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BIFA STC upheld in court case No set-off applies to air freight – Schenker v Negocios


Clause 21A of the BIFA Standard Trading Conditions (2005A edition) was recently tested in an Appeal Court case. The decision was against Negocios which had set off airfreight charges that were due to Schenker. Schenker was represented by BIFA Associate Member Myton Law in Hull. A set-off is a setting of cross-claims against


each other to produce a balance. A counter- claim is any claim that could be the subject of an independent action that is made against a claimant by a defendant.


Arbitrary settlement BIFA Members will be aware that a customer may try to obtain an arbitrary settlement of a claim or counterclaim by making a set-off, by refusing to pay charges, by making a deduction in payment, or by deferring payment. The purpose of Clause 21(A) is to overcome such action on the part of the customer so that the BIFA Member is paid in full when payment is due and the claim or counter-claim is dealt with as a separate matter. This common law rule was reported


to be well established in 19th century shipping cases and was affirmed in respect of sea freight in the relatively recent case of Aries Tanker Corporation v Total Transport Ltd. This common law rule regarding freight charges was extended to road carriage under the CMR Convention in the important case of RH&D International Ltd v IAS Animal Air Services Ltd, and the rule was further extended to road carriage within the UK by the case of United Carriers Ltd v Heritage Food Group (UK) Ltd, in


which the judge reviewed the history and the application of the rule. The common law rule regarding freight charges being payable without any set-off, claim or counterclaim was yet again upheld in the case Britannia Distribution Ltd v Factor Pace Ltd, where it was stated that this rule applies to the carriage of goods by sea, land or air, and that the rule cannot be circumvented


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unless there is a total failure of consideration – that is to say that the carriage was not performed. In the original case the judge had not allowed


Schenker to rely on the BIFA STC, questioning the evidence of incorporation of the STC in the contract. This was overturned on appeal and considerable weight was given to the claimant’s expert’s evidence, to the effect that the rule is the basis upon which the market for freight currently contracts.


Influences on decision Although it was acknowledged that the


basis for the original rule, namely cash flow, would not alone justify the extension of the rule to airfreight, given the shorter time periods involved, the court was influenced by the fact that the rule has already been extended to international and domestic road haulage. It found that there is “no logical or sensible distinction between the three means of transport for the purpose


of the common law rule”. As the expert pointed out, there can be considerable uncertainty otherwise in relation to multimodal freight contracts. It was also held that the rule as applied in relation to air freight extends to claims for delay. This means that in such cases, air freight will


need to be paid in full, and any cargo-related claim, including one for delay, will need to be made by way of separate claim. One key message emerging from this case is


the need for freight forwarders to demonstrate that the BIFA STC are incorporated in contracts and can be evidenced to the court. BIFA has guidance regarding incorporation of STC on the website.


Support your local Member group


BIFA holds Regional Member meetings around the UK and listed right are those due to occur soon. If you would like to attend and find out more about BIFA and what we do, then contact the appropriate Regional Consultant to BIFA. All BIFA Members are entitled and


encouraged to attend their regional meetings however pre-booking with the named contact is essential. Full contact details are shown on page 3 of this issue.


February 2018


Region Gatwick


Date Thu 8 Feb


Regional Members’ meeting Solent


Regional Members’ meeting Anglia


Regional Members’ meeting London East


Regional Members’ meeting Tue 13 Feb Tue 20 Feb Thu 22 Feb Time Venue


1230 Air & Cargo Services, Crawley


0800 Duke of Wellington, Southampton


1000 Holiday Inn Ipswich Orwell 1100 DP World London Gateway Paul Newman


BIFA Contact Colin Young


Colin Young Paul Newman


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