Legal minds dissect the issue of transporters' liability and the CPA

8 July 2011

This article was first published by Freight and Trading Weekly

First out of the blocks was Andre du Sart of Aon South Africa who said that the Consumer Protection Act (CPA) had a major impact on the way transporters communicated their services to customers. Also in the way their standard trading terms and conditions were drawn to the attention of the customer to ensure they were clearly understood from an insurance perspective.

He pointed out that “the Act will mean that, in the case of transporters, their standard trading terms and conditions can no longer absolve them from liability and responsibility for cargo unless this has been properly disclosed to customers in plain language and that the conditions are fair, just and reasonable”.

Alexander Robertson of cargo consult then joined the debate, adding that Du Sart's comments “are very important, and of which we must take note”.

He also said that it must be remembered that the case of Anderson Shipping vs Polysius found that a transporter was permitted to contract out of all liability. A case, he added, that “was not well received in the insurance market both locally as well as abroad”.

Perhaps, he suggested, “this needed some urgent attention from the Maritime Law Association (MLA)”.

This collision between the Anderson Shipping vs Polysius case and the CPA urged FTW to seek clarification on the issue, and we approached lawyer Andrew Robinson, a director of Norton Rose (formerly Deneys Reitz) and former chairman of the MLA.

He saw the debate falling into two issues.

The first was the Anderson Shipping case.

“This decision of the Appeal Court (as the Supreme Court of Appeal was then known) in this case simply held that the Praetor's Edict, which held ship owners, stable keepers and innkeepers strictly liable for any loss or damage to goods entrusted to them, was not applicable to public carriers by land,” Robinson told FTW.

“It has nothing to do with the ability (or otherwise) of public carriers to contract out of liability indeed in the Anderson case the contract between the parties was oral.”

But, Robinson added, what the court did make comment on was that the liability of both public and private carriers would be based on whether or not the loss or damage was caused wrongfully, either intentionally or negligently.

“The ability to regulate liability by way of contract,” he added, stems from the common law that recognises that parties can regulate their affairs by way of written or oral (or a combination of both) terms. There are constraints to this ability both at common law and by way of the operation of statutes. Generally speaking contracts that are contrary to public policy may not be enforceable, nor will a term of a contract be enforceable if it offends the provisions of a statute such as the CPA.

This matter of the CPA and transporters is, therefore, the second issue. It is based on the fact that transporters usually contract with their customers on the basis of terms set out in standard form contracts - the wording of which is usually contained or referred to in credit application forms and the transporters' quotations, consignment notes and invoices.

“Whether or not the standard terms will regulate the contractual conduct of the parties,” said Robinson, “will depend upon whether, on the facts, they were agreed to prior to or at the time the transporter and its customer concluded the relevant contract.”

As for the CPA, he added, this will have no application in circumstances where the customer, whether a natural person or a business, has assets or an annual turnover in excess of R2 million.

And, with regard to insurance advice, where the transporter is Financial Advisory and Intermediary Services (FAIS)-compliant (as some are), they will be exempted entirely because the FAIS Act already provides adequate consumer protection.

“What transporters (and similar service providers, including freight forwarders and warehousemen) need to do,” said Robinson, “is to ensure that they obtain suitable information from the customer in order to assess whether or not they fall within the under-R2-m ‘danger zone’ or not.” The transporter will then have to work out the commercial viability of doing business with such a customer and whether or not it will have a separate set of standard trading terms that will apply.

“My guess is that most transporters will simply rely on their usual trading terms and take the chance. However, it may well be to the transporter's benefit to have the trading terms reviewed so that the material terms are clearly set out, including those terms where liability is limited and where claims must be lodged or prosecuted within restricted time limits.”

Where does the liability lie? It it may well be to the transporters benefit to have the trading terms reviewed.

Obviously, Robinson added, transporters that offer advice on insurance (as many do) need to make sure that the person within the organisation that offers the advice is FAIS-compliant. “My preference,” he said, “would always be that they utilise the services of any one of the many competent South African goods-in-transit insurance brokers.”