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Road hauliers were held liable for nearly £500,000 in excise duty after goods were stolen from a lorry at an English service station – JTI Polska Sp. Z.o.o. and others v Jakubowski and others [2023] UKSC 19.

JTI Polska contracted with Jakubowski to carry 1,429 cartons of cigarettes by road from Poland to the UK. Whilst parked at a service station in England, thieves gained access to the consignment by cutting a hole in the vehicle and stole 289 cartons with a market value of £72,512.

Due to a suspension agreement in place, tobacco excise duty became payable when the consignment was released for commercial consumption or was deemed to have been so released. JTI Polska notified HMRC of the theft, who proceeded to levy an excise duty of £449,557 on the basis that they deemed the cigarettes to have entered into circulation within the UK following the theft.

JTI Polska claimed compensation from Jakubowski, the carrier, under article 23(4) of the Convention on the Contract for the International Carriage of Goods by Road 1956 (the “CMR”), which states:

“In addition, the carriage charges, Customs duties and other charges incurred in respect of the carriage of the goods shall be refunded in full in case of total loss and in proportion to the loss sustained in case of partial loss, but no further damages shall be payable.”

The High Court found in favour of JTI Polska by applying a wide interpretation of Article 23(4) of the CMR as adopted in the case of James Buchanan & Co. Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141 (“Buchanan“). Jakubowski appealed to the Supreme Court.

Jakubowski argued (as a carrier) that the wide interpretation of Buchanan was wrong. Instead, Article 23(4) should be interpreted narrowly to only capture charges which would have been incurred had the carriage been performed without incident.

The Supreme Court refused to depart from the judgment in Buchanan. In deciding whether to depart from an earlier judgement, Knauer v Ministry of Justice [2016] UKSC 9 was precedent that merely persuading the Court that a decision was wrong was insufficient. The party needed to demonstrate the decision was untenable and that it was appropriate for the Court to depart from it. This was the case notwithstanding that the decision in Buchanan had not been followed in other member states who had adopted the CMR.

The Court did not consider the broad interpretation in Buchanan untenable because:

  • The judges at all levels of Buchanan favoured that interpretation save for a minority in the House of Lords;
  • There was no consensus amongst other courts of the other signatories to the CMR as to which interpretation was correct;
  • The wording of Article 23(4) was widely drawn. A narrow interpretation required importing words such as “if it had been properly performed“.
  • Some of the criticisms were unjustified or overstated—for example, the need to avoid double insurance and the potential exposure to unforeseeable losses. In response, the Court recognised that parties to international road haulage contracts usually took out double insurance and that excise duty was a reasonably foreseeable liability.

The Court similarly found that it was not appropriate to depart from Buchanan as it had not been shown to work unsatisfactorily in the marketplace and had not produced manifestly unjust results. In the wider industry, contracting parties did not appear to be attempting to contract around the decision, raising concerns or asking for change.

Key takeaways

The decision affirms that:

  • Liability for stolen goods under the CMR rests with the road haulier/carrier. This may encourage haulage firms to examine their security measures when parking vehicles overnight; and
  • The English Courts are reluctant to overturn previous decisions, notwithstanding that (a) there were “powerful arguments” to do so and (b) other member states had adopted a different approach.
  • Road hauliers/carriers might consider varying their contracts to contract out of the impacts of Article 23(4) of the CMR.

If you have any questions regarding this case, please email our specialist Shipping & Logistics lawyers at online.enquiries@la-law.com.

 


Edited by

Linda Jacques

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