UAE Law : Carrier Liable for damage/shortage of goods shipped in sealed container

Date: 30/04/2002
Source: Al Tamimi & Co Ltd

Summary

In an action filed before the Dubai Courts by a consignee against a carrier for compensation from the carrier due to shortages and damages to goods which were shipped in a sealed container delivered to the carrier to ship from Taiwan to Sharjah Port, the Dubai Court of Cassation, in a judgement delivered in favour of the consignee against the carrier held that the Dubai Courts have jurisdiction to hear the matter even if the consignment was shipped to Sharjah, on the ground that the bill of lading ("B/L") was endorsed in Dubai, thus conferring jurisdiction to the Dubai Courts over the case by virtue of the fact that part of the contract was executed in Dubai. The Court of Cassation further held that the carrier will be liable for the shortfall in the goods and the damages to the same which were shipped in Taiwan and delivered to the carrier in al sealed container, as there is no special provision within the UAE Maritime Law governing the shipment of goods by containers. The Court added that the carrier is responsible to compensate the consignee for the shortages and the damages sustained to the goods which were described in the B/L, unless a clear and specific reservation on the conditions of the goods was specified in the B/L. In the absence of any such reservation in the B/L, the carrier will be liable for the contents of the container which were delivered to him to ship to the consignee.

Accordingly, the Court of Cassation dismissed the appeal filed by the carrier and upheld the judgement delivered by the lower court.

 

Claim

A local establishment, the "Plaintiff" brought an action before the Dubai Court of First Instance against a shipping company, the "Defendants." Another company subsequently joined the Plaintiff as a co-plaintiff in the proceedings against the shipping company, collectively the ":plaintiffs" requesting the Court to order the shipping company to pay the sum of US$324,346.50 or the AED equivalent of AED 1,190,350.40 plus interest and legal costs. The Plaintiffs claimed that they had shipped goods from a Port in Taiwan to Khalid Port in Sharjah in the vessel named in the B/L issued by the Defendants. The Defendants had subsequently undertaken to deliver the goods in the good condition in which they were shipped, although they had breached their contractual obligation under the B/L. According to the expert report provided by the Plaintiffs, the goods were incomplete on delivery and were not in good condition. The Defendants subsequently failed to pay towards the value of the goods.

 

Court of First Instance

The Court of First Instance ordered the Defendants to pay to the Plaintiffs the sum of AED 602,099.52 plus legal costs and interest and dismissed the Defendants claim that the Dubai Court did not have jurisdiction to hear the matter on the ground that the goods were actually discharged in Dubai, and therefore, the Dubai Court should have a jurisdiction on the matter according to Article 31 (3) of the UAE Law on Civil Procedure. The Defendants thus appealed against the decision to the Dubai Court to Appeal.

 

Court of Appeal

The Dubai Court of Appeal dismissed the judgement delivered by the Court of First Instance and held that the Dubai Courts do not have jurisdiction on the matter. The Plaintiffs appealed against the Court of Appeal's judgement to the Dubai Court of Cassation.

 

Court of Cassation

Upon ruling that the Dubai Courts do have the jurisdiction to consider the case, the Dubai Court of Cassation referred the matter back to the Court of Appeal to consider the merits of the case.

 

Court of Appeal

The Dubai Court of Appeal appointed an expert. Following a review of the files and the expert's report as well as the evidence presented in the case, the said Court delivered a judgement in favour of the Plaintiffs against the Defendants and ordered the Defendants to pay AED 372,467.52 plus legal costs and interest. The carrier, the Defendants appealed further against the judgement to the Dubai Court of Cassation.

 

Court of Cassation

In their appeal, the Defendants submitted the following:

1. The lower Court held that the Dubai Courts have the jurisdiction to consider the case on the grounds that the B/L was endorsed in Dubai, while the Court of Cassation on the first judgement where it referred the matter back to the Court of Appeal, requested the Court of Appeal to investigate whether the goods had actually been discharged in Dubai and placed in warehouses in Dubai in order to determine whether or not the Dubai Courts maintained jurisdiction over the matter. However, the Court of Appeal determined that the Dubai Courts have jurisdiction on the grounds that the B/L was endorsed in Dubai, thus failing to consider the fact that the goods were never discharged in Dubai. The goods, the Defendants submitted were actually only handled from one ship to another at sea and were never discharged in Dubai. Further, the goods were discharged at Khalid Port in Sharjah where they were originally consigned for. The fact that the B/L was endorsed in Dubai does not confer on the Dubai Courts jurisdiction, as the endorsement had no connection with the execution of the contract. The Defendants further argued that they had submitted to the court adequate evidence establishing that the goods were actually discharged in Sharjah and that it was evident from the B/L that the Port of Discharge was at the Sharjah Port. Therefore, the Defendants submitted the Dubai Courts do not have jurisdiction, as the contract was not executed and not intended to be executed or implemented in Dubai, in addition to the fact that the Defendants did not have a place of domicile in Dubai.

 

2. The B/L was not consigned to the Defendants in the proceedings neither had it been endorsed to the initial Plaintiff. Therefore, the Plaintiffs do not have title to bring this action based on the B/L which was not Issued in their favour and not endorsed to them.

 

3. The Courts had allowed the second plaintiff to join in the proceedings, notwithstanding that the procedure stipulated under Article 95 of the UAE Law of Procedure to do so was not actually followed. In addition, although a party who has joined legal proceedings can only join the Plaintiff in the action in their original claim the second plaintiff had made new claims.

 

4. The Lower court ordered the carrier to pay for the value of the goods based on the grounds that the goods suffered damages, while the Defendants submitted, it was evident that the damages were attributed to the shipper for which the carrier is exempted according to Article 275 of the UAE Maritime Code. It is further evident from the correspondence the Plaintiffs had with the a bank that the goods were of an inferior quality from what was originally ordered, which proved that the Plaintiffs were subject to fraudulent action by the shipper, for which the carrier is not responsible. This is also evident from the correspondence seen in the file issued from the Dubai Police, the Dubai Chamber of Commerce and Industry and the Taiwan Legal Establishment, all of which confirmed that the shipper had actually defrauded the consignee who were the Plaintiffs in the proceedings. Further, the container in which the goods were shipped were sealed and delivered by the shipper and were marked, CY-CY which means that the shipper did not check the container and had marked his reservation on the same as he had only taken delivery of the container from the container yard and borne no responsibility for the contents of the same. The carrier therefore should not be held responsible for the nature and the quality of the goods shipped in the sealed container. In addition, the Plaintiff claimed for short shipment of items which were less than the agreed amount for which the carrier should not be held responsible for. The carrier committed no fault or negligence and thus the Defendants submitted, they cannot be held responsible for the shippers fraudulent action.

The Dubai Courts of Cassation held in its judgement that once the judgement is cancelled by the Court of Cassation and the matter is referred back to the Court of Appeal, the Court of Appeal will then have the jurisdiction to determine the case based on the facts and submissions made. The Court of Appeal therefore will have absolute jurisdiction and power to determine the matter accordingly as per the meaning of Article 184 of the UAE Law on Civil Procedure.

 

Further, Article 31 of the UAE Law on Civil Procedure states that;

"1. The Jurisdiction shall be instituted to the court in whose circuit the defendant's domicile is situated unless otherwise stipulated by law. If the defendant does not maintain a domicile in the State, the jurisdiction shall be instituted for the court in whose circuit the defendant's residence or place of work is situated.

 

2. The Lawsuit may be filed before the court in whose circuit damage was inflicted with regard to indemnity cases due to damages inflicted on persons or properties.

 

3. Court jurisdiction on commercial items shall be instituted for the court in whose circuit the defendant's domicile is situated, to the court at whose circuit agreement is made in full or in part or to the court at whose circuit the agreement is to be implemented.

 

4. If more than one defendant is involved the jurisdiction shall be instituted to the court in whose circuit any of them maintains domicile.

 

5. In case other than those stipulated in Article 32 and 34 through 39, agreement may be made on the jurisdiction of a specific court to hear the conflict, in such case, the jurisdiction shall be instituted to this court or to the court in whose circuit the defendants domicile, residence or place of work is situated."

 

Further, Article 33 of the same law states that:

"In law suits involving companies or associated whether existing or under liquidation, or cases involving private establishments, the jurisdiction shall be instituted to the court in whose circuit their head offices are located, the lawsuit may be filed before the court in whose circuit the branch of the company, associated or establishment is situated in matters connected with such branch."

The Court of Cassation therefore held that according to the above, in commercial matters the court will have a jurisdiction if the person is domiciled or has his own business in Dubai as well as in the case of companies, the place where the contract was executed, implemented. The plaintiff then has the choice to file the case in any of the places the courts assume jurisdiction. In the present case, the Court stated that it was evident that the contract was partly implemented in Dubai. Therefore, the Dubai Courts will have jurisdiction as it is evident that the B/L was endorsed in Dubai, which means that the contract was partially implemented or executed in Dubai.

 

The Court of Cassation further held that it is at the Court of Appeal and Court of First Instance's discretion and not the Court of Cassation to determine whether or not a party maintains title to sue in a matter. The issue, the Court of Cassation expressed was a matter of fact as opposed to a matter of law and thus cannot be raised with the Court of Cassation. It is further evident that the B/L was endorsed to the Plaintiffs and that they had title to bring the present action.

 

The Court of Cassation further held that the carrier is under an obligation to deliver the goods in complete and good condition to the consignee or his representative. The liability of the carrier therefore is not released until he delivers the same goods as described in the B/L in the same quantity to the consignee at the Port of Discharge, unless he can prove that the goods were damaged or loss caused takes place during the voyage between the time in which the goods are shipped on board the vessel until the time of delivery, unless the carrier is able to prove otherwise.

 

According to Article 272 of the UAE Maritime code which states that:

"1. The Carrier must before setting sail and upon the commencement of a voyage use the necessary care to put the vessel in a seaworthy condition and to fit it out, man it and provision it properly. He must prepare the holds and cold rooms and other parts of the vessel to receive, carry and preserve the goods.

2. The carrier must also use the necessary care in loading, stowing, stacking, arranging, carrying, protecting, discharging and delivering the goods."

 

Article 275 of the UAE Maritime Code further states that:

"1. The carrier shall be responsible for loss or damage sustained by the goods during the period from the time he takes delivery of the goods at the port of loading to the time he delivers the same to the person having the right to them at the port of discharge or destruction arose out of one of the following causes:-

(a) Unseaworthiness of the ship, but on the condition the carrier proves that he discharged the obligations set out in Article 272;

(b) Errors in navigation or in the management of the vessel on the part of the captain, crew, pilots or other maritime workers;

(c) Fire, unless the same occurred through the act or default of the carrier;

(d) Perils of the sea or other navigable waters, or dangers or accidents thereof;

(e) Act of God;

(f) Perils of war;

(g) Acts of public enemies;

(h) Any detention or constraint by a power, state or judicial arrest;

(i) Quarantine restrictions;

(j) Any strikes or layoffs or any public obstacle such as to prevent continuance of the work in whole or in part;

(k) Civil unrest and commotion;

(l) Any act or omission on the part of the shipper or owner of the goods or his agent or representative;

(m) Shortfall in bulk or weight or any other shortfall arising out of a latent defect or from the particular nature of the goods or any defect inherent therein;

(n) Insufficiency of packaging;

(o) insufficiency or imperfection of distinguishing marks for the goods;

(p) Rescue or attempt rescue of persons or property at sea;

(q) Latent defects not discoverable by ordinary examination;

(r) Any deviation from course in the course of rescuing or attempting to rescue persons or property at sea or any other deviation for reasonable cause;

(s) Any other cause which does not arise out of the default of the carrier or those working under him or his representative. The burden of proof shall be upon the person alleging such cause to show that no default of such persons was instrumental in causing the loss or damage.

 

2. It shall be permissible for the shipper in the circumstances set our above to prove that the loss or damage out of the default of the carrier or the default of those working under him in a manner unconnected with the navigation or management of the vessel."

 

Accordingly, the carrier must take the proper precautionary measures at the time the goods are delivered to him from the shipper to safeguard the goods and ensure safe delivery of the same to the consignee. Further, according to Article 278 and 282 of the UAE Maritime Code, any agreement to exempt the carrier from liability will be null and void. Furthermore, according to Article 258, 259 and 266 of the same law, all details stipulated on the B/L are considered as conclusive evidence against the carrier and one cannot argue otherwise, unless the carrier has specifically placed a remark reserving his right with regards to the conditions of the goods.

 

Further, UAE Law does not specify any special conditions for shipment of goods by containers and even if the shipment of the goods takes place by container, this does not change the carrier's liability specified under the UAE Maritime Code. The carrier remains liable according to the articles referred to above.

 

Accordingly, the Court of Cassation dismissed the appeal and found the carrier liable based on the B/L. The court added that there is nothing in the B/L or the law which will exempt the carrier from liability or damage caused to goods which he has taken for the purposes of shipment.

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