Introduction

South Africa is no stranger to cargo theft. In their latest "Cargo Theft Report", co-authors TT Club and BSI state that in 2019, South Africa accounted for 54% of all cargo theft in the Middle East and Africa, followed by Kenya at 14%. Unsurprisingly, the top commodities stolen are food and beverages, metals and electronics. Given that much of the theft is carried out by organised syndicates, which are typically aided by inside information or collaboration, successful prosecutions are rare and a significant proportion of the financial burden is shouldered by cargo owners and their underwriters, which are left to obtain recovery as best they can.

It is against this background that the Johannesburg High Court's recent decision in Fujitsu Siemens Core (Pty) Ltd v Schenker South Africa (Pty) Ltd places the legal liability issues arising from cargo theft sharply into focus.

Facts

The facts of this case illustrate a familiar pattern. The claimant, Fujitsu, imported a consignment of laptops and accessories from its affiliate company in Germany to the value of $516,887. It engaged the services of Schenker South Africa to assist with the logistics, freight forwarding, warehousing and clearing of the consignment. This entailed Schenker receiving the goods from the carrier and delivering them by road to Fujitsu, after having attended to the necessary customs clearance and other logistical issues.

Once the goods arrived in storage at the South African Airways cargo warehouse and were ready to be delivered to Fujitsu, Schenker issued its drawing clerk, Wilfred Lerama, with the necessary documentation authorising him to collect and deliver the cargo. On 23 June 2012 Lerama arrived at the storage warehouse to collect the laptops ostensibly on behalf of Schenker and Fujitsu. The goods were loaded onto his truck, which was not marked with the Schenker branding, and he thereafter drove off, never to be seen again.

Like all of Schenker's drawing clerks, Lerama had been issued with an identity card which allowed him almost unfettered access to the airport cargo terminal and its warehouses and storage facilities. The warehouse cargo personnel knew that Lerama was one of Schenker's drawers and on the day in question did not suspect that he was there for any unlawful business. The court found that, on the probabilities, Lerama had carefully planned and orchestrated the theft with the assistance of one or more co-conspirators. Fujitsu had therefore fallen victim to a theft perpetrated by an employee of Schenker who, up to the point when he stole the goods, had been acting in the course and scope of his employment with Schenker.

Schenker's services to Fujitsu were subject to a national distribution agreement between the parties which in turn incorporated a number of the standard terms drafted and adopted by the South African Association of Freight Forwarders, whose terms are widely adopted throughout the industry.

As expected, these terms contain a host of limitations and exclusions from liability, including exemptions for loss or damage to cargo while in transit. When the avenue of contractual damages is closed to a claimant (as it was for Fujitsu in light of the contractual exclusions), the alternative possibility is to circumvent the contract by asserting a common law damages action in delict (or tort) arising from the theft. This was the route taken by Fujitsu in the present case.

Issues

The issues which arose for determination were twofold:

  • Could Schenker be held vicariously liable in delict for the theft perpetrated by one of its employees?
  • If so, did the terms of the contract between Fujitsu and Schenker exclude liability for the delict committed by Lerama?

As to the first issue, the law as it pertains to vicarious liability in South Africa has undergone a significant shift in recent years. As a general rule, an employer is vicariously liable for wrongful acts or omissions of its employees which are committed within the course and scope of their employment or while they are engaged in any activity reasonably incidental to the employer. There may also be circumstances in which vicarious liability on the employer's part can arise even where wrongdoing takes place outside the course and scope of employment. These are known as 'deviation cases' and are more challenging in their assessment.

In the post-constitutional era of the 1990s and onwards, the law relating to vicarious liability in the context of deviation cases has tended to asses liability on the degree of connection between the deviant conduct and the employment. The development of this principle culminated in the recent watershed Supreme Court of Appeal decision in Stallion Security v Van Staden, which held that, in the determination of the sufficiency of connection, the employer's creation or enhancement of risk and the wrong complained of may be relevant. Thus, the law of vicarious liability has shifted towards the adoption of the 'close connection' test which is already firmly established in jurisdictions such as Canada and the United Kingdom.

Decision

In applying the close connection test to the present case, the judge took the following aspects into consideration in finding that Schenker was vicariously liable for Lerama's acts:

  • Lerama had been employed as a cargo drawer and, as such, had enjoyed unfettered access to the South African Airways security cargo area to uplift and remove goods belonging to Fujitsu.
  • Lerama had been given specific security clearance, as well as necessary customs and clearing documentation.
  • Schenker had instructed and directed Lerama to go and collect the laptops and he had followed his normal protocol in doing so (but for the theft itself).
  • Lerama had gained access to the warehouse and to Fujitsu's goods by relying on and displaying his Schenker-issued security clearance.
  • Lerama had performed the same procedures and gone through the same motions as he would ordinarily have done with a lawful collection.

The court therefore concluded that the risk of theft arising from the access permitted to Lerama and the appearance of lawfulness created by Schenker clearly demonstrated a sufficiently close link between the theft and the initial lawful business which Lerama had been carrying out on Schenker's behalf. Put differently, the degree of responsibility and access to cargo which Schenker had bestowed on Lerama had increased or enhanced the risk of theft.

As to the issue of whether the terms of the contract between Fujitsu and Schenker operated to exclude liability for the theft in question, the determination by the court was essentially one of construction and interpretation of the terms of the agreement itself and centred on the following clause:

17. Goods requiring Special Arrangements

Except under special arrangements previously made in writing, the Company [Schenker] will not accept or deal with bullion, coin, precious stones, jewelry, valuables, antiques, pictures, human remains, livestock or plants. Should the Customer [Fujitsu] nevertheless deliver such goods to the Company or cause the Company to handle or deal with any such goods otherwise than under special arrangements previously made in writing, the Company shall incur no liability whatsoever in respect of such goods, and in particular, shall incur no liability in respect of its negligent acts or omissions in respect of such goods. A claim, if any, against the Company in respect of the goods referred to in this clause 17 shall be governed by the provisions of clauses 40 and 41.

Here, the starting point was the well-established principle under South African contract law that any limitations to liability will be interpreted strictly and that contractual instruments should not be allowed to restrict liability, even more so if they arise outside of the contract, unless expressly stated.

On the facts, the judge found that, by all accounts, Lerama had not been executing the contract when he attended the cargo terminal and stole the goods. In his analysis of the terms of the contract, the judge found that the recurring theme was that the loss or damage envisaged in the agreement was loss or damage intended to be suffered by Fujitsu pursuant to or during the provision of services by the defendant. In the judge's view, Lerama had not been performing the services in terms of the contract but rather had been acting outside of its terms when he stole the cargo.

Comment

This case raises interesting questions regarding the scope of liability and the degree to which carriers and logistics operators can exclude liability for theft perpetrated by their employees. Many in the industry will no doubt need to revisit their own standard trading terms and conditions in light of this judgment.

In the meantime, it will be interesting to see whether this case will be taken on appeal given its implications for the industry as a whole.