New Zealand has a statutory regime that imposes strict liability on contracting carriers for goods carried domestically, regardless of whether the damage was caused by them or by a separate actual carrier. In exchange for this strict liability, contracting carriers can limit their liability to NZ$1,500 a unit. A recent High Court decision has explored the limits of this statutory regime.(1)

Background

The Carriage of Goods Act applies only to domestic carriage in New Zealand. Section 5 provides that it does not extend to international carriage. If Section 9 applies and the loss or damage occurs on the domestic part of a voyage, liability attaches strictly but is limited. The limit is set at a maximum of $1,500 a unit of goods, unless there is a declared value (as provided by Section 15).

The relevant parts of Section 9 state that:

"(1) Subject to the other provisions of this Act, a contracting carrier is liable as such to the contracting party for the loss of or damage to any goods occurring while he is responsible for the goods in accordance with the succeeding provisions of this section, whether or not the loss or damage is caused wholly or partly by him or by any actual carrier...

(6) Notwithstanding any of the foregoing provisions of this section, the responsibility of a contracting carrier who contracts for the carriage of goods to a destination outside New Zealand ends for the purposes of this Act at the time when the international carriage of those goods begins."

Facts

Goat NZ exported 648 cartons of goat meat to Japan by sea in May 2009. It contracted with GVI Logistics to act as freight forwarder in arranging the transport of the cartons. The cartons were loaded into a reefer container which was set at the correct temperature of -1.5 degrees Celsius.

GVI arranged for the container to be sent to Auckland and provided written instructions to the port that the input air temperature to the container should be set at +1 degrees Celsius. The port followed that instruction and altered the input air temperature. When the cargo arrived in Japan and the container was opened, the meat was found to have deteriorated and was rejected. The temperature monitors placed inside the container recorded that the temperature of the meat had increased to +1 degrees Celsius before the container was loaded on the vessel for the international leg of the journey. The quantum of loss was over NZ$100,000. 

GVI did not dispute liability for the loss, but claimed that its liability was limited to NZ$1,500, as liability arose under the act

District Court decision

The District Court held that the change in temperature of the meat caused a reduction in its shelf life of one-and-a-half days. It held that the meat had a normal shelf life of 60 days. It found that the change was small enough to be considered de minimis, so that it did not constitute damage under Section 9(1). As there was no statutory strict liability, the monetary limitation did not apply. The court concluded that it could enter judgment for the full claim.

High Court decision

On appeal, the High Court did not consider that a de minimis requirement should be read into the act. It considered the purpose of the act was to reform the common law by imposing absolute liability on the contracting carrier, irrespective of fault, but placing upward limits on that liability. It held that Section 9 was "intended to identify and confine liability to loss or damage occurring in New Zealand". Counsel for GVI argued that once the wrong temperature had been set on the reefer in New Zealand, the damage was inevitable. 'Damage', it was argued, meant an impairment to the value or usefulness of the goods.

The court held that there had been damage to the meat in the circumstances, as the rise in temperature had caused a physical change that had the consequence of shortening the shelf-life of the meat, thus diminishing its commercial utility. This damage, it was held, had occurred in New Zealand and so came within Section 9. However, the court held that:

• no loss of value had been proven, so that no order under Section 15 (relating to quantum of liability) could be made;

• this did not insulate GVI from the consequences of the damage during the journey and that the loss, or consequences of the damage, occurred outside New Zealand; and

• the act did not permit GVI to limit its liability, outside New Zealand, for the consequences of the incorrect setting of the container in New Zealand.

GVI was therefore held to be liable for the full quantum of loss and was not entitled to limit its liability.

Comment

The High Court decision in this case is difficult to reconcile with a general understanding - confirmed in the decision of the Supreme Court in Ports of Auckland Ltd v Southpac Trucks Ltd(2) - that the act is a code. Section 6 of the act provides that no carrier is to be liable as such for loss or damage to goods that it carries, except in accordance with the provisions of the act. This should mean that where the act applies, liability is strict but limited (unless one of the express exceptions applies), and that there is no liability for domestic carriers outside the act. The judgment appears to hold that the act applied (as damage occurred in New Zealand) so as to create strict liability, but that certain provisions did not apply - namely, those limiting liability by amount and in respect of damage occurring after the domestic carriage ended. The judgment makes no reference to Section 6.

One would have expected that the court would find the contracting carrier either liable under the act (within whatever limits applied) or not liable at all in accordance with Section 6. The result in this case - unlimited liability imposed on a carrier for damage in New Zealand - sits uneasily with the act's acknowledged purpose: the imposition of strict but limited liability, providing commercial certainty regarding liability for all carriers and their insurers.

It is understood that this decision is not subject to further appeal.

Endnotes

(1) GVI Logistics Limited v Goat NZ Limited, HC Auckland CIV-2011-404-004407, Fogarty J, December 7 2011.

(2) [2010] INZLR 363.