Canadian Forest Products Ltd. v. B.C. Rail et al.

In Carriage of Goods by Sea on (Updated )

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.