Carriage of Goods
Carriage of Goods
Here you will find information and cases summaries relating to
the carriage of goods by sea and multi-modal (combined carriage).
For infomation on Air Carriage or Road/Rail Carriage go to Carriage
by Air or Carriage by Road/Rail.
Introduction
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 OverviewFor
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.
Case Summaries
Synopsis of significant developments in 2007-2008
The most interesting case of 2007-2008 in relation to carriage
of goods is Boutique Jacob Inc. v Pantainer Ltd., 2008 FCA 85,
where the Federal Court of Appeal corrected an error of
interpretation in respect of s. 137 of the Canada Transportation
Act holding that shipper means the entity that contracted with the
rail carrier. The case also dealt with the intricacies of multiple
bills of ladings and Himalaya clauses as does the case of Alcoa,
Inc.v.CP Ships (UK) Ltd., 2007 ONCA 686 . In Timberwest Forest
Corp. v. Pacific Link Ocean Services Corporation, 2008 FC 801, the
Federal Court held that the Hague-Visby Rules will not apply to
cases where the incorporated standard bill of lading states the
cargo is carried on deck even though the bill of lading is not
actually issued.
Multi-modal - Bailment on Terms - Himalaya Clause - Rail
Carriage - s.137 Canadian Transportation Act
Boutique Jacob Inc. v Pantainer Ltd., 2008 FCA 85, reversing in
part 2006 FC 217
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 Judges 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 Pacifics
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, reversing in
part 2006 CanLii 34210
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 - Deck Carriage - Marine Insurance - Waiver of
Subrogation - 3rd parties
Timberwest Forest Corp. v. Pacific Link Ocean Services
Corporation, 2008 FC 801
This was a subrogated claim for the loss of approximately C$1
million worth of logs while en route from Vancouver to California.
The logs were all carried on the deck of a barge. 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; and second, whether the waiver of subrogation clause in the
Plaintiffs 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 Plaintiffs policy of
insurance which specifically waived subrogation against the
contracting carrier. The contracting carrier had entered 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 parities 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.
Contract of Affreightment Negotiations - Essential Terms -
Damages
Catalyst Paper Corp. v. Companhia de Navegao Norsul , 2008 BCCA
336, reversing 2007 BCSC 610 1
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.
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 Defendants 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.
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.
Indemnity Deck Carriage Hague-Visby Rules
Gearbulk Pool Ltd. v Seaboard Shipping Co., 2006 BCCA 552 affg.
2005 BCSC 1620This 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.
Multimodal Liability of Rail Carrier Estoppel Waiver
Canadian Forest Products Ltd. v. B.C. Rail et al., 2005 BCCA
369Wood 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 receivers 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.
Mis-Delivery/Theft Onus of Proof Hearsay Evidence Post-Discharge
Exclusions Hague-Visby Rules
Shtutman v Ocean Marine Shipping Inc., 2005 FC 1471The 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.
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 affg. 2003 FC 837This 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.
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.
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 barges side wall fittings. The lashing
was done by the crew because the shippers 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 barges 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.
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.
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
Defendants contention that nothing out of the ordinary transpired
during the carriage.
Hague Visby Rules - Burden of Proof - Water Damage
Nova Steel Ltd. et al. v The Kapitonas Gudin et al., 2002 FCT
100
Samuel Son & Co. v The Kapitonas Gudin et al., 2002 FCT
101
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 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 Plaintiffs goods. The court held that the
contract had been frustrated by the failure of the Defendant to
ship the Plaintiffs 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 courts jurisdiction). With respect to the
counterclaim, the court awarded damages for storage in the amount
of $2,000.00. (Editors note: Unfortunately the Reasons do not
indicate why the counterclaim was allowed in this amount or at
all.)
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.
Standing to Sue - Collisions
Porto Seguro Companhia De Seguros Gerais v The Federal Danube et
al., (January 31, 2001) No. T-2057-85 (F.C.T.D.), [2001] F.C.J. No.
152
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 Plaintiffs action 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.
Summary Judgment - Misdelivery
Kanematsu GMBH v Acadia Shipbrokers Limited et al., (2000) 259
N.R. 201 (F.C.A.)
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.
Costs of Discharge and Re-stowage
Canadian Forest Products Inc. v Termar Navigation Co. Inc.,
(March 15, 2000) No. A-934-97 (F.C.A.), [2000] F.C.J. No. 450
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.
Claim for Freight - Set-off
Pantainer Ltd. v 996660 Ontario Ltd., (March 17, 2000) No.
T-231-99 (F.C.T.D.), [2000] F.C.J. No. 334
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.
Deck Cargo Exclusion Clauses
Canadian Pacific Forest Products Limited et al. v The"Beltimber"
et al.,(1999), 175 D.L.R. (4th) 449, (F.C.A.).
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.
Freight Charges
Morlines Maritime Agency Ltd. v IKO Industries Ltd.,(December 7,
1999) No. T-2522-96 (F.C.T.D.).
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.
Suit Time Extensions
Riva Stahl GmbH v The "Bergen Sea" et al., (1999), 243 N.R. 183,
(F.C.A.).
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.
Damages - Limitation - Interest - Costs
MacKay v Scott Packing & Warehousing Co.,(1999), 164 F.T.R.
6, (F.C.T.D.).
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.
Fraudulent Misrepresentation - Conversion
Westwood Shipping Lines v Geo International Inc. et al., (1999),
165 F.T.R. 290, (F.C.T.D.).
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), 165 F.T.R. 299,
(F.C.T.D.).
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.
Carriage By Sea - Burden of Proof - Identity of Carrier
Voest-Alpine Stahl Linz GmbH v The "Federal St. Clair" et
al.,(August 31, 1999) No. T-1296-95 (F.C.T.D.).
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.
Mis-delivery - Conversion
Westwood Shipping Lines v Geo International et.al (June 24,
1998) No. T-359-98 (F.C.T.D.)
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.
Liability of Terminal Operator - Limitation Clause - Himalaya
Clause
Braber Equipment Ltd. v Fraser Surrey Docks Ltd., (October 10,
1998) Vancouver Registry No. C961205 (B.C.S.C.) affirmed, (October
6, 1999) Vancouver Registry No. CA025240 (B.C.C.A.)
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.
Stay of Proceedings - Jurisdiction Clauses - Carriage of Goods -
Identity of Carrier
Jian Sheng Co. Ltd. v The "Trans Aspiration, (April 14, 1998),
No.A-442-97 (F.C.A.).
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", (February 16,
1998) No. T-459-95 (F.C.T.D.)
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.
Recovery of Freight
American President Lines Ltd. v Pannill Veneer Co. Ltd.,
(September 17,1997) No.T-1706-94 (F.C.T.D.).
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,, (May 20, 1997) No.
T-2403-81(F.C.T.D.).
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.
Booking Note - Parties
Domtar Inc. v. Lineas De Navigation Gema S.A. et.al., (April 11,
1997), No. T-2873-96 (F.C.T.D.).
This was a summary judgment application that concerned the
identity of the parties to a booking note contract. See a more
complete summary under Admiralty Practice. Excessive Freight
Charges
Me Thierry Van Dooselaere v Unispeed Group Inc. and SGS
Supervision Services, (January 27, 1997) No. T-1452-92
(F.C.T.D.).
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, (January 9,
1997), No. C943469, (S.C.B.C.).
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. et.al.,
(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", (May 10, 1996) No.
T-1701-90 (F.C.T.D.)
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., (December 22, 1995),
No.A-205094, (F.C.A.).
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 Forwarding Agents
Brereton v. KLC Freight Services Ltd., (November 26, 1997) 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.
Liability of Freight Forwarder
Bertex Fashions Inc. v Cargonaut Canada Inc., (May 29, 1995),
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.