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.