Based on a framework agreement of 6 February 2014, Nexans Norway AS (Nexans) entered into an agreement with Kuehne + Nagel AS (KN) on 10 November 2014 for international multimodal carriage of a large cable drum. KN issued a road consignment note on 14 November 2014. On 11 November 2014, KN entered into an agreement with Aquatran AS (Aquatran) as sub-carrier for the entire transport. Aquatran is now part of Pentagon Freight Services AS (Pentagon). Aquatran engaged Kåre K Lode AS for the road transport of the drum to the port terminal in Norway, and the shipping company Sea-Cargo AS (Sea-Cargo) for the sea leg from Norway to England in accordance with a sea waybill dated 15 November 2014. The damage to the drum occurred during the sea leg on board Sea-Cargo's ro-ro ship, the MV Norrland, when it slipped off the truck trailer to which it was attached and overturned onto the neighbouring trailer.

The claim for damages in the main action against KN was brought by Nexans and its cargo insurers, Axa Corporate Solutions SA and CNA Insurance Co Ltd. KN filed a recourse lawsuit against the sub-carrier Pentagon (formerly Aquatran) and its liability insurer, Gjensidige Forsikring ASA (Gjensidige). Pentagon and Gjensidige notified recourse claims against Sea-Cargo and its liability insurance company, Gard. Those proceedings were suspended pending the outcome of the present case.

The Oslo District Court and the Borgarting Court of Appeal held that the liability rules in the Road Freight Act, rather than those in the Maritime Code, applied to the transport. The parties appealed and cross-appealed to the Supreme Court. The Supreme Court ruled on 14 May 2019 (HR-2019-912-A) that the exception in the Road Freight Act § 4(2) applied. This meant that KN's liability for damage caused to Nexans' cable drum during sea transport was regulated by the Maritime Code. The Court of Appeal was instructed to re-examine the appeals against the District Court's judgment in the main and recourse actions, but to assess liability for damages in accordance with the Maritime Code.

Held: Compensation in the main and recourse proceedings is to be calculated on the basis of the limited liability amount under § 280 of the Maritime Code.

The parties agreed that the cable drum was inadequately secured, both for road and sea transport, based on the current requirements and standards for securing goods. It was therefore not disputed that KN was liable to pay damages to Nexans on the basis of negligence under the Maritime Code § 275 up to the limit of liability in § 280 of the Maritime Code. The two questions for the Court were, first, whether KN had waived its right to invoke limitation of liability in the framework agreement entered into with Nexans in February 2014; or, secondly, whether KN had lost its right to limit liability pursuant to § 283 of the Maritime Code.

Framework agreement

The framework agreement provided, amongst other things, that the 'Operator shall keep himself informed of and comply with existing laws and regulations and with requirements and orders prescribed by public authorities together with applicable collective agreements and wage agreements. Operator shall indemnify and hold harmless Nexans for any failure to comply with these requirements.'

Nexans argued that this provision established an objective and unlimited liability for transport damage caused by breaches of applicable standards and requirements for the proper performance of tasks that followed from law or regulations, and pointed out that the Maritime Code § 254(2) allowed the carrier to assume such an extended liability. The Court, however, held that this provision in the framework agreement was not intended to regulate compensation for losses in the event of transport damage. If this was intended, one would expect that it would be stated explicitly, and that the provision would use common tort law terminology, for example 'liability' for 'loss' or 'damage'. This applies not least if the liability for damage is to be unlimited and objective. Such a far-reaching liability, which fundamentally violates the Convention-based regulation of maritime transport damage, cannot be inferred only from the expression 'indemnify and hold harmless', which appears in a clause that applies to matters other than the actual execution of the transport.

Liability for damage to goods is also dealt with separately in cll 11-14 of the framework agreement. It is in these clauses that any extended liability should have appeared. However, the provisions do not say anything about this, but on the contrary state that the general Convention-based compensation rules in the field of transport apply, with the supplements and clarifications included. This follows from cl 13, which states that 'compensation for damaged and lost goods is subject to International conventions, sanctioned by Norway'. With regard to maritime transport, cl 12(b) stipulates that 'the liability of the carrier in respect of any carriage by sea' is decided in accordance with the Hague-Visby Rules as set out in the Maritime Code. The same can be deduced from cl 12(a), which states that the parties may demand that ordinary Conventions for the relevant type and stage of transport be used as a basis for assessing liability. The Supreme Court ruling from 2019 states the following about this provision at [50]:

Section 12 of the framework agreement contains a rule which seems to imply that KN's liability shall comply with the Hague-Visby rules, ie the Maritime Code, for any maritime transport that takes place as part of a transport assignment. The same follows from § 23 of NSAB 2000, a standard agreement that is attached to the framework agreement.

On this basis, the Court of Appeal concluded that KN's liability for transport damage should be assessed in accordance with the provisions of the Maritime Code, and that no extended liability had been agreed for transport damage in the framework agreement.

Loss of right to limit liability

The second issue was whether KN had lost its right to limit liability pursuant to § 283 of the Maritime Code, which reads: 'A responsible party may not limit his liability if it is proven that the person in question himself caused the loss intentionally or with gross negligence and with the understanding that such a loss would probably occur.'

As the Supreme Court pointed out in the judgment from 2019 at [34], the provision is formulated in a different way than the Road Freight Act § 38. The fundamental condition of intent or gross negligence is basically the same - a marked and strongly reprehensible deviation from normal prudent conduct: cf HR-2017-1997 [15]. However, the provision in the Maritime Act § 283 also sets out a subjective requirement that the tortfeasor realised that there would probably be a loss. There must therefore at least be deliberate gross negligence: cf Falkanger and Bull, Maritime Law (2016), p 176.

A further condition is that the tortious act must have been committed by 'the person in question himself': cf the term 'an act or omission of the carrier' in the Hague-Visby Rules, art 4.5.e, on which § 283 of the Maritime Code is based. The intentional or grossly negligent act that led to the damage must have been committed by the company as such, and not by individual employees. Errors by the company's board and the top administrative management will be included, because these must be identified with the company. Errors by 'superior personnel with independent responsibility for the management of the part of the business to which the error or negligence is related' can also be regarded as personal errors: cf NOU 1993:36 p 39; see also NOU 1980:55 p 21. This must be understood as managers in the company with a broad field of responsibility: cf Falkanger and Bull p 175.

The right of limitation, however, will be retained in the event of errors by ordinary employees, such as the ship's crew. This applies even if these parties had a supervisory responsibility for the specific transport where the damage occurred. Examples include the master of the ship and persons responsible for loading and unloading the goods. Reference is made to Rt-1957-624 and Rt-1994-626; see also the discussion in Rt-2012-1062 pp 115-122.

Nexans has the burden of proving that the conditions for the carrier's loss of the right to limit liability have been met.

Overall, this means that the conditions for breaking limitation of liability are stricter than under the Road Freight Act § 38, and will only be met in special cases. This high threshold for unlimited liability is based on a conscious choice that is enshrined in the relevant Conventions. This is compensated for by the fact that the carrier is easily held liable up to the limitation amount in § 280 of the Maritime Code, in that § 275(1) sets out a strict standard of care with a reverse burden of proof. The idea is that the system as a whole will be balanced and facilitate efficient and predictable claims settlement with insurance coverage: NOU 1980:55 p 21.

After assessing the evidence, the Court concluded that it was most likely that the damage was caused by individual negligence on the part of those who performed and checked the specific loading operation of the cable drum on the MV Norrland, ie ordinary employees on the ship or in the port. The damage could not be linked to personal fault in the form of gross negligence at a general level at Sea-Cargo. Serious management failures had also not been demonstrated at Aquatran, for example serious breaches of basic safety routines.

The requirement of grossly negligent personal fault in the Maritime Code § 283 is not fulfilled. The Court therefore does not need to address the subjective additional condition in § 283 that the tortfeasor must have considered the damage to be probable. Nexans' claim for compensation for the damage to the cable drum is to be limited in accordance with § 280 of the Maritime Code.