Gearbulk Pool Ltd. v. Scac Transport Canada Ltd.

This was an appeal from a determination of a point of law under Rule 220 of the Federal Court Rules, 1998 which proceeded under an Agreed Statement of Facts. The issue was whether a mutual release in a cargo action was a bar to the claim by Gearbulk, the Plaintiff in the present action, for damages for loss of freight arising out of a breach of a voyage agreement note. Gearbulk had entered into the voyage agreement note with the Defendants for the transportation of 10 transformers. The first of the transformers was damaged during loading. It was subsequently determined that all of the remaining transformers were packaged similarly to the first and were unsuitable for transportation. Accordingly, the remaining transformers were not loaded. The owner of the damaged transformer brought an action against Gearbulk and the other Defendants for the damage sustained to the transformer. This action was settled and a mutual release was signed. The cargo owner was paid $75,000, of which $10,311.48 was to be paid by the cargo owner to Gearbulk. The payment of $10,311.48 to Gearbulk was on account of costs incurred to clean up the spilled contents of the transformer. The mutual release provided that it was “with respect to any damage to the Cargo”. Based on the wording of the release, the court held that it related only to claims arising out of the damage to the cargo and did not extend to bar the present action which was for freight. A noteworthy aspect of this case is that it illustrates the potential dangers of proceeding under Rule 220 on an Agreed Statement of Facts. The Judge on appeal noted that there was a significant possibility that the record before the court was defective but nevertheless proceeded to hear and decide the matter without correcting the defects as he considered that any injustice was “created by the parties who had ample opportunity to put the complete record before the court”.