently gained relatively little assistance from the evidence of either expert. At para 12 of his judgment, having said that both witnesses were qualified to give expert evidence and were seeking to assist, he continued:
“Their views were of interest, but their evidence was of limited value: inevitably they had formed their views on the basis of the material put before them and their own investigations, whereas I must assess the evidence presented at trial. Although their information apparently largely coincided with the evidence, it was not entirely the same and in these circumstances I hesitate to place great weight upon their opinions.”
The finding that the Datec consignment was not delivered to L&A
In its original pleading UPS admitted that the Datec packages were not delivered to L&A. It was only at trial that UPS amended its pleading to contend that the packages may have been duly delivered – a point that also emerged from Mr van Beusekom’s reliance on delivery to L&A and theft within L&A as a possible explanation for the loss. The judge therefore had to make a finding on the issue of delivery to L&A. There was a dispute before him as to where the burden of proof lay. The judge was “inclined to think” that the burden lay on the claimants, but considered the debate to be “an arid one on the facts of this case”, for these reasons:
“49. … UPS’s procedures contemplate that they will obtain a proof of delivery: the Guide states (and at the relevant time stated), ‘Proof of delivery is a service designed to put your mind at ease’. Furthermore, as I have found, UPS did obtain a recipient’s signature for one package delivered to L&A on 26 July 2002, whereas it is common ground that UPS obtained no proof of delivery of the consignment that is the subject of this claim. This alone, in my judgment, establishes a strong prima facie case that the packages were not delivered, and on any view effectively places an evidential burden on UPS to produce evidence that the packages were delivered to L&A.
50. In saying this, I do not overlook the evidence of Mr van Beusekom about the UPS’s electronic scanning procedures: he described them as 90% effective, explaining that in about 10% of cases the procedure fails for one reason or another – for example, because bar codes are damaged and illegible, or because a scanner fails to read the code, or because of human error. (Mr Delafuente had apparently found them to be more reliable than Mr van Beusekom had.) However, this is not a case about a single package. It seems to me improbable that all three labels were damaged (despite being in pouches) or that all three codes were illegible. The DIAD scanner did read the bar code of one package that Mr Kadim delivered, and it is therefore the less likely that it failed to record other packages delivered at the same time. As for human error, L&A’s procedures were, as I shall explain, that their staff should provide a signature for each package that was delivered, and if Mr Kadim or another UPS driver did not ask them to acknowledge receipt, L&A would probably have reminded him.
51. I accept Mr Appelman’s evidence in his second witness statement about L&A’s operation in Schipol, and this too, it seems to me, makes it the less likely that the three packages were delivered to L&A and were later stolen or lost by them. L&A deal only with valuable computer parts, and their security arrangements are designed to protect such goods. Only L&A employees have access to their secure warehouse, an area of about 600 square metres, and they enter through a door controlled by a code lock. The exit door can be opened only from inside by a member of the warehouse staff. L&A have CCTV cameras covering the doors and the inside of the warehouse. When deliveries arrive from UPS or similar carriers, L&A’s procedure is for the warehouse staff to meet the driver outside the warehouse, to sign for each consignment, to take the airway bill, and then, in the case of deliveries for Incoparts, to check the goods. A Mr Michaels was responsible for receiving goods for Incoparts: he was an experienced employee and, I infer, would have been familiar with these procedures. Goods are either sent out by L&A to their customer on the day that they are received, or, if the goods are held by them, checked daily. Mr Appelman considered that in view of these procedures it is inconceivable that three or four high value packages would have been delivered without being noticed, and in any case, any “loose parcels” would soon have been noticed.
52. Of course, no procedures are completely infallible, and, despite L&A’s precautions, it would be unrealistic to think it impossible that the three packages were lost from their possession, either through criminal design or through accident. However, I accept Mr Appelman’s evidence that L&A had proper procedures for safeguarding valuable goods, and consider that they reduce the chances that the goods were lost or stolen from them.
53. Both expert witnesses expressed the opinion that because UPS sometimes fail to record proof of delivery the packages could have been mislaid or stolen by “the consignee or their employees” (presumably referring to L&A: in view of Mr Appelman’s evidence it is unrealistic to contemplate that the goods might have been received by Incoparts). However, Mr Holmes regarded this as a most unlikely possibility, and I agree with him. Wherever the legal burden of proof lies, I conclude that the three Datec packages were not delivered to L&A.”
There is no appeal against that finding.
The judge’s findings on the issue of theft by UPS employees
Having found that the three packages had not been delivered to L&A, the judge turned to consider the claimants’ contention that they were stolen by Mr Kadim or some other employee or employees of UPS. He observed (at para 56) that the argument appeared to derive from the suspicion reported by Mr van Beusekom to the Dutch police that Mr Kadim had stolen the consignment; but that Mr van Beusekom had reported no more than a suspicion and his report was made before Mr Kadim had been interviewed by the police. There was no reason to suppose that Mr van Beusekom’s suspicion was prompted by any evidence or consideration that had not been presented at the trial and which the judge was able to assess in the light of the rest of the evidence. The judge continued:
“57. Both expert witnesses agreed the paucity of evidence is such that it is difficult to say how the three packages came to be lost. Mr Heinrich-Jones concluded that, while it was possible that they were stolen by, or with the assistance of, an employee of UPS, it is impossible to conclude that that is the most likely cause of the loss. Mr Holmes thought it most likely that the packages were stolen by Mr Kadim or another UPS employee but his opinion was properly guarded: indeed, in cross-examination he acknowledged that he could not say that this was ‘the probable cause of the loss’.
58. Mr van Beusekom gave evidence that from time to time packages do go missing otherwise, UPS believe, than through theft. In his witness statement he said that between 1998 and 2002 their Amsterdam operation had only 18 packages stolen, but 41 packages were lost for one reason or another in July 2002 alone. As I made clear during the trial and as Mr Priday readily accepted, I do not attach any importance to the precise figures that Mr van Beusekom gives, and I discouraged the parties from exploring them in detail. However, his evidence does confirm that experience shows that packages are sometimes lost inexplicably, as indeed would be expected when a large organisation like UPS is handling so many consignments.
59. The real question, it seems to me, is whether the claimants have shown that theft by a UPS employee is more likely than accidental loss. I accept if they were stolen, it is probable that an employee of UPS was responsible for the theft. It would have been difficult for an outsider to gain access to the hub without his presence being recorded by the CCTV cameras; there is no evidence of a forced entry into a UPS vehicle; and it seems to me improbable that a casual thief happened upon a delivery vehicle that Mr Kadim or another driver had accidentally left unlocked, and chanced to pick such valuable packages, choosing them rather than smaller packages that could more conveniently have been carried off.
60. Mr Reeve rightly emphasised that this is not a case of one package being lost. Three packages were, as I have found, lost from UPS’s possession, and I am prepared to assume for the purposes of determining this question that the Axxis package was also lost before delivery to L&A. I accept that it is less likely that three or four packages were lost accidentally than that one was, and that therefore this consideration lends support to the claimants’ case that they were stolen.
61. At least at one stage of these proceedings, it appeared to be the claimants’ primary case that Mr Kadim stole the packages. Four considerations, taken together, seem to me to cast real doubt upon this contention. First, Mr Kadim went voluntarily to the Dutch police and there is no reason to doubt his account that he went to them promptly upon returning to Holland and learning that they wished to speak to him. If Mr Kadim had stolen these valuable goods, he would not have known the strength of the evidence against him, and it would have shown real bravado in these circumstances for him to have gone to the police. This at least goes a long way to answer any suggestion that in July 2002 he went to ground to avoid answering the suspicions against him.
62. Secondly, it was not obvious from the labelling of, and documents with, the packages that they were particularly valuable. They were, of course, addressed to L&A, but this would have been significant only to someone who knew that L&A handled only valuable consignments. While it is possible that Mr Kadim knew this, there is no evidence that he did so, and no reason has been suggested for me to doubt Mr Kadim’s statement to the police that he was not familiar with the route that he was driving on 26 July 2002.
63. Next, Mr Kadim did make a delivery to L&A on 26 July 2002, and then returned to the hub to hand in his DIAD board. If he were intending to steal the packages, the more obvious course would have been to steal all their packages, rather than choose to deliver one package and risk L&A questioning him about other packages that they might have been expecting.
64. Fourthly, there is no convincing evidence that the missing packages were ever loaded on to Mr Kadim’s vehicle. Mr van Beusekom said that Mr Kharbouche might have seen the packages behind the vehicle because they had been set aside to be delivered by another vehicle that had been allocated another delivery route. Mr Kadim told the police that he did not carry the packages in his vehicle, and this is consistent with what, as I have found, he told UPS when they telephoned him at home on 26 July 2002; and UPS did not then dismiss as improbable Mr Kadim’s explanation that the packages were being carried by other drivers, but passed it on to T&B. Mr Kadim therefore denied from the start that he had had the missing packages, before he could have known that his denial would be corroborated to some extent by Mr Kharbouche’s report of them being set apart for some reason from the other packages that were to be delivered in Schipol South East. I add that there is no evidence whether or not the Axxis package was loaded on Mr. Kadim’s vehicle.
65. Once it is recognised that there are grounds to think that the packages might well not have been loaded in Mr Kadim’s vehicle, but set aside with a view to being delivered by another driver, it seems to me that the claimants’ argument that the packages were stolen by an employee of UPS loses much of its force. Of course, it is possible that they might have been stolen from the hub and never loaded on a delivery vehicle, but, although Mr Holmes described the hub as “fertile ground for potential thieves among the employees”, it does not seem to me that it would have been at all easy to smuggle such large packages out of the hub building. Again, it is possible that another driver loaded the packages and stole them from his van, knowing that there would be no record that they were loaded on it, but there is no evidence indicating this. It would have been extraordinary risky for another driver to plan such a theft: to offer to carry the valuable parcels to assist Mr Kadim with a delivery in Schipol South East and then to steal them. If, on the other hand, another driver had the goods for delivery by chance and stole them opportunistically, he was remarkably lucky either to be able to infer their value from the L&A address or to happen upon such valuable goods.
66. Having considered how the goods might have disappeared as a result of theft to which an employee of UPS was party, it seems to me more likely that they were lost accidentally: that, for example, the packages were delivered to the wrong address by a driver other than Mr Kadim; or that they were put into the hub’s ‘overgoods’ either because they were returned by a driver who had failed to deliver them and they went astray, or because they were for some reason never loaded in any delivery vehicle.
67. In summary, I conclude that it would be too speculative to hold that the goods were taken by or with the assistance of an employee of UPS. There is no sufficient evidence to support that theory. In Laceys Footwear (Wholesale) Ltd v Bowler International Freight Ltd. [1997] 2 Ll L R 369 at p.383 Brooke LJ emphasised that when applying the provisions of an international convention, the Court must not ‘adopt anything other than a properly rigorous approach to such evidence as is available before it makes findings of fact on which a determination of wilful misconduct is based’, and although Brooke LJ dissented from the majority of the Court on the facts of the case before them, there is, I think, no room to dispute that this is the proper approach to the evidence in such cases of this.
68. I therefore decide that the claimants have not discharged their burden of proving on the balance of probabilities (or preponderance of probability) that their loss results from theft to which an employee of UPS was party. I should add that I was properly reminded by counsel of the principle set out in such cases as In re H (minors) [1996] AC 563, where Lord Nicholls observed that ‘Built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation’ (at p.586F). However, Lord Nicholls explained that this simply means that the inherent probability or improbability of an event is itself to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred. Although in this case the allegation is one of theft from an employer, I do not regard this possibility as so improbable that there is a particularly heavy burden upon the claimants to prove their case. I have simply concluded that there is not proper evidence to support the claimants’ allegation, and I therefore reject their contention that article 29 of the CMR applies to their claim.”
The judge did, however, reject an alternative contention by UPS that, if the consignment was stolen by a UPS employee, the claimants had not shown that it was stolen by him when he was acting in the scope of his employment. If he had decided that the consignment was stolen by an employee of UPS, he would have concluded that the employee was acting within the scope of his employment at the relevant time. That finding is not challenged before us.
The claimants’ submissions on the appeal
Mr Reeve makes no complaint about the judge’s overall approach. He accepts that the judge was correct to treat the claimants as having the burden of proof, to the balance of probabilities. In the absence of direct evidence, it was necessary to consider the relative probability of employee theft against the probability of loss through other causes. In conducting that exercise, the judge was right, as he stated at para 67, to adopt “a properly rigorous approach to such evidence as is available”, in accordance with the observations of Brooke LJ in Laceys Footwear (Wholesale) Ltd. v. Bowler International Freight Ltd. [1997] Ll L R 369. In para 68 the judge took proper account of what was said in Re H [1996] AC 563 about the burden of proof, though he was also right to conclude that an allegation of theft is not “so improbable that there is a particularly heavy burden upon the claimants to prove their case”. Indeed, Mr van Beusekom had originally suspected theft and accepted in evidence that theft was a possible explanation.
Mr Reeve submits further that the judge applied the above approach correctly in discounting two of the four other possible causes postulated by Mr van Beusekom. First, for the reasons given at paras 49-53 and irrespective or where the burden of proof lay, the judge held that the packages were not delivered to L&A. Closely linked with that finding was his view that it was “a most unlikely possibility” that the packages were mislaid or stolen at L&A (para 53). Secondly, for the reasons given at para 59, he considered it improbable that, if the packages were stolen, they were stolen by someone other than an employee of UPS.
Accordingly, submits Mr Reeve, the judge asked himself the right question at para 59, namely “whether the claimants have shown that theft by a UPS employee is more likely than accidental loss”.
The claimants’ case, however, is that the judge went wrong in answering the question he asked himself. The primary focus of the argument is on para 66 of the judgment, where the judge stated that “[h]aving considered how the goods might have disappeared as a result of theft to which an employee of UPS was party, it seems to me more likely that they were lost accidentally: for example, the packages were delivered to the wrong address by a driver other than Mr Kadim; or that they were put into the hub’s ‘overgoods’ …”. It is said that, although the judge considered how the goods might have disappeared as a result of employee theft, he did not consider how they might have disappeared as a result of either of the two accidental causes to which he referred. He made no attempt to analyse the series of steps required for either of those causes to have operated, or how his other findings and the undisputed evidence impacted on the likelihood of those steps having occurred. In fact, the cumulative improbability is such that neither cause can be regarded as plausible. The judge failed in this respect to take into account relevant factors. In addition, the judge was wrong in his assessment of the factors relevant to employee theft: he overestimated the extent to which they made it less likely and underestimated the extent to which they made it more likely. On any reasonably complete and balanced assessment, employee theft was more likely than any other cause and was proved on the balance of probabilities. The judge was therefore wrong to conclude in para 68 that it would be too speculative to hold that the goods were taken by or with the assistance of an employee of UPS, and to state in para 69 that there was not proper evidence to support the claimants’ allegation.
As regards misdelivery, the points made in support of the implausibility of such a hypothesis are these: (1) The driver would, mistakenly, have had to have taken the packages to the wrong address despite the fact that each package bore a typed label displaying the true consignee and a unique UPS barcode: the judge found it improbable that all three labels were damaged or that the barcodes on all three were illegible (para 50). There was no separate delivery plan and the drivers had to read the labels. (2) If the label was legible, the driver would have been forced to read it when deciding where and whether to deliver it. If the labels had been illegible, the packages would have been returned to the warehouse. (3) A coincidental mistake would also have to have been made in respect of the Axxis package which was due for delivery to L&A: the judge found that the package was scanned “out for delivery” at the hub soon before its loss and it is therefore highly unlikely that the label was defective. (4) The chances of such a mistake being made in respect of four separate packages in two separate consignments are even less than in respect of the claimants’ three packages. (5) The recipients would have had to make a similarly unlikely series of mistakes in accepting the packages when they were not the consignees named on them and had no reason to expect delivery. (6) The driver would have had to make further and coincidental mistakes in failing, contrary to his training, to obtain proofs of delivery for any of the packages. (7) As UPS’s expert witness, Mr Heinrich-Jones, accepted in cross-examination, recipients of misdelivered goods usually re-deliver them or require them to be collected by the carrier. It is therefore a further improbability that they would have held on to them. (8) UPS called none of its drivers at the trial to say that they had carried the packages, let alone that they had misdelivered them or made such mistakes. (9) As the judge found (at para 40), UPS was put on notice on the day of loss that the claimants’ three packages were missing. The claimants were told that they might have been loaded in error onto another delivery vehicle, but this was uncertain because some vehicles had not returned to the hub. Mr Kadim also suggested the same day that inquiries be made of other drivers. It is to be inferred that UPS contacted the returning drivers while their memories were still fresh and that no-one could recall these packages having been delivered or misdelivered. The fact of early inquiry and investigation makes the hypothesis of misdelivery even more remote.
As regards the overgoods area, Mr Reeve submits that there is uncertainty about the judge’s precise hypothesis but that he was probably contemplating the possibility of loss from the overgoods area. In any event the points made in support of the implausibility of a hypothesis involving the overgoods area are these: (1) On the judge’s findings and the undisputed evidence, the overgoods area is a secure area – “a locked cage” (para 22). It would be a non sequitur to suggest, without further analysis of how the security might have failed, that an accidental loss from the overgoods area was plausible. (2) As the judge held (also at para 22), goods placed in the overgoods area were the subject of inquiries and investigation to see if they could be delivered or returned; and it was only if they could be neither delivered nor returned that they were eventually sold at auction. In any event, goods sold at auction would have been accounted for. (3) UPS did not suggest, or call evidence to show, that there were any weaknesses in the system in respect of the overgoods area. (4) It was improbable that the packages went into the overgoods area in the first place. If the packages had been returned undelivered by one of the drivers, they would have been scanned on their return to the warehouse before they went into overgoods. There was no evidence of any such scans. (5) Furthermore, since UPS had been alerted before the drivers returned from their rounds on the day of the loss, it is implausible in the extreme that the three packages slipped into overgoods, past the staff whose responsibility it was to ensure the proper treatment of undelivered packages and despite the inquiries being made on that day. (6) The loss of the Axxis package as well as the claimants’ three packages adds to the implausibility of the hypothesis of loss from the overgoods area.
In relation to the above points, Mr Reeve also emphasises the weight and size of the claimants’ packages. These were substantial packages and it would have required a conscious decision to move them.
Mr Reeve relies on the following additional factors as providing positive support for a finding that the disappearance was the result of employee theft: (1) Mr van Beusekom reported the matter to the police because he considered there to be “good reason to suspect” employee theft (or, in another translation, that there was a “strong suspicion” of employee theft) and he regarded accidental loss as implausible. The information that the packages might have been carried by other drivers may have justified reconsidering Mr Kadim’s own position, but did not alter the conclusion that the loss was likely to be the result of employee theft. (2) Mr Kadim’s explanation for his subsequent absence from work was implausible: in particular, he told the police that the reason why he did not contact UPS was that he thought that his employment with UPS was not going to be extended; yet Mr van Beusekom’s evidence was that the decision to dismiss him was taken after he had failed to call the company. (3) Mr Kadim’s explanation for why he did not take the goods in his own delivery vehicle was also implausible: he took one package to L&A anyway, and there was no obvious reason why the three Datec packages should be given to another driver (whom he could not identify) for delivery to the same address. (4) None of the drivers or other UPS staff were called at trial to give evidence as to their handling of the Datec packages or to support Mr Kadim’s explanation.
Against those matters, it is submitted that the matters relied on by Andrew Smith J as disprobative of theft by Mr Kadim were minor points and were at best neutral in their effect.
UPS’s submissions on the appeal
Mr Flaux submits that the judge was right to hold that the claimants’ case was too speculative. The judge’s conclusion follows properly from his reasoned findings that theft by Mr Kadim was implausible and that theft by other UPS employees was even more unlikely. Mr van Beusekom and the independent experts identified numerous possible causes of the loss and none of them considered employee theft to be the most likely cause. Unexplained loss is just that; and the figures given by Mr van Beusekom show that there are many more cases of unexplained loss than of proven theft. The court should be slow to make a finding of wilful misconduct and should adopt a rigorous approach towards the evidence, as emphasised by Brooke LJ in Lacey’s Footwear (Wholesale) Ltd. (see above). In this case there was no evidence to support a finding of wilful misconduct, and to find wilful misconduct in such circumstances would be to subvert the CMR regime.
In Mr Flaux’s submission the claimants’ criticisms of para 66 of Andrew Smith J’s judgment are unfounded. The judge was simply alluding in that paragraph to two other examples of possible causes. He did not have to set out an exhaustive list or go through each example in detail. The exercise in which he was engaged was not to establish the cause of loss, but to determine whether the claimants had proved their case that the loss was caused by employee theft and therefore wilful misconduct. He was right to find that the claimants had failed to discharge the burden of proof.
Mr Flaux places substantial reliance on the decision of the House of Lords in The Popi M [1985] 2 Lloyds Rep.1. In that case a ship had sunk as a result of the entry of water through a large aperture in the shell plating of its hull. The plaintiff shipowners, upon whom the burden lay to prove that the loss had been caused by a peril of the sea, put forward a number of possible causes. After others had been eliminated, the only remaining possibility they could rely on was a collision with a submerged submarine, travelling in the same direction as the ship and at about the same speed. The defendant underwriters contended that the loss was caused by prolonged wear and tear of the ship’s hull over many years, resulting in the shell plating opening up under the ordinary action of wind and wave. The trial judge, Bingham J, found the shipowners’ submarine theory to be extremely improbable, but also found that the underwriters’ particular wear and tear explanation was effectively ruled out on the evidence. Left with a choice between the submarine theory and the possibility that the casualty occurred as a result of wear and tear but by a mechanism which remained in doubt, he preferred the submarine theory. Lord Brandon, giving the leading speech in the House of Lords, disapproved that approach, stating (at page 6):
“My Lords, the late Sir Arthur Conan Doyle in his book ‘The Sign of Four’, describes his hero, Mr Sherlock Holmes, as saying to the latter’s friend, Dr Watson: ‘how often have I said that, when you have eliminated the impossible, whatever remains, however improbable, must be the truth?’ It is, no doubt, on the basis of this well-known but unjudicial dictum that Mr Justice Bingham decided to accept the shipowners’ submarine theory, even though he regarded it, for seven cogent reasons, as extremely improbable.
In my view there are three reasons why it is inappropriate to apply the dictum of Mr Sherlock Holmes, to which I have just referred, to the process of fact-finding which a Judge of first instance has to perform at the conclusion of a case of the kind here concerned.
The first reason is one which I have already sought to emphasize as being of great importance, namely, that the Judge is not bound always to make a finding one way or the other with regard to the facts averred by the parties. He has open to him the third alternative of saying that the party on whom the burden of proof lies in relation to any averment made by him has failed to discharge that burden. No Judge likes to decide cases on burden of proof if he can legitimately avoid having to do so. There are cases, however, in which, owing to the unsatisfactory state of the evidence or otherwise, deciding on the burden of proof is the only just course for him to take.
The second reason is that the dictum can only apply when all relevant facts are known, so that all possible explanations, except a single extremely improbable one, can properly be eliminated. That state of affairs does not exist in the present case: to take but one example, the ship sank in such deep water that a diver’s examination of the nature of the aperture, which might well have thrown light on its cause, could not be carried out.
The third reason is that the legal concept of proof of a case on a balance of probabilities must be applied with common sense. It requires a Judge of first instance, before he finds that a particular event occurred, to be satisfied on the evidence that it is more likely to have occurred than not. If such a Judge concludes, on a whole series of cogent grounds, that the occurrence of an event is extremely improbable, a finding by him that it is nevertheless more likely to have occurred than not, does not accord with common sense. This is especially so when it is open to the Judge to say simply that the evidence leaves him in doubt whether the event occurred or not, and that the party on whom the burden of proving that the event occurred has therefore failed to discharge such burden.
In my opinion, Mr Justice Bingham adopted an erroneous approach to this case by regarding himself as compelled to choose between two theories, both of which he regarded as extremely improbable, or one of which he regarded as extremely improbable and the other of which he regarded as virtually impossible. He should have borne in mind, and considered carefully in his judgment, the third alternative which was open to him, namely, that the evidence left him in doubt as to the cause of the aperture in the ship’s hull, and that, in these circumstances, the shipowners had failed to discharge the burden of poof which was on them.”
It is submitted that the approach adopted by Andrew Smith J in the present case was fully in line with that laid down in Lord Brandon’s speech. This was a case where the judge was entitled to find that the claimants failed on the burden of proof; not all the relevant facts were known; and the judge’s finding accorded with the common sense of the matter.
In UPS’s skeleton argument, stress is placed on the fact that the judge’s conclusion was based on his evaluation of the evidence and the facts, which is pre-eminently a matter for the trial judge and one in relation to which the Court of Appeal should be slow to interfere. Reference is made to the principles laid down in Assicurazioni Generali SpA v. Arab Insurance Group (Practice Note) [2002] EWCA Civ 1642, [2003] 1 WLR 577, and in the authorities there cited. It is submitted that Andrew Smith’s conclusion could not possibly be said to be against the evidence or wrong, let alone plainly wrong or “exceeding the generous ambit within which reasonable disagreement about the conclusion to be drawn from the evidence is possible” (per Ward LJ in Assicurazioni Generali SpA at para 197).
Discussion and conclusions
In my judgment the case advanced by the claimants has considerable force to it. There is sufficient evidence about the three Datec packages and the surrounding circumstances to enable the court to engage in an informed analysis of the possible causes of the loss and to reach a reasoned conclusion as to the probable cause. The fact that the experts were unable to reach a conclusion of their own does not preclude the court from reaching such a conclusion on the totality of the evidence and in the light of the findings of fact.
I think it particularly important that the packages were recorded as reaching UPS’s hub and as being “out for delivery” on 26 July, and that they were identified by the floor supervisor as being stacked behind a delivery vehicle. Those established facts greatly reduce the scope for uncertainty, and the inferences that can be drawn from them as to the condition of the packages and in particular as to their labelling assist in the assessment of the subsequent fate of the packages.
I also think it important that there was detailed consideration at the trial of all possible explanations for the loss. It was not suggested that there might exist any realistic possibility that the experts had failed to canvass. The court was in a position to look closely at the evidence for and against each of the possible explanations. In practice that could be done largely by reference to the broad possibilities identified by UPS’s Mr van Beusekom.
In relation to those possibilities the judge gave compelling reasons for finding, first, that the packages had not been delivered to L&A (paras 49-53 of his judgment). That finding did not depend on where the burden of proof lay; and although the judge did not dismiss the possibility that the packages had been delivered to L&A and mislaid or stolen within L&A, he evidently and rightly considered it to be unlikely. His finding was firmly grounded on evidence not only about the Datec packages and UPS’s delivery procedures, but also about L&A’s own operation at Schipol.
The judge also gave compelling reasons for finding that theft by a third party was improbable (para 59 of his judgment). He dealt only briefly with third party theft from the hub itself, concentrating on the difficulty of gaining access without being recorded by the CCTV cameras (as to which, see paras 23 and 42 of the judgment). I would add that the overall security arrangements at the hub, as summarised at para 14 of the judgment, also militate strongly against the possibility of a third party gaining access and removing the packages undetected. As to theft by a third party from a delivery vehicle, I agree with the judge that it is improbable – I would say highly improbable – that a casual thief would have found by chance a delivery vehicle left accidentally unlocked (there was no evidence of any vehicle being broken into), have picked out three packages of the weight and size of these packages, and have removed them without detection.
The two examples of accidental loss mentioned by the judge at para 66 of his judgment were delivery to the wrong address (by a driver other than Mr Kadim) and placement of the packages in the overgoods area.
In my view the hypothesis of misdelivery is highly implausible, for all the reasons given by Mr Reeve in his submissions (para 57 above). It would require a most improbable combination of events for the packages to have been lost in this way, involving multiple errors by the UPS driver, errors by the recipient and a subsequent failure by the recipient to return the packages when the mistake was detected. The fact that prompt inquiries within UPS about the whereabouts of the packages produced nothing to support this hypothesis is a further factor telling against it.
The judge’s second example, of placement of the packages in the overgoods area, provides an even less plausible explanation for the loss. Again I agree with the reasons advanced by Mr Reeve in his submissions (para 58 above). It is difficult to see how the packages might have got to the overgoods area in the first place, given the evidence that they had labelling sufficiently intact and legible to be scanned “out for delivery” and to be identified by the floor supervisor. But if they had got to the overgoods area, the strong probability is that they would have been identified and delivered or returned or that they would have been sold and accounted for. The system does not admit of any sensible possibility of their simply disappearing accidentally and without trace.
Although the judge referred to those two possibilities of accidental loss as examples, there does not seem to me to be any other realistic way in which packages of this size and weight might have been lost accidentally, either from the floor of the hub or from one of the delivery vehicles.
That leaves for consideration the possibility of theft by one or more UPS employees. It should be noted at the outset that there is nothing inherently implausible about such an explanation: far from it. Although there were only 18 cases of established theft from the Amsterdam operation between 1998 and 2002, there was a large number of losses the causes of which had not been established (41 in July 2002 alone); and it would need only a relatively small proportion of such losses to be attributable to employee theft for the total losses from employee theft to run into the 100s over the same period. There was also evidence to support the view that the Datec packages might be targeted for theft or identified as containing high value items. Although there was no direct information about their value on their labelling or accompanying documentation, the contents were described as “electronic components”. Moreover, L&A was known to handle high value items of this sort, so that the delivery address would have been significant to anyone “in the know”. The experts acknowledged the possibility of targeted theft by organised criminals and agreed that, if the packages were stolen, it was probably a case of targeted theft.
I am inclined to agree with Mr Reeve’s submissions (para 60 above) concerning Mr Kadim’s subsequent conduct and explanations to the police, and to place less weight on them than the judge did. But the explanation of employee theft does not depend for its cogency on putting the blame specifically on Mr Kadim or on other otherwise identifying the responsible employee or employees. The explanation fits well with the known facts even though the employee or employees concerned cannot be identified.
The three packages disappeared between the point at which they were seen stacked behind a delivery vehicle and the point at which they should have been delivered. Whilst there existed an opportunity for them to be stolen by an employee from the floor of the hub, I agree with the judge’s comments (at para 65 of his judgment) about the difficulty of smuggling packages of this size out of the hub. There was a better opportunity, however, for the packages to be stolen without detection by the driver of a delivery vehicle, and that opportunity was enhanced in this case by a lack of transparency as to whether they had been loaded and, if so, on which vehicle. In the circumstances an entirely plausible mechanism for the loss is that the packages were loaded onto a delivery vehicle and were stolen by the driver of that vehicle. It remains a plausible mechanism irrespective of whether the situation that arose was the result of planning (by one or more employees) or of chance. Even if it did arise by chance, it was possible for a driver to infer from the description “electronic components” and/or from the delivery address that the packages were worth stealing.
Looking at the matter overall, it seems to me that the judge did overstate the factors telling against employee theft and understate the factors telling in favour of it. I consider employee theft to be a much more likely explanation than the judge found it to be. Perhaps more importantly, I regard as implausible and improbable the explanations of accidental loss to which the judge referred when concluding that accidental loss was more likely than employee theft.
If conducting the exercise of evaluation for myself, I would conclude that theft by one or more UPS employees was the probable cause of the loss and that the claimants’ case had therefore been proved on the balance of probabilities. That conclusion would lead in turn to a finding of wilful misconduct within article 29 of the CMR and the consequential disapplication of the limit imposed by article 23 on UPS’s liability. (I should mention, for the sake of clarity, that I agree with the approach of Andrew Smith J at para 68 of his judgment towards In re H (Minors) [1996] AC 563 and its application to the standard of proof in this case. In the circumstances the burden on the claimants to prove their case is not a particularly heavy one.)
My conclusion does not depend on the separate loss of the Axxis package, but I accept the submissions by Mr Reeve that the loss of the Axxis package adds to the improbability of other possible causes and makes employee theft all the more probable.
I have borne very much in mind the observations of Brooke LJ in Lacey’s Footwear (Wholesale) Ltd.(see above), with which I am in respectful and total agreement, as to the need for a properly rigorous approach to the available evidence. It is the evidence, properly analysed, which in my view leads to the conclusion. That is also why I disagree with the judge’s description of the claimants’ case as “too speculative”.
Nor do I see any inconsistency between my approach and the observations of Lord Brandon in The Popi M. The conclusion that employee theft was the probable cause of the loss is not based on a process of elimination of the impossible, in application of the dictum of Sherlock Holmes. It does take into consideration the relative probabilities or improbabilities of various possible causes as part of the overall process of reasoning, but I do not read The Popi M as precluding such a course. Employee theft is, as I have said, a plausible explanation and is very far from being an extremely improbable event. A finding that employee theft is more likely than not to have been the cause of the loss accords perfectly well with common sense. Thus the various objections to the finding made by the trial judge in The Popi M simply do not bite on the facts of this case.
There remains, however, the question whether it is right to interfere with the conclusion reached by the judge on this issue. An appellate court must exercise caution in such matters, for reasons discussed in Assicurazioni Generali SpA v. Arab Insurance Group (Practice Note) (see above), per Clarke LJ at paras 15-23 and Ward LJ at paras 195-197. The constraint applies with particular force where the conclusion is one of primary fact and where it depends to a significant extent on oral evidence and the view the judge formed of the witnesses. That, however, is not a material consideration in the present appeal, since there is no issue about the judge’s findings of primary fact, including his acceptance of the factual evidence given by Mr van Beusekom. Moreover the judge’s conclusion cannot have been significantly affected by the impression made by the expert witnesses, upon whose evidence he did not feel able to place great weight.
The issue here depends on an evaluation of the primary facts and the inferences to be drawn from them. At para 16 of Assicuriazioni Generali SpA, Clarke LJ described such cases as closely analogous to the exercise of a discretion and expressed the view that appellate courts should approach them in a similar way. At para 197, Ward LJ stated:
“… I would pose the test for deciding whether a finding of fact was against the evidence to be whether that finding by the trial judge exceeded the generous ambit within which reasonable disagreement about the conclusion to be drawn from the evidence is possible. The difficulty or ease with which that test can be satisfied will depend on the nature of the finding under attack. If the challenge is to the finding of a primary fact, particularly if founded upon an assessment of the credibility of witnesses, then it will be a hard task to overthrow. Where the primary facts are not challenged and the judgment is made from the inferences drawn by the judge from the evidence before him, then the Court of Appeal, which has the power to draw any inference of fact it considers to be justified, may more readily interfere with an evaluation of those facts.”
In the present case, if Andrew Smith J had taken into account all relevant considerations when evaluating the facts and determining whether employee theft had been proved on the balance of probabilities, I would have been very reluctant to interfere with his conclusion and to substitute my own.
That, however, does not seem to me to the position with which this court is faced. I regard it as highly material that the judge, in an otherwise admirable judgment, did not follow through his reference in para 66 to two examples of accidental loss and did not analyse what each would have involved and how plausible each might be. I accept Mr Reeve’s submission that the judge thereby failed to take into account considerations relevant to his overall evaluation of the facts and his assessment of whether employee theft had been proved to be the probable cause of the loss. In my view that failure was sufficiently significant to entitle this court to look at the matter afresh and to form its own conclusion on the issue. For an example of a similar approach in a different context, see Chantrey Vellacott v. The Convergence Group plc [2005] EWCA Civ 290, at paras 115-117.
Accordingly, on this issue I would give effect to the conclusion expressed above and would find, in the claimants’ favour, that the loss was caused by employee theft amounting to wilful misconduct within article 29 of the CMR.
OVERALL CONCLUSION
I would allow the claimants’ appeal and dismiss UPS’s cross-appeal, holding that the claimants were entitled to recover from UPS, by way of damages under article 17 of the CMR, the full value of the three packages that were lost, namely £241,241.14.
Micro Anvika Ltd & Ors v TNT Express Worldwide (Euro Hub) NV & Ors
[2006] EWHC 230 (Comm)
The Hon Mr Justice Morison :
Introduction
This is a claim which arises out of a theft of valuable electronic equipment on 9 October 2003. At the time of the theft the goods were in transit pursuant to a contract of carriagegoverned by the CMR. The goods were consigned to the claimants who had a warehouse at 31-32 Alfred Place, a street in WC1, parallel to and just off the Tottenham Court Road. It is a two-way street with a central divide which had breaks in it. The warehouse in question is below ground, accessed from a bay at street level. The loading and unloading bay is set back from the pavement, and there is enough room for two transit vans to back up into the bay [at right angles to the road] without causing obstruction to pedestrians walking along the pavement on that side of the road. The goods arrived at Alfred Place and the lorry driver, a Belgian national, Mr Branson was intercepted by crooks and persuaded to deliver the load elsewhere. It is not suggested that Mr Branson was involved in the dishonesty.
The claimants are retailers of electronic equipment with shops on Tottenham Court Road and elsewhere. There is no dispute between the parties that both TNT as first carriers and Ninatrans as last carriers are, under the Convention, liable for the loss of the goods up to the Convention limit (calculated by weight) provided in Article 23 of approximately £21,000. The true value of the goods was £672,500 approximately and the difference between these amounts is what is in issue in these proceedings. The issue in law is whether the Claimants have succeeded in proving that the carriers were guilty of wilful misconduct under Article 29: if yes, they succeed; if not, they fail. This is an allegation made essentially against the driver of the lorry.
The Law
The wilful misconduct provision is as follows:
“The carrier shall not be entitled to avail himself of the provisions of this chapter which … limit his liability … if the damage was caused by his wilful misconduct or by such default on his part as, in accordance with the law of the court or tribunal seised of the case, is considered as equivalent to wilful misconduct.”
It is obviously a serious allegation to make that a person has been guilty of wilful misconduct and therefore the facts must be examined with particular care. There has been a bookful of reported decisions on the meaning of wilful default and this is not the occasion to seek to add to the learning on the subject. As usual in cases such as these, the question is not what principles are applicable but, rather, how well- known principles are to be applied to the facts of the case. I set out here what I believe to be the relevant principles as they emerge from the decided cases. I start with the distillation of the authorities helpfully and, accurately, compiled by Cresswell J. in Thomas Cook v Air Malta [1997] 2 Lloyd’s Rep. 399 at 405-8:
“1. The starting point when considering whether in any given circumstances the acts or omissions of a person entrusted with goods of another amounted to wilful misconduct is an enquiry about the conduct ordinarily to be expected in the particular circumstances.
2. The next step is to ask whether the acts or omissions of the defendant were so far outside the range of such conduct as to be properly regarded as “misconduct”. (An important circumstance would be a deliberate disregard of express instructions clearly given and understood.)
3. It is next necessary to consider whether the misconduct was wilful.
4. What does not amount to wilful misconduct? Wilful misconduct is far beyond negligence, even gross or culpable negligence.
5. What does amount to wilful misconduct? A person wilfully misconducts himself if he knows and appreciates that it is misconduct on his part in the circumstances to do or to fail or omit to do something and yet (a) intentionally does or fails or omits to do it or (b) persists in the act, failure or omission regardless of the consequences or (c) acts with reckless carelessness, not caring what the results of his carelessness may be. (A person acts with reckless carelessness if, aware of a risk that goods in his care may be lost or damaged, he deliberately goes ahead and takes the risk, when it is unreasonable in all the circumstances for him to do so.)
6. The final step is to consider whether the wilful misconduct (if established) caused the loss of or damage to the goods.”
I cite these further well known observations from the cases:
“Wilful misconduct in such a special condition means misconduct to which the will is a party as contradistinguished from accident and is far beyond any negligence, even gross or culpable negligence, and involves that a person wilfully misconducts himself who knows and appreciates that it is wrong conduct on his part in the existing circumstances to do, or to fail or omit to do (as the case may be) a particular thing and yet intentionally does or fails or omits to do it, or persist in the act, failure or omission regardless of the consequences.” Per Johnson J. in Graham v Belfast and Northern Counties Railway [1901] 2.I.R. 13, which was cited with approval by Lord Alverstone in Forder v GWR [1905] 2 KB 532, who added “or acts with reckless carelessness, not caring what the results of his carelessness may be.”
“Wilful misconduct, to put it most shortly, as it has often been put in the past, is misconduct to which the will is a party, and it is something which is wholly different in kind from mere negligence or carelessness, however gross that negligence or carelessness may be. I think the first thing for you to remember is that the will must be party to the misconduct, and not merely a party to the conduct of which complaint is made. Let us take an example: if the pilot of an aircraft knowingly does something which subsequently a jury find amounted to misconduct, those facts alone do not show that he is guilty of wilful misconduct. To establish wilful misconduct on the part of this imaginary pilot it must be shown not only that he knowingly (and in that sense wilfully) did the wrongful act, but also that when he did it he was aware that it was a wrongful act – that is to say, he was aware that he was committing misconduct.”per Barry J. in Horabin v BOAC [1952] 2 Lloyd’s Law Reports 450 at page 459.
“If I summarise the principle in my own words, it would be to say that for wilful misconduct to be proved there must be either (one) an intention to do something which the actor knows to be wrong or (two) a reckless act in the sense that the actor is aware that loss may result from his act and yet does not care whether loss will result or not or, to use Mr Justice Barry’s words in Horabin’s case, ‘he took a risk which he knew he ought not to take’ per Longmore J. in National Semiconductors v UPS [1996] 2 Lloyd’s Reports 212 at 214.
“Further, a person could be said to act with reckless carelessness towards goods in his care if, aware of a risk that they may be lost or damaged, he nonetheless deliberately goes ahead and takes the risk when it is unreasonable in all the circumstances for him to do so.” per Beldam LJ. in Laceys Footwear (Wholesale) Ltd v Bowler International Freight Ltd [1997] 2 Lloyd’s Reports 369, at page 374.
Counsel in this case have sensibly distilled the test this way:
The claimants must show:
(1) Misconduct on the part of Mr Branson;
(2) That he was aware of a risk that the cargo might be stolen, but deliberately and unreasonably went ahead and took that risk;
(3) That that misconduct caused the loss of the cargo.
The facts
These are my findings of fact:
The cargo comprised numerous boxes of ipods and Apple computers, which were palletised and sealed in plastic. There were some 29 pallets in all. TNT took the cargo over on 3 October 2003 in Luxembourg and transported it to their depot in Belgium. For the journey from Belgium to London, TNT sub-contracted the carriage to Ninatrans.
Mr Branson, a Ninatrans driver, drove to the depot in Belgium on 8 October 2003 in an articulated lorry and trailer. It was a five axle arrangement: three on the trailer and two on the lorry and its overall length was approximately 40 feet. At TNT’s depot, the trailer was loaded with the pallets. Mr Branson said that he was neither involved in the loading itself nor was allowed into the depot; he said he waited outside. I accept his evidence on this point: it seems inherently plausible and probable. But, whether or not this was so, I am satisfied that he knew that he was carrying a valuable consignment of Apple electronic products although he probably did not know precisely what the load comprised. Mr Branson’s partner, Ms Logist, was with him at the time. She had travelled on his lorry before. As I understand the evidence, this was Mr Branson’s first trip to England as a driver and she came with him. Mr Branson told me that he thought that her command of English was not as good as his. Because of what was written in a document there is a suggestion that hers was better than his. Nothing turns on this as will become plain. She was unable to give oral evidence as she is not medically fit to travel as she has just given birth. Mr Branson had a good command of English and felt able to answer questions with only the occasional use of an interpreter.
After the pallets had been loaded, Mr Branson drove to Calais, passed through the Channel Tunnel and stopped for the night at a secure lorry park in Ashford, Kent. He had been told of this facility by his employers. Although he had an expensive cargo on board he told me that it was his practice to stop at a secure lorry park whenever he had to stop. In other words, he was telling the court that stopping at the secure lorry park at Ashford was not dictated by the need to protect a particularly valuable cargo. Again, I accept that evidence. They left the lorry park for London at about 6.10 am.
CCTV cameras were in operation in the street adjacent to the consignee’s premises. The film has been produced and this has been of considerable assistance in reconstructing what happened because it not only pictures what is going on but has the time of each frame. On the other hand, I was not provided with a ‘to scale’ plan of the area in question, which would have been helpful. From the pictures it can be seen that the lorry arrived at about 9.17 am. At that time there were two vans parked in the Micro Anvika bay: a red and a white vehicle. The white van was parked up against the entrance to the premises and was being loaded at the time. Mr Branson brought his lorry to a halt on the offside of his carriageway, where car parking was permitted, and as close to the bay as it was possible to get from his direction of travel. Immediately in front of his stationary lorry there was a gap in the central ‘reservation’ which is directly in front of the loading bay and was used by vans from the bay to turn right into Alfred Place, rather than always having to turn left About a minute after his arrival Mr Branson is seen moving in front of his lorry walking towards the claimants’ premises. His driver’s door was, of course, on the left of the lorry. Ms Logist was, on the evidence, at this stage sitting in the front passenger seat, closer to the premises. As he is rounding the front of his vehicle, a man can be seen moving towards him and they arrive together at the break in the reservation, a few feet only from the front of the lorry. It can be seen from the film that the man, a crook, had started walking towards the lorry as it was drawing to a stop. He was walking towards the traffic, on the same side as the claimants’ premises, in the roadway [I suspect that he was not in either rear view mirror] and starts to cross the road, at an angle, so that he arrives and meets Mr Branson, opposite the Claimants’ premises. I doubt whether Mr Branson had seen the crook much before they met, as his view would have been obstructed by the lorry and, as would be likely, he seems to be looking towards his left no doubt with a view to judging when it would be safe to cross the carriageway for traffic coming from his left [that is, in the opposite direction to the way his lorry was facing]. The film showed that he crossed the road with the crook and continued conversing with him just a few yards from the bay and the two parked vans. A second crook arrives and joins them. That crook had also come from down the road from where they were standing. The CCTV appeared to show, and Mr Branson agreed, that he went off with crook 2.
Mr Branson’s account of what happened is principally derived from the evidence he gave in court, along with his witness statement which stood as his evidence in chief, in the usual way. But there were other sources of evidence as to what he said at the time or is reported as having said. I should therefore identify those other sources.
Mr Branson was taken to the police station very quickly after the incident was discovered. He was not asked to make a formal statement on that occasion; he returned to England to do so after he had been interviewed by private investigators in Belgium. What he had done was to look at photographs and from them he thought he was able to identify one of the crooks. There has been no prosecution brought because such would have depended upon identification evidence only: the crooks were careful to avoid leaving any forensic evidence to be analysed. The circumstances in which he came to make his police statement 9 days after the incident, were not entirely satisfactory because he made the statement to an interpreter who had not been briefed about the incident and, therefore, knew nothing about the sequence of events. The statement was in Flemish and Mr Branson signed every page, and for the purposes of this hearing it has been translated. It was made more contemporaneously than his witness statement and I have looked at it with care.
Before he gave a statement to the police, Mr Branson was interviewed in Belgium by a firm of private investigators who were apparently instructed by the Ministry of Public Affairs. There is what purports to be a statement from him taken by Jan Klaus, one of the investigators, on 13 October 2003. This statement appears to be unsigned and the investigator has “deleted some points” [email dated 14 October] “because I am not sure if they really happened or were speculation afterwards. The driver has told his story several times and after that it has been added to by circumstances he has known about after the incident from the police, his employer, from TNT, his wife etc.” I can place little reliance on it both because it has been not been signed by the driver as accurate and because it has been edited. It does not provide reliable evidence on the basis of which I could draw adverse inferences against Mr Branson. In fact this statement is very much in accordance with Mr Branson’s oral evidence.
In addition there is a report by the Claimants’ loss adjusters dated October 29 2003. I am not sure on what basis this report was compiled; the maker of it has not been called. I am not at all sure that this report was based upon any direct contact with Mr Branson. I think that it was probably not, because Mr Branson recalls only speaking to the police and to the private investigators and there is no evidence to contradict that.
Finally, there is a report prepared by TNT, by whom Mr Branson was not employed, which has a date stamp on it of 16 October 2003. How this statement came to be prepared is unknown. Mr Branson says that he was not spoken to by anyone from TNT so far as he is aware. The report contains statements as to what the driver purportedly said. I have heard no evidence about this statement or the circumstances in which it came to be written and do not feel able to draw any adverse inferences from it against the driver. Mr Branson was not asked, contemporaneously, to confirm what was written in either of these two reports.
In fact, the important evidence was what he told the court during his evidence at the trial. I was able to observe him in the witness box and felt able to assess his credibility both on the basis of his manner and demeanour and on the probabilities and likelihood of what was going on, assisted as I was by the CCTV footage.
On his account, and this is confirmed by the CCTV evidence to which I referred, what happened on his arrival at Alfred Place was this. He said he saw three or four people standing in front of the Micro Anvika’s premises, as he turned into Alfred Place, and as he got out of his cab and walked towards the shop “a man came to me and asked if I had a delivery. I said ‘yes’ and showed him my CMR note. .. The man said that he had not expected such a large lorry .. and he suggested that I move the lorry a little further up the road. … I then went with the man on foot so that we could make sure the goods could be discharged at the warehouse” [witness statement]. “I took my (CMR) consignment note, someone came up to me and asked if I had a delivery, I said yes and the man said he had not expected such a big lorry and that there was no room to park it. He asked me to park the lorry a little further up but I didn’t because my wife was in it. I then went with the man on foot to look if perhaps there was another depot further down the road. … We turned left and left again and got to the entrance to a garage where there was a Mercedes Sprinter parked on the right. There I met a second man. … Man [1] said I could park there, but I told him it was too narrow. Then the man said we have another depot that is suitable for delivery two miles from here” [police statement made on 22 October 2003].
As they walked round the corner, the crook (2) bought Mr Branson a cup of coffee. He felt entirely comfortable with the contact which had been made. He was sure that the person he was dealing with was from the consignees. The film shows him talking to the crook in front of his lorry and Mr Branson appears to have papers in his hand. At that time he was in full view of Micro Anvika’s premises. After a short period, having disappeared from the camera’s view as they go into Store Street [the road running in a west east axis to the south of Alfred Place] they returned, after Mr Branson had ruled out the practicality of driving round the corner as suggested and unloading in yet another narrow street.
It is clear from the CCTV images that Mr Branson’s lorry was causing an obstruction for traffic wishing to travel north down Alfred Place in the direction of Chenies Street [in the direction his lorry was pointing]. It can be seen from the CCTV cameras that there was a small white van parked on the nearside kerb adjacent to the parked lorry. It looks from the film as though it was possible for cars to fit through the gap between the van and the lorry but not for a sizeable box van because such a van can be seen travelling along the wrong carriageway in Alfred Place. Waiting to get into the bay on the same side as the warehouse but just to the north of the bay was a TNT van which was due to make a delivery there. The front of that van can be seen in that position as the lorry arrives.
The film shows that at about 9.26 am the white van in the claimants’ bay moved off and is replaced by the red van which had been parked alongside it, making room for the waiting TNT van to pull into the bay alongside the red van. Shortly afterwards, a post office van parks, half on the pavement, just to the south of the bay, but leaving enough room for the red van to get out of the bay and turn right across the front of the lorry at about 9.32 am.
By 9.32 am Mr Branson is back at his lorry with one of the crooks; the nearside door of his lorry is partly open; at this time it is probable that Ms Logist is in the front passenger seat. So far as Mr Branson was concerned the unloading was going to take place at a different depot some two miles away and he was going to be shown the way by one of the two people to whom he had been speaking. For this purpose his partner needed to get out of the passenger seat and move to the centre of the cab to sit on the bed which is located there. In such a position she would be sitting higher up than either the driver or passenger.
In charge of the warehouse activities was Mr Surinder Patel, Warehouse Manager. Assisting the security side of the business was a security guard, who appears briefly on the film. Mr Patel’s responsibilities are “to look after everything to do with warehouse deliveries. When a delivery arrives, the pallets are unloaded from the truck and taken into the loading bay, so that they can be seen by our security cameras” [witness statement]. He told the court that he arrived at work at just after 7.30 in the morning. He said that he knew that “we were expecting a large delivery from Apple/TNT that day, as I had been told it was arriving by our Accounts Department. However, I did not know what time the consignment was arriving.”
He told the court that one of his first tasks was to load “one of our vans with goods to be delivered to one of our Stores. It was when I was engaged in this task that I noticed that a truck had drawn up outside the warehouse. As it was a large truck, I immediately assumed it was our delivery. … Although the road in question is marked by a single yellow line (and the truck was in fact causing a blockage), vehicles are allowed to wait there for the purposes of unloading up to 20 minutes at any one time. As soon as I saw the truck, I left the warehouse and walked up to the passenger side of the truck’s cab. The truck was facing Store Street.”
The film shows Mr Patel walking across the southbound carriageway, looking to his right for oncoming traffic, at 9.32 by which time the lorry had been parked for 15 minutes. The lorry was parked facing Chenies Street and not Store Street as he said in his witness statement. By the time he arrives at the nearside of the cab Mr Branson is seen going round the front of the lorry, presumably to get into his driver’s seat. It is common ground that Mr Patel said nothing to Mr Branson; indeed they did not see each other. However, the crook who was to accompany Mr Branson to show him the way to a more convenient unloading point ‘2 miles away’ was the person to whom Mr Patel first spoke. From the film it can be seen that Mr Patel arrived at the nearside of the lorry at 9.32.19 and left to walk back to the warehouse at 9.32.31 so he was there for some 12 seconds only. His evidence was that “As I approached the cab, a man walked up to me and complained that the truck was causing a blockage in the road. He had been driving a white van, and had had to drive on the wrong side of the road in order to pass the truck. It is correct that the truck was causing a blockage but that was not unusual in that area. Although I do not recall speaking to the man, I see from the statement which I gave to the police at the time that I apparently said to him that I would move the truck on. After dealing with this man, I walked up to the open door of the cab, showed the lady my Micro Anvika I.D. (which I carry round my neck) and told her to wait where she was. I said that we would take delivery here only within about 15 to 20 minutes (I wanted to complete the loading of our truck and also to unload a small TNT van which had arrived). … I assumed the lady was the driver, although I now know that she was the companion of the driver. Having spoken to the lady in the cab, I returned to the warehouse to complete the loading of our van and to start the unloading of the small TNT van.”
In his statement to the police he said that he stood in front of the lorry and told her [the lady whom he assumed was the driver] to wait. “I then noticed that the lorry was large and was blocking the road. Other motorists were shouting. I told the female driver to come back in 10 to 20 minutes time. She did not speak so I do not know if she understood what I was saying. … I would add that as I initially approached the large red lorry, a male who was in a white lorry, parked in front of the red lorry got out and walked up to me telling me that I had to move the red lorry. … I told this male that I would move the lorry ..”. In fact, from the film it can be seen that the man to whom he spoke was already by the lorry when Mr Patel started to cross the road and he could not have seen him come from another vehicle parked in front of the lorry. Indeed, there is no other vehicle within the camera’s view parked in front of the lorry. Further, as can be seen from the film, the warehouse staff had completed their work in relation to both the white and red vans in the bay.
In his evidence he said that he saw the lady sitting in the driver’s seat of the lorry. That seems most unlikely. At the end of the day, it is clear that if he did speak to her she showed no signs of having heard him, let alone of having understood what he was saying. Indeed, it would be very difficult to understand precisely what he wanted the lorry to do because he appears to have been giving conflicting orders: stay and go. It is obvious, I think, having seen Mr Patel as a witness that he is quite confused about the sequence of events. I am sure that he could not have seen the crook to whom he spoke at the side of the lorry either driving the white van as it came down the wrong side of the road or getting out of the van as he walked across the road. As to the first part, he can only have had at best a fleeting glimpse of the driver of the white van, as the film shows, and as to the second part, the man in question did not come from the direction of Chenies Street as Mr Patel was suggesting. Further, it simply would have made no sense to have told the ‘driver’ to wait, when the lorry was causing an obstruction and he did not intend to try and unload it for 20 minutes or so. I am sure that if he had given instructions to Mr Branson’s partner she would have passed them on. Whether he tried to speak to her at all is doubtful: she certainly was not in the driving seat at the time: she would either have been in the front passenger seat or in the middle or in the process of moving from the one position to the other.
I reject any suggestion that Mr Branson and his partner disobeyed an instruction given by one of the Claimants’ employees. Further, I am not persuaded that Mr Patel showed his pass to Mr Branson’s partner as he alleges. If he did try and show it to her, and the film is not clear on this issue, there is no certainty [or probability] that she would have seen it. So far as Mr Patel is concerned he is unable to say that the lady either heard or understood what he was saying to her: she made no reply and did not look at him. In my judgment, on the facts, Mr Patel never gave any instructions to anyone that the lorry should stay where it was. That is inherently improbable, because it was causing an obstruction and on Mr Patel’s case people were complaining about it. I think he intended to say that the lorry should move and return later but I very much doubt that he communicated such a message to either Mr Branson or Ms Logic. If he had told the driver, as he thought, to come back in about 20 minutes, his subsequent behaviour is difficult to explain because he did not raise any alarm when the lorry failed to turn up at 10.00am or until notified of the theft at 12.30 at the earliest. Furthermore, Mr Patel could not have told anyone at the warehouse that the vehicle was coming back shortly or within any time period. The evidence shows that at about 10.00 am the managing director of the company, who worked upstairs on the first floor, telephoned the warehouse to find out if the delivery, which he knew to be a large one, had arrived and what he was told was that “the courier company had gone away and would be coming back”. Micro Anvika had been the victims of two round the corner thefts in the past. Yet neither Mr Patel nor the managing director were concerned enough to wonder why the lorry had not returned. This strongly suggests, as I find on the evidence, that Mr Patel never told the ‘driver’ to come back shortly or within 20 minutes or anything to that effect. Had such been said it would have been reported to the managing director and both he and Mr Patel would have become anxious when the lorry did not return as allegedly expected. Further, I doubt whether Mr Patel’s evidence that he thought the woman was the driver can be right because of the position she had in the cab. He was confused during his evidence and I cannot place any credence on what he told me absent confirmation from the film.
The lorry drove off with one of the crooks inside giving Mr Branson directions, not, I think, because of Mr Patel’s instructions but because the crook had suggested the unloading should take place elsewhere. In order to unload the lorry into the bay, Mr Branson would have had to drive into Chesnies Street and make a U turn; but such a manoeuvre was probably not possible with a forty foot truck. But even had Mr Branson been able to get his vehicle facing south on Alfred Place so that it could be brought alongside the loading bay, it would have been obstructing the highway and people on foot. The film shows a flow of pedestrians walking past and across the bay. Contrary to Mr Patel’s evidence, the only way to unload the lorry would be by using the tail lift which could take two pallets at a time. The lorry did not carry a pump lift device but Micro Anvika had several. Using a pump lift inside the lorry, two pallets could be moved at a time onto the tail lift and then lowered to the ground where one or two pump lifts could gather them and take them into the premises. The tail lift would be brought up to the base of the lorry and the process repeated. The whole unloading process [even assuming all hands to the deck] was likely to take over an hour, possibly as much as two hours. And during this time, obstruction and inconvenience would be caused. The crook’s statement that they were not expecting such a large vehicle and the suggestion that the load were better taken off elsewhere must have seemed to Mr Branson sensible and reasonable. He was fooled; as it was put in argument, his belief was suspended.
With directions from the crook, Mr Branson was directed to drive to and down (in a westerly direction) a one way street, Guilford Street. This street is to the north of Queen’s Square and is linked to it by two alley ways, either side of a building on the south side of the road. Mr Branson parked his lorry outside a hotel just to the west of the western alleyway. There is no CCTV film in this area [no doubt the crooks knew that]. The crook who had accompanied him assisted in parking the vehicle and when Mr Branson and Ms Logist got out there were four men standing there. He described the men as smartly dressed with white shirts, black trousers and ties ‘having the appearance of uniformed workers’. They did not have a pallet truck available but they did have small hand trucks. Mr Branson was told that a pallet truck would arrive shortly but that its operator was having a tea break. Such a truck arrived about 15 minutes later [police statement]. The crook who had greeted the lorry at Alfred Place [but who had not accompanied the lorry to Guilford Street] suggested that they started the unloading process so as to avoid any delays. Mr Branson’s statement continues: “As I was keen to help, my partner and I became engaged in stripping the pallets and handing over the smaller boxes to the four men. We remained inside the trailer and goods were wheeled out of sight. I never got out of the back of the trailer other than … to go to the bathroom. By that time there were only two pallets left in the trailer. I asked [one of the crooks] where I could find a toilet. He accompanied me and we went into a hallway on the other side of the building and I noted that I appeared to have entered a hospital. I was told by a security guard at the hospital that I had gone the wrong way and should go to the ground floor. I went outside and the [crook] showed me the way to street level and we re-entered the hospital through the main entrance. When I came back from the toilet, the [crook] was no longer there. I returned to the lorry and found that everybody was gone apart from my partner. She told me that the [crook] had asked for the documents but she did not have them. The men had told her that it was their “tea time” and they were taking a break. The [crook] came back to my lorry a short time thereafter and asked me to hand over the documents for him to check. I gave him copies of the CMR notes.” Mr Branson and his partner than had lunch sitting in the front of the lorry, with the tail gate open but raised to the level of the floor of the lorry and as none of the men had returned to the lorry he thought he had better go and find them and he walked down the alley down which the goods had been taken, and near to the hospital there was a pallet lying in the footpath which was only half emptied. “I went inside the hospital but could not see any of the men I had met before. I then ran back to the lorry and called the dispatching service of Ninatrans on my mobile phone; it dawned on me that something untoward had happened and that I had been duped.”
The account in his police statement is not very different. He said that everyone was very kind and brought us drinks. “They were going backwards and forwards through the narrow alleyway and I thought they were taking it to a depot somewhere but the only thing I could see was a sort of gate at the end of the alleyway.” When he went to the main entrance to the hospital “I didn’t see anything suspect, just a few delivery vans stopped by the entrance to the hospital.” When he went to check he saw one half-loaded pallet and two empty pallets stacked against the hospital wall. He said that when he telephoned Ninatrans and told them what had happened they suggested that he waited “another while perhaps these people have gone for lunch”. “I waited a further 15 minutes and then my wife and I walked back to the goods entrance, but there was nobody there. We then went into the hospital and I told the receptionist the whole story. He had seen people loading goods into a van. .. He came outside with us to look at the boxes. He noted the name of the firm from a box, rang directory inquiries for the number, rang that number and I spoke to them. The man on the line was rather angry and reproached me that I should ask people for their ID card before making a delivery.” By the time he had got to his lorry Micro Anvika personnel were there and the police were called, but took rather a long time in coming.
Apart from Ms Logist’s witness statement, there was no other evidence as to what took place at Guildford Street.
Mr Morpuss, on behalf of the Claimants, challenges Mr Branson’s credibility and conduct. In relation to what happened at Alfred Place he submitted that Mr Branson’s evidence as to seeing 3 – 4 men standing adjacent to Micro Anvika’s loading bay as he turned into Alfred Place is not credible, because there was no sign of them on the film at the relevant time. I am of the view that the men must have been lurking quite close by but that they were not as close to the premises as Mr Branson thought. There were quite a number of people about, including innocent pedestrians. It is his case that this was a deliberate untruth to try and justify his belief that he was dealing with Micro Anvika personnel. I have to say that I do not consider Mr Branson to be other than a careful witness of truth. He was certainly duped [and it is not suggested otherwise] and was shocked to find this out in Guildford Street. He had not been made aware of the risk of ’round the corner’ delivery scams in marked contrast to the awareness of Micro Anvika and, I think, TNT who had adopted special instructions to their drivers. Mr Branson’s employers, Ninatrans, provided driver instructions/guidelines which did not alert him to the risk of this type of scam nor suggest that a driver should check the identity of anyone purporting to represent the consignee. Whether or not there were in fact three or four people by the Claimants’ premises, the important fact is that the first crook who approached him could well have come from the premises, looking at the film. There was nothing about the ‘position’ of this man which should have alerted Mr Branson to any risk that he was being duped. This was a highly sophisticated operation, by relaxed crooks operating under the noses of the Claimants. Mr Patel was equally taken in by one of the crooks whom he thought to have come from the white van which claimed it was being obstructed.
It was submitted that in agreeing to leave Alfred Place with suspects who had produced no identification “and had no apparent connection with Micro Anvika, Mr Branson was taking a deliberate risk that the cargo would be stolen (consistent with his later attitude to risk). The instructions given by Mr Patel were ignored, whether to stay or to come back in 20 minutes.” It is highly unlikely, submitted Mr Morpuss on behalf of the Claimants, that Ms Logist did not pass the instructions on and the most probable explanation is that Mr Branson simply ignored what he had been told, through Ms Logist. “If such instructions were ignored there is an overwhelming case of wilful misconduct. Mr Branson accepted that in those circumstances it would not have been right to drive away.” This criticism simply does not work on the facts as I have found them. With the benefit of hindsight, it would have been better had Mr Branson asked for identification. He was not alone in failing to do so. In the papers there is a list of London postal codes where ’round the corner’ scams have been reported to the police between April 2003 and May 2005. There are over 120 of them. Either identification tags were forged or the drivers were duped just as Mr Branson was on this occasion. Mr Morpuss is wrong to suggest that Mr Branson was taking a deliberate risk; so far as he was concerned he was taking no risk at all. Furthermore, if anyone was to blame for what happened, blame must rest with his own clients. Mr Patel knew of ’round the corner’ scams and had been a victim of them. I would have expected him or the security guard, who appears to have done nothing, to have gone to the lorry as soon as it had arrived and spoken to the driver and given instructions about unloading and how and when it was to be done. The lorry containing a valuable cargo had been parked for 15 minutes or so before he went out. Someone [and there are twelve warehousemen] should have been detailed to keep their eye out for this large delivery. Speaking to the driver at the earliest time after arrival is a good way to avoid such scams. Yet Mr Patel never checked to see who was driving, nor did he communicate at all with the driver: he simply assumed that Ms Logist was the driver; yet he never asked whether she was. Leaving the lorry in a place where it was causing an obstruction whilst he dealt with a much smaller vehicle was going to expose the lorry to a ’round the corner’ scam since there was a good reason to entice the lorry away.
As to the events in Guilford Street, the TNT report gives a different version of what happened than Mr Branson gives in either of his two statements [witness statement and police statement]. In the TNT report it is written:
“Towards the end of the off-loading process, the driver accompanied [a crook] to [Queen’s Square] and on his arrival there, he noted the loading of the products into a white van. He told [the crook] that he urgently needed a toilet, and walked into the reception of the adjacent hospital. It is believed that [the crook] followed him into the premises, and that CCTV evidence exists of this.
On returning to [Queen’s Square], he was advised that there was not enough room on the vehicle being loaded, and that another was to follow to the scene to assist. It is unclear whether he immediately returned to his vehicle, or followed shortly afterwards, but following a lengthy delay and no other vehicle turning up, he returned to Queen’s Square to find a number of boxes at the scene, the pallets against nearby railings and none of the suspects in sight.”
As I have said, the circumstances in which this report came to be made are not known. If it purports to be an account of the incident given to someone from TNT we do not know who that person was nor when he allegedly saw Mr Branson nor the circumstances in which what he said was noted or recorded and checked for accuracy with the driver. Mr Branson denies ever speaking to anyone from TNT, so how does this report come about? In the absence of any evidence it would be unsafe to speculate, although there is evidence from Mr Branson [police statement] that the receptionist had seen a van being loaded and that there were vans parked around the entrance to the hospital when he used the toilet there. Mr Branson thought that there was a storage place which was accessed through the passageway down which the goods had been wheeled. He did not think that the goods were being transferred to a smaller van (or vans). I am not confident that the makers of the report, whoever they are, are recording what Mr Branson told them, or have confused what they were told by the receptionist. Mr Branson was cross-examined about this report. In my judgment he convincingly denied any part in its preparation or content and I believe his evidence on this point. Further, it is not satisfactory to seek to accuse a person of wilful misconduct on the basis of a document whose maker has not given a witness statement.
Because this was a sophisticated scam, I can well understand that the crooks needed to ensure that Mr Branson’s suspicions were not alerted before the theft was complete. When he was taken down the alley by the hospital, the crook who accompanied him must have been hoping that he would not go into the square, where, presumably, the goods were being loaded into a vehicle. The story that had been put forward was that the Claimants had another depot more conveniently situated; they had not told him that the goods would be transhipped in a smaller vehicle and that, presumably, is why their van was parked in Queen’s Square rather than in Guilford Street itself. Therefore, the crooks must have tried to prevent Mr Branson knowing that they were transferring the goods to another van. He accepted in cross-examination, as was to be expected, that he would have thought something was wrong had he known that that was what the crooks were doing. Whether the crooks tried to stop him from seeing their van by taking him to the basement door to the hospital is unknown but probable and when he entered the main entrance with the crook he could well have had his attention diverted from what was going on in the square, although he did see some vans there. I reject, therefore, the attack on Mr Branson’s credibility on this issue based as it was upon a document whose provenance is unknown.
The next point that counsel made is that Mr Branson was reluctant to admit that he knew what a valuable cargo he was carrying. In my view this submission arose out of a failure to understand what Mr Branson was saying. I do not take him to have denied that he knew that the cargo was valuable; rather he did not know precisely what it contained. There is nothing in this point.
Mr Morpuss relies on the fact that Mr Branson left the tailgate of his lorry open whilst he and his partner ate their lunch. The suggestion was that this showed a reckless attitude to risk. The assumption underlying this point was that someone could get at one of the boxes still in the lorry whilst they were in the cab, without them knowing. The assumption is false because I accept that Mr Branson would have heard and felt anyone trying to access the back of the trailer. Finally, in this connection, he relied on the fact that both Mr Branson and his partner left the lorry to investigate what was happening. He should have shut the lorry up before he left it and this is a fair criticism. But by then the theft had occurred and even if this could be described as negligent it falls well short of what might be called misconduct. At this stage he was concerned about the whereabouts of the men and what had happened to the bulk of the cargo; in the circumstances he can be forgiven for abandoning his vehicle, which was nearly empty, to find out what was going on.
Mr Branson noticed that the four well dressed men were wearing gloves apart, I think, from one of them who lifted the boxes with his clenched fists. This is a detail which he recalled when recounting what had happened. At the time he thought that the men were simply trying to keep themselves from being dirtied whilst handling the boxes. The suggestion is that he should have appreciated that the men were trying to avoid leaving their prints on the boxes and this should have sounded alarm bells. I reject this analysis since it leaves out of account the fact that since the very beginning he thought he was dealing with Micro Anvika personnel and that there was nothing fishy about the delivery process. In that frame of mind it is unfair, I think, to suggest that his sense of disbelief which had been suspended should have changed by this one detail.
It was also submitted that Mr Branson should have realised that something was ‘wrong’ when he was shown to a toilet in a hospital rather than in the warehouse or store to which he believed the goods were being delivered. At the time, this did not strike Mr Branson as odd. He had never been to England before; the man who accompanied him appeared to know the location of the toilet when they got to the main entrance. Not all warehouses or stores would have toilets in them and the crooks’ familiarity with the place must have been reassuring. It is suggested that when he was in the square as he went in and came out of the toilet, there was loading of the goods into one or more vans going on. If there was, Mr Branson did not see it and no doubt the crooks took good care to make sure that he did not.
For present purposes I am content to accept Mr Morpuss’ submission that the test in law that I should apply is that the Claimants must show that Mr Branson was guilty of misconduct; that he was aware of a risk that the cargo might be stolen but deliberately and unreasonably went ahead and took that risk and that the misconduct caused the loss of the cargo.
In my view the behaviour of Mr Branson when he arrived to make a delivery to the premises in Alfred Place falls well short of behaviour which could be described as misconduct. There is no doubt that he was deceived into believing that he was making a lawful delivery. His lorry could not easily be unloaded at the bay. Mr Patel wrongly thought that the load could be taken off from the side of the lorry. The only access to the contents was via the tailgate lift, operated by controls on the side of the lorry at the back.
Conclusions
The high water mark for a case where a court was satisfied that wilful misconduct had occurred bears superficial similarities to the present case, namely the decision in Laceys Footwear. It was another example of a ’round the corner’ delivery. It is this authority upon which the claim in this case has, I think, largely been based. There is an obvious distinction between using an authority to establish the principles of law, on the one hand, and using it to show how the principles were applied in that case, on the other. I set out the findings made by the Judge in the Footwear case upon which the majority in the Court of Appeal relied:
“Mr Royo (the driver) showed Mr O’Kerwin [the agent’s import manager] the CMR documentation and, as the principal delivery was the consignment of 269 cartons of shoes for Laceys in Hackney Road, Mr O’Kerwin contacted Bowler [the carriers] so that he could give instructions to Mr Royo. Mr O’Kerwin was told expressly by Bowler that Lacey’s consignment was not to be off-loaded anywhere but 263-265 Hackney Road E2. These express instructions were then given to Mr Royo, both by Mr O’Kerwin and by a Spanish-speaking employee of CIT, Ms Anna Garcia…Mr O’Kerwin said that he and Ms Anna Garcia both told Mr Royo that the delivery to Laceys was very urgent and that under no circumstances was he to permit off loading of the goods anywhere other than 263-265 Hackney Road E2. There is no doubt that Mr Royo was given the plaintiff’s address and the Judge accepted that the instruction was given to him in Spanish and he acknowledged that he understood it.”
“According to Mr O’Kerwin, Mr Royo told him that he had been to Laceys’ premises and that Laceys were not ready to take delivery of the goods. He told Mr Royo to tell Laceys that they must accept the goods or else it would not be possible to redeliver until a much later date. Mr O’Kerwin told Mr Royo to go back to Laceys’ premises and to telephone again in about half an hour.” (page 372)
“The basis of the Judge’s finding [of wilful misconduct] was that the clear instructions that the goods were to be delivered to the plaintiff’s premises and nowhere else were passed on to Mr Royo.” (p. 374)
“I attach considerable significance to the Judge’s finding that Mr Royo had been given clear and express instructions which he had understood and that he had disobeyed them.” (p. 375)
“In my judgment it was open to the Judge to draw the inference that by disobeying clear instructions and departing so far from the ordinary duty and responsibility of a driver to protect his load the actions of Mr Royo amounted to misconduct.” (ibid)
There are obvious factual distinctions between that case and this. Mr Branson has, in my judgment, given an honest account of what happened; in that case the driver gave no evidence at all. No-one instructed Mr Branson that he was only to deliver the goods to the premises in question. The CMR note gave the address for delivery but it would have been permissible for the consignee to change the instructions and Mr Branson was obliged to deliver the goods as directed by the consignees (assuming the change of address was reasonably close by). He had been given no training about ’round the corner’ thefts and broke none of his employers’ written guidance or instructions Thus, there is a clear, essential distinction between this case and that.
My overall conclusion is that Mr Branson was certainly not guilty of any misconduct and, in the light of my findings, I do not consider that he was guilty of any negligence. He was the victim of a sophisticated scam, by crooks who were immensely cool and calm. In my judgment the Claimants are miles away from establishing their case and I dismiss the claim