James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd

Under the CMR regime, compensation for lost goods is calculated by reference to their value when and where the carrier accepted them, not their value at the intended destination. The value is determined under Article 23(2), without including a later liability that arose only because the goods were lost.

However, Article 23(4) must be interpreted purposively and, where necessary, by reference to the equally authentic language of the Convention. “Other charges” may include expenses which the owner becomes liable to pay as a direct consequence of the loss, including excise duty. Consequential loss and additional destination value remain excluded unless a special interest in delivery has been declared under Articles 23(6), 24 or 26.

The plaintiffs’ whisky was accepted for international road carriage from a bonded warehouse in Glasgow to Felixstowe, for onward shipment to Iran. The defendants accepted liability after their employee left the loaded vehicle unattended and the whisky was stolen in England.

Because the whisky was stolen before export, the plaintiffs became liable under section 85 of the Customs and Excise Act 1952 for approximately £30,000 excise duty. The value of the whisky in bond was approximately £7,000, while its value including duty was approximately £37,000.

Master Jacob assessed damages at the full amount. The defendants appealed, arguing that Article 23 of the CMR Convention limited recovery to the value at the place and time of acceptance, together with only charges incurred in respect of carriage. The central issues were whether the duty formed part of the goods’ value under Article 23(1) and (2), or was recoverable under Article 23(4).

1. Appeal dismissed with costs. The plaintiffs were entitled to recover £37,000.
2. Article 23(1) and (2) required the value of the whisky to be assessed at the bonded warehouse in Glasgow when it was accepted for carriage. The later excise duty could not be included in that value because, at that time, the whisky was intended for export and was not expected to bear United Kingdom duty. The statutory valuation under the Convention was distinct from the common-law measure based on value at the intended delivery date.
3. The court treated “normal value” as the value of goods of the same kind and quality in the circumstances of international commerce. Lord Justice Lawton regarded the appropriate starting point as the f.o.b. value, less transport and insurance costs between Glasgow and Felixstowe.
4. The excise duty was recoverable under Article 23(4). The English wording had to be read in the context and purpose of an international Convention, with regard to the French text. The phrase covered expenses which the owner had to pay as a result of the carriage and its failure. The duty was therefore a direct expense caused by the theft.
5. Loss of profit and additional value at the destination were not recoverable as “expenses”. They were consequential losses excluded by Article 23(4), unless the claimant had declared a special interest in delivery and paid the required surcharge under Articles 23(6), 24 or 26.
6. The court held that the narrow construction adopted in Wm. Tatton & Co. Ltd. v Ferrymasters Ltd should not be followed in relation to expenses reasonably incurred as a consequence of negligent carriage.

• Court of Appeal: Master Jacob assessed damages at the full amount claimed following judgment in default. The Court of Appeal dismissed the defendants’ appeal and awarded costs.