Shipping & Transport - Germany

Facts

In order to fulfil a sales contract with company E, company H entered into a contract of carriage with a parcel service in November 1998. For a fixed price, the parcel service contracted to carry two parcels (weighing 28 and 29 kilograms) containing computer items from Essen to Cologne - unaware of the value of the goods, which was approximately Dm100,000 (€50,000). The parcel service's general terms for carriage contracts, which dated from February 1998, contained provisions on the carrier's liability; according to these terms, the carrier's liability could not be limited in case of wilful misconduct or gross negligence.

The seller, H, was given a receipt for the goods by the parcel service driver who collected the two parcels on November 12 1998; however, the parcels were never delivered to E. As the parcel service only paid an indemnity of approximately Dm1,000 (€500) to E, E's insurance company paid the balance and then sued the parcel service for payment of this amount. The regional court and Düsseldorf Court of Appeal ruled in the claimant's favour. The defendant appealed to the German Federal Court of Justice.

Judgment

The Federal Court of Justice upheld the appeal court's decision on June 5 2003 on the grounds of Sections 425(1) and 435 of the German Commercial Code (revised version, in force since July 1 1998). Section 425(1) of the code concerns the carrier's general liability for the goods while they are in its custody. Pursuant to Section 431(1), the carrier's liability is limited to 8.33 special drawing rights per kilogram. Pursuant to Section 435 of the code, this cap may be exceeded if the carrier acts with wilful misconduct or recklessly with knowledge that damage would probably result. Prior to the revision of the code in 1998, Section 435 referred to 'wilful misconduct' or 'gross negligence'.

According to the general rules of German law, under Section 435 of the code the injured party bears the burden of proof in respect of the carrier's wilful misconduct or recklessness. However, prior to the revision of the code, the Federal Court of Justice ruled that in certain circumstances the carrier, in order to avoid full liability, had to disclose how the loss or damage occurred, and to this extent give an insight into its internal organization of the transport in question; failing which there would be a presumption that it acted with wilful misconduct or gross negligence. This duty to disclose falls short of a shifting of the burden of proof. The actual burden of proof remains with the injured party, but the party in breach must provide substantial information which may enable the injured party to prove its case.

In its decision of June 5 2003 the Federal Court of Justice had to decide whether this duty to disclose still applied after the 1998 revision of the Commercial Code, as the new Section 435 now refers to 'recklessness with knowledge that damage will probably result', and no longer to 'gross negligence'. According to the court, the duty to disclose is still valid. This means that, in contrast to the arguments of the parcel service, a carrier who does not explain how the transport was organized can be presumed to have acted not only with gross negligence, but also recklessly with knowledge that damage would probably result.

Comment

This judgment is a progression of existing case law rather than a groundbreaking ruling. The duty of disclosure had already been established by German courts on several occasions in neighbouring areas of law. For instance, in relation to Article 25 of the Warsaw Convention, the Cologne Court of Appeal established a duty of disclosure in a judgment of June 27 1995,(1) and the Federal Court of Justice did likewise by confirming a judgment of the Frankfurt Court of Appeal(2) on September 21 2000.(3)

In a judgment of February 28 2002, the Hamburg Court of Appeal transferred this concept to the Convention on Contracts on the International Carriage of Goods by Road (CMR) by applying it to Article 29 of the CMR.(4)

It was then only a minor step to the rule's application to domestic carriage contracts governed by the Commercial Code. In German law, the rules on domestic transport (Sections 407 to 452(d) of the 1998 Commercial Code) are modelled on the CMR. As Article 29 of the CMR refers to "wilful misconduct or... such default...as, in accordance with the law of the court...is considered as equivalent to wilful misconduct", the member states had to determine what kind of behaviour was equivalent to wilful misconduct according to their law. In Germany, as in most other countries except for Greece, a strong version of negligence was considered equivalent to wilful misconduct by the courts. This was reflected by the Commercial Code provisions on domestic transport, which referred to "gross negligence". However, in order to harmonize the CMR provisions on carriage of goods by road with those of the Warsaw Convention (Article 25) and the Hague-Visby Rules (Article 4(5)), "gross negligence" shifted to "recklessly with knowledge that damage would probably result", thus introducing the subjective element of 'knowledge'. Eventually, the Commercial Code revisions in 1998 introduced this formula in Section 435, so that domestic transport and international transport are largely harmonized under German law. In light of these developments, the application to domestic cases of the duty of disclosure known from the CMR and other international conventions is unsurprising.

For further information on this topic please contact Olaf Hartenstein at Dabelstein & Passehl by telephone (+49 40 31 77 970) or by fax (+49 40 31 77 97 77) or by email (o.hartenstein@da-pa.com).

Endnotes

(1) 22 U 265/94.

(2) April 21 1998, 5 U 210/96.

(3) TransportR 2001, 29.

(4) TransportR 2002, 344.