Court: An Israeli forwarder who acted as an agent coordinating the importation of shipment from England is liable for the loss of the shipment

In May 2010, the Magistrate’s Court in Tel Aviv delivered a judgment requiring an Israeli forwarder to compensate an Israeli importer for the loss of a shipment of books sent from England to Israel. The importer filed a claim for compensation in the amount of NIS 461,000 against the Israeli forwarder for direct and indirect damages. The Israeli forwarder submitted a third party notice against the English forwarder who had handled the shipment of the cargo on its behalf and against the warehouse in England.

The English forwarder, which was represented by our firm, filed a fourth party notice against the warehouse. Sholtry before the evidentiary hearing in the case, the Israeli forwarder and the English forwarder arrived at a conditional compromise regarding the division of liability between them, in the event that the court would uphold the importer’s claim against the Israeli forwarder. The warehouse did not defend itself and judgment was given against it in the absence of a defence, in favour of the Israeli forwarder and the English forwarder.

The importer had ordered two shipments of textbooks from English suppliers called Pearson and Penguin. The Israeli forwarder asked the English forwarder to coordinate the shipment orders with the suppliers and ship the cargo to Israel. The cargo was sent on Free Carrier terms, under which it was the responsibility of the suppliers to deliver the cargo to the English forwarder’s warehouse in Liverpool.

The importer claimed that the Pearson shipment had been lost in the warehouse in England and had never been loaded on the ship whereas the Penguin shipment had arrived short in Israel. The importer further claimed that the notice of the arrival of the goods given by the Israeli forwarder indicated the wrong shipment arriving in Israel and, as a result, the importer gave incorrect information to its customers. The importer’s claim for the amount of NIS 461,000 consisted of the lost Pearson cargo and a replacement cargo purchased for the total sum of NIS 70,000, loss of revenue in respect of the Pearson and Penguin shipments in the amount of NIS 191,000, damages for loss of customers in the amount of NIS 100,000 and damage to reputation in the amount of NIS 100,000.

The Israeli forwarder argued that it had been used as an agent to coordinate the shipment and was not contractually liable towards the importer for the ensuing loss. It was also claimed that the Israeli forwarder had not been negligent and that the importer had not produced any evidence to indicate that the Pearson shipment (the lost shipment) had been delivered to the warehouse in England. As noted, the supplier had been responsible for delivery of the shipment to the warehouse and in the absence of evidence of such delivery there was no proof that the shipment was ever delivered into the hands of the English forwarder.
The English forwarder argued that it had acted as an agent on behalf of the Israeli forwarder to coordinate the shipping orders with the suppliers and arrange their carriage to Israel. The English forwarder further claimed that it had sent the Israeli forwarder regular reports in real time regarding the handling and coordination of the shipments. Likewise, the English forwarder claimed that its relationship with the Israeli forwarder was subject to the standards conditions of BIFA (British International Freight Association).

As noted, sholtry before the evidentiary hearing, the Israeli forwarder reached a compromise with the English forwarder on the division of liability between them in the event that the importer’s claim was upheld.

The court was persuaded that the shipment had been delivered to the warehouse in England. The court ruled that the Israeli forwarder had been negligent in the performance of its functions as a forwarder even if, in practice, it had only acted as an agent and not as an actual carrier in charge of the carriage. The court held that the Israeli forwarder had been under a duty to monitor the messages received from the English forwarder in respect of shipments and give the importer timely and accurate reports. Ultimately, the court held that the negligence of the Israeli forwarder had led to the situation whereby the Pearson shipment was never loaded on the ship to Israel (and never arrived in Israel) and where the Penguin shipment arrived short.

Although the importer had claimed the total amount of NIS 461,000, the court awarded the importer total compensation of NIS 50,000 only (the value of the lost Pearson shipment- NIS 34,000- together with non-pecuniary damages of NIS 16,000), which equalled about 10% of the claim. The court ruled that the importer had not proved the rest of the damages claimed.

In our view, the judgment is open to criticism. First, the court based its judgment on documents that we believe were inadmissible (because they constituted hearsay) and there was no room to base the judgment on them. Second, the court did not really deal with the question of the status of the Israeli forwarder and with the question of the causal connection between the alleged negligence of the Israeli forwarder and the damage. Third, the non-pecuniary loss awarded to the importer had never actually been claimed by the importer. Fourth, the court held that it against the Israeli forwarder that the English forwarder had not come to testify, even though the court had not authorized the importer to summon this witness.

Another issue worthy of consideration is the disproportional amount of the claim. It should be noted that at the interlocutory stage, negotiations were held between the parties aimed at saving the costs of conducting the case. In this context, the importer was offered an ex gratia settlement very similar to the amount ultimately awarded to it by the court. At the time, the court also recommended that the importer accept the compromise, as is documented in the court transcript. Nonetheless, the importer firmly refused the offer and demanded compensation worth nearly the amount of the claim. Counsel for the Israeli forwarder and the English forwarder argued that in view of the importer’s arbitrary refusal of the offer and demand for excessive and disproportionate compensation, if ultimately, after hearing the evidence and wasting valuable judicial time, the court awarded the importer an amount of compensation similar to that offered in the initial compromise, then it would be appropriate to order the importer to pay the legal costs. The court did not address this issue in its judgment despite the fact that it awarded the importer a similar amount to that proposed in the suggested compromise.
Civil File (Magistrate’s Court of Tel Aviv) Edna Tal v. Avi Ram Cargo v. Denholm-Bahr Forwarding Ltd. (represented by Adv. Roy Gilad of Grossman, Singer, Gilad & Co. Law Offices) v. I.D.R. Logistics Ltd.

Adv. Roy Gilad