BETWEEN:
and
PANTAINER LTD.
and
PANALPINA INC.
and
ORIENT OVERSEAS CONTAINER LINE LTD.
and
CANADIAN PACIFIC RAILWAY
Defendants
and
PANTAINER LTD.
Plaintiff by Counterclaim
and
ORIENT OVERSEAS CONTAINER LINE LTD.
REASONS FOR ORDER AND ORDER
(Public Version)
JUSTICE de MONTIGNY
[1] This is a claim by the Plaintiff for the damages to its cargo that occurred as a result of a train derailment on or about April 27, 2003. The parties have agreed to all relevant facts and have admitted into evidence the relevant documents. I will therefore reproduce in the following paragraphs the agreed statement of facts.
1. Boutique Jacob Inc. (hereinafter referred to as "Boutique Jacob") is a body politic and corporate having a place of business at 6125 Chemin Côte-de-Liesse, in the City of Montreal, Province of Quebec; It carries on the business of retailing girls', young women's and women's fashions in stores located throughout Canada;
2. Pantainer Inc. is a Non-Vessel Operating Carrier, which carries on business worldwide for cargoes to be transported for customers of the "Panalpina Group of Companies", among of whom is Panalpina Inc., which carries on business as freight forwarder in Canada;
3. Panalpina Inc. uses the services of Panalpina (China) Ltd., its correspondent freight forwarder in the Far East;
4. Boutique Jacob Inc. is the customer of Panalpina Inc., as its freight forwarder, and has used the services of Panalpina Inc. and those of its related company, Pantainer Inc., on prior occasions for shipments from the Far East;
5. Orient Overseas Container Line Ltd. (known in the trade as "OOCL") is a container line service, which carries cargo by ship worldwide, and in particular, from Hong Kong to Vancouver; it carries on business from its head office located in Hong Kong;
6. Canadian Pacific Railway carries on the business of transport by rail in and throughout Canada and the United States, and from Vancouver to Montreal, and is a Canadian company operating from Calgary, Alberta;
7. At all material times, Boutique Jacob was the owner and party in every way interested in a shipment of assorted garments and accessories consisting of a total of 16,740 textile pieces in 1,605 cartons, having a total gross weight of 10,549 kilograms (hereinafter the "Cargo");
8. Boutique Jacob purchased the Cargo from various suppliers located in Hong Kong on a F.O.B. Hong Kong basis;
9. The F.O.B. Hong Kong value of the Cargo that was damaged and/or lost (hereinafter referred to as the "Subject Cargo") was CDN $26,880.40;
10. The Subject Cargo consisted of 3,342 textile pieces having a total weight of 494.1 kilograms;
11. The purchase price of the Subject Cargo plus freight and insurance was CDN $33,598.64;
12. The Cargo was ordered in December 2002 as approximately four to five months' lead time is required in order to meet the requirements of the intended seasonal market. In the clothing industry, where trends and fashion are critical, timing is an essential part of the production and merchandising process. Therefore, it was impossible for Boutique Jacob to arrange for a replacement shipment for the Subject Cargo;
13. Goods of the same styles that comprised the Subject Cargo were sold by Boutique Jacob in its various stores across Canada at full price and at various discounted prices. Taking the average of all sales prices of the styles of the Subject Cargo, the value of the Subject Cargo (being the value at which the Subject Cargo would have sold at on average, if the Subject Cargo had been delivered intact) would have been CDN $71,550.47;
14. Taking the lowest discounted sales prices of the same style of goods of the Subject Cargo during the same relevant period used in paragraph 13, then the value of the Subject Cargo would have been CDN $35,116.58;
15. With respect to the facts stated in paragraphs 13 and 14, reference is made to the spreadsheet prepared by Boutique Jacob Inc. and supporting documentation and to a letter of April 28, 2005 from their solicitors enclosing further financial information;
16. Through the agency of Panalpina Inc., Boutique Jacob contractually engaged and paid Pantainer Ltd. (hereinafter referred to as "Pantainer") to carry the Cargo from Hong Kong to the place of delivery in Montreal, Canada;
17. Pantainer issued Express Line bills of lading Nos. 744870, 744871, 744872, 744873, 744874, 744813, 744726 and 744869 to Boutique Jacob in respect of the carriage of the Cargo. The value of the Cargo was not declared. Pantainer had used the same style bill of lading with the same terms and conditions that appear on the back for previous shipments for Boutique Jacob in the two years prior to the shipment of the Cargo;
18. Through the agency of Panalpina (China) Ltd. as instructed by Panalpina Inc., Pantainer in turn engaged and paid Orient Overseas Container Line Ltd. (hereinafter "OOCL") to carry the Cargo from the port of loading in Hong Kong, China to the place of delivery in Montreal, Canada, under Bill of Lading (Waybill) OOLU8292212. The value of the cargo was not declared;
19. OOCL did not issue an original or any hardcopy waybill or bill of lading nor was it requested to do so by Pantainer. There was no master contract or booking note entered into between Pantainer and OOCL. The document covering this shipment was prepared, issued and was acted upon electronically. The electronic document itself is claused as follows: "The printed terms and conditions appearing on the face and reverse side of this bill of lading are available at www.oocl.com, in OOCL's published US tariffs and in pamphlet form". Neither Pantainer nor OOCL have records or recollection of discussions with respect to any limitations of liability or any other OOCL terms and conditions;
20. OOCL maintains a website at www.oocl.com through which NVOC operators such as Pantainer may reserve space on board vessels according to scheduled departure for specified destinations, provide the information necessary to appear on the electronic bill of lading (waybill), obtain confirmation that the containers presented for shipment at the terminal have been loaded, the name of the ship, the progress of the voyage, the expected time of arrival, and notice of arrival. NVOC operators may obtain an electronic copy of the bill of lading (waybill) that only becomes available once containers are actually loaded on board a container vessel.
21. OCCL uses the same website to convey information to the notify party on the bill of lading of the arrival of the container at the port of discharge.
22. On the aforesaid OOCL website, the bill of lading terms and conditions are provided for by a specific link. They have been in force in their present form since at least 2000, and have not been amended since then. They were in force at the time the carriage of the Subject Cargo was contracted and performed.
23. Pantainer was not specifically aware of the OOCL B/L terms and conditions in place at the time of the shipment in question; Pantainer whether by itself or through Panalpina China Ltd. or Panalpina Inc. have made frequent use of OOCL's online services with respect to the previous transport of cargo of Plaintiff and other customers and they did use the online service with respect to the transport of the Subject Cargo.
24. OOCL, in turn, engaged and paid Canadian Pacific Railway (hereinafter "CPR") pursuant to the Confidential Rate Contract between OOCL and CPR to carry the Cargo by rail from Vancouver, Canada to Montreal, Canada.
25. OOCL made the booking for the carriage of the Cargo from Vancouver to Montreal by rail with CPR. The booking procedure as between OOCL and CPR for North America import containers is done by EDI from the OOCL Chicago office. No hard copy documents were generated;
26. CPR did not issue a waybill or an EDI bill of lading for the shipment in question, but it did record the reception of the container and the train on its online system relied upon by Pantainer and OOCL;
27. Pantainer acknowledged receipt of the Cargo in good order and condition on or about April 7, 2003 and arranged for its stowage inside a container provided by OOCL;
28. OOCL acknowledged the receipt of one container containing the Cargo from Pantainer in Hong Kong in apparent good order and condition on April 7, 2003;
29. OOCL caused the container to be loaded on the board the container ship NYK KAI pursuant to its slot charter with the Owners of that vessel, which carried the container to and discharged the container at Vancouver and caused the issuance of its electronic bill of lading(waybill) thereafter;
30. CPR received the same container containing the Cargo at Vancouver from OOCL in apparent good order and condition on April 20, 2003 and commenced the rail carriage from Vancouver to Montreal on that day;
31. Whilst the Cargo was being carried by train, by CPR, from Vancouver to Montreal, there was a train derailment which occurred on or about April 27, 2003 in Sudbury, Ontario. As a result of the train derailment, some of the Cargo was damaged and some was lost;
32. There is no issue as to the non-negligence of CPR;
33. Boutique Jacob gave reasonable notice of the damage to and loss of the Cargo to defendants and there is no issue with respect thereto;
34. The nature and extent of the damages to the Subject Cargo were such that the Subject Cargo had to be disposed of and, accordingly, salvage was not possible. The damaged portion of the Subject Cargo was therefore a constructive total loss;
35. Boutique Jacob made all reasonable efforts to mitigate its loss;
36. The Subject Cargo lost or damaged by the derailment was covered by Pantainer bills of lading #744873 and #744869 and by the OOCL Bill of Lading (Waybill).
37. On April 27, 2003, the Special Drawing Right, according to the International Monetary Fund website in Canadian dollars, was equivalent to CDN $2.00;
38. The US exchange rate into Canadian dollars on or about April 27, 2003, according to the
Bank of Canada website, was 1.45;
39. Since April 27, 2003 to date, the average prime rate charged by Canadian chartered businesses is 4.3 %; the average commercial rate is 6%; in the event that the average changes by the time of the trial, the parties will submit a revision of this percentage; the parties cannot agree on the manner in which the indemnity of interest is to be calculated, whether as simple interest or as compounded according to a term of time.
40. Plaintiff filed its Statement of Claim on January 8, 2004 and served the Defendants within time; all Defendants have denied all liability or, in the event, that any of them is found liable, each seeks to limit or exclude that liability;
41. Defendant Pantainer Inc. has issued a Third Party Statement of Claim against OOCL and OOCL has denied liability towards Pantainer;
42. Pantainer and OOCL are not seeking any conclusions against CPR nor is CPR seeking any conclusions against OOCL or Pantainer;
QUESTIONS
[2] The parties have agreed that the following issues have to be decided :
a) Is Plaintiff entitled to compensation from any of the Defendants or from some or all of the Defendants jointly and severally?
b) If so, which Defendants and on what basis?
c) How are the Plaintiff's damages to be assessed and what is the quantum?
d) Are any of the Defendants who are found liable to Plaintiff entitled to limit their liability, and, if so, according to what provision of law or to what provision of contract?
e) As a result of its contract or of the law, is OOCL liable to Pantainer for any amount?
f) What compensation of interest is appropriate?
ANALYSIS
[3] I will deal first with the liability of the various parties and with the relevant clauses of limitations that are found in the contracts governing the complex relationships between the Plaintiff and the four Defendants. If necessary, I shall next turn to the issue of damages and how best to assess their quantum; in that context, I will examine the request made by the Plaintiff for compound interest.
A) Liability and Limitations
[4] The Agreed Facts reveal that the Panalpina Group of companies (that is, for the purposes of the present case, Panalpina Inc. and its correspondent for the Far East, Panalpina (China) Ltd.) carried on business exclusively as freight forwarder and agent for the carrier, Pantainer. This is made evident by the various bills of lading issued by this last mentioned carrier, as found in the Agreed Documents. In other words, Pantainer was the contracting party vis-à-vis the Plaintiff, and Panalpina was an agent at all times. This was explicitly admitted at the hearing by counsel for Jacob.
[5] It is by now beyond dispute that an agent will not be liable if it is clearly stated in the contract that he is contracting as agent only on behalf of a principal (Q.N.S. Paper Co., v. Chartwell Shipping Ltd., [1989] 2 S.C.R. 683; N. & J. Vlassopulos Ltd. v. Ney Shipping Ltd. (The "Santa Carina") (1977), 1 Lloyd's Rep. 478). Unless the rest of the contract clearly involves his personal liability or shows that he is the real principal, the agent will bear no contractual liability. As this is clearly not the case here, the case is therefore dismissed as against the Defendant Panalpina Inc.
[6] The issue is obviously more complex with respect to the other three Defendants. As for Pantainer, there is no doubt that it is contractually liable to Jacob. There was some debate at the hearing as to whether Pantainer could be considered as a bailee for reward or a common carrier, with all the obligations attached to these concepts. But I need not go there with respect to this Defendant, as clause 6.1 of the bill of lading leaves no room for discussion:
6.1 Carrier shall be liable for loss of or damage to the goods occurring between the time when it takes goods into its custody and the time of delivery.
[7] Therefore, Pantainer is liable as a contracting carrier for any and all damages sustained by the cargo unless it can limit its liability. This much has been admitted by counsel for Pantainer at the hearing. But there is, indeed, a limitation clause in the bill of lading which reads as follows:
The liability of the Carrier shall be governed by the following liability system:
6.2 The place where the loss or damage to the goods occurred is known:
6.2.1 General Clause (except USA):
a) Sea Carriage - if it is established that loss or damage occurred during the sea carriage, liability shall be governed by the legal rules applicable provided for in Section 1 of this Bill of Lading;
b) Land/Air Transport - if it is established that the loss or damage to the goods occurred during land or air carriage, except in the USA, liability shall be governed as follows:
Land Transport: by the CMR Convention (Trucking) or the CRM Convention (Railways), or by any national transport law mandatorily applicable, or if no such law is applicable, maximum liability shall be as provided for in section 7.1 b)
Air Transport: by the Convention for Unification of certain Rules relating to International Transportation (Warsaw Convention), or by any national transport law mandatorily applicable, or if no such law is applicable, maximum liability shall be as provided for in section 7.1 b).
[8] It is clear that the loss in question occurred during land transport. Moreover, there has been no argument or contention on the part of the Plaintiff or of Pantainer to the effect that the CRM Convention would apply, as it has not been ratified by Canada. However, subparagraph b) refers to "any national transport law mandatorily applicable". According to the Plaintiff, there is such a legislation in Canada, and it is the Canada Transportation Act (S.C. 1996, c. 10). Part III of that Act, entitled "Railway Transportation", contains a section allowing rail carriers to limit their responsibility. It reads as follows:
Agreement limiting liability
137. (1) A railway company shall not limit or restrict its liability to a shipper for the movement of traffic except by means of a written agreement signed by the shipper or by an association or other body representing shippers.
Liability if no agreement
(2) If there is no agreement, the railway company's liability is limited or restricted to the extent provided in any terms and conditions that the Agency may
(a) on the application of the company, specify for the traffic; or
(b) prescribe by regulation, if none are specified for the traffic
[9] Since there is no "written agreement signed by the shipper or by an association or other body representing shippers", it is the Plaintiff's submission that Pantainer is precluded from limiting its liability. Accordingly, the extent of Pantainer's liability should be governed by section 11 of the Railway Traffic Liability Regulations, which states:
11. The amount of any loss of or damage to goods for which a carrier is liable in respect of the transportation of the goods shall be the lesser of the value of the goods at the place and time of their shipment, including freight and other charges that affect the valuation of the goods, if paid, and the customs duties if paid or payable and not refundable, and
a) the value represented in writing by the shipper;
b) the value agreed to by the carrier and the shipper, or
c) the value determined in accordance with the tariff classification of the goods on which the rate is based.
[10] Despite Mr. Sproule's clever argument, I do not think that section 137 of the Canada Transportation Act can be considered as a "national transport law mandatorily applicable". Section 88 of that Act sets out that Part III applies "to all persons, railway companies and railways within the legislative authority of Parliament". It is beyond dispute that Pantainer is not a railway company coming within the legislative authority of Parliament.
[11] But that need not matter, according to Mr. Sproule, since clause 6.2.1.b) has incorporated by reference the Canada Transportation Act and, more particularly, its section 137. I fail to see how the words "or by any national transport law mandatorily applicable" can be interpreted as incorporating the provisions of the Canada Transportation Act into the bill of lading. If that was the intent, it could have been conveyed in much more compelling terms. Indeed, the same argument could be made with respect to the CRM Convention; the fact that it has not been ratified by Canada would be no bar to its referential incorporation into the bill of lading, if we accept this logic.
[12] But such a construction of the clause 6.2.1.b) flies in the face of its wording. The intention of the drafter was clearly to provide for three different possibilities with respect to liability. If the relevant convention has not been ratified, and if there is no national transport law mandatorily applicable, then liability is governed by section 7.1.b). This is consistent with the intent and spirit of the bill of lading, which leaves open to the parties the possibility to negotiate a higher value as the limit of the carrier's liability if such an agreement is not precluded by an international convention or by a national law.
[13] As a result, I am of the view that Pantainer's liability must be governed by section 7.1.b) of its Bill of Lading, which states:
Compensation for Loss or Damage:
7.1 General Clause (all shipments worldwide, except USA): Unless the Merchant, with the consent of the Carrier, has declared a higher value for the goods in the space provided on the front of the bill of lading and paid extra freight per Carrier's tariff in which case such higher value shall be the limit, Carrier's liability shall be limited as follows:
a) If it can be determined where loss or damage so occurred, the liability limits provided in the International conventions or national legislations mentioned in sections 1 and 6.2.1(b) shall apply;
b) If it cannot be determined where loss or damage took place, or if no legal or mandatory laws apply, compensation shall not, however, exceed 2 SDRs (special drawing rates) of the International Monetary Fund (IMF) per kilogram of gross weight, with a maximum of 1,000 SDR per bill of lading.
[14] On the basis of the Agreed Facts, according to which the total weight of the cargo was 494.1 kilograms and the value of the SDR on April 27, 2003 was equivalent to CDN $2.00, it appears that Pantainer's liability cannot exceed $1,976.40 per bill of lading. Since the cargo lost or damaged by the derailment was covered by two bills of lading, the total liability of Pantainer would be for the amount of $3,952.80.
[15] In his memorandum, Mr. Sproule has attempted to argue that this limitation clause could not apply because of its "inherent inadequacies and deficiencies". If I understand his argument correctly, section 7.1.b) would be too broad as it encompasses a number of ways in which Pantainer's liability could arise, without being specific enough. He relied for that proposition on the test enunciated in Canada Steamship Lines Ltd. v. The King, [1952] A.C. 192, where Lord Morton had to determine whether a limitation clause could be interpreted as excluding liability for negligence. He came to the conclusion that if there is no express reference to negligence in a limitation clause, but the words are wide enough to cover it, it will nevertheless be deemed not to cover negligence if the head of damage may be based on some other ground that could have been foreseen by the person claiming the benefit of the clause.
[16] As pointed out by Stone, J.A. in Canadian Pacific Forest Products Ltd. - Tahsis Pacific Region v. Beltimber (The), [1999] 4 F.C. 320, at para. 2), "[T]he unlikelihood that one party to a contract would intend to absolve the other party from negligent performance of the contract appears to lie at the root of the Canada Steamship tests". In the present case, there is no issue as to negligence. Despite its awkward wording, I take paragraph 32 of the Agreed Facts ("there is no issue as to the non-negligence of CPR) to mean that CPR's possible negligence is not to be litigated in the context of the present claim. Indeed, no evidence has been filed in that respect and the case has proceeded as a stated case, with no witnesses. The only way Pantainer could have been found negligent would have been in choosing OOCL to ship the cargo from Hong Kong to Vancouver. There has been no suggestion and certainly no evidence to that effect.
[17] In any event, I do not think that section 7.1.b) lends itself to any ambiguity on a fair and plain reading. It provides explicitly for a clear limit to any compensation, however the liability may have arisen. As for claims in tort, they are specifically covered by section 25 of the Bill of Lading:
25. The defences and limits of liability provided for in these terms and conditions shall apply in any action against the Carrier for loss or damages to goods whether the action be founded in contract or in tort.
[18] For all the above mentioned reasons, I come to the conclusion that Pantainer cannot be held liable for more than $1,976.40 vis-à-vis Jacob for each bill of lading, for a total amount of $3,952.80.
[19] I will now turn to the claim by the Plaintiff against OOCL. Clause 3.1 of Pantainer's bill of lading provides that Pantainer "shall be entitled to subcontract directly or indirectly on any terms the whole or any part of the handling storage or carriage of the goods and all duties undertaken by carrier in relation to the goods". This is precisely what Pantainer did in subcontracting the entirety of its carriage contract with Jacob to OOCL (see Agreed Facts, para. 16).
[20] It is therefore in its capacity as sub-bailee for reward that OOCL is liable to Jacob. The Plaintiff has no claim against OOCL in contract, since it is Pantainer which entered into a contract with OOCL, which in turn contracted with CPR. There is no evidence that Pantainer was acting in any agency capacity on behalf of Plaintiff or anyone from whom Plaintiff derived title. The facts, indeed, suggest the contrary: 1) Payment of freight was made pursuant to separate and independent contracts (see Agreed Facts, para. 16, 18 and 24); Pantainer issued its own bills of lading, on which it described and held itself out to be a carrier (see clause 2.2 of the bills of lading); as appear on the exhibits themselves, the Pantainer bills of lading were endorsed or consigned and used to transfer title, not the OOCL document; and OOCL's document describes Pantainer as the shipper and does not qualify it as being in any representative capacity. For all these reasons, there is clearly no direct contractual relationship between the Plaintiff and the Defendant OOCL.
[21] Moreover, the Plaintiff has no claim in tort against OOCL. There is no evidence that OOCL was careless in its choice of rail carrier, with whom it apparently has done business for many years. There is no evidence that the shape, weight or condition of the OOCL's container caused the derailment, and the Plaintiff did not raise any argument in this respect.
[22] As a result, OOCL's liability is only exposed as sub-bailee on terms. Plaintiff has also argued that OOCL was liable to Jacob as a common carrier. A common carrier has been defined as "one who is engaged in the trade of carrying goods as a regular business, and who holds himself out as ready to carry for any who may wish to employ him" (see Carver's Carriage by Sea, Vol. 1, 13th ed. by Raoul Colinvaux, 1982, para. 4). The responsibility of a common carrier has been described as that of an insurer of the safety of the goods entrusted to him for carriage, save where loss or damage results from an act of God or of the Queen's enemies, the fault of the consignor or an inherent vice in the goods themselves (see Halsbury's Laws of England, 4th Edition Reissue, Butterworths, 1993, p. 351; Chitty on Contracts, 26th Edition, Volume II, Specific Contracts, Sweet & Maxwell, 1989, para. 3160 ff.).
[23] This quasi-contractual liability has been accepted in Canadian law (see, for ex., Canadian National Railway co. v. Harris, [1946] S.C.R. 352; Canadian Forest Products Ltd. v. B.C. Rail Ltd., 2005 BCCA 369. It is well described in the following excerpt from Otto Kahn-Freund in The Law of Carriage by Inland Transport, 4th ed., (London: Stevens & Sons, 1965, at pp. 193-194):
The carrier is...liable not only to carry the goods, but to carry them safely and to deliver them intact to their owner or his agent. This means that he is liable for the loss of the goods and also liable for any damage to the goods. This duty of the carrier to deliver the goods safely is, mainly for historical reasons, at common law considered to exist apart from any contract. It is imposed upon him by the law not only because he has contracted to carry and deliver the goods but because he has been put in possession of another person's goods. In legal language this is expressed by saying that the carrier is a bailee, who, in certain circumstances... is liable to the bailor if he fails to deliver the goods intact.
[24] There was some discussion at the hearing as to whether OOCL (and, for that matter, Pantainer) can be considered as common carriers. Counsel for OOCL has vigorously disputed this characterization, submitting that in the absence of any legislation governing their trade (as opposed to railway companies), a freight forwarder, a non-vessel operating carrier, a ship owner or a ship operator were not under any obligation to take goods and carry them. I need not make a determination in this respect, since Pantainer and OOCL had discharged their duties as carriers when the cargo was damaged as a result of the derailment. This much has been made abundantly clear in International Terminal Operators Ltd. v. Miida Electronics Inc. et al., [1986] 1 S.C.R. 752, at p. 798, and it is not disputed by the Plaintiff.
[25] As a result, OOCL is liable only as a bailee for reward, as it received the cargo in Hong Kong and undertook to deliver the merchandise to Montreal, as can be seen from paragraph 18 of the Agreed Facts (see also the waybill and the terms and conditions in the Agreed Documents). Bailment on terms has been accepted in Canadian maritime law, and it is well established that the owner of the goods can sue the sub-bailee directly for loss or damage to the goods. The only issue is whether the Plaintiff is bound by the conditions found in the OOCL's terms and conditions.
[26] The issue has been well defined by Lord Denning in Morris v. Martin, [1966] 1 Q.B. 716, at p. 729-730), a decision that has been quoted to me both by the Plaintiff and the Defendant OOCL. In that case, the Plaintiff had sent her mink stole to a furrier to be cleaned; the furrier did not clean it himself but telephoned to the Plaintiff and offered to send it away to a reputable cleaner to be cleaned, which she accepted. That cleaner, known to the Plaintiff, only worked for the trade and not for the private individuals. While the fur was with the cleaner it was stolen by one of their servants. The question was whether the limitation clauses in the cleaning contract could be opposed to the Plaintiff:
Now comes the question: Can the cleaners rely, as against Mrs. Morris, on the exempting conditions, although there was no contract directly between them and her? There is much to be said on each side. On the one hand, it is hard on Mrs. Morris, if her just claim is defeated by exempting conditions of which she knew nothing and to which she was not a party. On the other hand, if is hard on the cleaners if they are held liable to a greater responsibility than they agreed to undertake. (...) The answer to the problem lies, I think, in this: the owner is bound by the conditions if he has expressly or impliedly consented to the bailee making a sub-bailment containing those conditions, but not otherwise. (...) In this case, Mrs. Morris agreed that Mr. Beder should send the fur to the cleaners, and by so doing I think she impliedly consented to his making a contract for cleaning on the terms usually current in the trade.
[27] In a maritime law context, the Privy Council also held that the authorization to sub-contract the whole or any part of the carriage of the goods "on any terms" demonstrated that the owner had "expressly consented" to the sub-bailment of their goods on any terms, and that the scope of that express consent was broad enough to include an exclusive jurisdiction clause (See K.H. Entreprise (The) v. Pioneer Container (The), [1994] 2 A.C. 324; see also Singer Co (U.K.) Ltd. v. Tees and Hartlepool Port Authorty, [1988] 2 Lloyd's Rep. 164).
[28] These principles have been incorporated into Canadian law on numerous occasions: see, for example, Punch v. Savoy's Jewellers Ltd. et al. (1986), 14 O.C.A. 4 (Ont. C.A.); Bombardier Inc. v. Canadian Pacific Ltd. (1991), 85 D.L.R. (4th) 558 (Ont. C.A.). In this last case, Mitsubishi had consigned three containers of its cargo to N.Y.K. for carriage from Kobe, Japan to Mitsubishi's agent at Montreal and from thence to its final destination, Bombardier at La Pocatière, Québec. This was authorized by an ocean bill of lading which provided that the goods were to be shipped in the vessel named "and/or other means of transport". The cargo was carried by ship to Vancouver and discharged into the custody of CPR for transport by rail to Montreal. The train was derailed without the Appellant's negligence. The Court found that Mitsubishi had expressly authorized the sub-bailment and was as much bound by the terms and conditions of the CPR bill of lading as if it had executed the document as shipper itself. It is immaterial, for the purposes of this analysis, that the standard bill of lading that was used at the time by CPR contained the terms prescribed by the
Canadian Transport Commission instead of the terms mutually agreed by the parties, as is now the case.
[29] The question that must be answered, therefore, is whether Jacob and Pantainer have expressly or implicitly consented to OOCL's terms and conditions. Neither Jacob nor Pantainer have admitted that they had actual knowledge of OOCL's terms and conditions, which are found on its website. The fact remains that Pantainer, through Panalpina (China) Ltd., and Panalpina Inc., have a history of prior dealings, particularly with respect to cargo from the Far East. OOCL's documentation alerts any reader, such as Pantainer, to the existence of OOCL terms subject to the applicable tariff, which can easily be found on its website. Pantainer admits using the OOCL website for other purposes related to booking and tracking cargoes. Anyone in Pantainer or in the Panalpina group could have found out by clicking onto the "B/L Terms" icon on the website (see Agreed Facts, paras. 18-23).
[30] Given the circumstances, I agree with counsel for OOCL that Pantainer must be taken to have knowledge of its standard terms due to previous dealings, the course of dealing and the fact that nothing in the terms that OOCL relies on is unduly burdensome or unconscionable in the commercial context. In fact, as we shall see shortly, the limitations found in OOCL's terms are very similar in scope and application as those in Pantainer's terms.
[31] Counsel for the Defendant OOCL has quoted to me a number of cases establishing that the party entering into a contract for the shipping of goods must be presumed to know that the terms and conditions are to be found on the bill of lading. The most relevant of those authorities, in Canadian law, is the decision of the Supreme Court in Anticosti Shipping Co. v. St. Amand, [1959] S.C.R. 372. In that case, the Plaintiff, through his agent, had entered into a contract of carriage with the defendant for the transport by sea of his truck. A bill of lading was filled out at the time but apparently no original or copy of it was given to the agent. The original of the bill was not signed and became mislaid. The truck was damaged through the fault of the defendant and action was brought for loss of its use during the time repairs were carried out. In the Supreme Court, the main question was whether the contract for the carriage by water of the truck was or was not covered by a bill of lading within the meaning of the Rules relating to bills of lading contained in the schedule to the Water Carriage of Goods Act, R.S.C. 1952, c. 291. Rand. J., on behalf of the court, wrote:
When Riddell requested the shipment to be made, what terms could he possibly have had in mind other than those on which invariably goods were carried by the company? His bald request implies, carry this truck "according to your regular practice". How can we possibly say that anything else could be intended? It was an ordinary transaction, and if, as the respondent's agent, he did not see fit to demand a bill of lading - as by art. III rule (3) he had the right to do - it cannot affect what on both sides was contemplated. (pp. 374-375)
[32] There is no need to belabour this point, since the case law is replete with illustrations of this principle. This is particularly apposite when the parties are sophisticated shippers and businesses, as opposed to private individual as in Punch. The fact that these terms and conditions could only be accessed through the Internet is irrelevant; in an age where computerized transactions are ever more pervasive, it would be disingenuous for a commercial enterprise like Pantainer to claim that they were unaware of OOCL's terms and conditions, especially when they admit having made frequent use of OOCL's online services (Agreed Facts, para. 23).
[33] As for Jacob, they are bound by Pantainer's bill of lading according to which Pantainer can subcontract "on any terms". The terms and conditions found in OOCL waybill are of the type that would ordinarily be expected to be found in that sort of contract, and are certainly not unreasonable or unconscionable. Moreover, these terms are very similar to those accepted by Jacob in Pantainer's bill of lading. Consequently, Jacob cannot argue that they were taken by surprise and that they could not foresee the OOCL's limitations.
[34] What, then, are the clauses that can be invoked by OOCL to exonerate itself or limit its liability? Counsel for OOCL drew my attention to clause 4(b)(2)(b)and its reference to Clause 4(b)(1)(a) and (c), which read as follows:
4) Carrier's Responsibility and Clause Paramount
(B) Combined Transport
1. If the stage of carriage where loss or damage occurred is not known
a) Exclusions: If the stage of the carriage where the loss or damage to the Goods is not known then the Carrier shall be liable for loss and damage to the Goods save that the Carrier shall be relieved from liability for any loss or damage to the extent that such loss or damage was caused by:
***
(viii) Any cause or event which the Carrier could not avoid and the consequence of which he could not prevent by the exercise of reasonable diligence.
***
c) Limitation: If the Carrier is liable for loss or damage to the Goods then the amount of compensation shall be calculated by reference to the invoice value of the Goods plus freight and insurance (if paid).
The Carrier's maximum liability hereunder shall in no circumstances exceed US $2 per kilo of gross weight of the Goods lost or damaged unless the value of the Goods has been declared by the Merchant with the consent of the Carrier and excess freight has been paid whereupon the declared value (if higher) as shown on the face of the Bill of Lading shall be substituted for the above limit and any partial loss or damage shall be adjusted pro rata on the basis of such declared value.
2. If the stage of carriage during which loss or damage is known
Notwithstanding anything provided for in Clause 4(B)(1) if the stage of the carriage where loss or damage to the Goods is known then subject to the operation of Clause 4(C) which shall apply where loss or damage occurs to the Goods from the time when the Goods are loaded on board the Vessel at the Port of Loading until the time when the goods are discharged from the Vessel at the Port of Discharge the Carriers liability in respect of any such loss or damage occurring shall be determined as follows:
(b) If no international convention or national law is applicable then the liability of the Carrier shall be determined pursuant to the provisions of Clause 4(B)(1).
[35] It would appear that by virtue of Clause 4(B)(1)(a)(viii), which applies in the present circumstances through the interplay of Clause 4(B)(2), OOCL is totally exempted from any liability. The derailment of the CPR train is certainly not an event that could have been avoided by OOCL, and it has not been argued that OOCL was negligent in choosing that railway company. There is, therefore, no need to go to the limitation clause found in 4(B)(1)(c), which in any event would have capped OOCL's liability at US $2 per kilo (the total weight of the lost cargo being 494.1 kilos, and the US exchange rate being 1.45 on April 27, 2003, it would have amounted to $1,432.89).
[36] Interestingly enough, Pantainer's bill of lading contains an exemption clause that is almost identical to that found in OOCL's terms and conditions. Clause 6.5 of Pantainer's bill of lading reads:
6.5 The Carrier shall not be liable for any loss or damage arising from
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h) any cause or event which Carrier could not avoid and the consequences of which the Carrier could not prevent by the exercise of due diligence.
[37] The consequences arising from the presence of this clause are twofold. First of all, even if OOCL was not entitled to invoke its terms and conditions vis-à-vis Jacob, it could nevertheless rely on clause 6.5 (as well as on clause 7.1) in Pantainer's bill of lading. Clause 3.2 of that document stipulates that:
3.2 Every servant or agent or sub-contractor of Carrier shall be entitled to the same rights, exemptions from liability, defences, and immunities to which Carrier is entitled. For these purposes, Carrier shall be deemed to be acting as agent or trustee for such servants or agents, who shall be deemed to be parties to the contract evidenced by this Bill of Lading.
[38] These so-called "Himalaya clauses" are well recognized terms in transport contracts, and they are enforceable by the courts notwithstanding a third party's complete ignorance of the existence of a clause granting it a benefit at the time of the performance of its own contract. They have long been recognized by the highest British Courts (see, for ex., Midland Silicones Ltd. v. Scruttons Ltd., [1961] 2 Lloyd's Rep. 365 (H.L.); The Eurymedon (New Zealand Shipping Company Ltd) v. A.M. Satterthwaite & Co. Ltd., [1974] 1 Lloyd's Rep. 534 (P.C.)), and have similarly been endorsed by the Supreme Court of Canada (see International Terminal Operators Ltd. v. Miida Electronics Inc. et al., supra, at pp. 782 ff.; Fraser River Pile & Dredge Ltd. v. Can-Dive Services, [1999] 3 S.C.R. 108.
[39] Now, if Clause 6.5 of the Pantainer bill of lading can be raised by OOCL as against the Plaintiff's claim to exempt it from any liability, it can also be raised by Pantainer vis-à-vis Jacob. Counsel for Pantainer was candid enough to confess during the hearing that he had overseen that defense but nevertheless wished to adopt it after having heard the submissions of Mr. Colford on behalf of OOCL. There is no doubt in my mind that this clause is equally applicable to Pantainer, for the same reasons that were mentioned as regard OOCL.
[40] I am therefore of the view that both Pantainer and OOCL are exempt from any liability for the loss suffered by the Plaintiff following the derailment of the train carrying its cargo. Counsel for OOCL has raised, both orally and in writing, a myriad of other alternatives whereby his client's liability could be limited; as a result of my conclusion with respect to the exemption clauses found both in the Pantainer's bill of lading and in the OOCL's waybill, there is no need to address them.
[41] The claim of the Plaintiff as against Pantainer and OOCL is accordingly dismissed, and by way of consequence the counterclaim of Pantainer as against OOCL is also dismissed.
[42] The Plaintiff is therefore left with the last Defendant, i.e. the railway company. CPR was at all material times a common carrier for hire and a sub-sub-bailee for reward. The obligations of CPR as a common carrier have been enacted into law by section 137 of the Canada Transportation Act and by the Railway Traffic Liability Regulations.
[43] I have already reproduced section 137 of the Act (see par. 8, above). Pursuant to sections 4 and 5 of the Railway Traffic Liability Regulations, SOR/91-488, adopted under the authority of section 137(2) of the Act, CPR appears to be clearly liable for the loss or damage to the Plaintiff's cargo. These sections state:
4. Subject to sections 8 and 15, for the purposes of subsection 137(2) of the Act, a carrier is liable, in respect of goods in its possession, for any loss of or damage to the goods or for any delay in their transportation unless that liability is limited by these Regulations.
5. (1) A carrier shall not be liable for any loss or damage in respect of any goods or for any delay in the transportation of the goods if the loss, damage or delay, as the case may be, results from
(a) an act of God;
(b) war or an insurrection;
(c) a riot, strike or lock-out;
(d) any defect in the goods;
(e) any act, negligence or omission of the shipper or owner of the goods;
(f) an authority of law; or
(g) a quarantine.
[44] Counsel for CPR has not denied that Jacob was the owner of the cargo, that the cargo was damaged, and that the damages occurred during the rail carriage. Nor has it been argued that CPR can take advantage of one of the exemptions set out in section 5 of the Regulation. What has been argued is that CPR can benefit from the terms and conditions found in its confidential contract with OOCL, in Tariff CPRS 7589, in OOCL bill of lading or in Pantainer bill of lading.
[45] This argument would be compelling, as it is for the other two Defendants, if it was not for section 137 of the Canada Transportation Act. This section clearly provides that a railway company shall not limit or restrict its liability to a shipper except by means of "a written agreement". Now, there is no written agreement as between Jacob and CPR (nor, for that matter, between CPR and OOCL, as can be seen from paragraphs 25 and 26 of the Agreed Facts). Counsel for CPR has tried to argue that OOCL is to be considered the "shipper" in the present case, as opposed to Jacob. I do not think that this position is sustainable. The Act, at section 6, clearly makes a distinction between a shipper and a carrier, and I fail to see how OOCL can be anything else than a carrier for the purposes of that Act. As a result, CPR would be liable to the extent provided by section 11 of the Regulations.
[46] I note in passing that the only two decisions that were referred to me on this subject have adopted this reasoning: The Sumitomo Marine & Fire Insurance Company Limited v. Canadian National Railway Company [2004] J.Q. no 11243 (QL) Royal Insurance Company of Canada v. Canadian National Railway Company, [1999] J.Q. no 812 (QL). This interpretation of section 137 may seem overly strict; but Parliament has provided for an alternative in stating that a written agreement can be signed not only by the shipper but also by an association or other body representing shippers.
[47] Be that as it may, I do not think that CPR would be in a better position even if I was to consider that section 137 of the Act is not a bar to the limitations of liability found in its Tariff and in its confidential contract with OOCL. Counsel for CPR would like to rely on the Tariff CPRS 7589, which provides, inter alia, that in no event shall the liability of CPR exceed an amount equal to the liability of the steamship company pursuant to the ocean bill of lading (if that amount is lesser than two other calculations). This, as we have seen in paragraph 36, would mean that CPR's maximum liability would be $1,432.89.
[48] But this scenario is defective as counsel is relying on a tariff, which is a published document available to the public, without taking into account that it has been incorporated into and possibly altered by a confidential rate agreement, which is a confidential document between OOCL and CPR filed under seal and not available for public inspection.
[49] Having examined the confidential rate agreement, which must be read in conjunction with the tariff, I come to the conclusion that it does not reduce CPR's liability towards the Plaintiff.
[50] Alternatively, counsel for CPR has argued that her client could take advantage of the limitations and exemptions found in OOCL and Pantainer terms and conditions. It is true that clause 1 of the OOCL waybill and clause 3 of the Pantainer bill of lading explicitly provide that participating carriers shall be entitled to the same rights, exemptions from liability, defences and immunities to which each of these two carriers are entitled. But the application of these clauses to a railway carrier would defeat the purpose of s. 137 of the Canada Transportation Act. It would make no sense to protect the shipper by prescribing that a railway company cannot limit its liability except by written agreement signed by that shipper, if the railway company could nevertheless achieve the same result through the means of a Himalaya clause found upstream in the contract of another carrier. I recognize that such reasoning results in a less advantageous position for railway companies as opposed to other carriers. But this is true not only for the purpose of liability but also in many other respects, since other modes of transportation are not as heavily regulated as are the railway companies.
B) Assessment of the Damages
[51] The purpose of awarding damages is obviously to put the offended party into the same position as he would have been, had the contract been performed. This is the principle known as restitutio in integrum. Section 11 of the Railway Traffic Liability Regulations provides that the valuation for loss or damage for a rail carrier shall be the lesser of "the value of the goods at the place and time of their shipment, including freight and other charges that affect the valuation of the goods, if paid, and customs if paid or payable and not refundable", and non applicable alternatives. Since this provision seeks to assess the liability of a railway company for the loss that occurred during rail transportation, it is only logical that the place and time of the shipment be that of the shipment by rail.
[52] Whether the common law rule for measuring damages in carriage situations (that is, the arrived sound market value less arrived damaged market value) or the rule found at section 11 of the Regulations applies, the result in this case is the same. Where goods have not been delivered or have been delivered totally damaged, there is nothing to sell, and thus no market. In those situations, the lost goods only have what Professor Tetley has called a "notional arrived sound market value" (see Tetley, W., Marine Cargo Claims, 4th ed., c. 13, at p. 12).
[53] The difficulty in assessing the value of lost goods is that, unless there is a published exchange of prices for those goods, one can never predict what the market value of those goods was, because they were never there. This should be no obstacle, however, for the Court to do as best it can to compensate the Plaintiff for his loss. As the Supreme Court of Canada said in Pendevic Contracting Co. v. International Nickel Co. of Canada, [1976] 1 S.C.R. 267, at pp. 279-280:
The difficulty in fixing an amount of damages was dealt with in the well known English case of Chaplin v. Hicks [[1911] 2 K.B. 786], which had been adopted in the Appellate Division of the Supreme Court of Ontario in Wood v. Grand Valley Railway Company [(1913), 30 O.L.R. 44], where at pp. 49-50, Meredith C.J.O. said:
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There are, no doubt, cases in which it is impossible to say that there is any loss assessable as damages resulting from the breach of a contract, but the Courts have gone a long way in holding that difficulty in ascertaining the amount of the loss is no reason for not giving substantial damages, and perhaps the furthest they have gone in that direction is in Chaplin v. Hicks, [1911] 2 K.B. 786. In that case the Plaintiff, owing, as was found by the jury, to a breach by the defendant of his contract, had lost the chance of being selected by him out of fifty young ladies as one of twelve to whom, if selected, he had promised to give engagements as actresses for a stated period and at stated wages, and the action was brought to recover damages for the breach of the contract, and the damages were assessed by the jury at 100 pounds [Sterling]. The defendant contended that the damages were too remote and that they were unassessable. The first contention was rejected by the Court as not arguable, and with regard to the second it was held that "where it is clear that there has been actual loss resulting from the breach of contract, which it is difficult to estimate in money, it is for the jury to do their best to estimate; it is not necessary that there should be an absolute measure of damages in each case": per Fletcher Moulton, L.J. at p. 795. |
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When Wood v. Grand Valley Railway Company, supra, reached the Supreme Court of Canada, judgment was given by Davies J. and was reported in 51 S.C.R. 283, where the learned justice said at p. 289:
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It was clearly impossible under the facts of that case to estimate with anything approaching to mathematical accuracy the damages sustained by the Plaintiffs, but it seems to me to be clearly laid down there by the learned judges that such an impossibility cannot "relieve the wrongdoer of the necessity of paying damages for his breach of contract" and that on the other hand the tribunal to estimate them whether jury or judge must under such circumstances do "the best it can" and its conclusion will not be set aside even if the amount of the verdict is a matter of guess work. |
[54] The Plaintiff has established that it was impossible for Jacob to arrange for a replacement shipment for the lost cargo (Agreed Fact, par. 12). Plaintiff argues that his loss should be assessed by taking the average of the post-loss sales prices of the styles that comprise the cargo, which would amount at $71,550.47. This would be the value of the cargo at the time and place of the commencement of their shipment in Vancouver with CPR, according to the Plaintiff.
[55] It was agreed that Jacob made all reasonable efforts to mitigate its loss (Agreed Fact, par. 35). But I am far from convinced that the applicable measure of damages should be the average retail price of the cargo. First of all, there is evidence that a large proportion of those goods were sold at discounted prices, which increased as the season progressed. Even more importantly, there is evidence that at the end of the season (i.e. as of October 31, 2003), Plaintiff still had inventory of these goods.
[56] Counsel for the Plaintiff has tried to argue that 94% of the claim is related to one particular style, and that 97% of that style was sold at the end of the season. This may well be true, but the fact remains that even as of February 25, 2005, these garments were still unsold. Plaintiff has therefore been unable to demonstrate that the items contained in the damaged cargo would have been sold, and certainly not at the regular price.
[57] On the other hand, I am prepared to accept that Jacob was certainly expecting to sell all of its cargo, and might well have marketed these items aggressively had they been delivered pursuant to the contract. I am therefore prepared to assess Jacob's loss not at the purchase price of the cargo plus freight and insurance (which would amount to $33,598.64), but at its lowest discounted sales prices, which has been agreed to be $35,116.58 (Agreed Facts, par. 14).
[58] An award of interest is also part of "restitutio in integrum", provided it has been claimed. In this case, not only has it been claimed but there is also agreement on the average prime bank-lending rate and the commercial rate that is 4.3% and 6% respectively (Agreed Facts, par. 39). Moreover, there is no issue about the delay in making and prosecuting the claim that would justify reducing the rate of interest.
[59] Unless special circumstances are demonstrated and proven, the policy of this Court is to award simple interest at the commercial rate from the date the cause of action arose until payment. Compound interest will be awarded only where the parties agreed, knew, or should have known that the money which is the subject of the dispute would bear compound interest, or where the successful party has demonstrated that his loss cannot be fairly compensated in damages without an award of compound interest. Such a demonstration has not been made by counsel for the Plaintiff. Accordingly, an award of 6% from April 27, 2003 to the date of payment appears to me to be appropriate in the circumstances.
[60] In conclusion, I venture to add that I am much indebted to all the counsel for their most helpful and thorough submissions.
[61] For all the above reasons, the Plaintiff's action against the Defendant Pantainer Ltd, Panalpina Inc. and Orient Overseas Container Line Ltd. is dismissed. The Defendant Pantainer Ltd.'s counterclaim against Orient Overseas Container Line Ltd. is also dismissed.
[62] The Plaintiff's action against the Defendant Canadian Pacific Railway is granted in part, and CPR is hereby condemned to pay the Plaintiff the sum of $35,116.58, with interest at the rate of 6% from April 27, 2003 to the date of this judgment.
[63] Parties shall submit their written representations with respect to costs no later than fifteen days after the release of these Reasons and Order.
ORDER
THIS COURT ORDERS THAT:
1) the Plaintiff's action against the Defendant Pantainer Ltd, Panalpina Inc. and Orient Overseas Container Line Ltd. is dismissed. The Defendant Pantainer Ltd.'s counterclaim against Orient Overseas Container Line Ltd. is also dismissed.
2) The Plaintiff's action against the Defendant Canadian Pacific Railway is granted in part, and CPR is hereby condemned to pay the Plaintiff the sum of $35,116.58, with interest at the rate of 6% from April 27, 2003 to the date of this judgment.
3) Parties shall submit their written representations with respect to costs no later than fifteen days after the release of these Reasons and Order.
"Yves de Montigny"
FEDERAL COURT
NAME OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-39-04
STYLE OF CAUSE: Boutique Jacob Inc. v. Pantainer Ltd. and Panalpina Inc. and Orient Overseas Container Line Ltd. and Canadian Pacific Railway
PLACE OF HEARING: Montréal, Québec
DATE OF HEARING: September 19 and 20, 2005
AND ORDER: Justice de Montigny
APPEARANCES:
Mr. Kenrick Sproule FOR THE PLAINTIFF
Mr. Eric Préfontaine FOR DEFENDANTS PANTAINER LTD.and PANALPINA INC.,
and PLAINTIFF BY OUNTERCLAIM PANTAINER LTD.
Mr. David G. Colford FOR DEFENDANT and DEFENDANT BY COUNTERCLAIM ORIENT OVERSEAS CONTAINER LINE LTD.
Ms. Karine Joizil FOR DEFENDANT CANADIAN PACIFIC RAILWAY
SOLICITORS OF RECORD:
The Law Offices of J. Kenrick Sproule FOR PLAINTIFF
Montréal, Quebec
Stikeman, Elliott FOR DEFENDANTS PANTAINER
Montréal, Quebec LTD.and PANALPINA INC. and PLAINTIFF BY COUNTERCLAIM PANTAINER LTD.
Brisset Bishop FOR DEFENDANT and DEFENDANT
Montréal, Quebec BY COUNTERCLAIM ORIENT OVERSEAS CONTAINER LINE LTD.
Fasken Martineau Dumoulin, LLP FOR DEFENDANT CANADIAN PACIFIC
Montréal, Quebec RAILWAY