Freight Forwarders’ Nine-Month Contractual Time Bar — Is it Reasonable?
The article discusses the reasonableness of freight forwarders’ nine-month contractual time bar in light of a recent decision in the English Court of Appeal.
Does a nine-month contractual time bar contained in a freight forwarding contract satisfy the test of reasonableness under the Unfair Contract Terms Act (‘UCTA’) (Cap 396)?
‘No’ held the Singapore High Court.1
‘Yes’ held the English Court of Appeal.2
After hearing evidence of the applicable international and local practice and the reasons put forward by the freight forwarders to justify the nine-month limitation period, the High Court of Singapore, in Press Automation
Technology v Trans-Link Exhibition Forwarding, held on the facts of that case that the nine-month limitation clause under cl 30 of the Singapore Freight Forwarders Association (‘SFFA’) Standard Trading Conditions (1986) failed
to satisfy the requirements of reasonableness prescribed by the UCTA. The judge found that Trans-Link had failed to show that it was necessary for them to have a nine-month time bar in place:
In the recent decision of the English Court of Appeal, however, in Granville Oil & Chemicals v Davis Turner where a similar nine-month period of limitation under cl 30(B) of the British International Freight Association
(‘BIFA’) standard trading conditions arose for consideration under similar albeit not identical factual circumstances, a contrary view was reached.
In reversing the decision of the court below, Lord Justice Tuckey of the Court of Appeal said in the course of his judgment, he had no doubt that nine months was a reasonable time limit for a claim for loss of or damage to
goods in transit as:
The latter argument in particular was canvassed in the Singapore court with force and the evidence of the same witness, Mr Ronald George Willis (who had long held an office with BIFA and who was at the time a member of the
International Federation of Freight Forwarders Associations (‘FIATA’) Advisory Body for Legal Matters) was relied upon in both cases. Notwithstanding the similarity in the arguments and evidence, the Singapore court and the
English Court of Appeal reached different conclusions.
In light of the decision of the English Court of Appeal, is there now scope for arguing in Singapore that nine months is reasonable?
The persuasiveness or otherwise of the Granville case, needless to say, would depend on the similarity of the clauses, the facts of the case and the evidence and legal arguments canvassed.
Although not in identical terms, the essential time periods prescribed are similar in the two sets of clauses. For ease of comparison, the two clauses are reproduced below.
Clause 30 of the SFFA provides as follows:
The Company shall be discharged of any liability whatsoever unless:
(a) (i) Notice of any claim is received in writing by the Company or its agent within 14 days after the date specified in (b) below, (ii) Suit is brought in the proper forum and written notice hereof received but the Company within nine months after the date specified in (b) below. (b) (i) In the case of damage to Goods, the date of delivery of the Goods, and in the case of loss of the Goods, the date the Goods should have been delivered. (ii) In the case of delay or non-delivery of the Goods, the date that the Goods should have been delivered. (iii) In any other case, the event giving rise to the claim. [emphasis added]
Clause 30 of the BIFA reads as follows:
(A) Any claim by the Customer against the Company arising in respect of any service provided for the Customer or which the Company has undertaken to provide should be made in writing and notified to the Company within 14 days of the date upon which the Customer became or should have become aware of any event or occurrence alleged to give rise to such claim and any claim not made and notified as aforesaid shall be deemed to be waived and absolutely barred except where the Customer can show that it was impossible for him to comply with this time limit and that he has made the claim as soon as it was reasonably possible for him to do so. (B) Notwithstanding the provisions of subparagraph (A) above the Company shall in any event be discharged of all liability whatsoever howsoever arising in respect of any service provided to the Customer or which the Company has undertaken to provide unless suit be brought and written notice thereof given to the Company within nine months from the date of the event or occurrence alleged to give rise to the cause of action against the Company. [emphasis added]
In both cases the defendants were freight forwarders who had agreed with the plaintiffs to transport their cargo from one destination to another.
In Press Automation, the defendants, Trans-Link, were to transport a machine from the plaintiffs’ (Patec) premises in Singapore to the exhibition centre in Bangkok and back to Patec’s premises. The machine was shipped from
Singapore to Bangkok and arrived at the exhibition centre on 10 November 2000. On 12 November 2000, whilst in Bangkok and in the custody of Trans-Link, the machine suffered damage. Patec claimed damages as a result of the damage
to the machine and also for survey fees. The action was commenced on 29 October 2001. The nine-month period to commence action expired on 10 August 2001.
In Granville, the defendants, Davies Turner (‘DT’), were asked to arrange for the return shipment of a consignment of paint in drums from Kuwait to the plaintiffs’ (Granville) warehouse in Britain and to arrange all risks cargo
insurance. The paint was packed and shipped from Kuwait in November 1999 and delivered to DT’s warehouse by 11 January 2000. Granville discovered that the paint had been damaged in transit and claimed against DT and DT claimed on
the insurance on Granville’s behalf. On 31 March 2000, the underwriters rejected the claim relying on an excepted peril. DT disputed the rejection but on 27 June 2000, the underwriters rejected the claim again because it was a
returned shipment. The nine-month period to bring a claim for breach of contract to insure expired on 3 August 2000. Granville were not informed that the insurance claim had been rejected till 2 August 2000 and of the reasons only
on 22 August 2000. Granville commenced action 15 months later on 15 November 2001.
In both Press Automation and Granville, the claim was for a breach of contract in relation to the damage to the goods but in Granville, Granville had an additional claim against DT for failing to insure against all risks.
Several issues were before both courts, some of which were common. In particular both courts had to consider if the respective SFFA and BIFA conditions formed part of the contract between the parties and if the answer was in
the affirmative, then whether it satisfied the test of reasonableness under the UCTA.
In Press Automation, the court also had to consider the reasonableness of another clause of the SFFA conditions, namely cl 27 which, on the facts of that case, limited the liability of Trans-Link to S$100,000.
In Granville, the court had to consider further if cl 30(B) restricted DT’s liability in relation to its failure to effect all risks insurance.
Both courts began by considering the relevant provisions of the UCTA. Both courts referred to s 3 of the UCTA and to the test of reasonableness as set out in s 11. The relevant provisions in Singapore which are identical to the English provisions save for the differences as shown below in parenthesis provide as follows:
3 (1) (The) section applies as between contracting parties where one of them deals as consumer or on the others’ written standard terms of business. (2) As against that party the other cannot by reference to any contract term – (a) when himself in breach of contract, exclude or restrict any liability of his in respect of the breach; (b) … except insofar as … the contract terms satisfies the requirement of reasonableness. 11 (1) In relation to a contract term the requirement of reasonableness for the purposes of this Part (Act) … is that the term shall have been a fair and reasonable one to be included having regards to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made. (2) … (3) … (4) Where by reference to a contract term or notice a person seeks to restrict liability to a specified sum of money, and the question arises (under this or any other Act) whether the terms or notice satisfies the requirement of reasonableness, regards shall be had in particular (but without prejudice to subsection (2) in the case of contract terms) to — (a) the resources which he could expect to be available to him for the purpose of meeting the liability should it arise; and (b) how far it was open to him to cover himself by insurance. (5) It is for those claiming that a contract term or notice satisfies the requirement of reasonableness to show that it does.
It was held in both cases that the relevant clause was incorporated into the contract. There was also no doubt in both cases that the UCTA applied and that the burden of proving that any particular restrictive clause in a
contract is reasonable was on the party asserting it.
The Divergent Views
From this point, however, the approach taken by the courts begins to diverge.
In Press Automation, reference was made to Kenwell & Co v Southern Ocean Shipbuilding Co  1 SLR 214 where Warren Khoo J in considering s 11 held the following factors to be insufficient to satisfy the
reasonableness requirement, viz:
On the ground that Kenwell’s case was clear authority for the principle that even if a party knowingly enters a contract with a restrictive condition he will still be able to seek the protection of the UCTA, the judge
rejected Trans-Link’s first argument that the clause was reasonable as Patec clearly had notice of the application of the SFFA Conditions to the contract by way of the incorporating clause.
The judge accepted on the evidence adduced3 that the clauses were in accordance with international and local practice and that in Singapore it is the practice of freight forwarders
generally who are members of the Singapore Logistics Association (‘SLA’) to also trade on either the SLA Conditions or their predecessor SFFA Conditions. However, this was not sufficient. Trans-Link still had to satisfy the court
that the disputed clause was reasonable in the specific circumstances of the contract between Patec and Trans-Link.
As to whether or not cl 30 was reasonable, Trans-Link put forward two arguments, viz, that the nine-month time bar is a necessary feature:
In relation to the first argument, Trans-Link adduced evidence that the clause has been adopted by many internationally accepted multimodal terms and conditions as it is common for more than just one mode of transportation to
be required and for the freight forwarder to sub-contract segments of the journey to third parties. Often the sub-contracts with third parties are subject to rules applied by international conventions which in themselves contain
time limits for the commencement of suit. In the case of carriage of goods by sea, for example, suit must be commenced within one year of loss or damage pursuant to the provisions of the Hague Rules or Hague-Visby Rules.
Accordingly, a nine-month time bar in a contract between the freight forwarder and its customer is crucial to ensure that the freight forwarder has sufficient time to consider and investigate any claim by its customer and protect
its position against sub-contractors if necessary. The nine-month time bar is therefore not an arbitrary limitation period adopted and imposed by the freight forwarding industry.
Mr Willis confirmed the position by stating that the nine-month time bar was a world-wide standard within the freight forwarding industry as is evidenced by its inclusion as cl 17 in the FIATA Multimodal Transport Bill of
Lading and cl 10 in the FIATA Model Rules for Freight Forwarding Services. The UNCTAD/ICC Rules for Multimodal which are contained in the ICC Publication 481 also have a nine-month time bar.
Whilst there are various international transport conventions that provide for lengthier time bars, Mr Willis testified that a forwarder adopted a nine-month time bar period so that this would be clearer than having to depend on
the sub-contract with the actual carrier.
The judge, however, took the view that the above were only general considerations and that Trans-Link would still have to satisfy that in the particular circumstances of that case, nine months, which was five years and three
months shorter than the statutorily bestowed time period, was a reasonable period.
The judge found that there was no evidence that a one-year limitation period would apply to any stage of the voyage and that the only evidence available was as to the carriage from Singapore which would be subject to the
Hague-Visby Rules. In that respect, the judge found that Trans-Link could rely on Art III r 6 bis to commence action against the ocean carrier as it would have at least three months from the date after suit was commenced against
it to commence an action against the ocean carrier. Accordingly, Trans-Link had not satisfied the judge that they needed the protection of a nine-month time bar period for that purpose.
With regard to the argument relating to insurance, Trans-Link’s witness agreed that it would still be possible to obtain insurance even if the freight forwarder contracted on terms that provide for a longer time bar period. The
additional premium for an extended time bar period was also not so prohibitive that the freight forwarder could not do profitable business after that. Further, although the time bar period could play a part, there was no definite
evidence of the link between increased premium and a longer time bar period.
There was also no evidence from Trans-Link’s insurance company as to whether it was a condition of the cover that a nine-month time bar was imposed or that it would charge a prohibitive rate of premium had it been asked to
cover the business for a longer time bar period or any evidence that required Trans-Link to trade on the SFFA Conditions. On a balance of probabilities, therefore, Trans-Link had not shown that in that year it required a
nine-month time bar in order to insure itself at reasonable rates for liability incurred as a bailee.
On the whole, therefore, the judge found that Trans-Link had not discharged the onus of showing that the nine-month time bar period imposed by cl 30 was reasonable in relation to the contract for the carriage of the Patec
machine from Singapore to Bangkok and back again.
The Granville Approach
In Granville, the Court of Appeal first reiterated that the UCTA requires the court to determine whether the term in question is reasonable as between the parties to the contract in question at the time when that contract was made. It further considered that it was common ground that Sch 2 of the UCTA which contains guidelines for the application of the reasonableness test, ought to be taken into account even though it related to the contracts for the sale or hire purchase of goods.
In applying the guidelines in Sch 2 of the UCTA, the court considered that the relevant provisions in the Schedule were:
(a) the strength of the parties’ relative bargaining positions;
(c) whether the respondents knew or ought reasonably to have known of the existence and extent of the term (having regard amongst other things to any custom of the trade and any previous course of dealing); and
(d) whether it was reasonable at the time of the contract to expect that compliance with cl 30(B) (by bringing suit within the time limit) would be practicable.
The court found that the parties in that case were of equal bargaining strength and that Granville ought to have known that the terms applied. Most of the arguments therefore turned on whether compliance with a nine-month time
limit was practicable.
As evidence, the defendants’ managing director said that:
The court accepted the evidence of Mr Willis given in Schenkers International v Overland Shoes  1 Lloyd’s Rep 498 where he described the background to the BIFA conditions and said in conclusion that they were ‘the
product of the combined efforts of nearly all those associated with the shipping industry and the movement of goods domestically and internationally. They seek to balance the interests of all parties and in my view have long been
accepted as reasonable and fair.’
The trial judge in Granville found the clause unreasonable for the following reasons:
The Court of Appeal recognised that in a case such as that before it, it should treat the original decision with the utmost respect and refrain from interfering with it unless satisfied that it proceeded upon some erroneous
principle or was plainly or obviously wrong and reference was made to Lord Bridge’s comments in George Mitchell (Chesterfield) v Finney Lock Seed  AC 803. However, the Court of Appeal accepted DT’s counsel’s
submission that the judge was wrong to have construed the clause so widely as to include a claim for fraud and that as the judge had proceeded to consider the reasonableness of the clause on a mistaken view of its meaning, it was
not a case in which the Court of Appeal would be inhibited by Lord Bridge’s comments.
The Court of Appeal accordingly approached the case as follows. First, it reiterated that the UCTA requires the court to determine whether the term in question is reasonable as between the parties to the contract in question at
the time when that contract was made.
Second, applying the guidelines in Sch 2, it held that the parties were obviously of equal bargaining strength and this being a commercial contract between commercial parties was one where the plaintiffs might have been able to contract other than on BIFA conditions or to make their own insurance arrangements. Even if Granville’s representative was unaware of the time bar, Granville ought reasonably to have known of the time bar contained in the BIFA conditions. Indeed the judge had held that the conditions had been sufficiently brought to Granville’s attention.
Most of the arguments therefore turned on whether the compliance with the nine-month time limit was practicable.
As in the Singapore decision, both parties sought support from international conventions and other standard conditions. These ranged from conventions applying to air, sea, road and rail conventions where the limitation periods
ranged from nine months to three years.
However, in accepting DT’s arguments that the nine-month period would be necessary to enable them to make a claim against the responsible carrier before that claim becomes time barred, Lord Justice Tuckey said:
Whatever his contractual relationship with his customer, the freight forwarder is usually not the carrier. He is simply an intermediary. If he is liable to his customer for damaging his goods it is only fair and reasonable that he should be able to pass on that liability to the responsible carrier in time.
So far as a claim for loss of damage to the goods was concerned, Lord Justice Tuckey held:
So is nine months a reasonable time limit? I have no doubt that it is for a claim for loss of or damage to goods in transit. The loss or damage can be ascertained on delivery. Nine months is ample time for the customer to decide whether to bring suit. This limit is necessary to enable the freight forwarder to claim within the 12-month time limit which applies to many contracts of carriage. [emphasis added]
In relation to the claim for failure to insure, he held that in the ordinary case the customer would know whether he has cover relatively soon after his goods are damaged. His loss for the failure to insure will be related to
the amount of his claim for the damage. In these circumstances he considered it fair and reasonable to fix the same time limit for a claim based on failure to insure the goods as is fixed for the claim for damage to those goods.
The Court of Appeal also rejected the argument that the clause was unreasonable because it did not permit any extension or that notice had to be given within the nine-month period as not many time bar provisions permit any
extension and the whole point of commencing proceedings within the time limit would be lost if notice need not be given.
In his closing comments, Tuckey LJ said:
The 1977 Act (UCTA) obviously plays a very important role in protecting vulnerable consumers from the effects of draconian contract terms. But I am less enthusiastic about its intrusion into contracts between commercial parties of equal bargaining strength, who should generally be considered capable of being able to make contracts of their choosing and expect to be bound by their terms. Here the transaction includes carriage of goods by sea and insurance. These spheres of commercial activity standing on their own are excluded from the Act (see Sch 1 paras 1a (insurance), 2c and 3 (carriage of goods by ship). In this case the element of road transport was sufficient to render the transaction subject to the Act, but the mixed nature of the contract of carriage emphasises the interest of the freight forwarder in having a time limitation which is applicable across the spectrum of his obligations.
Having analysed both cases, it would appear from the judgment of the Singapore court that factors such as the strength of the bargaining positions and the knowledge of the customer of the terms carried little, if any, weight
with the learned judge in her consideration as to whether cl 30 was reasonable.
It is of interest to note, however, that in considering if cl 27 of the SFFA conditions4 was reasonable, the judge held that ‘Patec did have bargaining power and it chose Trans-Link as its
freight forwarder after carefully considering its other options’ and the judge held that cl 27 was reasonable.
Further, it seems clear from the judgment that the court looked at the nine-month period as a substantial curtailment of the ‘statutorily bestowed time period’ of six years which Trans-Link had to justify, rather than as to
whether it would have been practicable to have complied with the nine-month time bar. It does not appear from the judgment that any attempts were made to rely on the guidelines in Sch 2 of the UCTA.
Finally, the judge approached the issue on the basis that Trans-Link had to satisfy the judge that in the particular circumstances of the case,5 nine-months was reasonable. This Trans-Link
had failed to do.
However, under s 11 of the UCTA, in determining whether or not the clause is reasonable, the court should have regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the
parties when the contract was made.
It would appear that in Press Automation, the judge took into account all the facts of the case, possibly including facts occurring after the contract was entered into.
If the judge had considered only the facts which the parties knew or ought reasonably to have known at the time the contract was made, a different conclusion might have been reached as it is unlikely that at the time the
contract was made the parties knew or ought reasonably to have known what time bar provisions would apply to each stage of the voyage to enable it to determine at that time what would be a reasonable limitation period to adopt in
its own contract with its customer. Accordingly, it would be arguable that as long as there was a possibility that Trans-Link might face a one-year time bar, it should be reasonable for the freight forwarder to rely on a
nine-month limitation clause.
In summary, therefore, if the matter were to be approached by applying the guidelines in Sch 2, in particular as to whether it would have been practicable to comply with a nine-month limitation clause and if the circumstances
to be taken into account are those which are based on circumstances which were or ought reasonably to have been known to or in the contemplation of the parties when the contract was made, there would be scope in the writer’s view
for arguing in Singapore that the nine-month period is reasonable.
Allen & Gledhill
E-mail: [email protected]
|1||Press Automation Technology v Trans-Link Exhibition Forwarding  1 SLR 712.|
|2||Granville Oil & Chemicals v Davis Turner  EWCA Civ 570,  2 Lloyd’s Rep 356.|
|3||Mr Lim Swee Hong, then the chairman of the SFFA and who had remained the chairman under its new name of Singapore Logistics Association, testified that the SFFA Conditions were drawn up in 1986 and modelled on the standard trading conditions of the BIFA. In 2000, SLA adopted an amended set of conditions and cls 27 and 30 of the SFFA Conditions also appear in the SLA Conditions. Mr Ronald Willis the Vice President of BIFA gave evidence on the international practice of freight forwarders and he testified that both the nine-month time bar and the limitation of liability provisions contained within the SFFA Conditions are internationally accepted customs of trade. Approved by two independent bodies namely ICC and UNCTAD. He confirmed that such restrictive clauses appeared in the BIFA standard terms and conditions which were initially compiled in full co-operation with the British Shippers Council and are registered with the British Office of Fair Trading. These restrictions appeared in every set of freight forwarding conditions that he had ever seen and he considered them to be both justified and reasonable. Patec did not adduce any evidence at all on the international position.|
|4||Clause limiting the quantum of liability. Press Automation Technology v Trans-Link Exhibition Forwarding at para 78 of the judgment.|
|5||See para 60 of the judgment.|