Carriage of Goods by Sea
Commentaries are intended as an introduction or overview of the topic. The commentaries for some topics are more detailed than others but none of them should be taken as a complete and full recitation of the law applicable to the topic.
Carriage of Goods by Sea
Part 5 of the Marine Liability Act (formerly the Carriage of Goods by Water Act) governs the carriage of goods by sea to or from Canada and within Canada. The Act implements the Hague-Visby Rules and provides for the possible future implementation of the Hamburg Rules. Pursuant to the Hague-Visby Rules the carrier of the cargo is liable for any loss of or damage to the cargo unless the loss or damage is caused by an excepted peril. The carrier is, however, entitled to limit liability to the greater of 666.67 SDRs per package (approximately C$1,200) or 2 SDRs per kilogram (approximately C$3.60). The time limit for bringing a suit against the carrier is one year from the date of discharge of the goods.
For an overview of Canadian Law of Carriage of Goods by Sea see the paper Canadian Law of Carriage of Goods by Sea: An Overview
For a list of the cargo regimes in force in various countries see A SURVEY OF THE CARGO BY SEA CONVENTIONS, prepared by George F. Chandler III of Hill, Rivkins & Hayden, Houston, Texas.
Statutes and Conventions
The database contains 72 case summaries relating to Carriage of Goods by Sea. The summaries are sorted in reverse date order with 20 summaries per page. If there are more than 20 summaries, use the navigation links at the bottom of the page.
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Cargo - Multimodal - Leg - Ocean - Terminal - Germany
Iamgold Corporation v. Hapag-Lloyd Ag, 2019 FC 1514
Précis: The Federal Court found that a loss of cargo on the road leg of the carriage was subject to the limitation of liability applicable to road carriage under German law.
Summary not yet available.
Freight Forwarder - Cargo - Carriage - Terms - Shipments - Himalaya Clause
Labrador-Island Link General Partner Corporation v. Panalpina Inc., 2019 FC 740
Précis: The Federal Court dismissed claims against a freight forwarder and preforming transporters on the basis the action was time barred and covered by a Himalaya clause.
Facts: This was a motion by the defendants for summary judgment to dismiss the action on the basis it was time barred. The underlying action arose from damage to two cargo shipments of aluminum conductor reels (collectively, the “Cargo”). The plaintiffs retained the defendant Panalpina to provide, inter alia, freight forwarding services for an electrical transmission project under a Freight Forwarding Service Agreement (“FFSA”) in which the plaintiffs would provide specifics of cargos and make a Request for Quotation (“RFQ”) for Panalpina to obtain quotes from carriers for the shipment of same. If the quote was accepted, the plaintiffs would issue Panalpina a Material Moving Ticket (“MMT”) which confirmed various details about a cargo’s movement. Panalpina contracted the defendant Logistec Stevedoring Inc. for the receipt and storage of the Cargo at its terminal in Trois-Riviers, and also contracted the defendant Desgagnes Transarctik Inc. for the transportation of the Cargo by sea. The Cargo was to be shipped by sea from Quebec to Newfoundland, with the first shipment shipped on 28 May 2015 (the “May Shipment”) and the second on 28 October 2015 (the “October Shipment”). During discharge operations both the May Shipment and October Shipment were found to be damaged, and the Plaintiff put Panalpina on notice of intent to claim for damages to the Cargo on 09 September 2015 and 02 November 2015 respectively. The plaintiff commenced the underlying action for damages on 29 May 2017.
To be decided by the Court was whether Panalpina could invoke the nine-month limitation period prescribed by the Canadian International Freight Forwarders Association Standard Trading Conditions (the “CIFFA Terms”), or in the alternative, whether any of the defendants can rely on the one year time limitation under the Hague Rules as incorporated by reference in the sea waybills issued by the defendant Desgagnes, either on the basis of the Paramount clause in the sea waybill, a sub-bailment, or the Himalaya clause contained in the booking notes between the plaintiffs and Panalpina.
Decision: Motion granted, action dismissed.
Held: The Court rejected the plaintiffs’ arguments that Panalpina never advised it of the CIFFA Terms and that the CIFFA terms contradicted the FFSA terms in that the CIFFA Terms provisioned a shorter limitation period than the provincial laws of Newfoundland and Labrador which were referred to in the FFSA. The Court found that the CIFFA Terms were brought to the attention of the plaintiffs by the explicit reference to those terms in Panalpina’s quotes provided in the document pursuant to the RFQ, and that the plaintiffs would issue MMTs in response approving the terms proposed by Panalpina. On the second argument, the Court found that the CIFFA Terms did not contradict the FFSA terms as on a plain reading of the FFSA the reference to laws of Newfoundland and Labrador and Canada were only to apply to the construction of the FFSA and resolution of any dispute arising in respect of the FFSA itself. The Court held that the Himalaya clause in section 2 of the CIFFA Terms also covered the defendants Desgagnes and Logistecs as that clause extended the benefit of the carrier’s contractual limitations to sub-carriers or other third parties engaged by the carrier to assist in the transportation of goods. The Court further held that, even if it were wrong on the Himalaya clause, the sea waybills had named the plaintiffs and the preforming carrier which had incorporated the Hague Rules to the carriage and thus a one-year time limitation applied.
Bill of Lading - Container Yard to Container Yard - Obligations - Completed
Black & White Merchandising Co. Ltd. v. Deltrans International Shipping Corporation, 2019 FC 379
Précis: The Federal Court lacked jurisdiction to hear a claim subsequent to completion of the obligations under a bill of lading.
Facts: The plaintiff ordered a cargo of children’s shoes and submitted a booking request with the defendant, which in turn contacted various third parties, including Delmar, to organize transportation of the cargo from China to Montreal. Delmar issued a bill of lading that specified Ningbo as the port of loading, Prince Rupert as the port of discharge and Montreal as the place of delivery with an estimated arrival date being 31 January 2017. The terms of the bill of lading specified the type of move as container yard to container yard. The cargo arrived on 5 February 2017 at the container yard in Montreal and was then to be sent to a third-party warehouse. On 6 February 2017 one of the third parties notified Delmar that the container in which the cargo was carried was stolen from that third-party warehouse. Delmar advised the Plaintiff that the container was stolen, and on 22 March 2017 the Plaintiff issued its Statement of Claim, alleging the loss of cargo was a result of the defendant’s breach of the contract of carriage and negligence. On 6 February 2019 the defendant brought this motion to strike the plaintiff’s claim.
Decision: Motion granted; claim struck.
Held: The plaintiff brought this action to Court pursuant to s. 22(2)(f) of the Federal Courts Act. The plaintiff’s affidavit provided that the bill of lading required the cargo to be delivered to the warehouse, and since the cargo was stolen from the warehouse of a third party, the defendant was liable for the loss. The defendant argued that the contractual obligations under the bill of lading ended with it delivered the cargo to the container yard, thus the obligations under the bill of lading were satisfied and complete prior to the theft from the warehouse. In finding that the plaintiff’s Statement of Claim did not assert the bill of lading required the cargo to be delivered to the warehouse, there was no alleged fact supporting the jurisdiction of the Court on the basis of the bill of lading or s. 22(2)(f). Further, the Court found no evidence tendered by the plaintiff as to its assertion that the defendant and Delmar were “one and the same” which would make the defendant liable for the loss. The court found that the transport of the cargo beyond container yard to container yard was not encompassed by the bill of lading and thus would not find jurisdiction under s. 22(2)(f). On that basis, the Court struck the claim without leave to amend.
Foreign Arbitration - Stay of Proceeding - Marine Cargo Insurance - Summary Judgment if Stay Refused
ATS Automation Tooling Systems Inc. v. Chubb Insurance Company of Canada, 2018 ONSC 6139
Précis: The Ontario Superior Court of Justice refused a motion to temporarily stay domestic proceedings where the same dispute was on-going and subject to final arbitral decision in India.
Facts: The plaintiffs ATS and IWK brought a motion to stay proceedings against Chubb Insurance pending an arbitration proceeding in India related to the claim. The claim arose after cargo shipped from Thailand to India by IWK and was found to be irreparably damaged upon arrival at the purchasers’ inland warehouse. The cargo was shipped by sea from Thailand to Chennai, India, and then inland by truck over 2,500km to Baddi, India, where the warehouse was located. The purchaser commenced arbitration in India for the damaged cargo stating that under the purchase and sale documents IWK was responsible for the cargo until it was delivered at the warehouse. ATS made a claim on the insurance policy and Chubb denied the claim on the basis that the damage occurred during inland transit, which was not covered by the policy. Chubb asserted that the CIF policy covered cargo damage occurring aboard the ship and until the goods were offloaded in India. ATS and IWK then brought an action against the defendant insurer in Ontario. The plaintiffs contended that the outcome of the India arbitration would determine the outcome of the Ontario action in terms of finding the goods were damaged prior to over-land shipment or that there was coverage for the entire journey. The defendant did not file a statement of defense in the Ontario action, instead opting for summary judgment motion to dismiss the claim. By judicial direction in November 2017, it was determined that the stay motion be scheduled first, and the summary judgment motion be scheduled if the stay was not granted.
Decision: Request for stay refused.
Held: The Court found that the outcome of the Foreign Arbitration, or the impact of that determination on the Ontario action, could be not be predicted. In the absence of no existing schedule for the arbitration hearing in India, or evidence to say there will be arbitration in India, it was clear the prejudice in delay would all be to Chubb, as having to wait for the outcome of the arbitration in which the insurer has no right of participation was akin to a denial of justice.
Bankruptcy - Default Judgment - Default of Time Charter - Lien on Cargo
BBC Chartering Carriers GMBH & CO. KG v. Openhydro Technology Canada Limited, 2018 FC 1098
Précis: The Federal Court granted default judgment in favour of the plaintiff and ordered the sale of the in rem defendant cargo, a Turbine Control Centre.
Facts: The plaintiff sought default judgment in the amount of $871,339.97 plus interest and costs against the in rem defendant, a turbine control centre (“TCC”). Pursuant to a time charter party with the plaintiff, the defendants chartered a vessel for, inter alia, the carriage of the TCC, from Ireland to New Brunswick. Once the TCC was delivered, the plaintiffs invoiced the defendants for services rendered, however no payments were made by the defendants towards those invoices. A total of $871,339.97 remained outstanding. Pursuant to the charter party agreement, upon default of payment the plaintiffs were entitled to assert a lien on the TCC in rem. Service on the TCC was impossible as it was located on the bed of the sea offshore Nova Scotia, however service on the in personam defendant was successful on 02 August 2018. On 14 August 2018 the Court validated service on the in rem defendant. On 24 September, the defendants filed a Notice of Intention under the Bankruptcy and Insolvency Act (“BIA”). The only issue for the Court was if default judgment should be granted against the in rem defendant, the TCC.
Decision: Motion allowed.
Held: The Court looked to its own enabling statute to hold that it had jurisdiction with respect to any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise: s. 22(2)(i) Federal Courts Act. It further found that under its enabling statute that the jurisdiction conferred in s. 22 may be exercised in rem against the ship, aircraft or other property that is subject of the action, or against any proceeds from its sale that have been paid into court: s. 43(2). After a review of the lead authority, the Court noted that the action in rem must relate to the specific property contemplated in the contract at issue, and found that although the TCC was no longer on board the vessel, there was a clear nexus between the cargo and the vessel and the cargo was the very subject matter of the charter party agreement.
While the plaintiff noted the bankruptcy proceedings stayed any action against the defendants, the plaintiffs argued that proceedings in rem do not apply to the automatic stay of proceedings under the BIA. The Court, finding in the plaintiff’s favour, held that the arrest of the in rem defendant was commenced before the defendant’s notice of intention under the BIA, and therefore the maritime jurisdiction of the Federal Court was engaged in advance of the BIA proceedings.
Carriage of Goods - Freight Forwarder - Privity
Nine Starz Fruits & Vegetables Inc. v. Schenker of Canada Ltd., 2017 QCCQ 2122
Précis: The Court of Quebec refused motions to dismiss the claim of the plaintiff consignee against a freight forwarder and ship owner on the basis of lack of privity of contract.
Facts: The plaintiff was the owner/consignee of a cargo of tangerines that had to be destroyed because of delay in delivery and temperature fluctuations during carriage. The plaintiff commenced suit against Schenker of Canada and against Mediterranean Shipping Company (“MSC”). Both defendants brought motions to dismiss the claims against them on the grounds of an insufficient legal relationship with the plaintiff.
Decision: Schenker motion referred to trial Judge. MSC motion dismissed.
Held: Schenker Canada argues that the claim against it should be dismissed because the contract of carriage as evidenced by the bill of lading was between the plaintiff and Schenkerocean not Schenker Canada. However, Schenker Canada does appear on documents, including the sea waybill, as a consignee, suggesting some relationship. At this stage of the proceeding it is premature to dismiss the claim as against Schenker Canada and this issue will be referred to the trial Judge. With respect to MSC, the documents show that the carrying vessel was owned by MSC and the law recognizes that the vessel owner can be liable as carrier. Thus, MSC’s motion must be dismissed.
Undeclared Deck Carriage - Right to Limit Liability
De Wolf Maritime Safety B.V. v. Traffic-Tech International Inc., 2017 FC 23
Précis: A carrier is entitled to limit liability under the Hague-Visby Rules for undeclared deck carriage.
Facts: The plaintiff was the owner and consignee of a cargo stuffed into a container and carried from Vancouver to Rotterdam under a bill of lading issued by the defendant. The container was carried on the deck of the carrying vessel but was not declared as being so carried on the bill of lading. During the course of the carriage by sea the container was lost overboard. The plaintiff commenced proceedings against the defendant for the value of the cargo. The defendant brought this application for determination of a question of law, namely, whether it was entitled to limit its liability under the Hague-Visby Rules notwithstanding the undeclared deck carriage.
Decision: The defendant is entitled to limit its liability under the Hague-Visby Rules.
Held: The question of law is to be determined by examining the relevant provisions of the Hague-Visby Rules. The Hague-Visby Rules apply to “goods” of every description “except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried”. Both conditions must be met before deck cargo is excluded from the Rules; it must both be carried on deck and be stated as being carried on deck. Therefore, cargo carried on deck but not so stated will be governed by the Hague-Visby Rules. The caselaw supports this interpretation.
Carriage of Goods - Is Transportation Services Contract a Charter? - Application of Hague-Visby Rules - Agreements to insure
AGF Steel Inc. v. Miller Shipping Limited, 2016 FC 461
Précis: The court held that a transportation services contract between the parties was, in fact, a contract for the charter of a ship and the Hague-Visby Rules did not apply.
Facts:The plaintiff and the defendant, Miller Shipping (“Miller”), entered into a contract for the transportation of 43,000 metric tonnes of steel rebar over 8 voyages by tug and barge. The contract was called a “Time Charter Party”, identified the plaintiff as “charterer” and referred to “Employment of the Vessel” and “Hire”. The contract contained a so-called “knock for knock” clause stipulating, inter alia, that each party would be liable for all losses, costs, damages and expenses incurred by the party on account of loss of or damage to its property. The contract also contained insurance clauses requiring the plaintiff to obtain cargo insurance and Miller to obtain Hull and Machinery insurance and protection and indemnity insurance. The first two voyages were completed without incident. During the third voyage on 10 May 2013 the barge capsized with the loss of the entire cargo. The plaintiff commenced suit for the value of the lost cargo (in excess of $8 million) against Miller and its various subcontractors including the actual owner of the tug and barge and the surveyor that surveyed and approved the stowage of the barge. Miller brought this summary judgment application for a declaration that it was not liable. The plaintiff opposed the application.
Decision: The application is allowed, in part.
Held: The test on a summary judgment application is that there is no genuine issue for trial. The onus is high and is on the party bringing the application. Summary judgment should be granted only in the clearest of cases.
Miller argues that the contract between the parties is a charterparty and that the contract excludes the liability of Miller and the other defendants. The plaintiff, on the other hand, argues that the contract is one for the carriage of goods by water, that the Hague-Visby Rules apply, that any exclusion or limitation clauses in the contract are rendered invalid by article III, r.8 of those rules and that, in any event, on a proper interpretation, the contract does not exclude the liability of Miller and the other defendants. Thus, there are two issues: first, is the contract governed by the Hague Visby Rules; and, second, if the contract is not governed by the Hague Visby Rules, do the “knock for knock” and insurance clauses exclude the liability of Miller and the other defendants.
The nature of the contract between the parties is a discrete issue that is capable of being determined by summary judgment as the principal evidence required to assess its nature is the contract itself. The contract is entitled “Time Charter Party”, describes the plaintiff as “charterer” and refers to “Employment of the Vessel” and to “Hire”. This is sufficient to find the contract is a charterparty and not covered by the Hague-Visby Rules. Accordingly, the parties were free to negotiate their own terms concerning liability. However, the contractual interpretation of the “knock for Knock” and insurance clauses is an issue of mixed fact and law which is not appropriate for summary judgment. These issues will proceed to trial.
Carriage by Sea - Dead Freight - Practice - Summary Judgment
Asia Ocean Services, Inc. (UPS Asia Group Pte Ltd) v. Belair Fabrication Ltd, 2015 FC 1141
Précis: The shipper was required to pay dead freight pursuant to the terms of a booking note.
Facts: The plaintiff, a logistics company, entered into an agreement with the defendant to carry the defendant’s cargo from China to Vancouver. The agreement was contained in a booking note that contained an estimated shipping date of 23 May 2013 and a “dead freight” clause requiring the defendant to pay the full amount of the freight if the booking was cancelled. The plaintiff subsequently sub-contracted the carriage by entering into a booking note with another carrier. This contract also contained a dead freight clause. The cargo was not ready to be shipped on 23 May and the vessel sailed without the cargo. The parties attempted to come to an agreement to ship the cargo on another vessel but were unsuccessful. The defendant ultimately shipped the cargo with another carrier. The plaintiff was required to pay dead freight to the carrier with whom it had sub-contracted and now claimed dead freight from the defendant. The defendant filed a counterclaim. The plaintiff brought this application for summary judgment.
Decision: The plaintiff’s motion for summary judgment is allowed. The defendant’s counterclaim is dismissed.
Held: The defendant argues that this matter is not suitable for summary judgment as the affidavit evidence is contradictory and disputed and a full trial is required to adequately address the issues. However, conflicting affidavits and disputed evidence do not necessarily render a matter inappropriate for summary judgment. The conflicting evidence can be tested against the documentary evidence and the cross-examinations. Other factors to consider include the amounts involved, the complexity of the matter, its urgency, any prejudice likely to arise by reason of delay, the cost of taking the case forward to a conventional trial in relation to the amount involved, and proportionality. Proportionality and the other factors support a disposition by way of summary trial.
The defendant seeks to avoid liability under the dead freight clause of the booking note by first arguing that the corporate entity that paid dead freight to the other carrier was not the plaintiff but a related company. There is no evidence of how or why the plaintiff accounted for the dead freight payment within its group of companies but this is not relevant. The issue is whether the defendant is required to pay dead freight to the plaintiff under the booking note as between them.
The defendant next argues it should not be required to pay dead freight because such a clause is a penalty clause or, alternatively, that the amount it should pay should be limited to the amount the plaintiff paid to the other carrier. The dead freight clause is, however, a reasonable attempt to estimate the damages and is not a penalty clause. Such clauses are to be assessed at the time they were made and are enforceable whether or not the actual damages are less than the estimated amount. It is therefore not relevant that the plaintiff may have paid less in dead freight to the other carrier than is owed by the defendant.
Finally, the defendant argues that at the time the booking note was entered into the plaintiff agreed to communicate with the defendant’s supplier and to ensure that the cargo would be at the port when required. The defendant says the plaintiff failed to do this and that it is therefore not liable to pay dead freight. But, the evidence does not support the defendant’s arguments in this regard. The booking note contains no such term and the extensive correspondence does not support such a term.
Damage to Yacht while being re-positioned - Is the contract one of carriage? - Jurisdiction of Quebec Courts
St. Paul Fire & Marine Insurance Company v. Vallée, 2015 QCCQ 1891
Précis: The Court of Quebec held that a contract to deliver a yacht by sea was a services contract and not a contract of carriage.
Facts: The plaintiff was the insurer of a yacht that was damaged while being re-positioned. The yacht owner contracted with the defendant to transport the yacht from Quebec City to the State of New York. The transportation involved the defendant taking possession of the vessel and sailing it to the destination. During the voyage the yacht was damaged. The plaintiff fully indemnified its insured and commenced these subrogation proceedings against the defendant. The defendant then brought this application to dismiss the action on the basis that: (1) the Quebec courts were without jurisdiction: and, (2) no notice of claim was provided within 60 days of delivery as required by art. 2050 of the Quebec Civil Code.
Decision: Application dismissed.
Held: (1) The Quebec Court has jurisdiction in admiralty and s. 22 of the Federal Courts Act does not operate to restrict that jurisdiction. (2) The contract was not a contract of carriage but a service contract and art. 2050 does not apply. In any event, notice is not required where, as here, the carrier notifies the property owner of the damage.
Comment: Although the plaintiff in this action was the insurer of the vessel, in the common law provinces it is not usual for an insurer to be named as the plaintiff in subrogation proceedings. In the common law provinces the insured is normally the named plaintiff.
Jurisdiction - FOB Contract of Sale - Liability of Vendor/Shipper to Indemnify Purchaser/Charterer for Demurrage and other Expenses
Arcelormittal Mines Canada Inc. v. AK Steel Corporation, 2014 FC 118 2014 FCA 287
Précis: The Federal Court of Appeal confirmed the trial judgment holding that the sale of cargo to be transported by ship was a matter of navigation and shipping, and within the jurisdiction of the Federal Court and further confirming the judgment for indemnity obtained by the purchaser of a cargo of iron ore pellets against the vendor of the pellets on the basis that the pellets delivered had excessive moisture content.
Facts: The plaintiff was the purchaser of a cargo of iron ore pellets and the voyage charterer of the “Rt. Hon. Paul J. Martin”, a self-unloading bulk carrier and the ship that was to carry the pellets. The defendant was the vendor of the pellets. The cargo was sold FOB ship’s hold. The terms of sale specified the cargo was to have a maximum moisture content of 2.5% (to prevent freezing) and required the vendor to indemnify the purchaser for additional costs incurred in the event the pellets were frozen. The cargo of iron ore pellets was loaded in very cold weather, about -18 degrees Celsius, at Port Cartier, Quebec. The “Rt. Hon. Paul J. Martin” then sailed to Toledo, Ohio where it was to discharge the cargo. Upon discharge it was discovered that the cargo was frozen and, as a consequence, the plaintiff was required to pay to the ship owner demurrage, additional loading costs and costs to repair damage to the ship during the unloading. The plaintiff brought this indemnity action against the defendant alleging that the moisture content of the cargo was in excess of that required by the contract of sale. The defendant argued that it was not in breach of its contract with the plaintiff, that the cause of the loss was the failure of the carrier to properly load, carry and discharge the cargo and that it had not been given timely notice of the alleged breach of contract.
At trial (2014 FC 118), the Judge addressed two issues; whether the Federal Court had jurisdiction; and whether the defendant was liable. On the first issue, the trial Judge held that the claim was really about the suitability or fitness of the cargo for transport, a matter of navigation and shipping, and therefore within the maritime jurisdiction of the Federal Court. On the second issue the trial Judge held that the cause of the freezing was the excessive moisture content of the pellets and was not due to any fault on the part of the carrier. The Judge further held the defendant was aware of the breach before the plaintiff and did not require notice. Accordingly, judgment was rendered for the plaintiff. The defendant appealed the substantive finding that it was liable (but apparently not the decision concerning the jurisdiction of the Federal Court).
Decision: Appeal dismissed.
Held: The appellant challenges the trial Judge’s findings on liability, reasonable notice, and spoliation. These are, however, questions of fact or mixed fact and law and the appellant must show the Judge committed a palpable and overriding error. The appellant has failed to meet this threshold. The Judge’s findings are supported by the evidence.
Domestic Carriage - Application of Hague-Visby Rules - Dangerous Goods - Liability of Shipper for Damage Caused to Ship
Oceanex Inc. v. Praxair Canada Inc., 2014 FC 6
Précis: The shipper was held liable for damage caused to the ship as a consequence of a rupture of a container of liquid oxygen.
Facts: The ship “Cabot” was damaged while discharging cargo when a 20 foot tank container filled with liquid oxygen ruptured. The escaped liquid oxygen fell onto the ship’s plating causing it to become extremely brittle which ultimately led to the plate cracking. The ship owner brought this action against the defendant, the lessee of the container, for the costs to repair the ship and for loss of revenue during the nine days required to repair the ship. The defendant counterclaimed against the ship for the damage to the container. The defendant alleged that the carrier had dropped or mishandled the container resulting in damage to the bottom railings and a misalignment of the piping which caused increased pressure on the valves and the leak. The defendant further challenged the damages claimed. In particular, the defendant argued that the plaintiff could not recover the costs of forwarding other cargoes to their consignees as it could have declared an event of force majeure.
Decision: Judgment for the ship owner.
Held: The evidence established that the container was leaking from two fire block valves, the purpose of which is to seal the tank in the event of a fire. The evidence further established that these valves had leaked previously and only one of them had been tightened. The valves leaked because they had not been sufficiently tightened and not because of the damage to the bottom rails of the container which, in any event, did not occur during or in connection with the voyage. Pursuant to the Consolidated Transportation of Dangerous Goods Regulations, dangerous goods must be loaded by the shipper in a “means of containment” to prevent damage. Also, at common law, a carrier is not liable for damage caused by insufficiency of packing. Concerning damages, the ship owner’s duty to mitigate did not require it to jeopardize its contracts with others by claiming force majeure. The costs of forwarding other cargoes to their consignees was recoverable.
Insolvency of Intermediate Charterer - Entitlement of Owner to Sub-Freight
Byatt International S.A. v. Canworld Shipping Company Limited,, 2013 BCCA 427
Précis: The British Columbia Court of Appeal confirmed the ship owner’s right to direct the payment of sub-freights to itself.
The owner of the ship “Loyalty” granted a time charter to KLC who, in turn granted a time charter to MUR who, in turn, granted a voyage charter to Canworld for a voyage from Vancouver to Australia carrying sulphur. Canworld contracted with the shipper, Prism, to carry the sulphur cargo to Australia. MUR paid its hire to KLC but KLC defaulted on its payment of hire to the owner. The owner then sought to exercise a lien on the freight owing by the shipper to Canworld and the shipper paid the freight into court. Insolvency proceedings were commenced in Korea concerning KLC. Those proceedings were settled on terms that the owner recovered approximately $10 million of the $16 million owed to it. However, the settlement terms further provided that any amounts recovered by the owner from sub-hires or sub-freights were to be deducted from the settlement amount. Subsequently, this motion was brought before the British Columbia Supreme Court for directions as to how the funds paid into court by the shipper ought to be paid out. The owner argued it was entitled to the funds on the basis of its lien rights and the terms of the bill of lading. MUR and others argued that, given the terms of the settlement in the Korean insolvency proceedings, it would be inequitable to order the payment to the owner since the person who would ultimately benefit would be KLC, the entity that was responsible for the dispute. At first instance, the motions Judge agreed and ordered the funds paid to Canworld who could then satisfy its debt to MUR. The ship owner appealed.
Decision: Appeal allowed.
Held: The motions Judge appears to have decided the case on the basis of his interpretation of what would be a fair result whereas he was required to base his decision on legal and equitable principles. There is no equitable principle supporting the motions Judge’s conclusions. There is no unjust enrichment or double recovery and there is not sufficient evidence for a conclusion that a payment to the owner would benefit KLC. There seems little question that, pursuant to the terms of the head charter party, the owner has the right to direct the payment of sub-freights to itself.
Carriage by Sea - Application of Hague-Visby Rules - In Rem Actions - Change of Ownership - Damage Done by a Ship
The Mercury XII (aka Wells Fargo) v. The MLT-3, 2012 FC 738 2013 FCA 96
Précis: The Federal Court of Appeal held that the hire of a tug and barge was not a contract of carriage to which the Hague-Visby Rules applied.
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. 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
Précis: The Federal Court of Appeal upheld the decision of the trial Judge enjoining proceedings in a provincial superior court while a limitation action was proceeding.
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
Précis: The Federal Court of Appeal upheld a decision of the Federal Court holding that a rail carrier could choose the limitation that was the most beneficial to it.
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 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 2011 QCCA 2173
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. The carrier appealed.
On appeal (2011 QCCA 2173) the Quebec Court of Appeal agreed with the trial Judge that the clause did not exclude liability for negligence. In result, the appeal was dismissed.
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 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.