Carriage of Goods

Carriage by Sea - Application of Hague-Visby Rules - In Rem Actions - Change of Ownership - Damage Done by a Ship

The “Mercury XII”  v. The “MLT-3” , 2012 FC 738,  2013 FCA 96

The plaintiff's truck was dumped into the water while being loaded onto a barge. At the time, the lines securing the barge to the loading ramp had been untied due to the rising tide. As a consequence, the barge moved away from the ramp when the truck was half on the barge. The driver of the truck applied the air brakes of the truck hoping to stop the movement of the barge away from the ramp but this was unsuccessful and the front end of truck became submerged. The parties then attempted to pull the truck onto the barge by attaching a line between the tug and truck. However, the truck tipped and sank. The plaintiff brought this action in rem against the barge and in personam against the owner/charterer of the tug and barge. In their defence, the defendants alleged the plaintiff was contributorily negligent and that there was no in rem action as the barge was not the instrument of damage. A further issue was whether the one year limitation period in the Hague-Visby Rules applied.
The trial Judge held (cited as Wells Fargo v. The Barge "MLT 3", 2012 FC 738) that the defendants were 90% at fault and the plaintiff 10%. The defendants were negligent for loading the truck without having the mooring lines attached. The plaintiff was negligent for applying the air brakes. Concerning the existence of a claim in rem against the barge, the trial Judge held s. 22(2)(d) of the Federal Courts Act requires that "the ship itself must be the actual instrument by which the damage was done". As the barge was not the actual instrument of the damage, he held there was no claim under s. 22(2)(d) and no action in rem. With respect to the application of the one year limitation period in the Hague-Visby rules, the trial Judge noted that section 43(2) of the Marine Liability Act provides that the rules apply to domestic carriage "unless there is no bill of lading and the contract stipulates that the Rules do not apply". The trial Judge held, however, that the lack of a bill of lading was sufficient by itself to oust the Rules. He said “oral contracts not evidenced by or incorporated into a bill of lading or similar document are not caught by subsection 43(2) of the Marine Liability Act”. The defendants appealed the ruling that that the one year limitation period in the Hague-Visby Rules did not apply.

Decision: Appeal dismissed

Held: The trial Judge decided this issue on a grounds that had not been argued before him and the parties were in agreement that the Judge was wrong in holding that s. 43(2) of the Marine Liability Act limits the application of the Hague-Visby Rules to written contracts. The conclusion of the trial Judge was, nevertheless, correct. The appellant must prove all elements of s. 43(2) for the rules to apply. The respondent argued that the contract was not “from one place in Canada to another place in Canada” since the contract was for a round-trip. This is “an unduly formalistic interpretation”. However, the respondent’s argument that there was no contract for the carriage of goods is accepted. A contract for the carriage of goods within the meaning of s. 43(2) does not include a contract for the charter or hire of a vessel. The plaintiff has not proven a contract for the carriage of goods. In fact, the evidence suggests a contract of hire rather than a contract of carriage. The contract was “for the use of the Tug and Barge” and charges were “on an hourly basis” regardless of whether there was cargo on the barge.

Comment: The parties also addressed whether the trial Judge had erred in holding the Hague-Visby Rules did not apply simply because no bill of lading had been issued and without considering the second part of s. 43(32), whether the contract expressly excluded the rules. The Federal Court of Appeal did not address these arguments since it concluded the rules did not apply on other grounds.

Limitation of Liability - Jurisdiction - Concurrent Cases - Stay of Limitation Proceedings - Establishment of Limitation Fund - Enjoining Superior Court

Siemens Canada Limited v. J.D. Irving, Limited, 2011 FC 791,  2012 FCA 225

Two steam turbine rotors were dropped into the waters of the harbour of St. John, New Brunswick in the course of being loaded onto a barge for transport. Siemens, the owner of the turbines, commenced proceedings in the Ontario courts for approximately $45 million against the carrier and a naval architect who provided consulting services to the carrier. The carrier and naval architect brought this action in the Federal Court for a declaration that their liability was limited to $500,000. Siemens brought applications (1) for an order staying the limitation proceedings on the basis that its claims were not governed by Canadian maritime law and the Federal Court was without jurisdiction; (2) for an interlocutory stay pursuant to s. 50 of the Federal Courts Act arguing that the Ontario proceedings were broader in scope than the Federal proceedings and that there was a risk of inconsistent findings if both proceedings were allowed to continue; and (3) for a final stay on the basis the carrier and naval architect were not entitled to limit their liability pursuant to Art. 4 of the Convention on Limitation of Liability for Maritime Claims. (Article 4 provides that a defendant is not entitled to limit liability if the loss resulted from the personal act or omission of the defendant “committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”.) Siemens relied upon an expert report for evidence that the carrier was reckless. The motions Judge dismissed all of Siemen’s applications. She held that it was “clear” that “the nature of Siemens’ claim is essentially maritime law” and that the Federal Court accordingly had concurrent jurisdiction with the Ontario Superior Court. Concerning the application for an interlocutory stay, the motions Judge noted that a stay order was discretionary and that the appropriate test was whether the continuation of the action would cause prejudice to Siemens and whether a stay would cause an injustice to the carrier and naval architect. She held that Siemens had not demonstrated that it would be prejudiced if the stay was not granted. On the other hand, the motions Judge expressly found that a stay would work an injustice to the carrier and the architect who had “a presumptive right to limit liability”. On the issue of the final stay, she held it was premature to determine such an issue and that a full trial would be required before a party could be denied the right to limit liability.
The carrier also brought an application for an order enjoining the Ontario action pursuant to s. 33(1)(c) of the Marine Liability Act. The motions Judge noted that the language of s. 33 was very broad and that the availability of the enjoining remedy illustrated “the value attached to the importance of adjudicating all issues relevant to the constitution and distribution of a limitation fund in one forum”. She said the large discrepancy between Siemens’ damage claim and the limitation amount was a significant factor in favour of enjoining the Ontario action. She also noted that there would be significant cost savings for all parties if the Ontario action was enjoined. Ultimately, having regard to all the facts, she concluded that it was appropriate to enjoin the Ontario proceedings and have all issues determined in the Federal Court. Siemens appealed.

Decision: Appeal dismissed.

Held: With respect to the issue of the Federal Court’s jurisdiction, the motions Judge made no error of law in concluding the Federal Court had jurisdiction. The grant of maritime jurisdiction to the Federal Court is very broad. “It is indisputable that Siemens’ claim arises from the movement of goods onto a ship...Siemens’ claim against Irving and MMC is clearly of a maritime nature.” With respect to the applications for stays, Siemens argued the Federal Court had no power to enjoin until the right to limit liability had been determined. This argument was rejected as being directly contrary to section 33(1) of the Marine Liability Act, the raison d’etre of which “is clearly to allow a shipowner against whom a claim has been made or where one is apprehended to have the Federal Court determine whether or not he can limit his liability”. The Court next rejected an argument that the Federal Court cannot enjoin a proceeding where a limitation fund is not needed or a vessel is not arrested saying that there was no merit in this argument. Finally, the Court considered the appropriate test applicable under s.33(1) of the Marine Liability Act and concluded that the test is that of “appropriateness”, a broad and discretionary test entitling the court to make an order enjoining proceedings where it is of the view that it would be appropriate. The motions Judge correctly applied this test when enjoining the Ontario proceedings. The circumstances that lead to the conclusion the motions Judge made no error include: the Federal Court is the only court that can adjudicate the right of the defendants to limit their liability; the defendants have a presumptive right to limit their liability; the limitation issue is the “fundamental issue” between the parties; and the dispute will likely be resolved when the right to limit liability is determined. In these circumstances, it would not be reasonable to permit the Ontario action to proceed and there is no prejudice to Siemens in temporarily preventing it from continuing the Ontario action.

Carriage of Goods - Intermodal - Rail Carriage - Himalaya Clause - Applicable Limitation - Meaning of Package - Meaning of Bill of Lading - Sub-Bailment - Hague-Visby Rules

Cami Automotive, Inc v. Westwood Shipping Lines Inc, 2009 FC 664,  2012 FCA 16

The plaintiffs sued the defendants for damage to cargo carried under a through bill of lading. The cargo was damaged as a result of a train derailment. The defendants were the charterer of the carrying vessel, the owner of the carrying vessel and the rail carrier. The plaintiff and the charterer conducted business under annual service contracts for the carriage of containers from Japan to Toronto pursuant to which a “Shipping Document” was issued when containers were loaded for carriage. The charterer and the rail carrier conducted business under a “Confidential Contract”. The issues for determination were the entitlement of the charterer and rail carrier to limit their liability under the terms of the various contracts. At trial (2009 FC 664) the trial Judge dealt first with the limitation of the charterer and considered whether the “Shipping Document” was a bill of lading or a waybill. The trial Judge held that it was a waybill noting that it was titled “Waybill” , it contained a stamp indicating delivery would be made to the named consignee (without production of the original) and only one copy was issued (bills of lading are usually issued in triplicate). As the “Shipping Document” was determined to be a waybill and not a bill of lading, the trial Judge further held that the Hague-Visby Rules were not compulsorily applicable. However, the Waybill incorporated the terms of COGSA which contains a US$500 per package limitation and this limitation was held to be applicable to the charterer. A secondary issue relevant to the charterer’s limitation was the definition of a “package”. The trial Judge held in the circumstances that each pallet was a package and that the total limitation amount was US$50,000. The trial Judge then turned to the limitation of the rail carrier and considered first whether the rail carrier could limit its liability under the “Confidential Contract” even though the plaintiff was not a party to that contract. The trial Judge applied the doctrine of sub-bailment and held that the plaintiff was bound by the terms of the “Confidential Contract”. There was, however, an issue as to the proper interpretation of the “Confidential Contract” and, specifically, whether the rail carrier’s limitation was contained in a tariff or in the Railway Traffic Liability Regulations. The trial Judge found that the tariff had not been properly incorporated into the “Confidential Contract” and, accordingly, held that liability was to be determined in accordance with the Regulations. The trial Judge next considered whether the rail carrier could rely upon the limitation provisions in the “Shipping Document” and, applying the Himalaya clause in the “Shipping Document”, held that it was entitled to do so. The trial Judge further noted that the rail carrier was free to choose the limitation most beneficial to it. The plaintiff appealed.

Decision: Appeal Dismissed.

Held: In very short reasons (2012 FCA 16) the Federal Court of Appeal dismissed the appeal saying merely that it had not been persuaded the trial Judge had made any errors warranting intervention.

Freight – Demurrage - Arbitration Awards – Enforcement – Appeals for Arbitrators

Orient Overseas Container Line Limited v. Sogelco International, 2011 FC 1466, 

This was an appeal from a decision of a Prothonotary granting recognition and enforcement of a New York arbitration award. The appellant argued that the Prothonotary had erred in finding that there was a written arbitration agreement, a requirement of recognition and enforcement. The Appeal Judge, however, agreed with the Prothonotary. He found the undisputed evidence was that a services contract containing an arbitration provision had been signed. The appellant’s argument that it had only been given one page of the agreement was not considered germane as that one page referred to the other pages and the appellant never asked for the other pages. The Appeal Judge did not agree with the Prothonotary that the appellant’s participation at the arbitration was relevant since that participation was done under protest. The Appeal Judge also did not agree that there was a three month time period within which to appeal the award as the three month time period under the Commercial Arbitration Code applies only to Canadian arbitrations not foreign arbitrations. Having found that there was an agreement to arbitrate, the Appeal Judge refused to consider the appellant’s arguments that the arbitrator erred on the merits. The Judge said: “If one agrees to arbitrate, one accepts the possibility that the arbitrator may get it wrong. This is not a jurisdiction in which one may go to court on a point of law, but only on whether there was an agreement to arbitrate and what I would broadly call principles of natural justice”.

Carriage – Bills of Lading – Carrier Not Required to Issue False Bills of Lading – Conversion of Foreign Currency – Breach Date Rule

Kuehne & Nagel Ltd. v. Agrimax Ltd., 2010 FC 1303, 

This was an action by a freight forwarder for payment of freight. The forwarder also had the “pen” of the NVOCC and was authorized to issue bills of lading on its behalf. The defendant argued that it was not liable for the freight because the forwarder refused to issue bills of lading with a date of loading different than the actual date of loading. The defendant required a different date to comply with the documentary requirements of a letter of credit. The Court held that the forwarder was absolutely right in refusing to amend the bill of lading and granted judgement to it. A subsidiary issue in the case was the proper date for conversion of foreign currency. The Court held that the proper date remained the date of breach and not the date of judgment.

Carriage by Sea – Hague-Visby Rules - Interpretation of Exclusion/Limitation Clauses - Refrigeration Breakdown Post Discharge – Fruit

Les Courtiers Breen Ltee. v.  Mediterranean Shipping Co.,  2010 QCCQ 583, 

The main issue in this case was the liability of the carrier for damage to a cargo of clementines carried from South Africa to Montreal via New York. The container in which the cargo was stowed had been stowed and sealed by the shipper and the carrier argued that the plaintiff had not proven the goods were received by it in good order and condition. The Court rejected this argument relying on the export certificates which provided prima facie evidence of receipt by the carrier in good condition. The Court next considered whether the carrier was liable for failing to maintain the goods at the required temperature. The goods were to be at 4.5 degrees and the container was set at this temperature but the records disclosed periods during which the temperature was between 6 and 8 degrees. The carrier argued that the higher temperatures were not the cause of the damage relying on an expert witness that said the optimum temperature for carriage of clementines was between 5 and 8 degrees. The Court rejected the testimony of the carrier’s expert, in part because he confused the carrying temperature of mandarins and clementines. The Court then turned to the clauses of the bill of lading relied upon by the carrier to exonerate it from liability. One clause stipulated the carrier was not liable for breakdown of machinery unless caused by the carrier’s negligence. The other clause stipulated that fruits and vegetables were carried at shipper’s risk. The Court noted that both clauses would be invalid under the Hague-Visby Rules, however, because the relevant temperature fluctuations occurred after discharge, the Rules did not apply. Therefore, the Court had to interpret the clauses and held that neither clause excluded liability for negligence. (Note: The author thanks Messrs. Brisset Bishop of Montreal for providing an English translation of this decision which, unfortunately, is reported only in French.)

Carriage of Goods - Liability for Storage Charges

American Transport Logistics  v. Kobi Group Inc.,  2009 CanLii 65798 , 

This was a motion for summary judgment brought by the plaintiff, an international freight forwarder, against the defendant, an international importer and exporter of commercial goods for resale. In January 2007, the defendant contacted the plaintiff to arrange the carriage of perishable goods from Germany to Kingston, Jamaica. The destination was later changed to St. Lucia and in March 2007 the goods arrived at St. Lucia. Upon arrival at St. Lucia, the St. Lucia authorities found the goods had passed their expiry dates and therefore condemned the goods and imposed local storage/detention charges. The defendant paid the shipping cost but refused to pay the storage/detention charges alleging that the plaintiff had acted without instructions in changing the destination to St. Lucia. The Court found that the defendant had, in fact, instructed the plaintiff to change the destination to St. Lucia. The Court additionally found that the terms of the contract between the parties imposed on the defendant the responsibility of paying all storage and detention charges. Finally, the Court held that article IV(2) of the Hague-Visby Rules, exempted the plaintiff from liability for such charges.

Carriage of Goods – Domestic Carriage - Deck Carriage – Application of Hague-Visby Rules

Allianz Global Risks US Insurance Co. v. Moosonee Trans. Ltd., 2009 QCCQ 7569, 

This was a subrogated claim for several vehicles and other cargo lost when a barge sank en route to James Bay. The defendants were a company that arranged the transportation and the actual carrier. A preliminary issue in the case was whether the claim was governed by Canadian maritime law or the Civil Code of Quebec. The Court had little difficulty in determining that the claim was governed solely by Canadian maritime law. The Court next considered whether the plaintiff was bound by the contract between the intermediary and the carrier and the exclusion clause contained therein. The Court held that the intermediary was a freight forwarder acting on behalf of the plaintiff and not a carrier and that, accordingly, the plaintiff was bound by the contract between the intermediary and the carrier. The Court next considered whether the contract of carriage was subject to the Hague-Visby Rules and held that the rules did not apply as the contract was evidenced by a non-negotiable shipping receipt (not a bill of lading) and the cargo was loaded on deck and was so stated in the contract. As a result, the exclusion clause in the shipping receipt was held to be applicable. (Note: Regrettably, this case, as with many cases decided by Quebec courts, is reported only in French. The author has relied on his limited command of the French language and computer translation in preparing this summary.)

Carriage of Goods - Non-payment of Freight - "Freight Prepaid" Bills of Lading - Agency

H. Paulin & Co. Ltd. v. A Plus Freight Forwarder Co. Ltd., 2009 FC 727, 

The issue in this case was whether the receiver of cargo under “freight Pre-paid” bills of lading was liable for non-payment of freight. The parties were: H. Paulin, the receiver/consignee; A Plus, a local forwarder who issued bills of lading and was held to be a NVOCC; Scanwell, a forwarder who had contracted with A Plus and who issued “freight prepaid” forwarders receipts; and OOCL, the ocean carrier, who had been hired by Scanwell. H. Paulin paid freight to A Plus and Scanwell paid freight to OOCL but A Plus did not pay Scanwell’s freight bill. Scanwell claimed the freight against H. Paulin. The first issue was the meaning of the term “freight prepaid”. The Court noted that, although the statement would not preclude an action for freight as between Scanwell and A Plus (the carrier and shipper), the statement was effective to prevent either a claim in rem against the cargo or in personam against H. Paulin. The Court next considered whether principles of agency could apply to make H. Paulin liable for the freight, however, it was held that A Plus acted as principal for its own account. Accordingly, Scanwell’s claim against H. Paulin was dismissed.

Carriage of Goods - Deck Carriage - Marine Insurance - Waiver of Subrogation - 3rd parties

Timberwest Forest Corp. v. Pacific Link Ocean Services Corporation, 2009 FCA 119 , 

This was a subrogated claim for the loss of approximately C$1 million worth of logs. The logs were lost from the deck of a barge while en route from Vancouver to California. The issues in the case were: first, whether the cargo was sufficiently described as deck cargo to remove it from the application of the Hague-Visby Rules (thus denying the defendants the right to rely upon exclusion or benefit of insurance clauses in the contract); and second, whether the waiver of subrogation clause in the plaintiff’s insurance policy protected all of the defendants or just the specifically named contracting carrier. The contract of carriage was contained in a letter of understanding and set of standard terms and conditions which incorporated a bill of lading that was “contemplated” to be issued. The bill of lading, which was never in fact issued, included on its face a statement that “all cargo was carried on deck unless otherwise stated”. The plaintiff argued that a printed statement of deck carriage in a standard bill of lading that was not actually issued was not sufficient compliance with Art 1(c) of the Hague-Visby Rules to oust the application of the Rules. The motions Judge held, however, that the plaintiff was bound by the terms of the contract including the bill of lading terms and these contained a clear statement as to deck carriage. In result, the Rules did not apply. The second major issue in the case concerned a clause in the plaintiff’s policy of insurance which specifically waived subrogation against the contracting carrier. The contracting carrier had entered into time charters for the tug and barge with two affiliated companies who actually carried out the contract through their employees. The issue was whether these other companies and their employees could take the benefit of the waiver of subrogation clause which did not name them specifically or by class. The motions Judge reviewed the complicated history of the waiver of subrogation clause and concluded that it was intended to waive subrogation against the “carrier” or “tower”, terms that were used indiscriminately. As the other parties fell within the definition of “carrier” in the bill of lading, they were entitled to the benefit of the waiver of subrogation clause. He further held that extending the benefits of the waiver of subrogation to these other entities would be a permissible incremental change in the law. On appeal, the Court of Appeal upheld the decision of the motions Judge but for different reasons. The Court of Appeal enforced the waiver of subrogation clause not on the basis of the intention of the parties but referred to a separate clause in the policy whereby underwriters waived rights of subrogation whenever the assured had waived rights of recovery. The Court of Appeal held that pursuant to the terms of the bill of lading recovery had been waived against all of the defendants and therefore rights of subrogation were also waived.

Carriage of Goods - Limitation Period - Counterclaim

Hapag-Lloyd Container Line GmbH v.  Moo Transport & Commodities Inc.,  2009 FC 201, 

The issue in this case was whether a counterclaim for damage to cargo and non-delivery should be dismissed on the grounds that the counterclaim was made out of time. The moving party relied upon a clause in the bill of lading that stipulated the carrier would be discharged from all liability unless suit was brought within one year (almost identical wording to the limitation period in the Hague/Hague-Visby Rules). The Court gave effect to the clause noting that this wording had the effect of completely excluding any cause of action rather than merely barring a remedy. In result, the counterclaim was dismissed.

Carriage – Freight - Interpleader

Rio Tinto Shipping (Asia) Pte Ltd. v. Korea Line Corporation, 2008 FC 1376, 

In this matter the applicant, a voyage charterer, applied to pay into court the freight which it admitted was owing. The reason was that there were conflicting claims by two parities as to entitlement to the freight. The Court recognized the conundrum of the applicant and allowed it to pay the freight into court in satisfaction of its liability in respect thereof.

Contract of Affreightment – Negotiations - Essential Terms - Damages

Catalyst Paper Corp. v. Companhia de Navegação Norsul,  2008 BCCA 336, 

This was an action for breach of a long term shipping contract. The contract was a three year contract of affreightment for the carriage of paper products to South America. The contract was negotiated using the “accept/reject” process. The main issue in the case was whether a final agreement had ever been concluded between the parties. The trial Judge found that there was a concluded agreement. On appeal, the British Columbia Court of Appeal extensively reviewed the evidence and concluded that a notional reasonable observer would not find a clear agreement between the parties on an essential term, cargo care. Accordingly, there was no agreement.

Carriage - Freight - set off - jurisdiction - Ciffa Terms

Locher Evers International  v. Canada Garlic Distribution Inc. , 2008 FC 319, 

This was an action for the recovery of freight in relation to the carriage of produce from China to Toronto. The Defendant did not dispute the freight was owing but alleged a right to set-off and argued that the agreement ousted the jurisdiction of the Federal Court. The agreement between the parties expressly incorporated the Ciffa terms and those terms contained a no set-off clause which the Court had no difficulty enforcing. With respect to the jurisdiction issue, unfortunately, it is not clear from the judgment how this issue arose. There was apparently a jurisdiction clause but its contents are not set out. Nevertheless, the Court does say that the issue was raised too late.

Multi-modal - Bailment on Terms - Himalaya Clause - Rail Carriage - s.137 Canadian Transportation Act

Boutique Jacob Inc. v.  Pantainer Ltd., 2008 FCA 85, 

This was an action by the Plaintiff for damage to cargo caused during a train derailment. The Plaintiff had contracted with the first Defendant, Pantainer, for the carriage of its cargo from Hong Kong to Montreal. Pantainer then sub-contracted the entire carriage to OOCL. OOCL in turn contracted with Canadian Pacific for the carriage of the cargo by rail from Vancouver to Montreal and it was during this portion of the carriage that the damage occurred. The carriage documents were an express bill of lading issued by Pantainer and an electronic waybill issued by OOCL which referred to OOCL's standard terms that were available on the OOCL website. At issue in the case was the liability of each of the Defendants and which bill of lading exclusions or limitations they were entitled to rely upon. With respect to the liability of Pantainer, the trial Judge held that it would have been liable as a contracting carrier but it was entitled to rely upon a clause in its bill of lading that excluded its liability for loss or damage that could not be avoided by the exercise of due diligence. With respect to OOCL, the Judge held that it was liable as a sub-bailee on terms and that the terms were those referred to in the OOCL electronic waybill. The Judge further held that these terms exonerated OOCL from liability for loss or damage that could not be avoided by the exercise of due diligence. The trial Judge also held that OOCL was entitled to rely upon the similar exemption in the Pantainer bill of lading via the Himalaya clause in that bill of lading. With respect to the liability of Canadian Pacific, the Judge referred to s. 137 of the Canadian Transportation Act, which prohibits a railway from restricting or limiting liability except by written agreement signed by the “shipper”. The trial Judge held that “shipper” in s.137 meant the plaintiff and not OOCL. As a consequence, this provision precluded Canadian Pacific from relying upon the Himalaya and limitation clauses in either the Pantainer or OOCL bills of lading. The trial Judge further held that Canadian Pacific could not rely upon any limitation clause in its published tariff as this had been displaced by a limitation provision in the confidential rate agreement between OOCL and Canadian Pacific. In result, Canadian Pacific was held liable for the Plaintiff's damages calculated at the discounted selling price of the goods.

On appeal, the main issue was the trial Judge’s interpretation of s. 137 of the Canada Transportation Act. The Court of Appeal overturned the trial Judge on the issue of the interpretation of s.137. Specifically, the Court of Appeal held that the term “shipper” meant OOCL, the entity that contracted with Canadian Pacific, and not the Plaintiff. Accordingly, there was a written agreement between Canadian Pacific and the “shipper” and the prohibition in s. 137 did not apply. The Court of Appeal next considered the applicable limitation amount. The Court noted that the agreement between OOCL and Canadian Pacific was subject to Canadian Pacific’s tariff which limited liability, inter alia, to “an amount equal to the liability of the steamship company”. The Court of Appeal held that this provision entitled Canadian Pacific to limit its liability to the amount prescribed by the OOCL bill of lading which was $2 per kilogram. The Court of Appeal disagreed with the trial Judge concerning the inconsistency of the limitation provision in the confidential agreement and tariff. The Court of Appeal held that the provisions were not inconsistent. Finally, the Court of Appeal held that the Himalaya clauses in either the Pantainer or OOCL bills of lading entitled Canadian Pacific to rely upon the limitation clauses in either bill of lading.

Multi-modal - Theft - Limitation of Liability - Himalaya Clause

Alcoa, Inc.  v. CP Ships (UK) Ltd.,  2007 ONCA 686, 

The Plaintiff contracted with the first Defendant for the carriage of a cargo of aluminum from Massena, New York to Italy. The first Defendant had an arrangement with the second Defendant for the performance of the inland portion of the carriage from Massena to Montreal. It was intended that the first Defendant would then complete the carriage by sea from Montreal. However, during the course of the inland transit the container was stolen when left unattended by the truck driver. The main issue in the case was whether the Defendants were entitled to limit their liability for the loss pursuant to the terms of the first Defendant's standard bill of lading. The Plaintiff argued that a document entitled Straight Form Bill of Lading had been issued when the cargo was picked up by the second Defendant and that this bill of lading, which contained no limitation clauses, governed. The trial Judge held, however, that this bill of lading was a mere acknowledgement of receipt. The trial Judge noted that on four prior occasions the Plaintiff had shipped goods with the first Defendant and that on each occasion the Defendant had issued its standard form bill of lading. Based on this prior practice, the trial Judge held it was this bill of lading which governed even though it had not been issued at the time of the loss. The trial Judge next considered the Himalaya clause and the multi-modal clause in the bill of lading and concluded that they applied to the benefit of both Defendants. Finally, the trial Judge considered and rejected an argument that there had been a fundamental breach by the Defendants, noting that there was nothing deliberate about the conduct of the Defendants that would warrant denying them the protection of the limitation clause. In result, the Plaintiff was awarded $4,000 being the limitation amount in the bill of lading.

On appeal, the Ontario Court of Appeal held that the trial Judge had applied the wrong limitation provision. Specifically, the bill of lading provided various limits depending on where the transport occurred. The trial Judge applied the limitation for “Multi-Modal Transport outside the United States where COGSA is not contractually applicable”. The Court of Appeal said the appropriate clause was the one dealing with multi-modal transport in Europe or within a state other than the United States. This provision gave a higher limit of $65,000.

Carriage of Goods - Rust Damage - Failure to Prove Damage on Discharge

Lovat inc. v.  Blue Anchor Line, 2007 FC 491, 

This was an action for damage to a bearing shipped from Toronto to Turkey. The bearing was allegedly damaged by rust when it was delivered at its destination in Turkey. The evidence was that the cargo was in apparent good condition when discharged from the last carrying vessel at Istanbul, however, when it was delivered to its final destination in Turkey by truck it was found to be unwrapped and rust damaged. The contract of carriage with the Defendants was for carriage only to the Port of Instanbul. The on-carriage from Istanbul was under a separate contract with a non-party. The Court was of the view that the expert evidence submitted was not sufficient to establish the rusting damage occurred in the possession of the Defendants. The Court accepted the evidence of the Defendant’s expert that an accurate assessment of the source of the rust damage required x-rays, chemical analysis and microscopic examination, none of which was done. Water samples and silver nitrate tests were inconclusive and there was no evidence submitted as to the composition of the alloy in the bearing or as to what might have caused the rust. Accordingly, the action against the carriers was dismissed.

Indemnity – Deck Carriage – Hague-Visby Rules

Gearbulk Pool Ltd. v. Seaboard Shipping Co., 2006 BCCA 552, 

This matter involved a claim for indemnity by the Plaintiff ocean carrier against the Defendant for damages the Plaintiff was ordered to pay in the matter of Timberwest Forest Ltd. v Gearbulk Pool Ltd. et al., 2003 BCCA 39 (the “underlying action”). In the underlying action the cargo of lumber was comprised of two consignments destined to two different consignees. The carrier had the right to stow the entire cargo on deck, however, because there was space available, some cargo was stowed under deck. In total, 86% of the entire shipment was loaded on deck and 14% under deck. Bills of lading were subsequently issued by the Defendant as agent for the Plaintiff containing a statement that the cargo was stowed 86% on deck and 14% under deck. (This apportionment, though accurate for the entire shipment, was not demonstrably accurate with respect to each individual consignment or bill of lading.) The deck cargo was damaged at the discharge port. The carrier sought to avoid liability by relying upon an exclusion clause in the bills of lading for damage to deck cargo. The courts in the underlying action held, however, that the carrier was not entitled to rely upon the exclusion clause as the deck cargo was not sufficiently identified as deck cargo to take it outside of the Hague-Visby Rules. The carrier then brought this action claiming that it was entitled to indemnity because the Defendant had breached a contract of affreightment between the Plaintiff and Defendant. The contract of affreightment provided that the Defendant would indemnify the Plaintiff for any losses caused by any variance between the carrier's bill of lading to the Defendant and the Defendant's bill of lading to the shippers. The Plaintiff's bill of lading to the Defendant contained the statement “Stowed on Deck: 2,304,088 FBM of which 1,982,204 FBM loaded on deck without liability for loss or damage howsoever caused”. The Defendant's bills of lading to the shippers contained, as indicted above, a breakdown in percentages of the on deck and under deck stowage. The trial Judge and the Court of Appeal held, however, that the cause of the failure of the exemption clause and the Plaintiff's liability in the underlying action was not the variance between the bills of lading but was because the Plaintiff's supercargo did not take steps during the loading to adequately identify what was loaded on deck and under deck. The description of the cargo stowage had to be sufficient to permit a shipper to determine the extent of the risk presented by the on deck cargo. This required sufficient identification of the cargo to determine not just the quantity but also the value of the cargo stowed on deck.

Rail Demurrage – Liability of Terminal – Canadian Transportation Act – Bills of Lading Act

Canadian National Railway v.  Neptune Bulk Terminals (Canada) Ltd., 2006 BCSC 1073, 

The Plaintiff railway company brought this action against the Defendant terminal operator to recover demurrage charges for delay in the loading and unloading of grain from the Plaintiff's rail cars. The Plaintiff argued that it was entitled to the payment of demurrage in accordance with its tariffs published pursuant to the Canadian Transportation Act. The Judge reviewed the history of the Canadian Transportation Act and demurrage in relation to rail carriers and ultimately concluded that the Act did not permit the Plaintiff to impose tariffs on third parties such as the Defendant who have no direct contractual relationship with the Plaintiff. The Plaintiff's tariffs were only enforceable against parties with whom the Plaintiff contracted, namely, the shippers. The Plaintiff advanced an alternative argument that there was an implied agreement with the Defendant for the payment of demurrage based on correspondence and notices from the Plaintiff advising that terminals accepting rail cars were deemed to undertake payment of demurrage. The Judge also rejected this argument, however, as the Defendant had repeatedly advised the Plaintiff that it would not be responsible for the charges. Finally, the Plaintiff argued that the Defendant, who was named as consignee in some bills of lading, was liable for demurrage pursuant to s.2 of the Bills of Lading Act. The Judge rejected this argument on the basis, inter alia, that s.2 of the Bills of Lading Act applied only to consignees “to whom the property in the goods therein mentioned passes” and the Defendant did not acquire ownership in any of the goods.

Mis-Delivery/Theft – Onus of Proof – Hearsay Evidence – Post-Discharge Exclusions – Hague-Visby Rules

Shtutman  v. Ocean Marine Shipping Inc.,  2005 FC 1471, 

The Plaintiff alleged that the carrier was liable for the loss of the contents of a container carried by sea from Halifax to Conakry. Specifically, the Plaintiff alleged that the carrier had either mis-delivered the container or that the contents of the container had been stolen while the container was in the possession of the carrier. Unfortunately, the Plaintiff's case depended primarily on the admissibility of letters from the consignee which stated that the container was empty when received and had no lock or seal. The Judge reviewed the law relating to the admissibility of hearsay evidence and noted that such evidence may be admissible if it meets the twin tests of reliability and necessity. The Judge found that this test had not been met and refused to admit the letters. The Judge further accepted the evidence of the Defendant's witness that the container had been delivered to the consignee. Accordingly, the Judge held that the Plaintiff had failed to meet the onus on it of proving the loss of the cargo while in the possession of the carrier. The Judge further held that the exclusion clause on the reverse of the carrier's bill of lading would have applied in any event since clauses excluding or limiting liability after discharge from the ship were not invalidated by Art. III r. 8 of the Hague-Visby Rules.

Multimodal – Liability of Rail Carrier – Estoppel – Waiver

Canadian Forest Products Ltd. v.  B.C. Rail et al., 2005 BCCA 369, 

Wood pulp was loaded in apparent good order and condition onto rail cars in the BC interior, discharged at a port terminal and then loaded on board the carrying vessel. At final discharge, the pulp was found contaminated with wood splinters and rejected for use by the receiver’s customer. The Plaintiff claimed against the rail carrier, the loading terminal and the ocean carrier. The evidence was that wood splinter contamination was a known risk from using wood floored or lined rail cars but the Plaintiff had selected such rail cars over ones with steel floors. There was also evidence that the rail cars when delivered for loading were often not cleaned and that employees of the the Plaintiff had to inspect and sweep them. Such debris could have been a source of wood splinter contamination. At trial, the Plaintiff invited the Court to apply a presumption that the party liable is the last party to handle the cargo when the contamination was found. Specifically, the Plaintiff argued that the ocean carrier should be found liable on the basis of the presumption, or if the ocean carrier rebutted the presumption, the terminal should be liable, or if the terminal in turn rebutted the presumption, the rail carrier should be liable. The trial Judge found that the handling at the terminal and on board the vessel presented little or no opportunity for the contamination to arise since the vessel was of steel construction and wood was not used in connection with storage and loading at the terminal. These two Defendants had rebutted the presumption but the rail carrier had not. However, the claim against the rail carrier was also dismissed as the trial Judge held that the Plaintiff had waived its right to claim for dirty rail cars by having its own employees sweep the cars and, further that the Plaintiff was estopped from claiming for wood contamination from the wood flooring as the Plaintiff had knowingly selected wood-lined rail cars thereby accepting the risk of wood contamination. Arguments as to lack of title to sue and whether the pulp was improperly rejected were also considered and rejected by the trial Judge. The Plaintiff appealed the dismissal as against the rail carrier. On appeal the British Columbia Court of Appeal noted that the starting point was the obligation of a common carrier not to damage goods in its possession and to provide suitable accommodation for the carriage of the particular goods. The application of these common law principles led to the conclusion that the rail carrier was liable unless there was a waiver or estoppel. The Court of Appeal considered and concluded that there was no estoppel or waiver. In reaching this conclusion the Court of Appeal noted that the reason for choosing wood lined rail cars, which was known to the rail carrier, was to minimize condensation damage to the pulp. The Court further noted that the reason the Plaintiff had its own employees sweep the rail cars was to avoid delays in shipping. Given these reasons for the Plaintiff's conduct and the fact that the Plaintiff was not more knowledgeable than the rail carrier about how to ship pulp, the Court found there was no estoppel and no waiver. In result, the Plaintiff's appeal was successful and the rail carrier was found liable.

Carriage – Fire – Dangerous Goods – Hague Rules – Appeal – Standard of Review

Elders Grain Company Limited et al. v. The “Ralph Misener” et al., 2005 FCA 139, 

This matter involved the carriage of a cargo of alfalfa pellets from Thunder Bay to Montreal. During the discharge of the cargo in Montreal a fire broke out damaging the cargo and the carrying ship. The Plaintiffs claimed for the damage to the cargo and the Defendants counter-claimed for the damage to the ship. The Plaintiffs argued that the bills of lading, which were clean, created a prima facie presumption against the Defendants that the cargo was received in good order and condition. The trial Judge, however, held that during the loading the cargo was surrounded by a cloud of dust which made visual inspection difficult and that under these circumstances the presumption did not apply. The trial Judge then turned to the cause of the fire and reviewed the evidence of the various experts and witnesses. He concluded that the evidence overwhelmingly supported the conclusion that spontaneous combustion caused the fire. He next considered whether the alfalfa pellets were a “dangerous cargo” within the meaning of Article IV r. 6 of the Hague Rules. He noted that the word “dangerous” had to be given a broad meaning and concluded with little difficulty that the cargo was indeed dangerous since if not properly stored it could ignite. He further held that there was no evidence the Defendants consented to the shipment of the cargo with knowledge of its dangerous character. The Plaintiffs failed to advise the Defendants of its flammable nature and failed to provide any information to the Defendants with respect to the cargo. In their defence the Plaintiffs argued that pursuant to Art. IV r. 3 of the Hague Rules they could not be liable to the Defendants without proof of an act, fault or neglect. The trial Judge rejected this argument, holding that a shipper's liability for damage caused by dangerous goods was strict both under Art. IV r. 6 and at common law. In result, the Plaintiffs' action was dismissed and the Counterclaim was allowed. The Plaintiffs appealed.

At the Court of Appeal the Court first noted that the standard of review depended on the nature of the questions appealed from. The standard of review for pure questions of law is one of correctness. The standard for questions of fact is whether the trial judge made a palpable and overriding error i.e. “one that gives rise to a reasoned belief that the trial judge must have forgotten, ignored or misconceived the evidence in a way that affected his conclusion”. The standard for a mixed question of law and fact is that of “palpable and overriding error unless it is clear that the trial judge made some extricable error in principle with respect of the characterisation of the legal test or its application”. Applying these standards of review the Court of Appeal upheld the trial Judge and dismissed the appeal.

Stay of Proceedings – Arbitration Clause – MLA s. 46 – Charterparties – Bills of Lading and Incorporation of Charter Terms – Striking Claims

Dongnam Oil & Fats Co. v. Chemex Ltd. et al., 2004 FC 1732, 

This matter concerned damage to a cargo of bleached tallow to be carried from Newark, New Jersey to Inchon, Korea. The cargo was to be carried on board the ship “Tuapse”. The “Tuapse” was owned by Novoship but chartered under a head charter to Chemex. The head charter provided for London arbitration. The Plaintiff and Chemex entered into a voyage charter party which again called for London arbitration. The cargo was loaded at Newark and two bills of lading were issued which incorporated the voyage charter party. The cargo was carried on board the “Tuapse” to Nanaimo, British Columbia where it was transhipped to another vessel for carriage to Korea. The cargo was allegedly damaged during the transhipment. The Plaintiff subsequently commenced this proceeding and the Defendants Novoship and Chemex brought applications to stay the proceedings in favour of London arbitration. The Plaintiff argued that s. 46 of the Marine Liability Act applied making the arbitration provisions inapplicable. The Prothonotary disagreed ruling that a transhipment from one vessel to another was not loading or discharging at a Canadian port within the meaning of s. 46(1)(a). The Prothonotary further noted that section 46 should be interpreted strictly since it was a restriction on freedom to contract. The Prothonotary then considered whether the arbitration provisions were incorporated. With respect to the dispute between the Plaintiff and Chemex he found that there was clearly an arbitration provision in the voyage charter and therefore concluded that he had no alternative but to allow the stay. With respect to the dispute between the Plaintiff and Novoship, however, there was no direct contractual relationship between these two and therefore he had to consider the effect of the bills of lading. In this regard he noted that if the bills of lading had specifically referred to the arbitration provision, Novoship would be entitled to a stay. In addition, if the bills of lading incorporated the charter party terms and those terms provided that the arbitration provision applied to disputes under the bill of lading, then Novoship would be entitled to a stay. However, in this case the terms of the voyage charter party did not provide that the arbitration provision applied to disputes under the bill of lading and the bills of lading did not specifically refer to arbitration. Accordingly, Novoship was not entitled to a stay. Two subsidiary issues dealt with in these reasons concerned applications to strike out a claim for a declaration the Plaintiff did not owe dead freight and a claim for wrongful arrest. The claim for a declaration on the dead freight issue was struck on the grounds that the issue had been decided in an arbitration. The claim for wrongful arrest was struck on the grounds the Plaintiff was not the owner or in possession of the cargo at the time it was arrested.

Damages – Compound Interest

Elders Grain Company Limited et al. v. The “Ralph Misener” et al., 2004 FC 1285, 

In this matter the Defendant had been successful in its counterclaim and now sought compound interest. The Court referred to the Supreme Court of Canada decision in Bank of America Canada v Mutual Trust Co., [2002] SCR 601, wherein it was held that compound interest will generally be limited to breach of contract cases where the parties agreed, knew or should have known compound interest would apply. Compound interest may also be awarded in other cases but subject to the requirement of proving that damage component. The Court refused the claim for compound interest holding that there had been no agreement and that the Defendant had not proved that damage component.

Carriage by Sea – Delivery Without Bill of Lading

Asian Exports International v. Zim Israel Navigation Co. Ltd. et al.,  2004 FC 225, 

In this matter the Plaintiff had paid for goods that were shipped from China and was the named consignee on a non-negotiable bill of lading. The vendor however refused to give the Plaintiff the original bill of lading by which to obtain delivery of the goods from the carrier. When the container arrived the Plaintiff commenced suit against the vendor and ocean carrier and arrested the container. The Plaintiff obtained the release of the container by posting a bank guarantee as security. The Plaintiff later brought the present motion to have the security returned. The only party that appeared on the motion was the ocean carrier who requested that the Plaintiff be required to execute a hold harmless agreement as a condition of the order. The Prothonotary declined this request but did provide in the order that any claim by the vendor against the ocean carrier was barred.

Freight – Bankruptcy of Freight Forwarder

Mediterranean Shipping Company SA v.  BPB Westroc Inc, 2003 FC 942, 

This was an action by the Plaintiff carrier to recover freight from the Defendant shipper. The Defendant's defence was that it had paid the freight to its freight forwarder. Unfortunately, the freight forwarder went bankrupt without remitting the payments to the carrier. The Prothonotary reviewed the applicable case law and held that a shipper is liable to a carrier for payment of freight unless it presents clear and unequivocal evidence that the carrier released it from liability. The Prothonotary held that the Defendant had failed to discharge this onus and was therefore liable to the carrier for the freight.

Carriage of Goods – Damage to Vessel – Seaworthiness – Improper Stowage – Liability of Shipper – Apportionment

Sea-Link Marine Services Ltd. et al. v. Doman Forest Products Limited, 2003 FCT 712, 

A cargo of lumber was partially lost during carriage on “SEA-LINK YARDER” a dumb barge under tow between ports on Vancouver Island. During a portion of the transit on the outer coast of Vancouver Island the tug and tow encountered heavy weather and the cargo shifted resulting in loss of some cargo and damage to the barge. A claim was initially made for damage to the cargo and the barge owner counterclaimed for damage to the barge. The cargo claim was settled and discontinued and the action proceeded on the counterclaim. The carriage was subject to an agreement that placed responsibility for loading and lashing on the shipper. The tug crew had inspected the lashing, recommended additional lashings and attached the lashing to the barge’s side wall fittings. The lashing was done by the crew because the shipper’s employees were concerned about doing so. This was the second voyage between the parties. In the previous voyage, the tug crew had told the shippers more cargo could be loaded next time. No information had been provided to the Master by the owner as to the barge’s load lines or stability or the amount of cargo it could carry. The Court held that the agreement placed responsibility for loading on the shipper and the tug crew did not intermeddle in the loading with respect to the lashing. The shippers argued that the barge owner, if held partially responsible, could not recover as the damages could not be separated, however, referring to Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210, the Court held that principles of contributory negligence could be applied in maritime law. The shippers also argued that the tug Master had been negligent in proceeding with the tow or continuing with the tow given the weather forecasts for gales and the actual weather conditions. The Court found no negligence in this regard. The shippers also argued that the barge was unseaworthy on various grounds including that the Master did not know how much cargo it could carry and the barge was loaded below its load lines. The Court, however, found the barge was not unseaworthy. Nevertheless, the Court did find that there were errors on the part of the Defendants and apportioned liability 60% to the shippers and 40% to the Defendants. Unfortunately, the particular faults of the Defendants warranting the apportionment are not clear from the judgment.

Deck Carriage – Meaning of “Goods” – Exclusions – Hague-Visby Rules

Timberwest Forest Ltd. v.  Gearbulk Pool Ltd. et al., 2003 BCCA 39, 

This case concerned the meaning of “goods” as defined in the Hague-Visby Rules and deals with the need for clarity and accuracy in descriptions of deck cargo. The Plaintiffs were the shippers and consignees of 1725 packages of lumber carried from Vancouver to Antwerp. The cargo was comprised of two consignments destined to two different consignees and covered by two separate bills of lading. The carrier had the right to stow the entire cargo on deck, however, because there was space available, some cargo was stowed under deck. The carrier made no effort to identify the specific packages loaded on or under deck but merely kept track of the amount of lumber loaded in each location. In total, 86% of the entire shipment was loaded on deck and 14% under deck. Bills of lading were subsequently issued containing a statement that the cargo was stowed 86% on deck and 14% under deck. The deck cargo was damaged at the discharge port. The Defendant sought to avoid liability by relying upon an exclusion clause in the bills of lading for damage to deck cargo. The Plaintiffs argued that the contracts of carriage were governed by the Hague-Visby Rules and that pursuant to Article 8(3) the exclusion clause was null and void. Specifically, the Plaintiffs argued that the 86% - 14% description of the stowage was neither a sufficient description of the deck cargo nor accurate in respect of the individual bills of lading. Both at trial and on appeal the courts agreed with the Plaintiffs. The Court of Appeal agreed with the motions Judge that the stowage notations on the bills of lading were unreliable with respect to the individual consignments. The Court of Appeal also agreed with the motions Judge that, because the specific packages carried on deck were not identified, it was impossible to determine the values of the cargo on deck. The Court of Appeal held that the uncertainty in the description of the deck cargo was analogous to an absence of information concerning deck carriage. In result, Court of Appeal held the carriage was governed by the Hague-Visby Rules and the exclusion clause was inapplicable.

Burden of Proof - Apparent Good Order - Hidden Damage

American Risk Management Inc.  v.  APL Co. Pte. Ltd., 2002 FCT 1023, 

This was an action for damage to a cargo of 52 rolls of fabric carried by land, sea and rail from Pakistan to Toronto, Ontario. The cargo was initially received at its destination without any notations as to damage. However, a few days later it was discovered that the rolls were damaged by mould and stains. The Plaintiff argued that the carrier was prima facie liable having received the cargo in good order and condition and delivered it in a damaged condition. The court held, however, that the damage was hidden and that under these circumstances the Plaintiff was required to prove delivery in good order and condition by means other than the bill of lading. The court further noted that the absence of evidence of damage to other cargoes carried in the containers buttressed the Defendant’s contention that nothing out of the ordinary transpired during the carriage.

Freight Forwarder - Failure to Ship

Vandenburg v. Randy Houston International, [2002] O.J. No. 485, 

The Plaintiff hired the Defendant to ship her goods from Toronto to Nigeria. Based on representations made by the Defendant, she understood that it was experienced in the shipment of such goods. The Plaintiff travelled to Nigeria but her goods never arrived. She claimed against the Defendant for the return of the freight she had paid and for her expenses. The Defendant counterclaimed for the costs of storing the Plaintiff’s goods. The court held that the contract had been frustrated by the failure of the Defendant to ship the Plaintiff’s goods, a failure which the court found was due to the lack of expertise of the Defendant. Accordingly, the court awarded the Plaintiff damages of $10,000 (the maximum amount allowed within that court’s jurisdiction). With respect to the counterclaim, the court awarded damages for storage in the amount of $2,000.00. (Editor’s note: Unfortunately the Reasons do not indicate why the counterclaim was allowed in this amount or at all.)

Hague Visby Rules - Burden of Proof - Water Damage

Nova Steel Ltd. et al. v. The “Kapitonas Gudin”, 2002 FCT 100, 

These cases were for damage to rolled coils carried from Latvia to Montreal. The coils were “pitted”, allegedly by sea water. The Defendants denied liability arguing the damage was caused by the excepted perils of peril of the sea (condensation), act or omission of the shipper (defective packaging) or inherent defect (mill defects in the coils). After reviewing the evidence, the Trial Judge considered whether the Plaintiffs had satisfied their initial burden of proving tender of the cargo in good condition and held that the Plaintiff had not met this burden. In so holding, the Judge noted that the bill of lading was claused “partly rust stained wet before shipment”. Further, there was no evidence of how the cargo was stored before shipment or how it was conveyed to the loading port. The fact that the Plaintiffs had not proven tender of the cargo in good condition did not, however, end the matter. The Judge held the Plaintiffs could still establish liability by showing by a preponderance of evidence that the Defendants were the proximate cause of the damage. The Judge held that the Plaintiffs had met this burden through “overwhelming” evidence that the coils were damaged by exposure to sea salt during the voyage. The Judge found that the Defendant ship was unseaworthy in that it was not watertight and had allowed sea water to enter the holds during the voyage. On the issue of damages, the Defendants challenged the allowances that had been established and agreed between the Plaintiffs and their insurers. The Judge held that these allowances were supported by evidence and represented the loss actually suffered by the Plaintiffs.

Freight - Set-off - Hague-Visby Rules - Limitation/Prescription - Exculpatory Clauses

Mediterranean Shipping company S.A. v. Sipco Inc., 2001 FCT 1046, 

The Plaintiff in this action claimed against the Defendant for ocean freight owing in respect of the carriage by sea of nine containers from Toronto to the Persian Gulf. The Defendant admitted non-payment of freight but alleged that it was entitled to a set-off and brought a counterclaim alleging breaches of the contract by the Plaintiff. Specifically, the Defendant alleged that seven of the containers were shipped together, that six of those seven containers arrived on time at the port of discharge, that the seventh container did not arrive until months after its scheduled arrival, and that as a consequence the clearance through customs of all of the containers was delayed. The issues in the case were the entitlement to set-off and whether the Plaintiff had been negligent in its handling of the containers. On the first issue the Trial Judge reviewed the Anglo-Canadian authorities and concluded that there could be no right of set-off against freight under a contract for the carriage of goods by sea unless the contract specifically provided otherwise. As the contract did not provide otherwise, there was no right of set-off. The Trial Judge next turned to the counterclaim. The first defence raised against the counter-claim was that the claim had not been brought within the one year time period fixed by the Hague-Visby Rules. The success of this argument depended upon whether the prescription period set by the Rules ran from the date of discharge or the date of actual or constructive delivery to the consignee. The Trial Judge held that the prescription period runs from delivery not discharge and that any clauses in a bill of lading declaring delivery takes place at discharge are null and void. The Trial Judge further held that delivery takes place on the day the last piece of cargo is delivered, the seventh container in the case at bar. Accordingly, the Judge held the counterclaim had been commenced within time. The Judge next considered various defences raised by the clauses in the bill of lading, namely: a scope of voyage clause which gave the carrier complete discretion as to the ports at which to call; a period of responsibility clause which provided the carrier was not liable for damages occurring in the period before loading or after discharge; and a clause providing that there could be no claims for failure of the carrier to meet arrival or departure dates. The Judge held that these various clauses were contrary to the Hague-Visby Rules and therefore null and void pursuant art. 3 r. 8 of the Rules. The Judge next considered the damages suffered as a consequence of the breach of contract by the Plaintiff but found that the Defendant had failed to prove any damages. In result, therefore, the claim for freight was allowed and the counterclaim was dismissed.

Hague-Visby Limitations - Turkish Law

Barzelex  v. The "EBN Al Waleed", 2001 FCA 111, 

This was an appeal from the Federal Court Trial Division. The bill of lading contained a general paramount clause incorporating the Hague Rules as enacted in the country of shipment. The country of shipment was Turkey. However, Turkey had enacted the Hague Rules twice into its legislation. Initially, the Rules were enacted through ratification of the convention. This enactment gave a limitation of 100 pounds sterling gold value (approximately $12,500) per package or unit. Later the Rules were enacted as part of Turkey's Commercial Code. This enactment, as amended, gave a limitation of 100,000 Turkish Lire (approximately $2.31) per package or unit. At issue in the case was which of these limitations applied. The Plaintiff argued and led expert evidence that the enactment in the Commercial Code applied only to internal shipments. The Trial Judge found as a fact however that under Turkish law the Commercial Code applied to international shipments as well as internal shipments. The Plaintiff then argued that a $2.31 limitation per package or unit was unconscionable and should not be enforced. The Trial Judge held that it was the result of a contractual provision which the Plaintiff could have avoided by declaring a value for the goods. The Plaintiff appealed. The Federal Court of Appeal dismissed the appeal saying they were not satisfied the Trial Judge had erred and that on the evidence before him it was open to him to make the findings he did.

Standing to Sue - Collisions - Insurance - Subrogation

Porto Seguro Companhia De Seguros Gerais v. The “Federal Danube” et al.,  2001 CanLII 22115 (FC), 

This was the re-trial of an action that had been previously dismissed by the Federal Court Trial Division in a judgment reported at [1995] 82 F.T.R. 127. That judgment was ultimately overturned by the Supreme Court of Canada and a new trial ordered on the grounds that the Trial Judge erred in refusing to hear three expert witnesses because assessors had been appointed by the court (see [1997] 3 S.C.R. 1278).

The Plaintiff was the cargo underwriter who had indemnified the cargo owners for damages suffered as a result of a collision in the St. Lawrence Seaway between the “Beograd” and the “Federal Danube”. The Plaintiff argued that the “Federal Danube” was wholly at fault for the collision and liable for the damage to the cargo in the principal amount of $4.4 million. There were two issues in the case; the standing of the Plaintiff to bring the action in its own name and the liability for the collision. On the first issue, the Defendant argued that under Canadian maritime law the Plaintiff ought to have commenced the action in the name of the cargo owners. The Court, however, held that the matter was governed either by the law of Brazil (where the insurance contract was made) or the law of Quebec and that in either case the insurers became subrogated to the rights of their insured upon payment and were entitled to bring the action in their own name. With respect to the second issue, the liability for the collision, the Court held that the “Beograd” was wholly at fault for the collision. The faults found against the “Beograd” included: navigating through the anchorage area rather than in the navigation channel; navigating at an unsafe speed; and, failing to keep out of the way of an anchored vessel. In reaching the conclusion that the “Beograd” was wholly at fault the Court noted that where a vessel underway strikes a vessel at anchor the underway vessel is prima facie at fault unless it is proven the accident could not have been avoided by the exercise of ordinary skill. In the result, the Plaintiff’s action was dismissed.

Summary Judgment - Misdelivery

Kanematsu GMBH v.  Acadia Shipbrokers Limited et al., 2000 CanLII 15572, 

This was an appeal from a motion in which the Plaintiff was granted summary judgment against the Defendant charterers for having induced the ship owner to deliver up the cargo to a third party without proper presentation of the bill of lading. The Defendants argued that the case was not appropriate for summary judgment as the facts were too complex. The motions judge, however, held that the fundamental issue was whether the cargo had been delivered without the surrender of the original bill of lading. As this was admitted, summary judgment was granted. On appeal, the Federal Court of Appeal set aside the order for summary judgment. The Court of Appeal held that the Defendants were not the ship owner and therefore were not prima facie liable for delivery of the cargo without proper presentation of the bill of lading. The case against the Defendants was for inducing breach of contract by the shipowner. This required proof that: (1) the Defendants knew there was a contract; (2) they induced its breach; and, (3) damages were suffered as a consequence. The Court of Appeal held that there was a real doubt whether the Defendants had knowledge of a contract between the Plaintiff, as holder of the bill of lading, and the shipowner. Further, the Court of Appeal thought there was doubt about whether the Defendants intended to induce a breach of the contract. These were serious factual issues which required a trial on the merits.

Claim for Freight - Set-off - Jurisdiction - Warehousing

Pantainer Ltd. v.  996660 Ontario Ltd., 2000 CanLII 15080 , 

This was a claim for freight charges owing. The Defendant alleged that it was entitled to a set-off for damage caused to cargo carried by the Defendant. The Court held the general rule was that freight is to be paid without deduction and that the Defendant accordingly had no right of set-off.

One of the issues in this case was whether the Defendant’s counterclaim against the Plaintiff for damage caused to cargo in a warehouse after the carriage by sea was within the jurisdiction of the Federal Court as coming under maritime law. The Court held that claims for warehousing and storage that arose out of contracts of the carriage of goods by sea are within the jurisdiction of the Court.

Costs of Discharge and Re-stowage

Canadian Forest Products Inc. v. Termar Navigation Co. Inc., 1997 CanLII 6323,  2000 CanLII 15054

This was an appeal from a judgment of the Trial Division reported at [1998] 2 F.C. 328. The claim was by the carrier to recover the costs of discharging and re-stowing the Plaintiff's cargo after it shifted when the vessel encountered a large wave in rough seas. The Trial Judge held that the Plaintiff was not obliged to pay the discharge and re-stowing costs either under the terms of the bill of lading or on the basis of bailment, agency of necessity, quantum meruit or unjust enrichment. On appeal, the Court of Appeal merely indicated that they were in substantial agreement with the reasons of the Trial Judge and dismissed the appeal.

Breach of Transportation Agreement

Transport Navimex Canada Inc. v. Canada, 2000 CanLII 14979, 

In this matter the Defendant, Transport Canada, had invited the submission of bids to transport cargo to Greenland. The Plaintiff submitted a bid to carry the cargo on the "Glencoe" which was accepted by the Defendant. After acceptance, the Defendant increased the amount of cargo it
wished to transport and purported to terminate the agreement with the Plaintiff on the grounds that the "Glencoe" did not have the capacity to carry the increased cargo. The Plaintiff took the position throughout that the "Glencoe" was capable of carrying the increased cargo and brought this action for breach of contract claiming the costs of chartering the "Glencoe", expenses and lost profits. At trial, the Trial Judge held: (1) that the "Glencoe" was not capable of carrying the increased cargo; (2) that the Defendant had unlawfully and without justification terminated the contract with the Plaintiff; but (3) that the Plaintiff had not suffered any damages. The Plaintiff appealed the first and third findings. On appeal, the Federal Court of Appeal held that the first finding was one of fact based on the Trial Judge’s assessment of expert evidence and that the judge made no "palpable and overriding" or "specific and identifiable" error. Accordingly, this finding was affirmed. However, the third finding that the Plaintiff had suffered no damages was reversed. This finding was based on the fact that the Plaintiff had not personally chartered the "Glencoe". The Court of Appeal held that as the Defendant never questioned the fact that the Plaintiff had chartered the "Glencoe" the Plaintiff did not have a duty to prove this fact. Further, and in any event, the Court of Appeal held that the evidence established that the Plaintiff had chartered the "Glencoe", albeit through a related corporation. As a result, the Court of Appeal held that the Plaintiff was entitled to damages for the chartering of the "Glencoe" and for the lost profit calculated on the basis of the cargo the "Glencoe" could have carried.

Freight Charges

Morlines Maritime Agency Ltd. v.  IKO Industries Ltd., 1999 CanLII 9196 , 

The issue in this case was whether the shipper was liable for the ocean carrier's freight charges when it had already paid the freight forwarder who went bankrupt without paying the carrier. The court relied upon the decision in C.P. Ships v Les Industries Lyons Corduroys Lte., [1983] 1 F.C. 736, where it was held that the debtor/shipper must pay the creditor/carrier his freight charges unless the shipper establishes either:

1. that the carrier authorized the third party/forwarder to receive the money on his behalf, or,

2. that the carrier held the third party/forwarder out as being so authorized, or

3. that the carrier by his conduct or otherwise induced the shipper to come to that conclusion, or

4. that a custom of the trade exists to the effect that both carrier and shipper would expect payment to be made to the third party/forwarder.

The court held that the third and fourth branches of this test had been met. The court relied upon the fact that the carrier never dealt directly with the shipper and never advised the shipper that it expected payment from them. Even after the forwarder began to have financial difficulties the carrier never contacted the shipper. This was conduct, the court held, that induced the shipper to believe that the forwarder was authorized to receive payments on behalf of the carrier. With respect to the fourth branch of the test, the court was satisfied that both the carrier and shipper expected the shipper to make payment to the forwarder and the forwarder to make payment to the carrier.

Liability of Terminal Operator - Limitation Clause - Himalaya Clause

Braber Equipment Ltd. v. Fraser Surrey Docks Ltd., 1999 BCCA 579 , 

This case involved damage to a container of equipment admittedly caused by the negligence of the terminal operator. The terminal operator sought to limit its liability to $100.00 per package pursuant to a limitation clause contained in its tariff. The Court found, however, that the Plaintiff had no knowledge of the tariff and was not bound by it. The Plaintiff's freight forwarder was aware of the tariff but as the decision to unload the container at the Defendant's terminal was made by the carrier and not the freight forwarder this did not assist the Defendant. The terminal operator further sought to rely upon the Himalaya clause in the carrier's bill of lading. The Court noted that the appropriate test to be met is the four point test enunciated in Scruttons Ltd. v Midland Silicones Ltd., [1962] A.C. 446 (i.e.. 1. that the bill of lading makes it clear that the stevedore is intended to be protected; 2. that the bill of lading makes it clear the carrier is contracting as agent for the stevedore; 3. that the carrier has authority from the stevedore to do that; and, 4. that any difficulties about consideration are overcome). The Court held that the terminal had failed to satisfy the third requirement. In obiter, the Court noted that if the Defendant was entitled to rely upon the Himalaya clause in the bill of lading there would be two inconsistent limitation provisions; the per package limitation under the bill of lading of 666.67 SDR per package and the $100 per package limitation under the Defendant's tariff. Following the decision in Meeker Log and Timber v The "Sea Imp VIII" (1996) 21 B.C.L.R. (3d) 101, the Court noted that two inconsistent exclusion/limitation clauses rendered both clauses null and void. On appeal, the terminal sought to re-argue the case on the basis of sub-bailment principles. The Court of Appeal declined to allow it to do so on the grounds that the record was not sufficient and there would be prejudice to the plaintiff. In result, the appeal was dismissed.

Carriage By Sea - Burden of Proof - Identity of Carrier

Voest-Alpine Stahl Linz GmbH v.  The "Federal St. Clair" et al., 1999 CanLII 8635 (FC), 

This was an action for damage to 35 steel coils. The coils were manufactured in Austria and carried by barge to Antwerp where they were loaded on board the Defendant vessel and carried to Montreal. A pre-loading survey at Antwerp noted some minor rusting to the coils. The cargo was not surveyed at Montreal. It was carried from Montreal to the consignee's premises where it was put in storage. Approximately two months later, when the coils were unrolled for use, they were discovered to be in a rusted condition. They were then surveyed and the surveyor concluded that the damage was attributable to contact with water in the vessel's holds (although only one of five samples indicated salt water contamination). The Defendants argued that the Plaintiff had failed to prove the damage occurred while the cargo was in its possession. The court, however, held that the Plaintiff had proven on the balance of probabilities that the damage occurred during the voyage from Antwerp to Montreal. The court further held that the burden was therefore on the Defendants to show the damage was caused by an excepted peril and that they had exercised due diligence to make the vessel seaworthy. The Defendants failed to discharge this burden. A secondary issue in the case was whether the time charterer of the vessel was liable together with the vessel's owner. On this issue the court held that the usual role of the time charterer is to find space on a vessel. Once it has booked the space the carrier or the owner issues the bill of lading which becomes the contract of carriage. The court found no specific undertaking by the time charterer to carry the goods and therefore the case against it was dismissed.

Deck Cargo Exclusion Clauses

Canadian Pacific Forest Products Limited et al. v. The "Beltimber" et al.,  [1999] 4 FC 320, 

This was an appeal from a decision of the Trial Division. The case involved the loss of a part cargo of lumber carried on deck from Canada to Europe. The bills of lading were claused "on deck at shipper's risk" and clause 8 of the bill of lading was a "liberty" clause which specifically allowed the carrier to stow goods on deck. It provided that: "Goods stowed on deck shall be at all times and in every respect at the risk of the shipper/consignees. The carrier shall in no circumstances whatsoever be under any liability for loss of or damage to deck cargo, howsoever the same may be caused...". The Plaintiff argued, inter alia, that this clause did not protect the carrier as it did not include an express reference to negligence. The trial judge agreed with the Plaintiff and further noted that the express references to negligence in the "Both to Blame" and "Transshipment" clauses of the bill of lading implied negligence was not excluded in clause 8. On appeal, the Federal Court of Appeal agreed with the Trial Judge that negligence was not excluded. The Federal Court of Appeal held that the liability of a carrier of goods by sea is not confined to acts of negligence. Such a carrier is liable for failing to deliver the goods safely and for breach of the implied warranty of seaworthiness as well as for negligence. Because of the existence of these other heads of liability, the failure to include an express reference to negligence in the exclusion clause was fatal. The Federal Court of Appeal expressly distinguished the case of Mackay v Scott Packing and Warehousing Co., [1996] 2 F.C. 36 (C.A.) in which a similarly worded clause was held sufficient to exclude liability for negligence. In doing so, the court noted that the Defendants in the Mackay case were freight forwarders who did not have the common law liabilities of a carrier by sea.

Suit Time Extensions

Riva Stahl GmbH v. The "Bergen Sea" et al., 1999 CanLII 8093, 

This was an appeal from a decision of the Trial Division in which an application for summary judgment by the Defendants based on a time limitation defence was allowed. The case illustrates the dangers to Plaintiffs of suit time extensions. The Plaintiffs in the case obtained a suit time extension from the shipowner to June 13, 1995. This extension was conditional on the Plaintiffs obtaining a similar extension from charterers. The Plaintiffs did obtain a suit time extension from charterers but it was to a date of June 30, 1995. This extension was also conditional on the Plaintiffs obtaining a similar extension from owners. The Plaintiffs were unaware of, or failed to appreciate that, the extensions were not similar in that they expired on different days. The Plaintiffs issued a Statement of Claim on June 28, 1995, two days before the charterer's extension expired but after the owner's extension had expired. Both Defendants brought a summary judgment application to dismiss the action as being out of time. The Trial Division granted the application holding that there was no binding agreement to extend suit time to either June 13, 1995 or June 30, 1995, and further holding that the Defendants had not waived the time bar defence and were not estopped from raising it by reason of their continued negotiations with the Plaintiffs. The Court of Appeal agreed with the Trial Judge that there were no effective time extensions in place when the action was commenced and that there was no waiver or estoppel.

Fraudulent Misrepresentation - Conversion

Westwood Shipping Lines v.  Geo International Inc. et al., 1999 CanLII 7652 , 

This was an action for fraudulent misrepresentation against the General Manager of the corporate Defendant. The corporate Defendant was the "Notify Party" on order bills of lading. The corporate Defendant obtained delivery of the cargo from the Plaintiff without surrendering the original endorsed bills of lading and without paying the purchase price to the shipper/vendor. In an earlier summary judgment motion ( Reasons dated June 24, 1998) the Plaintiff obtained judgment against the corporate Defendant and its President for conversion. The Plaintiff now sought judgment against the General Manager. The evidence established that the General Manager convinced the Plaintiff to release the goods by advising they were urgently needed and by representing that the original bills of lading would be forwarded when received. The Plaintiff argued that the General Manager knew the bills of lading would never be forwarded or was wilfully blind. The court, however, was not convinced that the General Manager had acted fraudulently. The court noted that, at the time, the corporate Defendant was a going concern and was receiving fifty to sixty containers per year. The court found it difficult to believe that the General Manager knew the goods would not be paid for. In result, the action was dismissed.

Himalaya Clause

Kodak  v. Racine Terminal (Montreal) Ltd., 1999 CanLII 7750, 

This was an application for summary judgment by a cargo owner for damage to a shipment of paper. The cargo was damaged by the crane operator of the Defendant terminal during unloading. The only issue in the case was whether the terminal could rely upon a Himalaya clause contained in the bill of lading. Although there was no written contract between the terminal and the ocean carrier authorizing the ocean carrier to insert a Himalaya clause, the terminal sought to rely upon a contract with the predecessor of the current carrier, whose business the current carrier had acquired. This contract, however, contained a clause prohibiting assignment unless consented to in writing. Express written consent was never obtained. The court held that failure to obtain the prior written consent was fatal. The court further held that the clause requiring written consent was fatal to the Defendant's alternate argument that there had been a novation of the contract. In result, the terminal was not entitled to rely upon the Himalaya clause.

Damages - Limitation - Interest - Costs

MacKay  v. Scott Packing & Warehousing Co., 1999 CanLII 7401, 

This was a reference to determine the damages of the Plaintiff based upon a limitation of liability clause contained in the contract of carriage. The limitation clause limited the defendant's liability to 10 pounds sterling per cubic foot of the cubic capacity of the item lost or damaged or, at the Defendant's option, to the cost of repair or replacement. The Plaintiff argued that as the Defendant did not measure the cubic capacity of the articles upon shipment that it should not be entitled to limit its liability. The court disagreed. The Defendant sought to have its liability in respect of some items limited by the repair or replacement option. The court, however, held that the Defendant had not exercised the repair or replacement option and was therefore not entitled to limit its liability on this basis. The court awarded the Plaintiff pre-judgment interest compounded semi-annually. With respect to costs, the court awarded the Plaintiff its costs up to the time of the Defendant's settlement offer. Thereafter, the Defendant was awarded costs.

Mis-delivery - Conversion

Westwood Shipping Lines  v. Geo International Inc., 1998 CanLII 7984 , 

This was an application for summary judgement by the Plaintiff carrier against the Defendant for conversion. The Defendant was the "Notify Party" on order bills of lading. The Defendant obtained delivery of the cargo without surrendering the original endorsed bills of lading and without paying the purchase price to the shipper/vendor. The Plaintiff maintained that the cargo was delivered only after the Defendant fraudulently misrepresented that the original bills of lading had been surrendered by the shipper. The Defendant denied any such representation had been made. The Court found it unnecessary to determine whether a fraudulent misrepresentation had been made. The Court held that the Defendant's actions in taking the goods without having paid for them amounted to conversion.

Stay of Proceedings - Jurisdiction Clauses - Carriage of Goods - Identity of Carrier

Jian Sheng Co. Ltd. v. Great Tempo S.A., 1998 CanLII 9059 (FCA), 

This is an important case on the issue of the identity of the carrier under a bill of lading although the case arose in the context of a motion for a stay of proceedings under a jurisdiction clause. The Federal Court of Appeal held that where the bill of lading is signed for or on behalf of the Master it is a shipowner's bill and the shipowner is prima facie the carrier. The Court expressly rejected the notion that both the charterer and owner could be a carrier. See the full summary on the Arbitration/Jurisdiction Clauses page.

Summary Trial- Liability of Freight Forwarder

Canusa Systems Ltd. v. The "Canmar Ambassador",  1998 CanLII 7449 , 

This was a motion by the Plaintiff for summary judgment against the Defendant freight forwarder for damage caused to a cargo of heat shrunk tubing. The Defendant admitted that it had arranged the shipment of the goods and that the goods were damaged but argued that as freight forwarder it was not responsible for the damage. However, it had issued a "Combined Transport Bill of Lading" which provided it "shall be liable for loss of or damage to the goods occurring between the time when he takes the goods into his charge and the time of delivery". The "Combined Transport Bill of Lading" further provided for exceptions from this liability but the onus of proving such exceptions was on the freight forwarder. The forwarder had not proven any such exceptions. The Court granted summary judgment with a reference to determine the damages.

Liability of Forwarding Agents

Brereton  v. KLC Freight Services Ltd., No. 485/95 (Ont. Ct. Gen. Div.), 

This was an appeal of a judgement rendered by the Ontario Small Claims Court. The action involved a shipment of personal effects from Toronto to Trinidad. Sixteen pieces were delivered by the Plaintiff to the Defendant for carriage but only fifteen pieces were ultimately delivered. The contract between the Plaintiff and Defendant specified that the Defendant was not a carrier but was only a forwarding agent responsible for the selection of third party carriers. At trial, the Small Claims Court held that the Defendant was liable for the non-delivery on the basis of res ipsa loquitor. On appeal, the Ontario Court General Division held that the Defendant was not a carrier but was merely a forwarding agent and, as such, was not liable absent proof of negligence. As there was no evidence of negligence on the part of the Defendant, the appeal was allowed and the action dismissed.

Recovery of Freight

American President Lines Ltd. v.  Pannill Veneer Co. Ltd., 1997 CanLII 5500, 

This was an action by an ocean carrier to recover freight charges. The Defendant shipper had retained a freight forwarder who made the carriage arrangements with the Plaintiff. The Plaintiff invoiced the freight forwarder who in turn invoiced the Defendant. The Defendant paid the freight forwarder but the forwarder became insolvent and did not pay the Plaintiff. The Court held that it was never intended that the Defendant would pay the Plaintiff and accordingly dismissed the action.

Proper Parties - Identity of Carrier - Proof of Damages

Union Carbide Corporation v.  Fednav Limited, 1997 CanLII 6062, 

This was a claim for damage to a cargo of synthetic resin shipped from Montreal to Bangkok and Manila on board the ship "Hudson Bay". The Plaintiffs were the shipper of the cargo and the consignees. The consignees purchased the cargo on cif Bangkok and cif Manila terms. The "Hudson Bay" was under time charter pursuant to a New York Produce Exchange Form time charter agreement. The bills of lading were signed by the charterer "by authority of master as agents only". The issues in the case were: whether the shipper was a proper Plaintiff, whether the charterer was liable in contract as a "carrier", whether the charterer was liable in tort for negligent stowage, and whether the Plaintiffs had properly proven their damages. On the first issue the Court held that the shipper was not a proper Plaintiff. The Court held that under the cif terms the risk of loss passed to the buyer upon shipment and further that pursuant to the Bills of Lading Act all rights of action in respect of the cargo were vested in the consignees. The Court also held that the rule in Dunlop v Lambert (1939) 7 ER 824, (which allows the shipper to recover substantial damages as trustee for the true owner of the goods) had no application because the claims were covered by the Bills of Lading Act.

On the second issue, the Court held that there could be only one carrier and, where the bills of lading are signed for or on behalf of the Master, that the carrier is the shipowner unless there is an express undertaking on the part of the charterer to carry the goods. The Court found that there was no such express undertaking notwithstanding that the charterer had described itself as the carrier in the booking note. In reaching this conclusion the Court refused to follow Canastrand Industries Ltd. v. The "Lara S", [1993] 2 FC 553, (affirmed by the Court of Appeal 176 N.R. 31), wherein Madame Justice Reed held that both shipowner and charterer should be jointly liable.

The Plaintiffs further argued that the charterer was liable in tort for negligently stowing the pallets more than three tiers in height. The Court found that the charterer was not aware of any restrictions in the height to which the pallets could be stowed and that it was not obvious they should be restricted to three levels. The Court further held that the charterer could not be liable for the negligence of the stevedores.

Finally, on the question of quantum, the Court held that evidence of the settlement of the Plaintiffs' cargo insurance claim was neither relevant to the question of, nor admissible to prove, the Plaintiffs' damages. The Court held that the Plaintiffs must testify as to the actual losses suffered by them and that it was not sufficient to simply rely on generic evidence of arrived sound market value and arrived damaged market value.

Excessive Freight Charges

Me Thierry Van Dooselaere  v.  Unispeed Group Inc. and SGS Supervision Services, 1997 CanLII 4764, 

This was an action by the Plaintiff shipper against the carrier and surveyors for excessive freight charges. The Plaintiff negotiated a freight rate for 1486 metric tonnes of creosoted poles. During the course of loading the poles it was discovered that the cargo occupied more space than anticipated and the carrier demanded additional freight which the Plaintiff was forced to pay. The Plaintiff subsequently retained a surveyor to measure the cargo. The surveyor did so and the Plaintiff paid on the basis of the survey. Upon delivery the cargo was again surveyed by two independent surveys both of whom agreed that the original survey significantly overstated the amount of cargo. The Court held that the carrier and the surveyor were jointly and severally liable for the excessive freight charges the Plaintiff was forced to pay.

Liability of Terminal Operator

Bethlehem Resources Corporation v. Vancouver Wharves, 1997 CanLII 539 , 

This was a motion for summary judgment brought by the Plaintiff against the Defendant, a terminal operator, for shortages to ore concentrate shipped through the Defendant's facility. The relationship between the parties was governed by an agreement which specifically provided that the terminal would only be liable for "proven negligence". The Court held that normal shrinkage might have accounted for the shortages and further held that the Plaintiff had not proven an act of negligence to support the claim.

Breach of Booking Note

Alcan Aluminum Ltd. v. Unican International S.A. et.al., (June 17, 1996) No. T-1217-90 (F.C.T.D.) , 

In this matter the Plaintiff claimed damages against the owner and time charterer of the "CarryBulk" for breach of a booking note contract. Due to engine problems the vessel did not have sufficient power to make its way through the ice to the agreed port of loading and the time charterer ordered the ship to another port where it loaded other cargo. The Plaintiff then made alternate, and very costly, arrangements to have other vessels carry its cargo. The time charterer also claimed damages from the Plaintiff arguing that it was the Plaintiff that breached the booking note contract by shipping its cargo on these other vessels. The Court held that the time charterer and not the Plaintiff was in breach of the booking note contract. The Court found the conduct of the time charterer was anticipatory breach and the Plaintiff was justified in making alternate arrangements to ship the cargo. The time charterer argued, in the alternative, that the substitution clause gave it a defence to the Plaintiff's claim but the Court held the substitution clause could offer no defence where the named vessel had already begun to perform under the agreement. The time charterer was therefore held liable. The owner, however, was not found liable as the Court held the booking note was signed by the charterer on its own behalf and not as agent on behalf of the owner. Although successful on the issue of liability, the Plaintiff was not completely successful on the matter of damages. Most of the damages claimed were disallowed on the basis that time was not of the essence and the Plaintiff could have waited and chartered another ship at a later date at a much more reasonable price. The Plaintiff's claim for compound interest was also disallowed. The trial Judge held that compound interest should only be awarded where the Plaintiff demonstrates that his or her loss cannot be fairly compensated without an award of compound interest.

Interest and Costs

Alcan Aluminum Ltd. v. Unican International S.A., (September 25, 1996) No. T-1217-90 (F.C.T.D.), 

In this matter the Plaintiff had been awarded damages against the Defendant ship owner for breach of a time charter. The parties could, however, not agree on issues of interest and costs and the case was referred back to the Court . The Court held that the Plaintiff was only entitled to pre-judgment interest at the legal rate of 5%. The Plaintiff was not entitled to pre-judgment interest at the prevailing commercial rates since it led no evidence on the point. The Plaintiff was, however, allowed to rely on Provincial legislation with respect to post-judgment interest and, pursuant to the applicable Provincial legislation, the Plaintiff obtained more than the legal rate. On the question of costs, the Defendant argued that two offers to settle it made should be taken into account in its favour. The Court, however, agreed with the Plaintiff that the offers could not be taken into account because the first was not a firm offer of settlement but only an offer by counsel to "recommend" a settlement and, the second was conditional.

Onus of Proof - Clean Bills of Lading

Wirth Limited et.al. v.  The "Federal Danube", No.T-1701-90, 

This case concerned damage to a cargo of steel rails carried from Antwerp to Montreal. The carrier acknowledged receipt of the cargo at Antwerp in apparent good order and condition except for some slight rusting. Upon discharge at Montreal the cargo was noted as being in substantially the same condition except one rail was damaged. The cargo was then carried by Rail to Winnipeg. Upon delivery to the consignee at Winnipeg it was noted that approximately 10% of the rails had been damaged by scratches to their base. The scratches were slightly rusted by salt water mist indicating the damage occurred prior to arrival at Montreal. The Plaintiff argued that the carrier was liable as having received the cargo in good order and condition and delivered it in bad condition. The Court, however, stated that the clean bills of lading were not a statement that the cargo was in perfect condition when it arrived at Antwerp. The clean bills of lading meant only that upon a reasonable and practical examination of the cargo, no damage was visible. The Court noted that, except for one rail, the cargo was delivered at Montreal in the same condition as received at Antwerp, i.e.. with no visible damage. It was therefore held that the carrier was only liable for damage to one rail.

Limitation Clause - Interpretation

Mackay  v.  Scott Packing and Warehousing Co., [1996] 2 FC 36, 

The Plaintiff in this case had entered into a contract with the Defendant moving company for the carriage of his personal possessions to England. A large number of articles became lost or damaged during transit. The Defendant accepted liability but argued that it was entitled to rely upon a limitation clause in its contract with the Plaintiff. The Plaintiff argued the limitation clause did not extend to cover the negligence of the Defendant and, in any event, it would be unconscionable or unreasonable to allow the Defendant to rely on the clause. Both the Trial Judge and the Court of Appeal rejected the Plaintiff's argument. The clause in question limited the Defendant's liability for any loss or damage " howsoever caused" . The Court of Appeal held that the phrase " howsoever caused" was wide enough to encompass negligence. The Court of Appeal further held that there was no unconscionability or inequality of bargaining power and it would not be unreasonable to enforce the clause.

Liability of Freight Forwarder

Bertex Fashions Inc. v. Cargonaut Canada Inc., No. T-651-93, (F.C.T.D.), 

The issue in this case was the liability of a freight forwarder for damage to cargo shipped under a through bill of lading issued by the forwarder. The forwarder argued that it acted only as agent for the Plaintiff and was therefore not liable. The Court held, however, that the forwarder was liable as a carrier. The factors leading to this conclusion were the forwarder undertook to carry the goods, the forwarder charged the Plaintiff a lump sum as freight not as commission, and the Plaintiff was totally uninformed and unaware of the identity of the actual carriers.