Judgments

[1995] 2 F.C. 37

T-271-93

Kishinchand & Sons (Hong Kong) Ltd. (Plaintiff)

v.

Wellcorp Container Lines Ltd. and Wellcorp Express (Canada) Inc. (Defendants)

Indexed as: Kishinchand & Sons (Hong Kong) Ltd. v. Wellcorp Container Lines Ltd. (T.D.)

Trial Division, Noël J.—Toronto, November 29; Ottawa, December 14, 1994.*

Maritime law — Carriage of goods — Plaintiff exporting clothing from Hong Kong to Montréal — Defendant ordering release of cargo without receiving bills of lading — Plaintiff unpaid as consignee bankrupt — Limitation of liability clause in bills of lading not applicable as no loss or damage to goods.

Maritime law — Torts — Negligence — Cargo delivered without receipt of endorsed bills of lading — Carrier not entitled to limit liability under bills of lading where wilful negligence.

Both sides moved for summary judgment under Rule 432.3. The plaintiff, which carries on a textile export business in Hong Kong, sent a shipment of clothing to a Montréal import business, and one of the defendants, Wellcorp Express (Canada) Inc. (Wellcorp Canada), was designated as the shipper. Wellcorp Canada was to release the cargo to the consignee upon the surrender of the bills of lading, but one of its customer service representatives ordered the release without receiving the bills of lading. She did not obtain authorization from her superiors to do so. The consignee went bankrupt and the plaintiff was unpaid. Under clause 6(3) of the bills of lading, the carrier was entitled to limit its liability “for loss or damage to the Goods occurring from the time that the Goods are taken into his charge until the time of delivery.” Two issues were raised herein: 1) whether the defendants were entitled to limit their liability to US $14,850 by virtue of the terms of the bills of lading and 2) whether Wellcorp Hong Kong was jointly liable for the damages resulting from the failure of Wellcorp Canada to obtain the bills of lading prior to the delivery of the cargo.

Held, summary judgment should be granted against defendant Wellcorp Canada.

1) Wellcorp Canada’s main obligation was to obtain the surrender of the duly endorsed bills of lading in exchange for the goods. That is precisely what it failed to do knowingly. It could not dissociate itself from the alleged unauthorized act of its employee. Her actions bound her employer to the fullest extent. Clear, precise and unambiguous words are required to exempt or limit one’s liability as against the failure to perform the very obligation which forms the object of a contractual undertaking. Considering that limitation clauses are to be strictly construed against those in favour of whom they are made, the limitation clause herein was of no assistance to the defendants. There had been no “loss or damage to the goods” so as to trigger the operation of the limitation clause. The whereabouts of the goods was known at the time of delivery and even thereafter. The goods were delivered to the consignee which admitted to having them; as such they were not lost, nor were they at any time removed from the bailee’s possession without his knowledge. The act complained of could be described as wilful negligence. The limitation clause falls substantially short of protecting the defendant from the liability it has incurred. It would take much clearer words to hold that the parties contemplated that the defendant could limit its liability in the face of a wilful breach of the very obligation it had undertaken. In the absence of such language, the general limitation against liability did not shield Wellcorp Canada from acts of wilful negligence, and any ambiguity in this regard should be resolved in favour of the plaintiff.

2) Wellcorp Hong Kong could no more claim the benefit of the limitation clause than could Wellcorp Canada. The assertion that both carried on business as one entity raised a pure question of fact which could not be determined upon an application for summary judgment. The issue of the joint and several liability of Wellcorp Hong Kong should proceed to trial.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Federal Court Rules, C.R.C., c. 663, RR. 432.1 (as enacted by SOR/94-41, s. 5), 432.3 (as enacted idem), 432.5 (as enacted idem).

CASES JUDICIALLY CONSIDERED

APPLIED:

Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd., [1959] A.C. 576 (H.L.); Raymor Painting Contractors (Canada) Limited c. Purolator Courier Ltd., [1976] C.S. 468; ITO—International Terminal Operators Ltd. v. Miida Electronics Inc. et al., [1986] 1 S.C.R. 752; (1986), 28 D.L.R. (4th) 641; 34 B.L.R. 251; 68 N.R. 241.

DISTINGUISHED:

Johnston, W.R. and Company Limited et al. v. Inter-City Forwarders Limited et al., [1964] O.R. 754; [1947] 1 D.L.R. 8 (C.A.).

REFERRED TO:

Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 (H.L.).

APPLICATIONS by each party for summary judgment under Rule 432.3. Summary judgment granted against defendant, Wellcorp Canada, in the amount of $201,776.89 plus interest.

COUNSEL:

George J. Pollack for plaintiff.

Jeffrey S. Klein for defendants.

SOLICITORS:

Marler, Sproule, Castonguay, Montréal, for plaintiff.

Spencer, Romberg Associates, Toronto, for defendants.

The following are the reasons for judgment rendered in English by

Noël J.: Each party moves for summary judgment by way of distinct applications made pursuant to Rule 432.3 [Federal Court Rules, C.R.C., c. 663 (as enacted by SOR/94-41, s. 5)]:

1. the plaintiff moves for damages to be awarded condemning the defendants jointly and severally to pay the plaintiff $201,776.89 plus interest from August 31, 1992; and

2. the defendants move for damages to be awarded condemning the defendant Wellcorp Express (Canada) Inc. to pay the plaintiff an amount sufficient to purchase US $14,850 plus interest from August 31, 1992.

The plaintiff carries on a textile export business in Hong Kong. It contracted with Equip Canada Inc. (Equip), a textile import business located in Montréal, for the sale of CAN $210,776.89 worth of men’s shirts, jackets and top coats (the cargo). Equip designated Wellcorp Express (Canada) Inc. (Wellcorp Canada) as the shipper to transport the goods from Hong Kong to Montréal. The goods were sent f.o.b. Hong Kong under two bills of lading in August 1992. The shipment travelled by way of combined transport to Montréal through Vancouver. Wellcorp Canada was only to release the cargo to Equip upon the surrender of the bills of lading, showing that Equip’s bank had credited the bank account of the plaintiff.

Wellcorp Canada had never before released goods without delivery of the bills of lading. In this case, however, a customer service representative of Wellcorp Canada, Tammy Pelley, ordered the release of the cargo on August 31, 1992 before receiving the bills of lading. She did so without obtaining any authorization from her superiors. She states that she ordered the release of the cargo under pressure from a Michel Lasary of Equip who stated that he needed the goods urgently. Wellcorp Canada had not had problems during their two-year relationship with Equip and are not owed any money by Equip, but Wellcorp Canada was in this instance unsuccessful in obtaining the bills of lading. Equip eventually went bankrupt. It ceased carrying on business in September or October of 1993. The bills of lading have since been returned to plaintiff’s bank in Hong Kong by the Canadian Imperial Bank of Commerce which held them unendorsed at the time the goods were released.

Rules 432.1 et seq. [Rules 432.1 and 432.5 (as enacted idem)] of the Federal Court Rules, providing for the issuance of summary judgment, were promulgated on January 13, 1994. In so far as they are relevant to the present matter, they provide:

Rule 432.1 (1) A plaintiff may, after the defendant has filed a defence, or earlier with leave of the Court, and at any time prior to the fixing of the time and date for trial, make a motion to a judge, with supporting affidavit material or other evidence, for summary judgment on all or part of the claim in the statement of claim.

(2) A defendant may, after filing and serving a defence and at any time prior to the fixing of the time and date for trial, make a motion to a judge, with supporting affidavit material or other evidence, for summary judgment on all or part of the claim in the statement of claim.

…

Rule 432.3 (1) Where a judge is satisfied that there is no genuine issue for trial with respect to a claim or defence, the judge shall grant summary judgment accordingly.

…

(3) Where a judge is satisfied that the only genuine issue is a question of law, the judge may determine the question and grant summary judgment accordingly.

(4) Where a judge decides that there is a genuine issue with respect to a claim or defence, the judge may nevertheless grant summary judgment in favour of any party, either upon an issue or generally, unless

(a) the judge is unable on the whole of the evidence to find the facts necessary to decide the questions of fact or law; or

(b) the judge considers that it would be unjust to decide the issues on the motion for summary judgment.

…

Rule 432.5 Where summary judgment is refused or is granted only in part, the judge may make an order specifying what material facts are not in dispute and defining the issues to be tried, and may give such directions or impose such terms as the judge deems just, including an order

(a) for payment into Court of all or part of the claim;

(b) for security for costs; and

(c) limiting the nature and scope of discovery, if any, to matters not covered by the affidavits filed on the motion for summary judgment and any cross-examination on them, and providing for the use of the affidavits and cross-examination at the trial in the same manner as an examination for discovery.

Wellcorp Canada admits that the cargo was delivered to Equip without receipt of the endorsed bills of lading such that as between it and the plaintiff, the only issue to be decided is the extent of the damages payable. This in turn raises a pure question of law as the defendants contend that they are entitled to limit their liability to US $14,850 by virtue of the terms of the bills of lading, whereas the plaintiff maintains that this contractual limitation is inapplicable on the admitted facts and that, accordingly, the defendants are liable for the full value of the cargo in the agreed amount of CAN $201,776.89. Hence the issue of damages falls squarely within the ambit of subsection 432.3(3).

The other issue which I am asked to decide by way of summary judgment is whether Wellcorp Container Lines Ltd. (Wellcorp Hong Kong) is jointly liable for the damages resulting from the failure of Wellcorp Canada to obtain the bills of lading prior to the delivery of the cargo to Equip.

Turning to the first issue, it is acknowledged that the cargo was to be released on a cash against documents basis and that Wellcorp Canada is liable for surrendering the cargo without receiving the bills of lading. Wellcorp Canada nevertheless relies on the terms and conditions of the bills of lading to limit its liability to $50 per package or US $14,850. The relevant provisions of the bills of lading are as follows:

“Carriage” means the whole of the operations and services undertaken or performed by or on behalf of the Carrier in respect of the Goods.

…

“Combined Transport” arises where the Carriage called for by this Bill of Lading is not a Port to Port Shipment.

…

“COGSA” means the Carriage of Goods by Sea Act of the United States of America approved on April 16th, 1936.

…

“COGWA” means the Carriage of Goods by Water Act 1936 of Canada.

…

6.   CARRIER’S RESPONSIBILITY

(1)  CLAUSE PARAMOUNT

(A) Subject to Clause 13 below, this Bill of Lading insofar as it relates to sea carriage by any vessel (…) shall have effect (…) and the provisions of the Hague Rules or applicable legislation shall be deemed incorporated herein. The Hague Rules (or COGSA or COGWA if this Bill of Lading is subject to U.S. or Canadian law respectively) shall apply to the carriage of Goods by inland waterways and reference to carriage by sea in such Rules or legislation shall be deemed to include reference to inland waterways. If and to the extent that the provisions of the Harter Act of the United States of America 1893 would otherwise be compulsorily applicable to regulate the Carrier’s responsibility for the Goods during any period prior to loading on or after discharge from the vessel the Carrier’s responsibility shall instead be determined by the provisions of 6(3) below but if such provisions are found to be invalid such responsibility shall be subject to COGSA.

(B) The Carrier shall be entitled to (and nothing in this Bill of Lading shall operate to deprive or limit such entitlement) the full benefit, and rights to all limitations of and exclusions from liability and all rights conferred or authorised by any applicable (sic) law, statute or regulation available to the Owner of the vessel(s) on which the Goods are carried.

(2)  PORT TO PORT SHIPMENT

The responsibility of the Carrier is limited to that part of the Carriage from and during loading onto the vessel up to and during discharge from the vessel and the Carrier shall not be liable for any loss or damage whatsoever in respect of the Goods or for any other matter arising during any other part of the Carriage even though Charges for the whole Carriage have been charged by the Carrier. The Merchant constitutes the Carrier as agent to enter into contracts on behalf of the Merchant with others for transport, storage, handling or any other services in respect of the Goods prior to loading and subsequent to discharge of the Goods from the vessel without responsibility for any act or omission whatsoever on the part of the Carrier or others and the Carrier may as such agent enter into contracts with others on any terms whatsoever including terms less favourable than the terms of this Bill of Lading.

(3)  COMBINED TRANSPORT

Save as is otherwise provided in this Bill of Lading, the Carrier shall be liable for loss or damage to the Goods occurring from the time that the Goods are taken into his charge until the time of delivery to the extent set out below.

(A) Where the stage of Carriage where the loss or damager (sic) occurred cannot be proved:

(i)   The carrier shall be entitled to rely upon all exclusions from liability under the Rules or legislation that would have been applied under 6(1)(A) above had the loss or damage occurred at sea or, if there was no carriage by sea, under the Hague Rules (or COGSA or COGWA if this Bill of Lading is subject to U.S. or Canadian law respectively).

(ii)  Where under (i) above, the Carrier is not liable in respect of some of the factors causing the loss or damage, he shall only be liable to the extent that those factors for which he is liable have contributed to the loss or damage.

(iii)  Subject to 6(4) below, where the Hague Rules or any legislation applying such Rules or the Hague-Visby Rules (such as COGSA or COGWA) is not compulsorily applicable the Carriers liability shall not exceed $50 per package or shipping unit.

(iv) The value of the Goods shall be determined according to the commodity exchange price at the place and time of delivery to the Merchant or at the place and time when they should have been so delivered or if there is no such price according to the current market price by reference to the normal value of Goods of the same kind and quality, at such place and time.

(B) Where the stage of Carriage where the loss or damage occurred can be proved:

(i)   The liability of the Carrier shall be determined by the provisions contained in any international convention or national law of the country which provisions

(a)  cannot be departed from by private contract to the detriment of the Merchant, and

(b)  would have applied if the Merchant had made a separate and direct contract with the Carrier in respect of the particular stage of Carriage where the loss or damage occurred and had received as evidence thereof any particular document which must be issued in order to make such international convention or national law applicable.

(ii)  With respect to the transportation in the United States of America or in Canada to the Port of Loading or from the Port of Discharge the responsibility of the Carrier shall be to procure transportation by carriers (one or more) and such transportation shall be subject to the inland carriers contracts of carriage and tariffs and any law compulsorily applicable. The Carrier guarantees the fulfilment of such inland carriers’ obligations under their contracts and tariffs.

(iii)  Where neither (i) or (ii) above apply, any liability of the Carrier shall be determined by 6(3)(A) above.

(4)  GENERAL PROVISIONS

…

(C) Ad Valorem: Declared Value of Package or Shipping Unit

The Carrier’s liability may be increased to a higher value by a declaration in writing of the value of the Goods by the shipper upon delivery to the Carrier of the Goods for shipment, such higher value being inserted on the front of this Bill of Lading in the space provided and, if required by the Carrier, extra freight paid. In such case, if the actual value of the Goods shall exceed such declared value, the value shall nevertheless be deemed to be the declared value and the Carrier’s liability, if any, shall not exceed the declared value and any partial loss or damage shall be adjusted pro rata on the basis of such declared value. [Emphasis added.]

In this instance, the cargo travelled by way of combined transport and the loss occurred after discharge from the vessel so that by virtue of the paramountcy clause, the carrier’s responsibility is to be determined by the provisions of clause 6(3). When the stage of carriage where the loss occurred can be proved, clause 6(3)(B)(iii) provides that, in the circumstances of the present case, the limitation is to be ascertained by reference to clause 6(3)(A)(iii) which in turn limits the carrier’s liability to $50 per package.

By virtue of its introductory paragraph, clause 6(3) only applies to limit a carrier’s liability “for loss or damage to the Goods occurring from the time that the goods are taken into his charge until the time of delivery.” The question to be decided is whether, on the facts of this case, there has been “loss or damage to the goods” prior to or “until the time of delivery” within the meaning of clause 6(3).

The bills of lading on their face contained the following notation:

RECEIVED in apparent good order and condition except as otherwise noted the total number of Containers or Packages or units enumerated below for transportation from the place of receipt to the place of delivery subject to the terms hereof. One of the original Bills of Lading must be surrendered duly endorsed in exchange for the Goods or Delivery Order. On presentation of this document (duly endorsed) to the Carrier by or on behalf of the Holder, the rights and liabilities arising in accordance with the terms hereof shall (without prejudice to any rule of common law or statute rendering them binding on the Merchant) become binding in all respects between the Carrier and the Holder as though the contract evidenced hereby had been made between them.

IN WITNESS whereof the number of original Bills of Lading stated below have been signed, one of which being accomplished, the other(s) to be void. [Emphasis added.]

Wellcorp Canada’s main obligation in so far as the release of the goods is concerned was to obtain the surrender of the duly endorsed bills of lading in exchange for the goods. However, that is precisely what it failed to do knowingly, that is with the full knowledge that the release was not authorized. The employee of Wellcorp Canada who released the goods testified during discovery that she was fully aware of the need to obtain the bills of lading beforehand. However, Wellcorp Canada had an ongoing business relationship with Equip which had not given rise to any problems in the past, and on that occasion, she testified that she simply took a chance.

The attorney for the defendants suggested that the release of the goods by Tammy Pelley was an unauthorized act which should be viewed in the same light as theft by an employee. He referred the Court to the case of Johnston, W.R. and Company Limited et al. v. Inter-City Forwarders Limited et al., [1946] O.R. 754, where the Ontario Court of Appeal held that a limitation of liability clause operated to limit the liability of a carrier where a shipment had been stolen by one of its employees. In so doing, the Court of Appeal disassociated the wrongful act committed by the employee from the employer who was found to have acted in good faith and without negligence in hiring the employee. It held, in effect, that the employer stood as a third party vis-à-vis the actions of the employee.

I do not believe that the situation at hand bears any analogy to the case of theft. The employee who released the goods acted in what she perceived to be the best interest of her employer. Equip was a long standing and valued client which had never defaulted in the past. She responded to their request for an urgent delivery on the assumption that payment would be forthcoming. In so doing, she made a business decision which turned out to be bad. Notwithstanding this mistake, she remained in the employ of Wellcorp Canada. In a telex from an officer of Wellcorp Canada to Wellcorp Hong Kong sent shortly after the incident, the following was stated:

Have also issues (sic) very strict order to all people involved in Canada about importance to protect HBL/originals (bills of lading) and endorsed properly in order to protect Wellcorp’s interest and will monitor very closely. Let’s just say between you and me that sometimes we have been to (sic) lenient towards clients failing to obtain HBL (bills of lading) before releasing but as of today this will no longer be the case I can assure you. [Emphasis added.]

In that context, I do not believe that Wellcorp Canada can dissociate itself from the alleged unauthorized act of its employee. Her actions bind her employer to the fullest extent.

It is trite law that very clear, precise and unambiguous words are required to exempt or limit one’s liability as against the failure to perform the very obligation which forms the object of a contractual undertaking. In Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd., [1959] A.C. 576, the House of Lords was confronted with a similar situation. Lord Denning who delivered the judgment of their Lordships stated, at pages 586-588:

It is perfectly clear law that a shipowner who delivers without production of the bill of lading does so at his peril. The contract is to deliver, on production of the bill of lading, to the person entitled under the bill of lading. In this case it was “unto order or his or their assigns,” that is to say, to the order of the Rambler Cycle Company, if they had not assigned the bill of lading, or to their assigns, if they had. The shipping company did not deliver the goods to any such person. They are therefore liable for breach of contract unless there is some term in the bill of lading protecting them. And they delivered the goods, without production of the bill of lading, to a person who was not entitled to receive them. They are therefore liable in conversion unless likewise so protected.

In order to escape the consequences of the misdelivery, the appellants say that the shipping company is protected by clause 2 of the bill of lading, which says that:

“During the period before the goods are loaded on or after they are discharged from the ship on which they are carried by sea, the following terms and conditions shall apply to the exclusion of any other provisions in this bill of lading that may be inconsistent therewith, viz., (a) so long as the goods remain in the actual custody of the carrier or his servants” (here follows a specified exception); “(b) whilst the goods are being transported to or from the ship” (here follows another specified exemption); “(c) in all other cases the responsibility of the carrier, whether as carrier or as custodian or bailee of the goods, shall be deemed to commence only when the goods are loaded on the ship and to cease absolutely after they are discharged therefrom.”

The exemption, on the face of it, could hardly be more comprehensive, and it is contended that it is wide enough to absolve the shipping company from responsibility for the act of which the Rambler Cycle Company complains, that is to say, the delivery of the goods to a person who, to their knowledge, was not entitled to receive them. If the exemption clause upon its true construction absolved the shipping company from an act such as that, it seems that by parity of reasoning they would have been absolved if they had given the goods away to some passer-by or had burnt them or thrown them into the sea. If it had been suggested to the parties that the condition exempted the shipping company in such a case, they would both have said: “Of course not.” There is, therefore, an implied limitation on the clause, which cuts down the extreme width of it: and, as a matter of construction, their Lordships decline to attribute to it the unreasonable effect contended for.

But their Lordships go further. If such an extreme width were given to the exemption clause, it would run counter to the main object and intent of the contract. For the contract, as it seems to their Lordships, has, as one of its main objects, the proper delivery of the goods by the shipping company, “unto order or his or their assigns,” against production of the bill of lading. It would defeat this object entirely if the shipping company was at liberty, at its own will and pleasure, to deliver the goods to somebody else, to someone not entitled at all, without being liable for the consequences. The clause must therefore be limited and modified to the extent necessary to enable effect to be given to the main object and intent of the contract: see Glynn v. Margetson & Co., [1893] A.C. 351, 357; 9 T.L.R. 437; G. H. Renton& Co. Ltd. v. Palmyra Trading Corporation of Panama, [1956] 1 Q.B. 462, 501; [1956] 1 All E.R. 209; [1957] A.C. 149, 164; [1957] 2 W.L.R. 45; [1956] 3 All E.R. 957.

To what extent is it necessary to limit or modify the clause? It must at least be modified so as not to permit the shipping company deliberately to disregard its obligations as to delivery. For that is what has happened here. The shipping company’s agents in Singapore acknowledged: “We are doing something we know we should not do.” Yet they did it. And they did it as agents in such circumstances that their acts were the acts of the shipping company itself. They were so placed that their state of mind can properly be regarded as the state of mind of the shipping company itself. And they deliberately disregarded one of the prime obligations of the contract. No court can allow so fundamental a breach to pass unnoticed under the cloak of a general exemption clause: see The Cap Palos, [1921] P. 458, 471; 37 T.L.R., 921.

The Court does not need to go so far as to delve into the issue of fundamental breach in this instance.[1] Keeping in mind that limitation clauses are to be strictly construed against those in favour of whom they are made, I do not believe that the limitation clause is, in this instance, of any assistance to the defendants. Specifically, I do not believe that there has been “loss or damage to the goods” as this term is used in the introductory paragraph of clause 6(3), so as to trigger the operation of the limitation clause.

The plain meaning of the term “loss or damage to the goods” suggests that the whereabouts of the goods can no longer be ascertained. Typically such loss occurs when goods are removed from the bailee’s possession without its knowledge. In most instances, this results from theft, but the goods may have simply disappeared, for instance where the goods are animals and have broken free. In the case at bar, the whereabouts of the goods was known at the time of delivery. Indeed, their whereabouts remained known after delivery. The goods were delivered to the consignee, Equip, which admitted to having them. As such they were not lost, nor were they at any time removed from the bailee’s possession without its knowledge.

Because the location of the goods remained known, nothing prevented Wellcorp Canada from reclaiming possession of these goods after their delivery if it had acted promptly. The goods were delivered to Equip’s warehouse. The evidence of Mr. Cohen, one of the principals of Equip, is that the goods were not immediately re-expedited. They went into stock and awaited client orders prior to being gradually dispersed. However, instead of seeking repossession of the goods, Wellcorp Canada continued to proceed on the assumption that the payment would be forthcoming.

Mr. Kalouf was the officer responsible for the Equip account at Wellcorp Canada. As such he was charged with the task of retrieving the bills of lading from Equip. When he first inquired, he was told that it was an oversight and that he would get them the very next day. Time passed. He was again advised that it was just a matter of locating the bills. After some weeks, Equip finally advised that the bills could not be located.

In his own words, Mr. Kalouf got the “run around.” When asked if he had pressed to get the bills of lading, he answered that he pressed diplomatically because he wanted to retain the Equip account. He had personally solicited the Equip account on behalf of Wellcorp Canada. He cultivated the relationship over a period of three years prior to obtaining the account.

It seems clear that Wellcorp Canada was more concerned with maintaining its business relationship with Equip than preserving the propriety interest which the plaintiff had in the goods. The goods were eventually lost when they were gradually put into commerce by Equip. However, it remains that they were not lost within any of the meanings attributable to that word until sometime after delivery with the result that the limitation of liability clause can have no application.

It could be argued against this that the word “delivery” embodied in the limitation clause refers to delivery when effected in conformity with the terms of the bills of lading, that is, after the surrender of the bill of lading. In this instance such delivery was never made, with the result that the loss of the goods would have necessarily occurred within the time period contemplated by the limitation clause.

However, I do not believe that the word “delivery” as found in the limitation clause refers to anything other than actual delivery. No special meaning is attributed to that term. By contrast, the word “carriage” is a defined term which means “the whole of the operations and services … performed by … the carrier in respect of the goods.” (Emphasis added.) This would extend the notion of carriage beyond the point of delivery when effected without obtaining the surrender of the bill of lading as the obtention of duly endorsed bills of lading forms part of the service performed by the carrier. No such extension is provided for in connection with the word “delivery.”

The purpose of the clause 6(3) is to limit the carrier’s liability while the goods remain in its control or possession or that of its agents because that is the time period during which liability is likely to be incurred. In my view, the authors of the clause simply did not foresee the possibility that it could remain liable for a loss to the goods occurring after delivery and while the goods are in the possession of a third party.

If I should be wrong in this regard, it would mean that the carrier’s liability is limited in all instances of wrongful delivery. In the words of the Privy Council in Sze Hai Tong Bank Ltd., supra, at page 587, the carrier would, by parity of reasoning, be protected if the goods had been given away randomly to some passer-by. I do not believe that the clause can reasonably be construed as having this effect.

Before turning to this, I note that the act complained of took place in the province of Quebec and amounts at least to gross negligence. Indeed it is more appropriately described as wilful negligence. In Raymor Painting Contractors (Canada) Limited c. Purolator Courier Ltd, [1976] C.S. 468, Hugessen J., while he sat as a judge of the Superior Court, pointed out at page 471 that there is a considerable body of law in that province to the effect that clauses of limitation do not, in any event, extend to cover cases of gross negligence. He did so in the course of a judgment refusing to give effect to a limitation clause after finding that liability had been incurred as a result of gross negligence. If that is the state of the law in connection with liability arising out of gross negligence, it would seem to be all the more extent and appropriate when liability arises out of an act of wilful negligence.

I am aware, however, of the decision of the Supreme Court in ITO—International Terminal Operators Ltd. v. Miida Electronics Inc. et al., [1986] 1 S.C.R. 752, where it was held in an admiralty matter arising in the province of Quebec that the common law principles of bailment and negligence were applicable. The ratio of the decision further suggests that, at common law, contracting parties are free to exempt or limit whatever type of liability they envisage and that the matter stands to be decided by reference to what was within the reasonable contemplation of the parties. Applying this approach, it was held that liability for negligence was within the reasonable contemplation of the parties although negligence was not specifically mentioned in the limitation clause there in issue.

Adopting the same approach, I am of the view that the limitation clause falls substantially short of protecting the defendant from the liability which it has incurred. It would take much clearer words to hold, in effect, that the parties contemplated that the defendant could limit its liability in the face of a wilful breach of the very obligation which it had undertaken. Quite aside from the fact that wilful negligence, let alone negligence, is nowhere mentioned in the limitation clause, a reading of the terms and conditions incorporated into the bill of lading does not suggest that the parties contemplated that the liability of the carrier or of its agent would be limited in the circumstances of this case.

The only argument which can be made in support of the contrary contention is that the liability limited by the clause is unqualified and hence, could encompass any liability however it should arise. The argument might have merit in the face of liability arising out of an act of negligence but it collapses entirely in the face of an act of wilful negligence. In my view, if the parties had envisaged the rather extreme situation where the carrier was at liberty, at its will and pleasure, to deliver the goods to someone not entitled at all, while limiting its liability to the extent contemplated, they would have used more explicit language. In the absence of such language, the general limitation against liability does not shield Wellcorp Canada from acts of wilful negligence, and if there should be any ambiguity in this regard, I am bound to resolve the ambiguity in favour of the plaintiff.

For these reasons, the defendant Wellcorp Canada cannot avail itself of the limitation clause and is therefore liable for the full value of the goods which it improperly released.

Having so decided, Wellcorp Hong Kong can no more claim the benefit of the limitation clause than Wellcorp Canada. It is the plaintiff’s contention that Wellcorp Hong Kong and Wellcorp Canada are one and the same business and, therefore, Wellcorp Hong Kong is jointly and severally liable for Wellcorp Canada’s negligence. Summary judgment is sought against Wellcorp Hong Kong on that ground.

There is no evidence from any representative of Wellcorp Hong Kong before me. There is limited evidence from representatives of Wellcorp Canada which suggests the existence of a close relationship between the two entities as well as evidence showing that the two entities worked closely together, as in this instance, Wellcorp Hong Kong made all the shipping arrangements in Hong Kong while Wellcorp Canada arranged for the unloading, storage and delivery of the goods in Montréal. However, both are separately incorporated entities with places of business in different continents.

The assertion that Wellcorp Canada and Wellcorp Hong Kong carried on business as one entity raises a pure question of fact, and I do not believe, having regard to subsection 432.3(4), that I have before me the facts which would allow a fair and just determination of this question in the context of a summary judgment.

I will therefore grant summary judgment against defendant Wellcorp Canada condemning it to pay the plaintiff the amount of CAN $201,776.89, plus pre-judgment interest from August 31, 1992 computed at the prime rate, and post-judgment interest as well as the costs of the action to date. In conformity with subsection 432.3(5), I will order that the issue of the joint and several liability of defendant Wellcorp Hong Kong proceed to trial in the usual way, if need be.

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