Liability in tort arising out of the failure to perform a contract

On the 26 January 2018, the Court of Appeal was asked to decide on the case Mediterranean Trading Shipping Company Limited and Dr. Cedric Mifsud for Atwood Oceanics Australia Pty Ltd v. Tristar Freight Services Limited in which the defendant company (‘Tristar’) was sued for damages for the loss of goods that were destroyed in a fire.

Atwood Oceanics Australia Pty Ltd (‘Atwood’) engaged Mediterranean Trading Shipping Company Limited (‘Mediterranean Company’) to transport equipment used on oil rigs from Malta to Perth, Australia. On the 1 August 2011, upon instructions from Tristar, the plaintiff Mediterranean Company placed the equipment in a warehouse in Cospicua for them to be prepared for transport. The defendant company then issued a Bill of Lading, which indicated that the equipment was to be shipped on the 14 August 2011. The defendant company also issued an invoice for the transport of the goods. On the 17th August 2011, there was fire in the area and the defendant company wrote to the plaintiff Mediterranean Company to inform it that their equipment was completely destroyed in this incident.

The plaintiffs therefore sued Tristar and asked the Court to liquidate damages in their favour as for compensation of the loss of the goods claiming that the defendants had breached their contractual obligation to deliver the goods on the 14 August and that the loss occurred on account of the defendant’s negligence because the goods should have been on their way to Australia when the fire took place in the warehouse.

In their reply, the defendants pleaded, amongst other pleas, that the Bill of Lading was never signed and therefore was not a binding contract and therefore it could not be held liable towards the first plaintiff Mediterranean Company. Tristar also pleaded that it could not be held liable for contractual damages as there was no juridical relationship between itself and Atwood.

During the proceedings, defendants argued that the action is based on a breach of contract due to the Bill of Lading. Its first argument that the Bill of Lading was not binding as it was still in draft form, and had therefore not yet been agreed, was rejected by the Court. The Court held that the Bill of Lading was in fact still binding as the defendant confirmed that the goods would be shipped on the 6 August and then once this did not take place on the 14 August and also issued an invoice for this service.

Once the binding nature of the Bill of Lading was confirmed, the defendant then claimed that its contractual relationship, was with Mediterranean Company, which did not suffer any loss on account of the non performance of the contract, and not with Atwood. The First Hall Civil Court ruled that although the contractual relationship was between Tristar and Mediterranean Company, this did not mean that there was no juridical relationship between the defendant and Atwood. The defendant’s liability towards Atwood arose from tort law (Articles 1031 and 1032 of the Civil Code). Article 1031 of the Civil Code states that ‘every person shall be liable for damage which occurs through his fault’ and since the goods should have been en route to their final destination when they were destroyed in the fire, this loss could be attributed to the defendant company.

In the defendant’s failure to fulfil his contractual obligations, it became liable towards Atwood as it did not exercise the required level of diligence .

Furthermore, under Article 1033 of the Civil Code:

Any person who, with or without intent to injure, voluntarily or through negligence, imprudence, or want of attention, is guilty of any act or omission constituting a breach of

the duty imposed by law, shall be liable for any damage resulting therefrom.

The defendant company had a duty imposed by law, under Article 1126 of the Civil Code dealing with the obligation to preserve things deposited in its care. The risk for the goods passed on to the defendant company once those goods were in its possession.

Therefore the court held that Tristar was responsible to carry out obligations it assumed unless it is a case of force majeure. So once the defendant took possession of the goods, he was obliged to preserve it and ensure that no damage occurs as the risk and peril of the thing passed on to defendant. The Court held the defendant liable for the damages due to the fact that it was responsible for the delay in the delivery of the goods. The burden was on the defendant to prove to the court that the equipment was kept in a safe place and it was the defendants duty to ensure that until the goods were exported they were kept safe and looked after as one would his own things.

Both the First Hall Civil Court as well as the Court of Appeal, having considered all the plaintiff’s claims and the defendant’s please which included the above, ordered the liquidation of damages in Atwood’s favour and found the defendant liable towards Atwood for the loss of the goods. Customs documents indicate that the value of the equipment is 2k whilst the real value is 18K.