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Siemens v.

Schenker (High Court)

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Siemens v. Schenker (High Court)


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DMC/SandT/04/24
Siemens Ltd v. Schenker International (Australia) Pty Ltd & Another
High Court of Australia: McHugh ACJ., Gummow, Kirby, Callinan and Heydon JJ: 9 March 2004:
[2004] HCA 11
P H Greenwood SC and I G B Roberts, instructed by OReilly Sever & Co, for Siemens
A J Meagher SC and R J H Darke SC, instructed by Blake Dawson Waldron, for Schenker
AVIATION: CARRIAGE BY AIR: DAMAGE TO CARGO BETWEEN AIRPORT OF
DESTINATION AND BONDED WAREHOUSE: WARSAW CONVENTION, ARTICLES 18 AND
22: MEANING OF IN AN AERODROME: DEFINITION OF AIRPORT SITE:
CONSTRUCTION OF HOUSE AIR WAYBILL: WHETHER LIMITATION OF LIABILITY
CLAUSE APPLIES TO TRANSPORTATION AFTER AIR CARRIAGE COMPLETE
Summary
A consignment of electronic equipment, carried under an umbrella contract from factory in the
country of origin to Customs warehouse in the country of destination, was damaged by the
negligence of the carriers en route from the airport of destination to the Customs warehouse. In
these circumstances, the terms of the Warsaw Convention did not apply, since the damage did not
take place in an aerodrome within the meaning of Article 18. The carriers were therefore unable to
limit their liability under Article 22 of the Convention. Carriers accordingly sought to limit their
liability by reference to cl.4 of the House air waybill, which provided "in carriage to which the
Warsaw Convention does not apply, carriers liability shall not exceed US$20.00 per kilogram of
goods lost, damaged or delayed."
The judge at first instance had held that the carrier could not limit its liability as provided by clause
4 of the air waybill. The air waybill had to be interpreted as providing that either the carriage as a
whole would be subject to the Convention or the carriage as a whole would not be subject to it there being no half measures.
The Court of Appeal of New South Wales overruled the decision at first instance, holding that the
carriage under the waybill was divisible into segments, some consisting of carriage subject to the
Convention and some not. Carriage in the latter sense was governed by the terms of the air waybill
itself.
On appeal to the High Court of Australia, the decision of the Court of Appeal was upheld by a
majority of 3 to 2,with the result that the carrier was entitled to limit its liability to the amount of
US$20.00 per kilo set out in cl.4 of the air waybill.
DMC Category Rating: Developed
Facts
The claimants, Siemens, were the Australian subsidiary of the German electronics company, Siemens AG.
Schenker Australia were a subsidiary of Schenker Deutschland, a German transportation company. In
December 1996, Siemens AG engaged Schenker Deutschland to undertake the carriage of a consignment
consisting of two pallets of electronic equipment from Germany to Schenker Australias Melbourne
warehouse, for delivery to Siemens Australia. The consignment was sent by air from Berlin airport to
Melbourne, via Frankfurt. The air carriage between Frankfurt and Melbourne airport was performed by

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Singapore Airlines. On arrival in Melbourne, Schenker Australia collected the consignment from
Singapore Airlines for carriage by truck to Schenker Australias warehouse situated outside the airport
boundary, about 4 kilometers from the airports main gate.
En route to the warehouse, one of the pallets fell from the truck and its contents were damaged beyond
repair. The cause of the pallet falling was that the strap by which the driver had attempted to secure the
load was either defective or inadequate for the purpose.
The Arguments
The liability of either Schenker Deutschland or Schenker Australia for the damage was not in dispute but
two issues remained in contention. The first related to the availability to the Schenker interests of the
limitation of liability provided under the Warsaw Convention, as amended by the Hague protocol of 1955,
which had the force of law in Australia by virtue of the Civil Aviation (Carriers Liability) Act of 1959.
The second related to the applicability of a limitation of liability provision contained in the Schenker
house air waybill.
Article18 of the Warsaw Convention reads as follows:
"1. The carrier is liable for damages sustained in the event of the destruction or loss of, or of damage to,
.. any cargo, if the occurrence which caused the damage so sustained took place during the carriage by
air.
2 The carriage by air within the meaning of the preceding paragraph comprises the period during which
the cargo is in charge of the carrier, whether in an aerodrome or on board an aircraft
3 The period of carriage by air does not extend to any carriage by land, by sea or by river performed
outside an aerodrome. If, however, such a carriage takes place in the performance of a contract for carriage
by air, for the purpose of loading, delivery, or trans-shipment, any damage is presumed, subject to the
proof to the contrary, to have been the result of an event which took place during the carriage by air."
Article 22.2 of the Convention limits the carriers liability to a sum of two hundred and fifty francs per
kilogramme.
The relevant provisions of the House air waybill were as follows:
"1. As used in this contract, carrier means all air carriers that carry or undertake to carry the goods
hereunder or perform any other services incidental to such air carriage.
2.1. Carriage hereunder is subject to the rules relating to liability established by the Warsaw Convention
unless such carriage is not international carriage as defined by that Convention.
4.1 .in carriage to which the Warsaw Convention does not apply, carriers liability shall not exceed
US$20.00 .. per kilogram of goods lost, damaged or delayed.."
Clause 11 provided for delivery to be made at the place of destination to or in accordance with the
instructions of the consignee.
The Judgment at first instance (the Supreme Court of New South Wales)
On the first issue, whether or not the Warsaw Convention applied, the judge held that the presumption in
Article 18.3 did not apply, because the damage had clearly taken place on the road between Melbourne
airport and the Schenker warehouse. That left the central question whether it can properly be said that the
point at which [the] pallet fell to the roadway was in an aerodrome or, more precisely, in the Melbourne
airport. After referring to the Airports Act of 1996 and the Airports Regulations of 1997, the judge
concluded that the boundaries of the airport were to be fixed according to the ordinary concepts of the land
law of the state of Victoria, in which Melbourne is situated. The judge held accordingly that the roadway

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on which the accident occurred was not within the airport boundaries and therefore the incident in which
the damage arose did not occur in an aerodrome for the purposes of the Convention. Therefore the
liability regime created by the Convention did not apply and the Schenker interests could not limit their
liability by reference to Article 22.2 of the Convention..
On the second issue, the judge had to consider the terms of the contract of carriage between the Siemens
and the Schenker interests. The cargo had been carried under an umbrella arrangement of long standing
between the Siemens and the Schenker interests, known as the Richtungsverkehr (direct traffic). The
Richtungsverkehr applied to each individual consignment and when, in accordance with usual practice, a
house air waybill was issued in respect of a particular transportation, its terms supplemented those of the
standing agreement. He held accordingly that Schenker (Deutschland) became a bailee of the cargo for
Siemens (Australia) at the point at which title and risk passed from Siemens AG to Siemens (Australia) at
the Berlin airport and undertook an obligation to transport that cargo to the Schenker (Australia)
warehouse in Melbourne. A sub-bailment or sub-contract then arose when Schenker (Australia) took
possession of the cargo from Singapore Airlines at the Melbourne Airport, for delivery to Siemens
(Australia) at the Schenker customs bonded warehouse.
There was no dispute that the provisions of the air waybill were operative, as a part of or as an adjunct to
the overall contract. The parties had, however, taken different views as to the applicability of the
provisions of the air waybill. Siemens had contended that the air waybill provisions did not extend to the
segment of the total transportation involving movement from the Melbourne airport to the Schenker
(Australia) warehouse, even though that segment was part of the overall contract. The Schenker
companies regarded that segment as covered by the waybill.
The judge held that Siemens were correct. In his view, the air waybill did not extend to the Melbourne
airport/Schenker warehouse leg of the overall journey. His decision was based on the terms of the air
waybill itself. The judge regarded it as confined to air carriage and, except where land transportation
became a substitute for air carriage, it did not purport to cover any land element. He found, in clauses 2.1
and 4, the clear assumption that the carriage as a whole would or would not be within the Conventions
definition of international carriage and that the carriage as a whole would or would not be carriage to
which the Convention applied. He said: No half measures are contemplated. The carriage is not regarded
as consisting of segments, with some being international carriage for the purposes of the Convention and
others not, or with the Convention applying to some but not to others. It is all or nothing.
Consequently, the judge found that Clause 4 did not apply unless the whole of the carriage was carriage to
which the Warsaw Convention did not apply. In other words, if the Convention applied, clause 4 did not.
In this case, the Convention clearly did apply to the carriage, up to the point where the cargo crossed the
boundary of the Melbourne airport en route to the Schenker warehouse. If followed that the carriage was
not of the description in clause 4 of the air waybill. The substitute liability limitation provision in that
clause therefore did not operate at all. Accordingly, the Schenker interests could not limit their liability to
US$20.00 per kilo.
Judgment was accordingly given in Siemens favour in the amount of Aus$ 1.7 million, approximately.
Judgment of the Court of Appeal of New South Wales
The Court of Appeal agreed with the judgment of first instance on the first point, regarding the application
of the Warsaw Convention, but unanimously overruled it on the second point, relating to the application of
clause 4 of the air waybill.
In the leading judgment, Meagher JA had no difficulty in applying the literal interpretation of the word
aerodrome adopted in the US case of Victoria Sales Corporation v. Emery Air Freight, a view which he
noted had been followed in many other jurisdictions worldwide. On that basis, the Schenker warehouse

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and the place where the accident occurred were clearly outside the boundaries of the Tullamarine airport in
Melbourne and therefore beyond the geographical scope of the Convention.
On the second point, he regarded Schenker (Australia) as clearly within the definition of carrier under
clause 1 of the air waybill, since they were performing a service (transport of the cargo from Tullamarine
to their bonded warehouse for delivery there to Siemens) incidental to such air carriage. By clause 8 of
the air waybill, the carrier remained liable for the goods during the period that they were in its charge or
that of its agent.
In these circumstances, he said that he was quite unable to understand the all or nothing approach of the
judge at first instance. In Meagher JAs view, the Schenker companies were transferring cargo under two
regimes, one covering the route from Berlin airport to Melbourne airport and the other the route from
Siemens Berlin factory to Schenkers Melbourne bondstore. "If the latter, contractual, regime is different
from the former, statutory, one" he said, "it still operates to the extent it can. It thus covers the short trip
from Melbourne airport to the bondstore."
Sheller JA delivered a supporting judgment. In setting out the terms of the air waybill, he emphasised that,
under clause 2, "carriage under the house air waybill and services performed by each carrier [as defined in
clause 1] were subject to the provisions of the house air waybill". As regards clause 4, he noted that it
spoke of carriage and not of air carriage and read it as providing that, in any carriage under the waybill
to which the Warsaw Convention did not apply, liability was limited in accordance with the clauses
provisions. He agreed with Meagher JA that the Convention did not apply to the carriage between
Melbourne airport and the Schenker warehouse. The literal interpretation of the word aerodrome in
Articles 2 and 3 of the Convention was the correct one.
On the application of clause 4 of the air waybill, Sheller JA, like Meagher JA, did not agree with the
judgment at first instance on this point. He noted that "to effect delivery in accordance with the house air
waybill and the instructions of the shipper, the carrier was bound to arrange for the goods to be carried to
the under bond warehouse and therefore bound, within the meaning of clause 1, to perform a service
incidental to the air carriage. That was part of the contract evidenced by the house air waybillthere is no
sound basis for treating the house air waybill as evidencing a contract which terminated before delivery to
the consignee at the point where the goods crossed the boundary at Melbourne airport." Clause 2.1 of the
air waybill was "consistent with part of the carriage to be performed under the house air waybill being
subject to the rules relating to liability established by the Convention and part of it not being so subject
because it is carriage performed outside an aerodrome."
In his view, the house air waybill remained the contract for carriage that governed the road transportation
from the airport to the bonded warehouse. "Since it was carriage to which the Convention did not apply,
clause 4 of the air waybill did."
Judgment was accordingly given in Siemens favour, but only for the limitation amount under clause 4 of
the air waybill, in the sum of US$74,700 approx. Siemens appealed to the High Court of Australia, the
ultimate court of appeal.
Judgment of the High Court of Australia
The majority judgment of Gummow, Callinan and Heydon JJ. upheld the decision of the Court of Appeal
and dismissed Siemens appeal.
The majority agreed with the Court of Appeal that the limitation provisions of the Warsaw Convention
itself did not apply, by reason of Art.18.3. Indeed, Schenker did not contest this point before the High
Court. As regards the interpretation of cl.4 of the air waybill, the majority held that the word "carriage" in
that clause was not limited, as Siemens had argued, to air carriage, but included carriage by other means of
transport. Their reasoning was as follows:

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1. Cl.4 operated only in respect of carriage to which the Warsaw Convention did not apply. The air
waybill therefore contemplated a disjunction between carriage to which the Convention applied (air
carriage) and carriage which was governed solely by the terms of the waybill itself. It must follow
that "carriage" in cl.4 had a meaning different from that in Art.18 of the Warsaw Convention.
2. The definition of carrier in the waybill referred to the carriage of goods "hereunder", and the terms
of the waybill provided, in cl.11, for example, for the transportation of goods other than through
carriage by air. Further, the Richtungsverkehr required Schenker to transport the goods to the point
of deconsolidation in Australia.
3. The statutory regime in force at Melbourne airport at the time permitted no other possibility. Under
the Customs Act, Schenker was prohibited from delivering the consignment to Siemens (Australia)
at any stage prior to the consignments arrival at Schenkers bonded warehouse and inspection there
by Customs officers.
The result was that "on the proper construction of the waybill, the damage sustained to the consignment in
the course of complying with requirements necessary in order to effect delivery of that consignment fell
within the terms of cl.4 of the waybill."
The Dissenting Judgments
In the first of the dissenting judgments, McHugh ACJ. favoured the approach of Barrett J. at first instance,
to the effect that a combined reading of cl.2.1 and cl.4 of the air waybill indicated that the liability regimes
of the Convention and that of the waybill operated exclusively of one another. Which liability regime
applied was determined by reference to whether or not the carriage in question was "international
carriage". The reference to "international carriage" in cl.2.1 confirmed that "whether or not the carriage is
carriage to which the Convention does not apply is determined by reference to the criteria in Art.1 of the
Convention*. Cl.4 does not refer to carriage to which the liability provisions in the Convention do not
apply." Accordingly, cl.4 of the waybill was inapplicable to the present case.
As for the meaning of "carriage" in cl.4 of the waybill, McHugh ACJ agreed with Barrett J. at first
instance that it meant "air carriage". He placed reliance on the reference in cl.1 of the waybill to "air
carriers" and "other services incidental to such air carriage". Accordingly, for the liability provisions of the
waybill to apply, the "carriage hereunder" in that clause had to be air carriage. In this case, air carriage had
ceased before the accident occurred. He found support for his view in the interpretation of cl.2.1 of the
waybill, which provided that "carriage hereunder is subject to the liability provisions in the [Convention]".
"However," he continued, "a conflict arises if "carriage hereunder" means any carriage, including that
which comprises both air and road segments. In such a case, cl.2.1 would render such carriage (including
the road segment) "subject to the rules relating to liability established by [that] Convention". This would
contradict Art.31 of the [Convention], which provides that the provisions of the Convention apply only to
air carriage. The FIATA standard form air waybill is intended to supplement, not contradict, the
[Convention]. Accordingly, for the liability provisions in the air waybill to apply, the "carriage hereunder"
must be air carriage.
Furthermore, McHugh ACJ accepted Siemens argument that the provisions of the air waybill did not
apply beyond the "Airport of Destination" stated on the front of the waybill, the carriage from Tullamarine
to the Schenker bonded warehouse being effected under the umbrella contract of the Richtungsverkehr,
which did not contain any provisions limiting the liability of the carrier. In this regard, he relied on cl.11 of
the waybill, which provided that, "on arrival of the goods at the place of destination.. delivery will be
made to, or in accordance with the instructions of the consignee." The place of destination was, he said,
clearly the Airport of Destination given on the front of the waybill. "The word to in the phrase delivery
will be made to indicates," he continued, "that the issue is how and to whom delivery is to be made at the
place of destination, not where the delivery is to be made. If the parties had intended that the terms of
the air waybill were to extend to the delivery to the warehouse, clear words would surely have been used
in the air waybill"

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The second dissenting judgment was delivered by Kirby J. He found that the purpose of the air waybill
was "to apply to all situations of carriage by air", including both those cases where the Warsaw
Convention applied and those where it did not. He said "As befitted its integration with the Warsaw
Convention, the air waybill was not, therefore, designed to govern transport or other arrangements not
carried out by air. On the contrary, the IATA air waybillwas intended to provide uniformity of liability
and conditions for all forms of carriage by airIn such circumstances, it would be unsurprising to
conclude that a standard form air waybill, designed to provide for air carriage of cargo, was limited in its
purpose and application and generally inapt for operation to a wider range of services happening between
the parties".
He turned next to an analysis of the terms of the air waybill. Cl.1 established in his view, that "the carriage
with which the air waybill is concerned is, and is only, air carriage". He then stated that cl.2.1 gave a
definition (Editors emphasis) of "carriage", and in consequence, wherever the term "carriage" was used in
the waybill, it was to take the meaning of carriage subject to the Warsaw Convention. "The distinction," he
said, "in cl.2.1 between carriage subject to the Warsaw Convention and otherwise is not between air
carriage and carriage by truck, car, ship, horse, camel or donkey. It is between "international carriage" by
air as defined in the Warsaw Convention and other "carriage" by air which, by the terms of the
Convention, is outside its application." He notes further that the statement in cl.2.1 of the waybill that
"carriage hereunder" is subject to the Warsaw Convention is obviously a reflection of Art.8(q) of the
Convention, which requires that the air waybill contain such a statement. "In such a context", he
continues, "the word "carriage" in the air waybill could only mean air carriage by reason of Art.31 of the
Convention. It follows that cl.2.1 in the air waybill, by its reference to "carriage", refers, and refers only, to
air carriage. If it were intended to refer to other forms of carriage by the many alternatives that are
possible, or to other activities in the vast range of potential interaction between a carrier and its customers,
a different, clearer and supplementary condition would have been included in the air waybill."
Once this definition of carriage were adopted, Kirby J found that the meaning of "carriage" in the
limitation clause, cl.4, of the waybill became clear. It was concerned with, and only concerned with, air
carriage to which the Warsaw Convention did not apply, namely, air carriage outside the category of
"international carriage" as defined. Barnett J at first instance had been correct in so concluding.
Finally, Kirby J. was prepared to rely upon the rule of construction that where there is ambiguity in a
printed document, that ambiguity should be construed against the party seeking to rely on it. "In
Australia", he concluded, "those who wish to reduce the entitlements of others to prosecute their legal
rights to recover damages for conceded negligence must do so clearly. The Schenker companies did not."
Comment
Whilst the majority judgment is clearly helpful to carriers, given the increasing tendency of air carriers to
become involved in off-airport carriage and other services, its importance may diminish over time, as the
1999 Montreal Convention, which is already in force in a number of countries becomes more widely
adopted. That Convention extends the definition of "carriage by air" to the period during which the cargo
is in the care of the carrier. This, perhaps together with some revision to cl.4 itself, should remove any
uncertainty in other jurisdictions about the validity of cl.4 of the standard IATA air waybill.
Furthermore, the Editor understands that IATA is currently reviewing the conditions of its air waybill, to
which it refers as its "recommended Neutral Air Waybill", in the light of the decision in this case and also
to take into account the effect of the new Convention.
*Art.1 reads: "the expression "international carriage" means any carriage in which. the place of
departure and the place of destination. are situated either within the territories of two High Contracting
Parties or within the territory of a single High Contracting Party if there is an agreed stopping place within
the territory of another state.

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These Case Notes have been prepared with care, but neither the Editor nor the International and other
Contributors can guarantee that they are free from error, nor that they contain every pertinent point.
Reliance should not therefore be placed upon them without independent verification. The Editor and the
International and other Contributors disclaim all liability for any loss of whatsoever nature and howsoever
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