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 74 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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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.
Carriage of Goods – Domestic Carriage - Deck Carriage – Application of Hague-Visby Rules
Allianz Global Risks US Insurance Co. v. Moosonee Trans. Ltd., 2009 QCCQ 7569
This was a subrogated claim for several vehicles and other cargo lost when a barge sank en route to James Bay. The defendants were a company that arranged the transportation and the actual carrier. A preliminary issue in the case was whether the claim was governed by Canadian maritime law or the Civil Code of Quebec. The Court had little difficulty in determining that the claim was governed solely by Canadian maritime law. The Court next considered whether the plaintiff was bound by the contract between the intermediary and the carrier and the exclusion clause contained therein. The Court held that the intermediary was a freight forwarder acting on behalf of the plaintiff and not a carrier and that, accordingly, the plaintiff was bound by the contract between the intermediary and the carrier. The Court next considered whether the contract of carriage was subject to the Hague-Visby Rules and held that the rules did not apply as the contract was evidenced by a non-negotiable shipping receipt (not a bill of lading) and the cargo was loaded on deck and was so stated in the contract. As a result, the exclusion clause in the shipping receipt was held to be applicable. (Note: Regrettably, this case, as with many cases decided by Quebec courts, is reported only in French. The author has relied on his limited command of the French language and computer translation in preparing this summary.)
Carriage of Goods - Non-payment of Freight - "Freight Prepaid" Bills of Lading - Agency
H. Paulin & Co. Ltd. v. A Plus Freight Forwarder Co. Ltd., 2009 FC 727
The issue in this case was whether the receiver of cargo under “freight Pre-paid” bills of lading was liable for non-payment of freight. The parties were: H. Paulin, the receiver/consignee; A Plus, a local forwarder who issued bills of lading and was held to be a NVOCC; Scanwell, a forwarder who had contracted with A Plus and who issued “freight prepaid” forwarders receipts; and OOCL, the ocean carrier, who had been hired by Scanwell. H. Paulin paid freight to A Plus and Scanwell paid freight to OOCL but A Plus did not pay Scanwell’s freight bill. Scanwell claimed the freight against H. Paulin. The first issue was the meaning of the term “freight prepaid”. The Court noted that, although the statement would not preclude an action for freight as between Scanwell and A Plus (the carrier and shipper), the statement was effective to prevent either a claim in rem against the cargo or in personam against H. Paulin. The Court next considered whether principles of agency could apply to make H. Paulin liable for the freight, however, it was held that A Plus acted as principal for its own account. Accordingly, Scanwell’s claim against H. Paulin was dismissed.
Carriage of Goods - Deck Carriage - Marine Insurance - Waiver of Subrogation - 3rd parties
Timberwest Forest Corp. v. Pacific Link Ocean Services Corporation, 2009 FCA 119
This was a subrogated claim for the loss of approximately C$1 million worth of logs. The logs were lost from the deck of a barge while en route from Vancouver to California. The issues in the case were: first, whether the cargo was sufficiently described as deck cargo to remove it from the application of the Hague-Visby Rules (thus denying the defendants the right to rely upon exclusion or benefit of insurance clauses in the contract); and second, whether the waiver of subrogation clause in the plaintiff’s insurance policy protected all of the defendants or just the specifically named contracting carrier. The contract of carriage was contained in a letter of understanding and set of standard terms and conditions which incorporated a bill of lading that was “contemplated” to be issued. The bill of lading, which was never in fact issued, included on its face a statement that “all cargo was carried on deck unless otherwise stated”. The plaintiff argued that a printed statement of deck carriage in a standard bill of lading that was not actually issued was not sufficient compliance with Art 1(c) of the Hague-Visby Rules to oust the application of the Rules. The motions Judge held, however, that the plaintiff was bound by the terms of the contract including the bill of lading terms and these contained a clear statement as to deck carriage. In result, the Rules did not apply. The second major issue in the case concerned a clause in the plaintiff’s policy of insurance which specifically waived subrogation against the contracting carrier. The contracting carrier had entered into time charters for the tug and barge with two affiliated companies who actually carried out the contract through their employees. The issue was whether these other companies and their employees could take the benefit of the waiver of subrogation clause which did not name them specifically or by class. The motions Judge reviewed the complicated history of the waiver of subrogation clause and concluded that it was intended to waive subrogation against the “carrier” or “tower”, terms that were used indiscriminately. As the other parties fell within the definition of “carrier” in the bill of lading, they were entitled to the benefit of the waiver of subrogation clause. He further held that extending the benefits of the waiver of subrogation to these other entities would be a permissible incremental change in the law. On appeal, the Court of Appeal upheld the decision of the motions Judge but for different reasons. The Court of Appeal enforced the waiver of subrogation clause not on the basis of the intention of the parties but referred to a separate clause in the policy whereby underwriters waived rights of subrogation whenever the assured had waived rights of recovery. The Court of Appeal held that pursuant to the terms of the bill of lading recovery had been waived against all of the defendants and therefore rights of subrogation were also waived.
Carriage of Goods - Limitation Period - Counterclaim
Hapag-Lloyd Container Line GmbH v. Moo Transport & Commodities Inc., 2009 FC 201
The issue in this case was whether a counterclaim for damage to cargo and non-delivery should be dismissed on the grounds that the counterclaim was made out of time. The moving party relied upon a clause in the bill of lading that stipulated the carrier would be discharged from all liability unless suit was brought within one year (almost identical wording to the limitation period in the Hague/Hague-Visby Rules). The Court gave effect to the clause noting that this wording had the effect of completely excluding any cause of action rather than merely barring a remedy. In result, the counterclaim was dismissed.
Carriage – Freight - Interpleader
Rio Tinto Shipping (Asia) Pte Ltd. v. Korea Line Corporation, 2008 FC 1376
In this matter the applicant, a voyage charterer, applied to pay into court the freight which it admitted was owing. The reason was that there were conflicting claims by two parities as to entitlement to the freight. The Court recognized the conundrum of the applicant and allowed it to pay the freight into court in satisfaction of its liability in respect thereof.
Contract of Affreightment – Negotiations - Essential Terms - Damages
Catalyst Paper Corp. v. Companhia de Navegação Norsul, 2008 BCCA 336
This was an action for breach of a long term shipping contract. The contract was a three year contract of affreightment for the carriage of paper products to South America. The contract was negotiated using the “accept/reject” process. The main issue in the case was whether a final agreement had ever been concluded between the parties. The trial Judge found that there was a concluded agreement. On appeal, the British Columbia Court of Appeal extensively reviewed the evidence and concluded that a notional reasonable observer would not find a clear agreement between the parties on an essential term, cargo care. Accordingly, there was no agreement.
Carriage - Freight - set off - jurisdiction - Ciffa Terms
Locher Evers International v. Canada Garlic Distribution Inc. , 2008 FC 319
This was an action for the recovery of freight in relation to the carriage of produce from China to Toronto. The Defendant did not dispute the freight was owing but alleged a right to set-off and argued that the agreement ousted the jurisdiction of the Federal Court. The agreement between the parties expressly incorporated the Ciffa terms and those terms contained a no set-off clause which the Court had no difficulty enforcing. With respect to the jurisdiction issue, unfortunately, it is not clear from the judgment how this issue arose. There was apparently a jurisdiction clause but its contents are not set out. Nevertheless, the Court does say that the issue was raised too late.
Multi-modal - Bailment on Terms - Himalaya Clause - Rail Carriage - s.137 Canadian Transportation Act
Boutique Jacob Inc. v. Pantainer Ltd., 2008 FCA 85
This was an action by the Plaintiff for damage to cargo caused during a train derailment. The Plaintiff had contracted with the first Defendant, Pantainer, for the carriage of its cargo from Hong Kong to Montreal. Pantainer then sub-contracted the entire carriage to OOCL. OOCL in turn contracted with Canadian Pacific for the carriage of the cargo by rail from Vancouver to Montreal and it was during this portion of the carriage that the damage occurred. The carriage documents were an express bill of lading issued by Pantainer and an electronic waybill issued by OOCL which referred to OOCL's standard terms that were available on the OOCL website. At issue in the case was the liability of each of the Defendants and which bill of lading exclusions or limitations they were entitled to rely upon. With respect to the liability of Pantainer, the trial Judge held that it would have been liable as a contracting carrier but it was entitled to rely upon a clause in its bill of lading that excluded its liability for loss or damage that could not be avoided by the exercise of due diligence. With respect to OOCL, the Judge held that it was liable as a sub-bailee on terms and that the terms were those referred to in the OOCL electronic waybill. The Judge further held that these terms exonerated OOCL from liability for loss or damage that could not be avoided by the exercise of due diligence. The trial Judge also held that OOCL was entitled to rely upon the similar exemption in the Pantainer bill of lading via the Himalaya clause in that bill of lading. With respect to the liability of Canadian Pacific, the Judge referred to s. 137 of the Canadian Transportation Act, which prohibits a railway from restricting or limiting liability except by written agreement signed by the “shipper”. The trial Judge held that “shipper” in s.137 meant the plaintiff and not OOCL. As a consequence, this provision precluded Canadian Pacific from relying upon the Himalaya and limitation clauses in either the Pantainer or OOCL bills of lading. The trial Judge further held that Canadian Pacific could not rely upon any limitation clause in its published tariff as this had been displaced by a limitation provision in the confidential rate agreement between OOCL and Canadian Pacific. In result, Canadian Pacific was held liable for the Plaintiff's damages calculated at the discounted selling price of the goods.
On appeal, the main issue was the trial Judge’s interpretation of s. 137 of the Canada Transportation Act. The Court of Appeal overturned the trial Judge on the issue of the interpretation of s.137. Specifically, the Court of Appeal held that the term “shipper” meant OOCL, the entity that contracted with Canadian Pacific, and not the Plaintiff. Accordingly, there was a written agreement between Canadian Pacific and the “shipper” and the prohibition in s. 137 did not apply. The Court of Appeal next considered the applicable limitation amount. The Court noted that the agreement between OOCL and Canadian Pacific was subject to Canadian Pacific’s tariff which limited liability, inter alia, to “an amount equal to the liability of the steamship company”. The Court of Appeal held that this provision entitled Canadian Pacific to limit its liability to the amount prescribed by the OOCL bill of lading which was $2 per kilogram. The Court of Appeal disagreed with the trial Judge concerning the inconsistency of the limitation provision in the confidential agreement and tariff. The Court of Appeal held that the provisions were not inconsistent. Finally, the Court of Appeal held that the Himalaya clauses in either the Pantainer or OOCL bills of lading entitled Canadian Pacific to rely upon the limitation clauses in either bill of lading.
Multi-modal - Theft - Limitation of Liability - Himalaya Clause
Alcoa, Inc. v. CP Ships (UK) Ltd., 2007 ONCA 686
The Plaintiff contracted with the first Defendant for the carriage of a cargo of aluminum from Massena, New York to Italy. The first Defendant had an arrangement with the second Defendant for the performance of the inland portion of the carriage from Massena to Montreal. It was intended that the first Defendant would then complete the carriage by sea from Montreal. However, during the course of the inland transit the container was stolen when left unattended by the truck driver. The main issue in the case was whether the Defendants were entitled to limit their liability for the loss pursuant to the terms of the first Defendant's standard bill of lading. The Plaintiff argued that a document entitled Straight Form Bill of Lading had been issued when the cargo was picked up by the second Defendant and that this bill of lading, which contained no limitation clauses, governed. The trial Judge held, however, that this bill of lading was a mere acknowledgement of receipt. The trial Judge noted that on four prior occasions the Plaintiff had shipped goods with the first Defendant and that on each occasion the Defendant had issued its standard form bill of lading. Based on this prior practice, the trial Judge held it was this bill of lading which governed even though it had not been issued at the time of the loss. The trial Judge next considered the Himalaya clause and the multi-modal clause in the bill of lading and concluded that they applied to the benefit of both Defendants. Finally, the trial Judge considered and rejected an argument that there had been a fundamental breach by the Defendants, noting that there was nothing deliberate about the conduct of the Defendants that would warrant denying them the protection of the limitation clause. In result, the Plaintiff was awarded $4,000 being the limitation amount in the bill of lading.
On appeal, the Ontario Court of Appeal held that the trial Judge had applied the wrong limitation provision. Specifically, the bill of lading provided various limits depending on where the transport occurred. The trial Judge applied the limitation for “Multi-Modal Transport outside the United States where COGSA is not contractually applicable”. The Court of Appeal said the appropriate clause was the one dealing with multi-modal transport in Europe or within a state other than the United States. This provision gave a higher limit of $65,000.
Carriage of Goods - Rust Damage - Failure to Prove Damage on Discharge
Lovat inc. v. Blue Anchor Line, 2007 FC 491
This was an action for damage to a bearing shipped from Toronto to Turkey. The bearing was allegedly damaged by rust when it was delivered at its destination in Turkey. The evidence was that the cargo was in apparent good condition when discharged from the last carrying vessel at Istanbul, however, when it was delivered to its final destination in Turkey by truck it was found to be unwrapped and rust damaged. The contract of carriage with the Defendants was for carriage only to the Port of Instanbul. The on-carriage from Istanbul was under a separate contract with a non-party. The Court was of the view that the expert evidence submitted was not sufficient to establish the rusting damage occurred in the possession of the Defendants. The Court accepted the evidence of the Defendant’s expert that an accurate assessment of the source of the rust damage required x-rays, chemical analysis and microscopic examination, none of which was done. Water samples and silver nitrate tests were inconclusive and there was no evidence submitted as to the composition of the alloy in the bearing or as to what might have caused the rust. Accordingly, the action against the carriers was dismissed.
Indemnity – Deck Carriage – Hague-Visby Rules
Gearbulk Pool Ltd. v. Seaboard Shipping Co., 2006 BCCA 552
This matter involved a claim for indemnity by the Plaintiff ocean carrier against the Defendant for damages the Plaintiff was ordered to pay in the matter of Timberwest Forest Ltd. v Gearbulk Pool Ltd. et al., 2003 BCCA 39 (the “underlying action”). In the underlying action the cargo of lumber was comprised of two consignments destined to two different consignees. The carrier had the right to stow the entire cargo on deck, however, because there was space available, some cargo was stowed under deck. In total, 86% of the entire shipment was loaded on deck and 14% under deck. Bills of lading were subsequently issued by the Defendant as agent for the Plaintiff containing a statement that the cargo was stowed 86% on deck and 14% under deck. (This apportionment, though accurate for the entire shipment, was not demonstrably accurate with respect to each individual consignment or bill of lading.) The deck cargo was damaged at the discharge port. The carrier sought to avoid liability by relying upon an exclusion clause in the bills of lading for damage to deck cargo. The courts in the underlying action held, however, that the carrier was not entitled to rely upon the exclusion clause as the deck cargo was not sufficiently identified as deck cargo to take it outside of the Hague-Visby Rules. The carrier then brought this action claiming that it was entitled to indemnity because the Defendant had breached a contract of affreightment between the Plaintiff and Defendant. The contract of affreightment provided that the Defendant would indemnify the Plaintiff for any losses caused by any variance between the carrier's bill of lading to the Defendant and the Defendant's bill of lading to the shippers. The Plaintiff's bill of lading to the Defendant contained the statement “Stowed on Deck: 2,304,088 FBM of which 1,982,204 FBM loaded on deck without liability for loss or damage howsoever caused”. The Defendant's bills of lading to the shippers contained, as indicted above, a breakdown in percentages of the on deck and under deck stowage. The trial Judge and the Court of Appeal held, however, that the cause of the failure of the exemption clause and the Plaintiff's liability in the underlying action was not the variance between the bills of lading but was because the Plaintiff's supercargo did not take steps during the loading to adequately identify what was loaded on deck and under deck. The description of the cargo stowage had to be sufficient to permit a shipper to determine the extent of the risk presented by the on deck cargo. This required sufficient identification of the cargo to determine not just the quantity but also the value of the cargo stowed on deck.
Rail Demurrage – Liability of Terminal – Canadian Transportation Act – Bills of Lading Act
Canadian National Railway v. Neptune Bulk Terminals (Canada) Ltd., 2006 BCSC 1073
The Plaintiff railway company brought this action against the Defendant terminal operator to recover demurrage charges for delay in the loading and unloading of grain from the Plaintiff's rail cars. The Plaintiff argued that it was entitled to the payment of demurrage in accordance with its tariffs published pursuant to the Canadian Transportation Act. The Judge reviewed the history of the Canadian Transportation Act and demurrage in relation to rail carriers and ultimately concluded that the Act did not permit the Plaintiff to impose tariffs on third parties such as the Defendant who have no direct contractual relationship with the Plaintiff. The Plaintiff's tariffs were only enforceable against parties with whom the Plaintiff contracted, namely, the shippers. The Plaintiff advanced an alternative argument that there was an implied agreement with the Defendant for the payment of demurrage based on correspondence and notices from the Plaintiff advising that terminals accepting rail cars were deemed to undertake payment of demurrage. The Judge also rejected this argument, however, as the Defendant had repeatedly advised the Plaintiff that it would not be responsible for the charges. Finally, the Plaintiff argued that the Defendant, who was named as consignee in some bills of lading, was liable for demurrage pursuant to s.2 of the Bills of Lading Act. The Judge rejected this argument on the basis, inter alia, that s.2 of the Bills of Lading Act applied only to consignees “to whom the property in the goods therein mentioned passes” and the Defendant did not acquire ownership in any of the goods.
Mis-Delivery/Theft – Onus of Proof – Hearsay Evidence – Post-Discharge Exclusions – Hague-Visby Rules
Shtutman v. Ocean Marine Shipping Inc., 2005 FC 1471
The Plaintiff alleged that the carrier was liable for the loss of the contents of a container carried by sea from Halifax to Conakry. Specifically, the Plaintiff alleged that the carrier had either mis-delivered the container or that the contents of the container had been stolen while the container was in the possession of the carrier. Unfortunately, the Plaintiff's case depended primarily on the admissibility of letters from the consignee which stated that the container was empty when received and had no lock or seal. The Judge reviewed the law relating to the admissibility of hearsay evidence and noted that such evidence may be admissible if it meets the twin tests of reliability and necessity. The Judge found that this test had not been met and refused to admit the letters. The Judge further accepted the evidence of the Defendant's witness that the container had been delivered to the consignee. Accordingly, the Judge held that the Plaintiff had failed to meet the onus on it of proving the loss of the cargo while in the possession of the carrier. The Judge further held that the exclusion clause on the reverse of the carrier's bill of lading would have applied in any event since clauses excluding or limiting liability after discharge from the ship were not invalidated by Art. III r. 8 of the Hague-Visby Rules.
Multimodal – Liability of Rail Carrier – Estoppel – Waiver
Canadian Forest Products Ltd. v. B.C. Rail et al., 2005 BCCA 369
Wood pulp was loaded in apparent good order and condition onto rail cars in the BC interior, discharged at a port terminal and then loaded on board the carrying vessel. At final discharge, the pulp was found contaminated with wood splinters and rejected for use by the receiver’s customer. The Plaintiff claimed against the rail carrier, the loading terminal and the ocean carrier. The evidence was that wood splinter contamination was a known risk from using wood floored or lined rail cars but the Plaintiff had selected such rail cars over ones with steel floors. There was also evidence that the rail cars when delivered for loading were often not cleaned and that employees of the the Plaintiff had to inspect and sweep them. Such debris could have been a source of wood splinter contamination. At trial, the Plaintiff invited the Court to apply a presumption that the party liable is the last party to handle the cargo when the contamination was found. Specifically, the Plaintiff argued that the ocean carrier should be found liable on the basis of the presumption, or if the ocean carrier rebutted the presumption, the terminal should be liable, or if the terminal in turn rebutted the presumption, the rail carrier should be liable. The trial Judge found that the handling at the terminal and on board the vessel presented little or no opportunity for the contamination to arise since the vessel was of steel construction and wood was not used in connection with storage and loading at the terminal. These two Defendants had rebutted the presumption but the rail carrier had not. However, the claim against the rail carrier was also dismissed as the trial Judge held that the Plaintiff had waived its right to claim for dirty rail cars by having its own employees sweep the cars and, further that the Plaintiff was estopped from claiming for wood contamination from the wood flooring as the Plaintiff had knowingly selected wood-lined rail cars thereby accepting the risk of wood contamination. Arguments as to lack of title to sue and whether the pulp was improperly rejected were also considered and rejected by the trial Judge. The Plaintiff appealed the dismissal as against the rail carrier. On appeal the British Columbia Court of Appeal noted that the starting point was the obligation of a common carrier not to damage goods in its possession and to provide suitable accommodation for the carriage of the particular goods. The application of these common law principles led to the conclusion that the rail carrier was liable unless there was a waiver or estoppel. The Court of Appeal considered and concluded that there was no estoppel or waiver. In reaching this conclusion the Court of Appeal noted that the reason for choosing wood lined rail cars, which was known to the rail carrier, was to minimize condensation damage to the pulp. The Court further noted that the reason the Plaintiff had its own employees sweep the rail cars was to avoid delays in shipping. Given these reasons for the Plaintiff's conduct and the fact that the Plaintiff was not more knowledgeable than the rail carrier about how to ship pulp, the Court found there was no estoppel and no waiver. In result, the Plaintiff's appeal was successful and the rail carrier was found liable.
Carriage – Fire – Dangerous Goods – Hague Rules – Appeal – Standard of Review
Elders Grain Company Limited et al. v. The “Ralph Misener” et al., 2005 FCA 139
This matter involved the carriage of a cargo of alfalfa pellets from Thunder Bay to Montreal. During the discharge of the cargo in Montreal a fire broke out damaging the cargo and the carrying ship. The Plaintiffs claimed for the damage to the cargo and the Defendants counter-claimed for the damage to the ship. The Plaintiffs argued that the bills of lading, which were clean, created a prima facie presumption against the Defendants that the cargo was received in good order and condition. The trial Judge, however, held that during the loading the cargo was surrounded by a cloud of dust which made visual inspection difficult and that under these circumstances the presumption did not apply. The trial Judge then turned to the cause of the fire and reviewed the evidence of the various experts and witnesses. He concluded that the evidence overwhelmingly supported the conclusion that spontaneous combustion caused the fire. He next considered whether the alfalfa pellets were a “dangerous cargo” within the meaning of Article IV r. 6 of the Hague Rules. He noted that the word “dangerous” had to be given a broad meaning and concluded with little difficulty that the cargo was indeed dangerous since if not properly stored it could ignite. He further held that there was no evidence the Defendants consented to the shipment of the cargo with knowledge of its dangerous character. The Plaintiffs failed to advise the Defendants of its flammable nature and failed to provide any information to the Defendants with respect to the cargo. In their defence the Plaintiffs argued that pursuant to Art. IV r. 3 of the Hague Rules they could not be liable to the Defendants without proof of an act, fault or neglect. The trial Judge rejected this argument, holding that a shipper's liability for damage caused by dangerous goods was strict both under Art. IV r. 6 and at common law. In result, the Plaintiffs' action was dismissed and the Counterclaim was allowed. The Plaintiffs appealed.
At the Court of Appeal the Court first noted that the standard of review depended on the nature of the questions appealed from. The standard of review for pure questions of law is one of correctness. The standard for questions of fact is whether the trial judge made a palpable and overriding error i.e. “one that gives rise to a reasoned belief that the trial judge must have forgotten, ignored or misconceived the evidence in a way that affected his conclusion”. The standard for a mixed question of law and fact is that of “palpable and overriding error unless it is clear that the trial judge made some extricable error in principle with respect of the characterisation of the legal test or its application”. Applying these standards of review the Court of Appeal upheld the trial Judge and dismissed the appeal.
Stay of Proceedings – Arbitration Clause – MLA s. 46 – Charterparties – Bills of Lading and Incorporation of Charter Terms – Striking Claims
Dongnam Oil & Fats Co. v. Chemex Ltd. et al., 2004 FC 1732
This matter concerned damage to a cargo of bleached tallow to be carried from Newark, New Jersey to Inchon, Korea. The cargo was to be carried on board the ship “Tuapse”. The “Tuapse” was owned by Novoship but chartered under a head charter to Chemex. The head charter provided for London arbitration. The Plaintiff and Chemex entered into a voyage charter party which again called for London arbitration. The cargo was loaded at Newark and two bills of lading were issued which incorporated the voyage charter party. The cargo was carried on board the “Tuapse” to Nanaimo, British Columbia where it was transhipped to another vessel for carriage to Korea. The cargo was allegedly damaged during the transhipment. The Plaintiff subsequently commenced this proceeding and the Defendants Novoship and Chemex brought applications to stay the proceedings in favour of London arbitration. The Plaintiff argued that s. 46 of the Marine Liability Act applied making the arbitration provisions inapplicable. The Prothonotary disagreed ruling that a transhipment from one vessel to another was not loading or discharging at a Canadian port within the meaning of s. 46(1)(a). The Prothonotary further noted that section 46 should be interpreted strictly since it was a restriction on freedom to contract. The Prothonotary then considered whether the arbitration provisions were incorporated. With respect to the dispute between the Plaintiff and Chemex he found that there was clearly an arbitration provision in the voyage charter and therefore concluded that he had no alternative but to allow the stay. With respect to the dispute between the Plaintiff and Novoship, however, there was no direct contractual relationship between these two and therefore he had to consider the effect of the bills of lading. In this regard he noted that if the bills of lading had specifically referred to the arbitration provision, Novoship would be entitled to a stay. In addition, if the bills of lading incorporated the charter party terms and those terms provided that the arbitration provision applied to disputes under the bill of lading, then Novoship would be entitled to a stay. However, in this case the terms of the voyage charter party did not provide that the arbitration provision applied to disputes under the bill of lading and the bills of lading did not specifically refer to arbitration. Accordingly, Novoship was not entitled to a stay. Two subsidiary issues dealt with in these reasons concerned applications to strike out a claim for a declaration the Plaintiff did not owe dead freight and a claim for wrongful arrest. The claim for a declaration on the dead freight issue was struck on the grounds that the issue had been decided in an arbitration. The claim for wrongful arrest was struck on the grounds the Plaintiff was not the owner or in possession of the cargo at the time it was arrested.
Damages – Compound Interest
Elders Grain Company Limited et al. v. The “Ralph Misener” et al., 2004 FC 1285
In this matter the Defendant had been successful in its counterclaim and now sought compound interest. The Court referred to the Supreme Court of Canada decision in Bank of America Canada v Mutual Trust Co.,  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.