England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		11 January 2000

Introduction

On the evening of 25 February 1994 a BAe Viscount 813 freighter aircraft left Edinburgh for Coventry with a cargo of mail consisting of parcels. It crashed 4 miles south of Uttoxeter and the aircraft and its cargo were totally destroyed; one of the crew was killed and the other injured.

The aircraft was owned by the defendants (BWA) who had entered into an agreement on 24 December 1993 with the first claimants (the Post Office) to carry mail on a round trip from Edinburgh to Coventry five nights a week. The mail to be carried was that provided by a subsidiary of the Post Office, the second claimant (Parcelforce). Parcelforce in its turn entered into contracts with the third to sixth claimants (Motorola, Burberrys, Wemyss Weavecraft and BT) for the carriage of parcels. No distinction was made between Parcelforce and the Post Office for the purposes of these proceedings and it is therefore convenient to refer solely to the Post Office as the interested party.

As a result of the accident and the destruction of the parcels being carried, the Post Office settled claims made by Motorola, Burberrys, Wemyss Weavecraft and BT. On 23 February 1996 the Post Office issued these proceedings against BWA seeking to recover £149,687.28 which they had paid by way of compensation. After the exchange of pleadings, Cresswell J on 5 March 1999 ordered the trial of two preliminary issues. One preliminary issue was whether the Post Office could maintain a claim under the contract between the Post Office and BWA in respect of the sums it had paid and, if so, for what amount. The other preliminary issue was whether the Post Office could bring an alternative claim against BWA under the Carriage by Air Acts (Application of Provisions) Order 1967 as amended (the 1967 Order).

As might be anticipated, the primary claim of the Post Office lay under the contract with BWA; it is therefore convenient to consider that claim first, though because of a provision of the contract, it will also be necessary to consider the 1967 Order and the legislation surrounding it in connection with the contractual claim.

The contract between the Post Office and BWA

The contract into which BWA and the Post Office entered followed an invitation to tender made by the Post Office and dated 25 November 1993. The terms of the tender made it clear that the Post Office was seeking tenders for the provision of an Air Charter Service between Scotland and Coventry. The specification stated that the Post Office wanted a quotation on the basis of a minimum payload of 5000kg and 1200 useable cu/ft of space on an aircraft; detailed conditions of contract were attached. BWA tendered, and their tender was accepted upon the basis of the specification and conditions sent by the Post Office.

Under the contract signed by the parties, BWA were to provide two BAe Viscount aircraft per night with each aircraft having a minimum load of 8000kg per sector and useable capacity of 2000 cu/ft to operate five days a week Monday to Friday (except for Bank and Public Holidays). The price payable per aircraft rotation was fixed irrespective of the amount of mail carried. The contract provided that the aircraft were to be painted and to have transfers applied to them, as required by the Post Office. The conditions of the contract made it clear that the aircraft were to be used exclusively for the Post Office, unless the Post Office agreed otherwise. It was common ground that the contract was in substance and form a charter.

The contract also made clear by clause 3 that the mail was to be at the risk of BWA from the moment at which it was accepted by them and loaded onto the aircraft until it was offloaded and accepted by the Post Office at the airport of arrival. The contract also contained a force majeure clause (clause 16).

The two most important clauses for the purposes of the preliminary issue were clauses 4 and 13.

4. Liability

The contractor shall be responsible for the loss, damage or violation of any item of Mail accepted by the contractor under this agreement and in the event that any such loss, damage or violation occurs, the Contractor shall be liable to pay to the Post Office in respect of each item so lost, damaged or violated, such sums of money as shall be equal to the amount which the Post Office shall, at its sole option and discretion, pay to the sender or addressee of such items as compensation, provided always that such amount shall not in any case exceed the maximum amounts payable by the Post Office under the Post Office Act 1969 (as amended).

The Contractor shall at all times by subject to the liabilities imposed by The Carriage of Air act 1961 (as amended).

13. Indemnity

The Contractor shall indemnify the Post Office against any action, loss, damage, claims, costs or expense of whatsoever kind arising as a result of any act or omission on the part of the contractor, its employees or agents in connection with the performance of its obligations under this Contract.

As can be seen from clause 4, there was a reference to sums that were payable by the Post Office under the Post Office Act 1969. It is therefore convenient next to refer to the general arrangements of the Post Office and the specific arrangements it had with Motorola, Burberrys, Wemyss Weavecraft and BT.

The schemes and contracts under which the Post Office carried mail

The Post Office Act 1969 created the Post Office as a statutory corporation; by s.7 it has power to provide postal services. Insofar as is relevant to these proceedings, the postal services provided by the Post Office were provided in one of two ways - under schemes and under contracts.

( Where a letter or package was carried by the Post Office without any contract between the Post Office and the sender, the letter or package was carried upon the terms of a scheme made under s.28 of the Act. Such schemes determined the charges, terms and conditions applicable to the postal service. One of the schemes was in respect of inland packets. Under the terms of that scheme, as I understand it, the Post Office accepted that where a packet was damaged or lost, it was to be presumed, unless the contrary was shown, that that loss or damage was due to the wrongful act, neglect or default of the Post Office or its agents or employees; this mirrored the liability under s.30(2) Act; the scheme provided for a scale of compensation. In 1994, the maximum payable was £1500 per item.

( There has, however, been a gradual trend for the Post Office to provide services under contract; each of the claimant customers of the Post Office had a contract.

( In the case of Motorola, Burberrys, and Wemyss Weavecraft, the contract entered into was on the terms of the Royal Mail Parcelforce 24 and Parcelforce 48 terms and conditions (Parcelforce 24/48 terms). Under those terms, the Post Office guaranteed a 24 or 48 hour delivery service and provided specific terms for loss or damage and insurance cover. Those terms were set out in condition 6:

6.1 The Customer acknowledges that the object of this Contract is to give the Customer, in return for posting Post Office Datapost/24/48 Parcels in bulk, a service which is not available to Customers posting Parcels under the relevant statutory scheme and that one of the benefits of the service is the availability of insurance cover in respect of Post Office Datapost/24/48 Parcels.

6.2 Neither [the Post Office] nor its officers, servants or agents, shall be liable to the Customer or any other person for any loss of or damage to any Parcel dealt with by [the Post Office] hereunder, or for any loss of or damage to the contents of any such Parcel or for any loss or damage arising from delay in the collection, conveyance or delivery of any such Parcel howsoever any such loss or damage of any of the foregoing kinds was caused and whether by the negligence of [ the Post Office] or its officers, servants or agents or otherwise.

6.3 The insurance cover arranged by [the Post Office] in respect of Post Office Datapost/24/48 Parcels includes insurance cover for the Customer’s Post Office Datapost 24/48 Parcels whilst the same are being handled by [the Post Office] pursuant to this Contract and in the event of loss of or damage to such a Parcel the Customer shall whilst such insurance cover remains in effect, be entitled to claim compensation in respect thereof pursuant to that insurance cover and in accordance with the terms and conditions thereof.

6.4 [The Post Office] may at any time modify or withdraw these insurance arrangements.

6.5 ...Under the Post Office 24 and 48 services, and subject to Conditions 6.3 and 6.4, the insurance covers loss of or damage to the Parcels or their contents, but not consequential loss caused by late delivery (as defined in the last preceding paragraph) or loss of or damage to the Parcels. Each Parcel is insured for a maximum value of £1,000 and a maximum limit of £1 million applies in respect of any one claim or series of claims.

6.6 The insurance does not cover diamonds, precious stones, real fur, jewellery (other than imitation), articles made largely of gold or silver or other precious metals, antiques, porcelain or glass, stamps, stamp collections, negotiable documents, money or bearer bonds.

6.7 [The Post Office] does not act as insurers but has arranged this facility with insurance underwriters.

( The contract with BT was made on 29 September 1993. Under the terms of that contract (relevant to the parcels that were on the aircraft and which had been sent by BT), the Post Office agreed to indemnity BT against all loss or damage or wilful acts or omissions of the Post Office, its employees agents or sub-contractors in relation to their performance of the contract. Furthermore under that contract the Post Office was to maintain at its own expense insurance in respect of its obligations under the contract. The findings of fact agreed for the purpose of the preliminary issue included a finding that Parcelforce 24/48 terms “were part of this broader contract”.

Thus it can be seen that, although clause 4 of the contract between the Post Office and BWA referred to the Post Office’s schemes, none of the parcels carried on the aircraft were carried under schemes.

The payments made by the Post Office to the claimant customers

For the purpose of the preliminary issue, it was agreed that after 26 April 1993 the Post Office directly provided insurance cover under their own insurance arrangements in respect of the loss or damage to parcels in transit; this change was not notified to Motorola, Burberrys Wemyss Weavecraft, BT. Nor was BWA notified at the time they entered into the contract.

It was also an agreed fact for the purposes of the preliminary issue that the Post Office in fact met the claims by the customers on the basis they were paying out on the insurance cover which should have been arranged under clause 6.5 but which had not in fact been obtained. The sums paid to the customers were calculated on the basis of the maximum values and maximum limits of the insurance cover which could have been provided under clause 6.5, but which was instead provided directly by the Post Office.

The statutory scheme for carriage of mail by air

Before turning to consider the issues relating to the construction of clause 4 in the light of those facts, it is necessary to refer to further provisions of the Post Office Act and the statutory regime under legislation relating to carriage by air, as clause 4 of the contract (ignoring the typographical errors) contained a reference to the Carriage by Air Act 1961.

Under legislation prior to the Post Office Act 1969, the Post Office enjoyed Crown immunity in respect of claims in tort in relation to the mail that it carried (s.9, Crown Proceedings Act 1947). In 1967 Browne J decided in Moukataff v BOAC [1967] 1 Lloyd’s Rep 396 that if mail was carried in an aircraft operated by a person other than the Post Office, there was no immunity in respect of a claim in tort brought against the operator of the aircraft by the owner of a packet which had been posted by mail.

Within a short while of that decision, Parliament made under the Carriage by Air Act 1961 the 1967 Order to which I have already referred. The general legislative history of the Order is set out in the speech of Lord Bridge of Harwich in Holmes v Bangladesh Biman Corpn [1989] AC 1112. Of relevance to this claim, was an amendment made to the Order just before it was made in March 1967 as a result of the decision in Moukataff. The amendment subjected the carriage of mail to the regime established by the Warsaw Convention (as amended by the Hague Protocol) and the Guadalajara Convention, though modified by specific provisions of the Order.

Paragraph 4 of the Order provided that the provisions of the Conventions set out in schedule 1 of the Order (as modified and adapted by the Schedule) applied to the carriage of mail or postal packages. Paragraph 6 incorporated the provisions of s.4 of the Carriage by Air Act 1961 which provided that the limitations in Article 22 of the Warsaw Convention applied “whatever the nature of the proceedings by which liability may be enforced”.

Part III of Schedule I set out (for convenience) those parts of the Warsaw Convention and the Guadalajara Convention in their amended or modified form which applied to the carriage of mail and postal packages. That part set out the applicable provisions of the Warsaw Convention including:

Article 18

The carrier is liable for damage sustained in the event of the destruction or loss of, or of damage to, any registered baggage or any cargo, if the occurrence which caused the damage so sustained took place during the carriage by air.

Article 22 was also set out; paragraph 2 (as amended) set out a limit of liability in respect of the carriage of registered baggage and cargo at a specified sum per kilo, unless a special declaration was made or the limit could be broken. In 1994, that amount was 17 SDRs per kilo, a sum the sterling equivalent of which was in 1999 £14.42 per kilo.

Part III of Schedule I next set out the applicable provisions of the Guadalajara Convention as amended and modified, including:

Article II

If an actual carrier performs the whole or part of carriage which is governed by the Warsaw Convention, both the contracting carrier and the actual carrier shall, except as otherwise provided in the Warsaw Convention, be subject to the rules of the Warsaw Convention, the former for the whole of the carriage contemplated in the agreement, the latter solely for the carriage which he performs.

Article VII

In relation to the carriage performed by the actual carrier, an action for damages may be brought, at the option of the plaintiff, against that carrier of the contracting carrier, or against both together or separately.

Article X

Except as provided in Article VII, nothing in the Guadalajara Convention as applied by this Schedule shall affect the rights and obligation of the two carriers between themselves.

Article XI

Nothing herein shall impose any liability on the Postmaster General.

The effect of the modifications made by the Order was that Parliament made the Conventions applicable to the carriage of mail; it followed that the applicable provisions of the Conventions were to be read as including mail where there was a reference to cargo. The addition of Article XI made it clear that no action could in fact be brought against the Post Office, consistent with the Crown immunity that existed. However this immunity did not apply to the operator of the aircraft which carried the mail; the protection given to it was that its liability was limited under the provision of Article 22 of the Warsaw Convention.

The position was, however, changed in 1969. On 1 October 1969, when the Post Office Act came into force, a statutory corporation replaced the Postmaster General. S.29(1) continued the immunity in tort enjoyed by Postmaster General in favour of the new statutory corporation - the Post Office. It provided:

Save as provided by the next following section, no proceedings in tort shall lie against the Post Office in respect of any loss or damage suffered by any person by reason of -

(a) anything done or omitted to be done in relation to anything in the post or omission to carry out arrangements for the collection of anything to be conveyed by post

(b)-(d) ....

The “next following section” is s 30 which imposes a limited liability on the Post Office for registered inland packets and is not relevant to this claim. S.29(3) made express provision for the position of the person operating the carriage of the mail:

No person engaged in or about the carriage of mail and no officer, servant, agent or sub-contractor of such person shall be subject except at the suit of the Post Office to any civil liability for any loss or damage in the case of which liability of the Post Office therefore is excluded by subsection (1) of this section (or any loss of, or damage to, a packet to which the next following section applies).

The effect therefore was to provide the operator of the aircraft who carried the mail with immunity from suit by the sender or owner of the mail, though it preserved the Post Office’s right of claim against the operator. In effect, it prevented a claimant like Moukataff bringing a claim and thus circumventing the statutory immunity for actions in tort; the position of the operator was therefore much better than it had been under the 1967 Order, as it was entitled to immunity and not merely a limit to its liability. In American Express v British Airways [1983] 1 WLR 701 Lloyd J (as he then was) decided that the statutory immunity extended to a claim under the 1967 Order as such a claim was encompassed within the words “proceedings in tort”. Article XI of the Guadalajara Convention as applied by the 1967 Order was also amended so that it read:

Nothing herein shall impose any liability on the Postmaster General or any authority for the time being established by or under any Act of Parliament with power to provide postal services.

The construction of clause 4 of the contract between the Post Office and BWA

It was common ground that the liabilities between the Post Office and BWA should be determined by the provisions of the contract. It was not in issue that the scope of clause 4 of the contract, particularly when read with clause 13 and clause 3, was wide enough to make BWA liable for any loss or damage of any item of mail accepted by BWA, subject only to the force majeure clause. It was agreed for the purposes of the preliminary issue that the mail had been accepted by BWA and was at their risk under the terms of the contract.

However, it was contended by BWA that it was only liable under the contract to the Post Office for the amounts which the Post Office had to pay to its customers if that amount had been paid under one of its schemes; and that, in any event, the contract provided a still further limitation as the separate paragraph of clause 4 which subjected BWA to the liabilities imposed by the Carriage by Air Act 1961 applied the limitations of liability contained in the Article 22 of the Warsaw Convention as set out in the 1967 Order.

The Pot Office contended that the reference in the contract to the schemes made under the Post Office Act did not restrict the liability of BWA to pay the Post Office only for mail that was carried under schemes. BWA were made liable in respect of all mail carried; the reference to the schemes provided only a limitation of liability. Furthermore, the Post Office submitted that, as the parties had in any event agreed a limitation of liability by reference to the schemes of the Post Office Act, it was inconceivable that they had agreed yet a further limitation under the Warsaw Convention, particularly as that was calculated by weight and thus in a wholly different manner from the per item limit in clause 4.

It is convenient to consider these points in turn.

The reference in the contract to schemes made under the Post Office Act

It was common ground that clause 4 should be construed by reference to the surrounding circumstances and the principles set out in the judgment of Lord Hoffman in Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896 at 912f to 913e. On the material before me I am satisfied that the background known to the parties included the following matters:

( The Post Office carried mail (including parcels) either under one of its schemes or under contracts entered into with its customers.

( Mail would be carried under contracts which were entered into between the Post Office and their customers on Parcelforce 24/48 terms or on terms that might include the imposition of liability of the Post Office for loss or damage; it was a feature of the Parcelforce 24/48 terms that inclusive insurance was provided up to a specified amount per item.

( The Post Office provided an ordinary mail service called Parcelforce Standard which provided for compensation as an optional extra.

Against that background, it is difficult to understand how two commercial parties could sensibly have intended clause 4 which in general terms imposed the risk of loss on BWA to limit that risk only to mail carried under one of the statutory schemes. Indeed it seems to me clear from the language of the clause that these two parties intended no such thing and intended the reference to the schemes made under the Post Office Act to act as a ceiling for compensation paid by the Post Office, whether the liability of the Post Office arose under a scheme or under a contract.

The language of the clause, viewed against the surrounding circumstances, made that quite clear. It provided that BWA “shall be liable to pay to the Post Office” for each item lost or damaged “such sum of money as shall be equal to the amount which the Post Office shall, at its sole option and discretion, pay to the sender or addressee of such items as compensation”. Those words are, in my view, clear and imposed liability to pay the amount that the Post Office decided to pay as compensation. There were no words limiting the compensation payable to compensation payable under a scheme. If the parties had intended such a result to follow, given the fact that the parties knew that mail would be carried both under schemes and under contract, I am sure they would have said so.

The wording of the proviso which follows is a limitation on the amount payable. It is clear from the language that by using the words “provided always that such amounts shall not in any case exceed the maximum amount payable [under a scheme]” the parties were referring to the schemes purely for limiting the amount payable. They were not using the proviso to determine whether compensation was payable at all. It seems to me by the use of the reference to the amount the parties made their intention clear.

I am therefore sure, both as a matter of the language of clause 4 and as a matter of a sensible and purposive construction of the clause, that BWA are liable to pay the amount the Post Office paid as compensation for any item lost or damage, but subject to the maximum amount payable under the Post Office schemes.

The position in relation to the amounts paid to BT

It follows therefore that, as the Post Office was bound to pay compensation to BT under its contract with them if the accident was caused by the negligence of BWA, then if they paid on the basis that the accident was or may have been so caused, then the Post Office would be entitled to recover the amount paid from BWA, subject to the limit set out in the Post Office schemes.

The position in relation to the other customer claimants

However, in respect of the other customers which contracted with the Post Office (and possibly also BT on the assumed findings for the purpose of this preliminary issue), the amount the Post Office paid was paid on the basis they were paying out “the insurance cover which should have been arranged under clause 6.5 of the Parcelforce 24/48 terms”. Indeed as clause 6.2 of those terms excluded the Post Office’s liability, there was no other basis on which the Post Office would have paid Motorola, Burberrys and Wemyss Weavecraft.

The question therefore arises as to whether this was paid “as compensation” within the meaning of clause 4. BWA said that the sums paid to Motorola, Burberrys and Wemyss Weavecraft were not paid as compensation within the meaning of clause 4, first because there was no obligation for the Post Office to pay and secondly that what was paid was a payment in lieu of the insurance cover which should have been obtained.

The first contention made by BWA depended upon clause 6.4 of the Parcelforce 24/48 terms and conditions. Under that clause, the Post Office was entitled at any time to modify or withdraw the insurance arrangements. BWA therefore submitted that as the Post Office was entitled at any time to withdraw the insurance arrangements, once it had done so, it was under no liability at all.

I do not accept that argument. Considering the Parcelforce 24/48 terms as a whole, it is clear that the Post Office could only withdraw the insurance arrangements if it gave notice to its customers. I am sure that clause 6.4 was subject to an implied term to that effect and the implication of such a term was necessary to give business efficacy to the contract. If one considers the whole of the terms against the background as advertised, it is clear that the insurance arrangements were a key feature of the services offered to its bulk customers. In my judgment, it could not be withdrawn without giving reasonable notice, thus entitling the bulk customers to decide whether they wished to continue to use the service. As it is to be assumed for the purpose of this preliminary issue that no notice was given, I am satisfied that the Post Office was bound to compensate Motorola, Burberrys and Wemyss Weavecraft on the basis that insurance should have been obtained.

The second argument put forward by BWA was more formidable. They pointed to the fact that under clause 6.2 of the Parcelforce 24/48 terms, the Post Office excluded all liability for loss or damage for the parcels; the Post Office could never therefore have been liable to pay compensation for parcels carried under the Parcelforce 24/48 terms. Instead, the Post Office had agreed to arrange insurance up to a specified sum per parcel; under clause 6.7 of the Parcelforce 24/48 terms, the Post Office stated that they did not act as insurers, but had arranged a facility with insurance underwriters. BWA contended that if insurance had been obtained, it was the insurers who would have paid the customers and not the Post Office. The only right of action that insurers would have had against BWA was a subrogation claim they would have had to bring in the name of Motorola, Burberrys or Wemyss Weavecraft. Any claim against BWA would have been in tort or under the terms of the 1967 order, but such a claim was barred by the provisions of s.29(3) of the Post Office Act. Thus, as insurers could not bring a claim against BWA, it could never have been intended that the Post Office should be entitled to bring a claim under its contract with BWA for sums paid “as compensation” where they had paid out on the basis of the insurance which they should have obtained.

In my view this argument is correct. Construing the agreement against the background known to the parties, I consider that clause 4 was directed at payments that the Post Office would make as compensation and not payments made because the Post Office had failed to obtain insurance. The parties would not have anticipated when they used the words “as compensation”, a payment made by the Post Office in lieu of the insurance that it should have obtained. If and insofar as the customers were insured, whether under their own policies or by a policy arranged by the Post Office, the insurers would have had no rights by way of subrogation against BWA because of the provisions of s.29(3) of the Post Office Act. Thus the parties would never have anticipated BWA being liable to pay in the event of loss or damage where the Post Office were bound to obtain insurance and had excluded their own liability. Thus where the Post Office paid out because it had not obtained insurance, then in my view that payment was not within the words “as compensation” in clause 4.

Thus, in the result, in my view on the assumed findings that have been agreed for the purpose of this preliminary issue, the Post Office are not entitled to recover the sums that have been paid to Motorola, Burberrys or Wemyss Weavecraft. However, if the sums paid to BT were not in fact paid solely on the basis that insurance had not been obtained under the Parcelforce 24/48 terms, but on the basis that the Post Office was or might have been liable for negligence under its contract with BT, the Post Office is entitled to recover the monies paid to BT subject to the per item limit.

“Subject to the liabilities imposed by the Carriage by Air Act 1961”

The limit of liability under the schemes is a limit per item. If the item under Article 22 of the Warsaw Convention was to be applicable as an individual limit, that would be a limit by reference to the weight of either the individual items (if known) or the overall weight of the cargo. It would, in my view, have been wholly uncommercial for the parties to have agreed a limit per item and then to have subjected that limit to yet a further limit calculated on a different basis Do the words used compel that result?

In my view they do not. The reference in this separate paragraph of clause 4 was to the liability imposed by the Carriage by Air Act. I agree with the submission made by the Post Office that these words referred to the general liabilities imposed by that regime and emphasised (just as clause 13 of the contract emphasised) the liability for mail carried. The sentence referring to the Carriage by Air Act did not refer to “limitations and exceptions” and, in my view, there is no need to read the sentence as referring to the limitations. Furthermore Article X of the Guadalajara Convention as applied by the 1967 Order made it clear that nothing in the Convention affected the rights between the carriers. Thus, in my view, the limit applicable to compensation payable was that in the schemes and it was not subject to the further limitation in Article 22.

The alternative claim under the 1967 Order

I find it difficult to see how the Post Office can have a separate claim under the 1967 Order as, in my view, it is clear that the parties intended their liabilities to be governed by the contract.

It was common ground, as I have said, that the contract was in substance and form a charter agreement; BWA provided space on the aircraft for the exclusive use of the Post Office. No freight was payable as the sum payable under the contract was payable irrespective of whether any mail was carried or not. The contract was not a contract for the carriage of a specific consignment by air; no way bills were issued. Furthermore, it is clear from Article X of the Guadalajara Convention, that the terms of that Convention did not affect the rights and obligations of the two carriers as between themselves.

All of these factors point, in my view, to the clear position that the rights and liabilities between BWA and the Post Office were governed exclusively by the contract and not by the terms of the statutory regime. Thus, insofar as the Post Office did not have a claim under the contract or such a claim is limited by the terms of the contract, the statutory regime did not provide it with an alternative cause of action.

In case I am wrong in that view I will briefly express my views on the claim put forward by the Post Office under the 1967 Order. This can be done under three headings:

(1) The manner in which the statutory regime applies

It is clear from the decisions of the House of Lords in Sidhu v British Airways Plc [1997] AC430 and Herd v Clyde Helicopters [1997] AC 534 that where the Conventions apply, they create an exclusive right of action and resort cannot be had to other forms of action. The claim is then governed by the terms set out in the Convention.

(2) Who can sue?

In 1988, Gatehouse J decided in Gatewhite v Iberia [1990] QB326 that there was nothing in the Conventions which required only the consignee or the consignor to sue and an action could be brought by the owner of the consignment. However , as a result of the two decisions at the House of Lords to which I have referred in the preceding paragraph, the question decided by Gatehouse J was reconsidered in 1999 by David Steel J in Western Digital Corporation v British Airways [1999] 2 Lloyd’s Rep 380. He decided that only the consignee or the consignor or the person entitled to delivery could sue. At the conclusion of his judgment he doubted whether the parties had benefited from a further exposition from another first instance court on this long standing issue. As the same issue arises only as an incidental point in this case, I certainly do not wish to add yet another exposition from a first instance judge, particularly as the appeal in Western Digital Corporation is due to be heard in the Court of Appeal shortly.

However it is not easy to apply the concept of consignee and consignor to the carriage of mail by BWA for the Post Office. There were no waybills in respect of the consignments.

Furthermore as far as the customers (Motorola, Burberrys, Wemyss Weavecraft or BT) were concerned, it was a matter entirely for the Post Office whether it sent their goods by air or by road or by rail. Thus it is rather difficult to fit the concepts of contracting carrier and actual carrier and consignee and consignor into carriage under this contract. I find it difficult to see how a customer such as Motorola could be looked on as the consignee or consignor for the purpose of carriage by air when they did not know that their goods would necessarily go by air; furthermore BWA had no relationship with the customer and did not know who they were. As far as BWA was concerned, they were simply carrying a consignment of mail for the Post Office. If anyone had to be regarded as the consignee, I would have taken the view, on the facts of this case, that it was the Post Office and that therefore the Post Office could sue, assuming of course that the 1967 Order applied.

(3) The scope of the liability under Article 18

Article 18 of the Warsaw Convention only imposed liability “if the occurrence which caused the damage so ... took place during the carriage by air”. It was BWA’s argument that the claim made by the Post Office was for a loss which was not caused by an occurrence during the course of carriage by air; the claim was for a loss caused by the failure by the Post Office to obtain insurance.

I do not accept that argument. If there was liability under the statutory regime, and the Post Office was entitled to bring a claim, then the claim it was entitled to bring was in respect of the actual loss or damage sustained to the mail. Provided that the actual loss or damage took place during the carriage by air, then it was within Article 18. In my view the actual damage plainly so took place; the limitation in Article 18 is therefore inapplicable.

Conclusion

On the assumed facts for the purpose of the preliminary issue therefore:

( I hold that the Post Office was not entitled under the contract to recover the sums paid to Motorola, Burberrys or Wemyss Weavecraft as these were paid out in lieu of the insurance which it should have obtained.

( The Post Office might be entitled to recover the sums paid to BT, depending on the further elucidation of the facts; the claim was subject to a per item limit.

( I do not consider a claim could be brought under the 1967 Order.