DUBAI COURT OF APPEAL NO. 75- 2005 DATED 3 MAY 2005
The claim:
Briefly the facts are that a trading company sued the agent of the airline and airline company seeking judgment against them jointly for US$ 49,600 (which equates to AED 182,528) plus interest calculated from the date of filing proceedings until paid, plus costs.
It is contended that the trading company had delivered to the agent on 26.02.03, a cargo of 3 boxes of mobile phones valued at US$ 148,800 weighing 87 kg to be shipped by air to Sofia, Bulgaria and delivered to the consignee under the Airway Bill ("AWB") mentioned in the Statement of Claim. The trading company's representative made a material error when he incorrectly entered the value on the AWB as AED 45,000. The trading company was surprised to learn that the consignee had only received 2 boxes. The defendant failed to locate the missing box and refused to reimburse their value. The trading company suffered damages in the form of 400 mobile phones lost without cause.
The agent of the airline argues that the proceedings should not be entertained because they were filed against a party having no capacity who issued the AWB only as agent for the airline. The agent argues on the merits that the trading company failed to substantiate its claim for AED 182,528. The AWB was issued in UAE Dirhams not US Dollars and gives the amount of insurance paid in advance of a potential total cargo loss as AED 45,000 with No Value Declared ("NVD") appearing in the Declared Value column in the AWB which means that no specific amount was declared for the cargo.
The trading company joined the airline for judgment to be entered against it jointly with the agent.
Court of first instance:
The Court ordered Defendants to pay to the trading company the sum of AED 4,350 plus 5% interest calculated from 03.04.04 until paid and appropriate costs.
The Court based its decision on the particulars shown on the invoice, AWB and the guidelines of the law by assigning equal weight values to the boxes such that each box weighed 29 kg.
The Court held that the agent was a commission agent and awarded compensation pursuant to Articles 356/ 1, 2 and 359/2 at the rate of AED 150 per kilogram since no value was declared for the goods under the relevant column of the AWB. The Court further held that there was no evidence that the trading company had paid any surcharge to the Carrier or declared the goods as valuable cargo. The freight was based on the weight of the cargo and not the value AWB. Hence, it took the rate of compensation as AED 150 per kilogram.
Court of appeal:
The trading company appealed requesting the Court to admit the appeal in form and, on the merits, reverse the appealed decision and award its claim before the Court of First Instance and costs in respect of both stages of proceedings.
The trading company argues that the AWB contained a full description of the goods in terms of type, number of packages and weight, as admitted by Defendants. The trading company confirmed its plea that Defendants had made a material error which resulted in failure to enter the value on the AWB, pointing to the sales invoice and the insurance that was concluded. The trading company supported its appeal with a letter from the airline stating the amount of insurance and a certificate from customs showing the value of the goods and a certificate from the cargo company regarding the incorrect insurance amount, adding that the lower Court ignored certain evidence namely the correspondence exchanged between the parties. The airline requested the Court to dismiss the appeal and concur the lower Court's findings.
The Court held that the trading company's arguments were no more than a rehashing of its defence before the Court of First Instance. The lower Court's ruling is legally sound and based on a thorough understanding of the factual and legal aspects of the case.
The ruling correctly decided the trading company's arguments and correctly applied Articles 356/ 1,2 and 359/2 of the Code of Commercial Practice, assessing the compensation at the rate of AED150 per kilogram as expressly stated in the AWB which contains no declaration of value for the goods under the relevant column in the AWB, adding that the particulars of the AWB may not be completed using another document and that, according to the documents, no surcharge freight had been paid since the freight was calculated based on the weight of the cargo and not the value.
The Court thus decided not to rely upon the insured value of the goods and concluded that no value was declared for the goods in the relevant column of the AWB and that the trading company did not pay any surcharge or declare the goods as valuable cargo that had to be delivered intact. Therefore, the Court held that Article 359/ 2 of the Code of Commercial Practice was applicable and accordingly proceeded to dismiss appeal on the merits and affirm the lower Court's ruling. The trading company was ordered to pay costs pursuant to Article 133/ 1,2 and 168 of the Civil Procedures Code and AED 500 advocate's fees.
Commentary:
The Carrier/Agent can rely on the limitation of liability for any claim of loss/damage of cargo by Air irrespective of the value, provided the following:
1. No declaration is mentioned and inserted in the AWB regarding the value of the cargo.
2. No additional freight paid to carrier.
3. The freight to be calculated based on the weight of the cargo and not the value.
4. The cargo loss/damage is not caused by the carrier to harm the shipper and/or the consignee or found to be gross negligence.
The compensation will be AED 150 per kilogram as per the UAE Commercial Transaction Law or AED 73.50 as per the Warsaw Convention.
The UAE courts will apply the limitation of liability but it is still unclear whether the limitation will be based on the UAE Commercial Transaction law or the Warsaw Convention, despite the fact that the UAE had signed the Warsaw Convention and other conventions. The courts are relying on the facts that the UAE Commercial Transaction law was enacted after signing the Warsaw Convention by the UAE which means that the legislator was aware about the compensation based on the Convention but set a higher figure for compensation in the law.
By Yazan Saoudi
© Al Tamimi & Company 2006
