Gijutsu Shisutemu Ltd (GS) is a manufacturer and distributor of computer hardware and software for the retail industry based in Osaka, Japan. AKEI Ltd, headquartered in Melbourne, is a retailer specialising in homewares. In January 2021, AKEI ordered new systems from GS, to replace its hardware and software across all of its 20 Australian stores. GS has promised AKEI an increase of 15% in staff productivity as a consequence of the efficiency of the new systems. The sale is agreed on FCA (Osaka) (Incoterms 2010), for delivery between 20 May and 15 June 2021. GS and AKEI agree that payment will be made via a commercial, irrevocable confirmed letter of credit.

At the end of April 2021, GS informed AKEI that the product was ready for shipment. In accordance with the contract of sale, AKEI obtained a letter of credit from FedBank in Australia. The Bank of Japan (BJ) is named as the confirming bank, as organised and requested by GS. The letter of credit specifies that it incorporates the UCP600 rules and that presentation must be "made within 15 calendar days of the shipment and in any event before 30 June 2021, which is when the credit expires."

After receiving notification from BJ that the credit is available, GS organises to deliver the goods to Osaka Airport. On receipt of the goods from GS on 8 June, Japan Airlines (JA) issues an Air Waybill which details that the goods will be carried from Osaka to Taiwan on a JA flight and then to Melbourne on a Qantas flight.

AKEI representatives inspected the goods two days after receipt and reported to AKEI management that some parts were missing. These parts are quite valuable. The boxes these parts were packed in for transport arrived empty. AKEI management immediately telephoned Qantas to report the missing goods, and GS began investigating. An email was sent confirming these details 21 days later. An incident report made by ground crew at Taiwan Airport revealed CCTV footage of trespassers in the loading and warehousing areas, removing items from the boxes while the goods were being transferred from a JA to a Qantas plane. While security staff and ground crew made checks at the time, they did not notice the theft. The systems delivered to GS will not work without these parts.

Using the relevant provisions of the Montreal Convention and any relevant cases discuss the following legal issues,

(a) Qantas has argued that it is not liable for the damages, as the goods were not stolen on a Qantas flight. They argue the goods were still in the care of JA when the theft occurred.

(b) AKEI argues that the goods were lost rather than damaged. Explain the importance of this distinction and whether you believe this argument would be successful. Was the notice provided by AKEI to Qantas sufficient?

(c) Regardless of your response to the previous questions, discuss whether there is liability under Article 18 of the Montreal Convention or whether the carrier can call on any defences?