Transfer of possession of merchandise = transfer of risk

The First Hall of the Civil Court ordered a freight company to pay the value of merchandise it was asked to ship, since it was not shipped on the agreed date and it was destroyed in a fire that erupted in the warehouse it was being kept.

This was held in a judgement delivered by Mr Justice Anthony Ellul on 14 October 2013 in the names Mediterranean Trading Shipping Company Limited and Dr Cedric Mifsud for and on behalf of the foreign company Atwood Oceanis Australia Pty Limited -v- Tristar Freight Services Limited.

In their application, the plaintiff companies held that the Atwood had engaged Mediterranean Trading to send part of equipment used on an oil rig from Malta to Perth in Australia. On 1 August 2011, Mediterranean Trading placed this equipment in a warehouse in Cospicua in accordance to the defendant company's instructions. It was also agreed that this piece of equipment was to leave the island by sea on 14 August. On the 19 August 2011, the Tristar sent an email informing Mediterranean Trading that the equipment was destroyed in a fire. The plaintiff company held that this was the defendant company's fault and should pay damages.

The defendant company filed a statement of defence stating, amongst others, that it had no contractual relationship with Atwood, that it was not responsible for the fire and that the action instituted by the plaintiff company was based on an illegal premise, since that sum declared in the customs documents were far less than what was being claimed in this action.

The court examined these pleas and on the question of illegality of the premises of the action, the court held that it was true that the amount declared for Customs and that being claimed is considerably different. However, from the evidence produced it did not result that this export required a payment to customs. 

Then the court entered into the issue whether the 14 August 2011 was the actual date that the merchandise was to leave the island, or whether it was merely an indication. The Director of Tristar testified that since the Waybill was not signed the transaction was not complete and therefore there was not contract between the two entities. The Court disagreed, since there was email correspondence between the two Maltese companies that at first the date of departure was 6 August 2011, then on 9 August an invoice of €521.74 was sent and then instructions were given where the equipment was to be taken to. Furthermore, it was established that Mediterranean Trading was responsible for the equipment that was owned by Atwood.

The court pointed out that there was no contestation that the equipment was destroyed by the fire that took place in the warehouse Tristar had indicated to the plaintiff company to take the equipment. Tristar presented a report that the cause of fire was arson, however, it did not mention how it arrived to that conclusion. The court held that a person is always bound by its obligations as long as an incident is not caused by force majeure. Once the defendant company took possession of the equipment, it was then bound to take care of it and assure itself that no damage was caused. Once the possession passed on to the defendant company, so did the risk. The report did not mention whether there was anything that could have prevented the fire such as safety equipment.

The Court also pointed out that Mediterranean Trading did not suffer any damages. With regard to the value of this piece of equipment, the plaintiff company declared to Customs that it held a value of €2,000, but in fact it costs €18,599.99. Mediterranean Trading held that it merely wrote down the value. The defendant company claimed it had no judicial relationship with Atwood. It was proved that the equipment, which was eventually destroyed, belonged to Atwood, whoever Atwood had engaged Mediterranean Trading, while Mediterranean Trading engaged Tristar. Therefore, a direct relationship between Tristar and Atwood was not required.

The Court then upheld Atwood's claims only, and ordered Tristar to pay the sum of €18599.99.

Malcolm Mifsud is a partner at Mifsud and Mifsud Advocates


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