Supreme Court Rules on Timely Notice of Damage for Non-International Cargo

Santi Zabaleta Llorens.

05/11/2008 International Law Office


The Supreme Court has recently considered the requirement for timely notice to the carrier of loss or damage to cargo carried between two non-international ports.(1)

Facts

A consignment of frozen fish was damaged during its carriage inside a refrigerator lorry aboard the Bahía de Alcudia, from the port of Sagunto, Valencia, to the port of Alcudia, Majorca. When the vessel arrived at the port of destination, its owners requested the intervention of the local health authority, which declared the total loss of the cargo and ordered its immediate destruction. The damage was caused by the breakdown of the lorry’s refrigerating system due to a shift of cargo as a result of heavy weather conditions encountered during the voyage.

The court did not consider the possible exclusion of the carrier’s liability. The only issue raised by the claimant and appellant (which was the insurance company, subrogated into the position of the cargo’s consignee) was the allegedly incorrect application by both lower courts of the second paragraph of Section 952(2) of the Commercial Code, which regulates carriers’ liability arising from non-international carriage of goods by sea. This provision states that actions arising from loss or damage to cargo are valid only if a protest or reservation was addressed to the carrier at the time of the cargo’s delivery or, if the loss or damage was not apparent, within 24 hours of delivery. This strict rule clearly contrasts with the Hague-Visby Rules, which apply only to carriage of goods by sea between ports of different countries. Rather than place a strict requirement on validity for actions against a carrier, the omission of which causes the loss of the cargo interest’s right of action, Article III(6) of the rules establishes a prima facie presumption that goods were received in a sound state, which may be rebutted by other evidence. Both the trial judge and the Court of Appeal dismissed the insurance company’s claim on the grounds of the lack of timely notice of the total loss of the goods.

Decision

On appeal the insurance company argued that the Court of Appeal’s interpretation of the second paragraph of Section 952(2) was contrary to the spirit and purpose of the provision. The appellant argued that the requirement to issue a timely protest or reservation as a condition precedent to the validity of an action against the carrier does not imply that the protest or reservation may not be carried out by different means or acts - provided that they fulfil the same function as the notice of loss or damage - or that such protest or reservation will be required when its ultimate addressee (ie, the carrier) has completed an action which renders the protest or reservation redundant and therefore unnecessary.

The Supreme Court accepted the appellant’s allegations and overturned the Court of Appeal’s ruling on the grounds that the lower court had failed to take into account that it was at the carrier's request that the goods were analyzed by the health authority at the port of delivery. The authority instantly decided to seize the fish, as it was not apt for human consumption, and proceeded to destroy it with the acknowledgement of the consignee and the carrier. This demonstrated that the total loss of the cargo was known to the carrier, thus making it unnecessary to issue protests or reservations, and also that the actions carried out by the parties amounted to a notice of loss or damage to the carrier.

Comment

The decision confirms the informal interpretation of the requirement for a protest or reservation made to the carrier pursuant to the second paragraph of Section 952(2). This kind of interpretation (ie, teleological or finalistic) is also used by the courts when construing the requirement of Article III(6) of the Hague-Visby Rules. Given the severe consequences of non-compliance with Section 952(2), the Supreme Court’s interpretation is entirely reasonable.

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(1) Judgment 148/2008 of February 21 2008.