Précis: The Federal Court of Appeal held that s. 137 of the Canada Transportation Act prohibits rail carriers from contracting out of liabilities using hold harmless and indemnity clauses.
Facts:The Canadian Transportation Agency was asked by a group of shippers for a ruling on whether Item 54 of a Tariff published by the Canadian Pacific Railway Company violated s. 137 of the Canada Transportation Act (the “CTA”). Item 54 contained a group of clauses dealing with liability and indemnity. The Agency rendered two decisions and ordered that portions of Item 54 were contrary to s. 137 of the CTA. Both parties appealed.
Decision: The appeal of Canadian Pacific is allowed. The cross-appeal is dismissed.
Held: Under s. 117 of the CTA, a railway may only charge the rates and apply the terms and conditions that have been set out in its published tariffs. Section 126 of the CTA allows the parties to deviate from the published tariffs if there is a “confidential contract” between them. Section 137 of the CTA provides that a railway company may only restrict or limit its liability pursuant to a written agreement signed by the shipper. Otherwise the company’s liability is limited or restricted only to the extent prescribed by the Agency in the Railway Traffic Liability Regulations which largely reproduce the common liabilities of a carrier. In this case Canadian Pacific published a tariff in relation to hazardous commodities. Item 54 of that tariff provided Canadian Pacific would not be liable in respect of such commodities, included a broadly worded indemnity in respect of third party claims arising from the carriage of such commodities and included a joint liability clause.
The Agency published two decisions which were contradictory. In the first, the Agency gave s. 137 of the CTA a broad interpretation that includes “any liability that is caused by, arising from, or associated in any way with the movement of traffic” and held that Item 54 was a limitation or restriction of liability not contained in a written agreement and therefore invalid. In the second decision the Agency restricted the scope of s. 137 by excluding liabilities of the railways to third parties and the reallocation of those liabilities between the railway and the shipper. The first decision is the correct interpretation of s. 137. Section 137 is not a codification of the common law but is a restriction on a railway company’s ability to limit its liability. Where a third party suffers damage by the railway’s negligence and seeks to recover that damage from the shipper, the shipper would have a claim against the railway under provincial contributory negligence law and any limitation of the railway’s liability to the shipper is be caught by the plain meaning of s. 137.
With respect to the interpretation of Item 54, it is to be noted that shippers are not subject to any limitation or restriction of liability by the mere publication of the tariff. Such limitations or restrictions must be contained in a signed agreement. Nevertheless, when properly interpreted, Item 54 does not contain prohibited limitations of liability. The broad limitation expressed in the opening words of Item 54 is subject to later exceptions that preserve the railway’s liability to shippers.