One of the main terminal operators at Stockholm Airport, Arlanda, took custody of nine cases of pharmaceuticals for distribution first to air carriers during a period of two years. Losses occurred and it emerged that employees, including a foreman, had stolen pharmaceuticals worth a total of €1 million. The employees were sentenced and served time in prison. Cargo underwriters took recourse action against the terminal operator, which invoked the General Conditions of the Nordic Association of Freight Forwarders (NSAB), at that time version NSAB 85. The terminal operator argued that the claims were time barred since the one-year limitation period set out in the standard agreement had elapsed, and furthermore that the liability was limited to 8.33 special drawing rights per kilogram.
A key question was whether the time limitation should be considered a rule corresponding to the limitation of liability. The Court of Appeal upheld the Stockholm District Court's view that it should not be possible to get round a limitation clause in a contract in an action in tort (Supreme Court, NJA 2007, page 758) even if the loss is caused through gross negligence or intention.
The applicable clause, NSAB Section 4, reads:
"It is the duty of the freight forwarder to prove, according to the contract, that he has protected the customer's interests in a diligent manner (i.e. checking that necessary permits according to the statute on commercial road traffic SFS 1979:559 and corresponding permits for road traffic to and from Sweden have been obtained).
Should the freight forwarder, or any of those for whom he is responsible, wilfully have caused loss or damage, then he cannot invoke the rules in these conditions, which exonerate him from or limit his liability, or alter the burden of proof, unless otherwise stated in § 22."
Section 22 refers matters to compulsory rules under the Transportation Law (air, railway, road carriage and sea), which was not applicable here since it was the terminal operator's liability that was at issue.
The appeal court held that it could be considered objectionable that a party can invoke the limitation of liabilities under a contract where it wilfully caused the damage itself, the leading management. The question was whether this should also apply where the damage was not caused by the management of the company, but by its employees. Accordingly, in this case it was not a question of disloyal behaviour from the party itself. From the injured party's point of view it can be established, according to the appeal court, that it makes no difference how the damage occurred and whether the cargo was stolen, damaged or lost. The terminal operator was therefore entitled to rely on the limitation of the liability in the contract, NSAB.
The appeal court held that it should not usually be possible to get round the contractually agreed limitation clause by an action in tort based on employees' criminal actions.
With reference to Section 4, Paragraph 2 of NSAB 85, the appeal court stated that the view taken by the court in respect of the limitation of liability should give the same result as in respect of the time bar rule in Section 29. Therefore, the appeal court found that the terminal operator was entitled to invoke the time bar rule, although the losses were caused by employee theft. Thus, the claims were considered time barred.
Section 4, Paragraph 2 of NSAB 85 states that should a freight forwarder "or any of those for whom he is responsible, wilfully have caused the damage, then he cannot invoke the rules in these conditions which exonerate him from or limit his liability" (emphasis added).
The reasoning behind the Court of Appeal's judgment in respect of the limitation of liability and theft by employees is contrary to the Supreme Court's judgment in NJA 1998, page 390. The difference between the cases is that in the Supreme Court's ruling, the limitation of liability rule was not a contractual rule, but rather an ordinance governing postal convention. However, there is now uncertainty under Swedish law as to what extent a limitation of liability clause should be upheld where criminal actions by employees have caused the damage.
The current general conditions of the Nordic Association of Freight Forwarders, NSAB 2000, include the same rule, although Section 5, Paragraph 2 now reads:
"Should the freight forwarder, or any of those for whom he is responsible, wilfully have caused damage, delay or other loss, he may not invoke the rules in these conditions which exonerate him from or limit his liability, or alter the burden of proof, unless otherwise stated in Section 23."
The case has been referred to the Supreme Court, but it is not yet known whether the court will hear it.
For further information on this topic please contact Anders Höglund at JCA Skarp by telephone (+46 8 676 9780), fax (+46 8 676 9789) or email ([email protected]).