Jeremy Prain August 24 2022 Supreme Court revisits cargo theft and liability Bowmans | Shipping & Transport - South Africa Jeremy Prain Shipping & Transport IntroductionFactsDecisionCommentIntroductionFreight forwarders and logistics operators are breathing a sigh of relief after the Supreme Court of Appeal in South Africa overturned the first-instance decision in Fujitsu Siemens Core (Pty) Ltd v Schenker South Africa (Pty) Ltd.The High Court imposed liability on Schenker following theft committed by an employee of theirs (for further details, see "Cargo theft and liability: Fujitsu v Schenker"). The Court found that the theft fell outside the scope of Schenker's standard trading terms and conditions and instead awarded damage to Fujitsu under the common law remedy of delict (or tort).Facts The facts of this case illustrated an all too familiar pattern of cargo theft. The claimant, Fujitsu, imported a consignment of laptops and accessories valued at $516,887 from its affiliate company in Germany. Fujitsu engaged the services of Schenker to assist with the logistics, freight forwarding, warehousing and clearing of the consignment. This led to Schenker receiving the goods from the carrier and delivering it by road to Fujitsu, after having attended to the necessary customs clearance and other logistical issues.Once the goods arrived in storage at the South African Airways cargo warehouse and were ready to be delivered to Fujitsu, Schenker issued its drawing clerk, Wilfred Lerama, the necessary documentation authorising him to collect and deliver the cargo. On 23 June 2012, Lerama arrived at the storage warehouse to collect the laptops ostensibly on behalf of Schenker and Fujitsu. The goods were loaded onto his truck, which was not marked with Schenker branding, and he thereafter drove off, never to be seen again.Like all Schenker's drawing clerks, Lerama had been issued with an identity card which allowed him almost unfettered access to the airport cargo terminal, its warehouses and storage facilities. The warehouse cargo personnel knew that Lerama was one of Schenker's drawers and on the day in question they did not suspect that he was there for any unlawful business. The High Court found that, on the probabilities, Lerama had carefully planned and orchestrated the theft with one or more co-conspirators.DecisionOn appeal, the Supreme Court dismissed the initial finding that, on the facts, the theft had been committed outside of the scope of the contract between the parties.Schenker's services to Fujitsu had been subject to a national distribution agreement which, in turn, incorporated several the standard terms drafted and adopted by the South African Association of Freight Forwarders, whose terms are widely adopted throughout the industry.Specifically, clause 17 of the standard terms states that should the customer deliver certain categories of goods (eg, bullion, coin, precious stones, jewellery or "valuables") to the forwarder or cause the forwarder to handle or deal with goods (other than under special arrangements previously made in writing), the forwarder shall incur no liability whatsoever in respect of such goods, including as regards negligent acts or omissions.When analysing the facts, the Court was satisfied that:the laptops constituted "valuables"; andthe goods had indeed been handled, transported or dealt with by, or on behalf of, Schenker as contemplated by the relevant clause.The final issue to be determined by the appeal court was whether, on proper construction of the exemption clauses in the standard terms, Schenker was absolved from liability arising from the theft. Citing the 1997 decision in Goodman Brothers (Pty) Ltd v Rennies Group Ltd with approval, the Court stated as follows:In Goodman Brothers it was held that if an employer responsible to deliver goods to another person with whom he has contracted to do just that, can validly and without more contract out of liability for the dishonesty of his servants entrusted by him with the performance of his contractual duty, then a fortiori [Schenker] must be entitled to escape liability where it had stipulated for 'special arrangements' to be made in the case of valuables. Had these 'special arrangements' been made . . . [Schenker] would have been able to protect itself against the dishonesty of its employees by taking out fidelity insurance or by taking additional precautions for the safe conveyance of the valuables.The Supreme Court went on to confirm the view expressed in the Goodman Brothers case that there were no considerations of public policy which required that Schenker ought to be precluded from enforcing the risk allocation agreed upon by the parties as contained in its standard trading conditions.CommentAll parties involved in the logistics chain rely, for the most part, on standard contractual terms and conditions adopted by their sector to provide legal certainty in their business dealings. That includes terms covering the allocation of risk and the exclusion of certain forms of liability and allows parties to fill the gaps with appropriate insurance. Against this background, the Supreme Court's recognition and enforcement of Schenker's terms brings back the much-needed certainty that was disturbed, to some degree, by the decision of the first-instance court.For further information on this topic please contact Jeremy Prain at Bowmans by telephone (+27 21 480 7800) or email ([email protected]). The Bowmans website can be accessed at www.bowmanslaw.com.