Euro Cellular (Distribution) Plc v Danzas Ltd. (t/a Danzas AEI Intercontinental) & Anor

In a contract of bailment, where goods are lost while in the bailee’s possession and the contractual limitation applies only to specified causes of loss, the bailee must prove that the loss falls within the limitation. The bailee’s liability is unrestricted where the goods were negligently released contrary to agreed release procedures. Loss of goods in the bailee’s possession may support an inference of negligence, which the bailee can rebut by proving that the loss occurred despite reasonable care. The burden may also be allocated to the bailee because it is in the better position to establish what happened.

The claimant engaged the defendants to provide freight forwarding, carriage and warehousing services for mobile phones. The parties’ agreement incorporated the defendants’ standard terms, limiting liability to 2 SDRs per kilogram, but provided for full liability for negligent release of goods held to the claimant’s order.

Goods placed in the defendants’ Barcelona warehouse disappeared. The claimant alleged negligent release and claimed their full value. The defendants contended that the goods had been stolen and that any liability was limited. Title to sue in relation to part of the goods remained unresolved, so the judgment determined liability only.

1. Liability under the contract. The agreement required the defendants to exercise reasonable care in carrying and storing goods held to the claimant’s order. Liability was limited to 2 SDRs per kilogram for losses other than negligent release. Loss caused by releasing goods without the agreed authorisation attracted liability for their full value. The reference to insurance did not replace the defendants’ contractual liability.
2. Cause of loss. The evidence did not establish that the goods remained in the warehouse immediately before the relevant weekend, so theft or robbery could not be inferred on that basis. The inventory evidence, together with the absence of any report of an apparent discrepancy, pointed instead to the computer records showing that the goods had been released. On the balance of probabilities, the goods were lost by negligent release.
3. Burden of proof. The contractual structure placed on the defendants the burden of proving that the loss resulted from an event other than negligent release if they wished to rely on the limitation. The defendants’ liability arose from bailment, rather than from an indemnity for a specified peril. The claimant therefore needed to prove only loss while the goods were in the defendants’ possession. That loss raised an inference of negligence, rebuttable by proof of reasonable care.
4. The same conclusion followed from the bailment authorities and considerations of justice and common sense. The defendants were better placed than the claimant to establish what had happened to the goods. They failed to prove circumstances entitling them to limit their liability. Subject to the claimant establishing title, the defendants were liable in full.