Lutfy Limited (Plaintiff)
v.
Canadian Pacific Railway Company (Defendant)
Trial Division, Walsh J.—Montreal, September
18; Ottawa, October 16, 1973.
Maritime law—Through bill of lading—Rail carrier not
governed by clauses applicable to sea carrier.
A cargo of nylon piece goods in a container was shipped
to plaintiff in Montreal via Saint John, N.B., from London
on the MIV Alex under a through bill of lading issued by
Canadian Pacific Steamships Ltd. and the Canadian Pacific
Railway Co. The cargo was delivered to plaintiff in Montreal
in damaged condition as a result of rainwater entering the
container while it was being carried by rail by defendant
railway company. Parts I and II of the bill of lading related
to sea carriage and Part III to rail carriage. Defendant
railway company relied for its defence on those portions of
the bill of lading limiting the liability of the carrier under
Parts I and II of the bill of lading.
Held, those clauses in the bill of lading relating to sea
carriage applied only to the steamship company and the
railway company was governed only by the conditions set
out in Part III, which had been approved by the Canadian
Transport Commission. The railway company could not, by
joining in a bill of lading with a sea carrier, diminish its
liability or limit the time for bringing action except as
permitted by the Railway Regulations made pursuant to the
Railway Act.
ACTION for damages.
COUNSEL:
David Angus for plaintiff.
Pierre Durand for defendant.
SOLICITORS:
Stikeman and Elliott & Co., Montreal, for
plaintiff.
Gadbois and Joannette, Montreal, for
defendant.
WALSH J.—This action arises out of a claim
for $10,386.43 damages suffered by a container
cargo of 450 pieces of knitted nylon piece goods
shipped on March 28, 1969 under a clean bill of
lading from the Port of London, England on the
ship M/V Alex to plaintiff at Montreal via Saint
John, New Brunswick. The cargo, when it was
delivered to plaintiff in Montreal, was found to
be in a damaged and deteriorated condition as a
result of water damage apparently as a result of
holes in the roof of the container. Notice of loss
was duly given to defendant and surveys were
held and there is an agreement between the
parties that the damages, after allowing for sal
vage of the undamaged goods, amount to the
sum of $10,386.43 claimed. Plaintiff claims that
the loss resulted from defendant's failure to
safely convey, carry, care for, handle and deliv
er the cargo in good order and condition and
that it is accordingly liable to plaintiff in breach.
of contract. Plaintiff also claims damages for
delict and tort in its statement of claim and
alleges that defendant was grossly negligent in
the handling of the cargo and accordingly not
entitled to invoke any of the rights, immunities
or limitations of liability to which it might other
wise be entitled under the law and contract. The
claim based on tort was abandoned, plaintiff
conceding that it would be prescribed. Plaintiff
further specifically invokes the doctrine of res
ipsa loquitur.
It was admitted that although the container
contained 450 pieces of knitted nylon piece
goods, plaintiff was the owner of 400 of these
pieces which were shipped to Montreal under
Canadian Pacific Railway Company (hereinafter
referred to as the railway company) and Canadi-
an Pacific Steamships Limited (hereinafter
referred to as the steamships company) west
bound through bill of lading, that defendant
accepted delivery of the container from the
steamships company in apparent good order and
condition on April 14, 1969 in Saint John, New
Brunswick and agreed to transport the container
by rail to Montreal and there to deliver it to the
plaintiff, and that when the goods were deliv
ered to plaintiff in Montreal on or about May 2,
they were found to be wet and seriously
damaged. A further admission was made that
the container was stowed in the hold of the ship.
In its contestation, defendant claims that
plaintiff cannot sue it in tort since a period of
more than two years had elapsed between the
date of the shipment and the date of the institu
tion of the present action on December 10,
1971, and that as a result it is entitled to invoke
all of the rights, immunities and limitations of
liability to which it is entitled under law and the
bill of lading. Under the heading "conditions" it
states:
It is agreed that each of the carriers on the route shall be
responsible only for the goods whilst same are in its own
personal custody. The arrangements for through carriage are
made for the convenience of shippers, and the responsibility
of each carrier with regard to the carriage and storage by
other means than its own vessels or other vehicles or stores
or Railway Lines is to be that of forwarding agent only, and
any claim for loss, damage or delay must be made only
against the person or company in whose custody the goods
actually were at the time when the loss, damage or delay
was caused or arose.
It states that the container, when it was
removed by defendant from Saint John, New
Brunswick on April 14, 1969 was noted to be in
apparent good order and condition and that the
container and its contents were properly and
carefully loaded, handled, stowed, carried, kept,
cared for and discharged in accordance with the
terms of the bill of lading and the law, that a
technical analysis made of the shipment after
delivery to the consignee revealed sufficient
chloride contamination to indicate that the
wrapping had contacted a dilute salt water solu
tion, that it could not have come in contact with
salt water while under the custody of defendant,
so that such . contact must have been made
either at the Port of London, England or while
the container and its contents were on board the
vessel Alex, and that the defendant cannot be
held responsible for damages that occurred
while the shipment was not under its custody. It
further alleges that the shipper did not declare a
valuation higher than £ 100 on the container and
its contents and even if liable defendant is en
titled to limit its liability to this sum under the
law (the Hague Rules) and in accordance with
the provisions of the bill of lading.
It further claims that plaintiff failed to give
defendant the notice provided for in the bill of
lading within the time stipulated and also failed
to_ institute the present proceedings within the
period of one year provided for in the bill of
lading.
The bill of lading is a through bill of lading
issued on a form bearing the name "Canadian
Pacific Railway Company" and underneath the
name "Canadian Pacific Steamships Limited"
and although it was issued in London, England
by an agent of the steamships company, he must
also be considered as acting for the railway
company so as to bind both companies as par
ties to the contract. Since it was a through bill
of lading the Court has jurisdiction under the
provisions of section 22(2)(O of the Federal
Court Act which reads as follows:
22. (2) Without limiting the generality of subsection (1), it
is hereby declared for greater certainty that the Trial Divi
sion has jurisdiction with respect to any claim or question
arising out of one or more of the following:
(D any claim arising out of an agreement relating to the
carriage of goods on a ship under a through bill of lading
or in respect of which a through bill of lading is intended
to be issued, for loss or damage to goods occurring at any
time or place during transit;
The ship on which the merchandise was carried,
MOT Alex, was not owned by the steamships
company but was time chartered by it. The bill
of lading contained a demise clause reading as
follows:
18. If the vessel is not owned or chartered by demise to
Canadian Pacific Railway Company or Canadian Pacific
Steamships Limited (as may be the case notwithstanding
anything that appears to the contrary), this Bill of Lading
shall take effect only as a contract with the owner or demise
charterer, as the case may be, as principal, made through the
agency of Canadian Pacific Railway Company or Canadian
Pacific Steamships Limited which in either case acts as
agent only and which shall be under no personal liability
whatsoever in respect thereof.
The dock receipt signed at Saint John, New
Brunswick gives the railway company as the
carrier, destination Place Viger Special
Services' indication R/F open pier and contains
no exception to the printed heading "The fol
lowing packages or pieces in apparent good
order and condition".
The way bill indicates that the shipment left
Saint John on April 16, 1969 and was to be
placed in bond on a siding for delivery by Place
Viger Special Services to the consignee, plain
tiff Luffy Limited. It bears the stamp April 18,
1969 of Blackpool Brokerage and the seal of the
customs appraiser on April 23, 1969. It was not
delivered to plaintiff until May 2 and the freight
delivery slip bears a hand-written notation dated
May 6 reading "container old and rusted on top,
all contents saturated with water and stained,
received under protest". The goods were par
tially unpacked at Lutfy's and Yvry Kyle, pur
chasing agent who has been with plaintiff for 18
years, was called down with other senior
employees of the company to see the condition
of the goods. He saw water spilling over the
floor from the container and that the packages
being unloaded were wet. He went inside the
container, the floor and side walls of which
were wet and he could see daylight through four
or five holes in the top which he judged to be
about an inch in diameter. The container opens
from the end. There was corrugated board
around the sides of the container to protect the
contents and this too was wet. The packages
were about 54 inches in length by about 8
inches in diameter and were wrapped in a green
ish paper.
Mr. Francesco Librero, a cargo surveyor with
wide experience, was called and when he went
to plaintiff's on May 6, 1969 he ascertained that
part of the rolls were out of the container. The
container was about 20' x 8' x 8' in area and
was made of corrugated metal. It had wooden
planks on the floor but was not otherwise lined
although the floor and sides had corrugated
paper on them. Some of the rolls which had
been taken out were wet and inside the contain
er he could see other wet rolls especially on the
top, beside the walls, and those resting on the
floor. The liners were water-saturated. He could
see about five punctures on the roof of the
container at the right-hand side toward the
centre being about one-half inch to one and
one-half inches in diameter. He suggested that
the contents be sent to a salvage factory for
opening and further examination. The packages
appeared to be wrapped in corrugated board and
kraft paper which is not waterproof. The wet
test packages were in the lower corners of the
container. He contacted the railway company
and took a sample of the wet paper to send to
the J.T. Donald Laboratories for analysis to see
if it had been in contact with salt water. This
sample was about one foot square taken from
the wettest roll. About $7,100 salvage was
eventually realized for the material, the pack
ages being wet to varying degrees. He was of
the opinion that the wetting was comparatively
recent although once wet, the parcels would not
dry out in the container. They would, however,
develop mould after a period of some weeks
and there was no mould in this case. He sug
gested that the traces of salt found in the labora
tory analysis might result from the fact that the
container may have been shipped on the deck of
a ship on previous voyages and had a deposit of
salt spray on it which would be washed through
the holes by rain. He also stated that some salt
can be deposited from the atmosphere at sea. In
his experience he had once encountered a
rusted cargo of iron in a hold caused by salt.
The cargo had been loaded in rainy conditions,
the hatch covers being on shore. When they
were placed over the hold, water collected
under the hatch covers, dripping down on the
cargo leaving salt traces which rusted. He also
testified that the term "shipper's load and
count" on the bill of lading means that the
shippers would stack the goods in the container
themselves. For ocean transportation other than
in containers, the goods would have been
wrapped in polyvinyl and kraft paper and put in
boxes lined to be waterproof. The containers
are sealed at the point of origin and are not
normally opened thereafter except perhaps by
customs until delivery. When he saw the goods
on May 6 it was four days after delivery and
they had been partially unloaded. He stated that
for goods shipped in a container designed to be
waterproof it was not customary to use polyvi-
nyl wrappings on the contents, as kraft paper is
more resistant to tearing and the supposedly
waterproof container replaces the need for
polyvinyl wrapping and cartons. If not shipped
in a container, normally 4 - 6 rolls of about the
size of this shipment would be placed in a
carton which would then be a convenient size
and weight for handling.
Dr. Solomon Lipsett testified as an expert
witness on behalf of plaintiff. By agreement
between the parties and with the permission of
the Court his evidence and that of defendant's
expert witness, James Orr, was admitted despite
the absence of affidavits from them in accord
ance with the provisions of Rule 482. Dr. Lip-
sett is a Ph.D. in Chemistry, a Fellow of the
Chemical Institute of Canada, Member of the
American Chemical Society and has been with
the J.T. Donald Laboratories since 1928 acting
as a consultant engineer and chemist. He stated
that during his career he has carried out perhaps
5,000 tests for salt water damage. Accepting
Mr. Librero's statement that the paper he was
given for testing was soaking wet when it was
removed from the container, his tests indicate
that this soaking was not primarily with salt
water or the salt content would have been about
twenty times greater than it was. Although his
test was for chlorides generally, 80% of the salt
in ocean water would be sodium chloride. He
proceeded on the assumption that if chloride
was found in the paper this would be sodium
chloride. Only small traces of salt were found
amounting to 0.14%. While the paper was
porous and some chloride might have been
absorbed from the sea atmosphere, he was of
the opinion that some of the salt content could
be accounted for if the container had been left
on a wharf at the seaside exposed to ordinary
atmosphere resulting in a salt deposit on the
surface which would be washed in by the rain if
the container leaked. Later, rain water inland
could dilute this further. Paper alone can con
tain some chloride amounting to between 0.01
and 0.06%. In his view, if the sample was taken
from below or near one of the holes, the quanti
ty of salt he found in the sample could have
been washed into it through the hole but not in
the form of ocean water. In his view, if the
paper had initially been soaked by ocean water
it was unlikely that the chloride content would
be reduced to the small quantity he found even
if it had been diluted extensively subsequently
by rain water.
On behalf of defendant, James Dunn, claims
and insurance manager for the steamships com
pany, testified that the container was leased by
that company from Sea Containers in London
and that the containers are checked before they
are sent out to a customer if they are sent
directly from the steamship company. The ship
per loaded the container itself in this case. It
was stowed under deck in No. 3 lower hold and
might have been stacked with another container
on top. He agreed with other witnesses that
normally, if not in a container, bales of nylon
would be wrapped in a waterproof wrapping and
packed in cartons with several bales to a carton.
On cross-examination he admitted that although
the two companies are named Canadian Pacific
Steamships and Canadian Pacific Railway they
are entirely independent but the bill of lading
was issued for both of them so that in a sense
they acted together as agents for each other.
The quotation of the steamships company
included the inland freight rate. Normally pay
ment would be collected by the steamships com
pany and the share of the railway company
would then be turned over to it. The steamships
company would arrange for the on-carriage by
rail with the railway company on the shipper's
behalf unless the customer otherwise requested.
He testified further that on the request of Dale
and Company, representing the insurers for
plaintiff, the time to institute proceedings
against the steamships company was extended.
Clause 4 of the Gold Clause Agreement reads as
follows:
4. The Shipowners will, upon the request of any party
representing the cargo (whether made before or after the
expiry of the period of twelve months after the delivery of
the goods or the date when the goods should have been
delivered as laid down by the Hague Rules) extend the time
for bringing suit for a further twelve months, unless:—
(a) Notice of the claim with the best particulars available
has not been given within the period of twelve months.
or
(b) There has been undue delay on the part of Con-
signees, Receivers or Underwriters in obtaining the rele
vant information and formulating the claim.
An extension was given by letter dated April 14,
1970 extending the time for bringing proceed
ings up to and including April 8, 1971. This
delay was subsequently extended for another
three months until July 13, 1971 and plaintiff
commenced proceedings against the Canadian
Pacific Railway Company, Canadian Pacific
Steamships Limited and the owners of the M/V
Alex on June 18, 1971 within this extended
period. There was never any agreement, how
ever, that the proceedings would be brought
against the steamships company in Canada and
it adhered to the provisions of the Gold Clause
Agreement insisting that the claim be processed
through Lloyd's in London. A further series of
three months extensions carried the extended
period up to September 30, 1973. All these
extensions were made on behalf of the steam
ships company and not of the railway company.
The steamships company declined liability
because of the clean receipt received from the
defendant herein, the railway company. Mr.
Dunn conceded that the containers should be
carefully checked for damage when taken off
the ship as holes can develop in handling but
stated that at that time only the sides and end
were checked although they are now also
checked on top.
Joseph Curtis, who was at the time yardman
and clerk at Place Viger for the Canadian Pacif
ic Express Company Special Services whose
responsibility was to take delivery of containers
arriving from Saint John, New Brunswick and
deliver them to the consignee if requested,
stated that the containers in question were on
the track on the morning of April 15 2 but were
not cleared by customs until April 23. He has no
personal knowledge of plaintiff being notified of
the arrival of the container as this would nor
mally be done by the railway company and not
from the yard. He knows that a telephone call
was made to Mr. Dionne of the plaintiff com
pany on or about April 28. He was not aware of
any damage which may have been caused to the
container while in the yard. They are normally
lifted with a fork lift from the bottom and not
touched on top. He does not believe that they
would be stacked two deep while in the yard
although empty containers might be.
James P. McGee, a claims investigator for
defendant who in 1969 was the senior over,
short and damage clerk for the Atlantic region
of the company, gave evidence as to the various
forms used. He testified that normally goods
such as those with which we are here concerned
would be wrapped in polyvinyl and then put in a
carton with water repellent paper in between,
perhaps four to six rolls being placed in a carton
so that the total package would weigh perhaps
200 lbs. He is not familiar with the through bill
of lading form but knows that the domestic bill
of lading used by the railway company has been
approved by the Canadian Transport Commis
sion: All the conditions of this bill of lading are
set out in full in Part III of the through bill of
lading issued jointly by the railway company
and steamships company. The preamble to the
section in question reads:
PART ill—With respect to the service after arrival at the port
of discharge first before mentioned, it is agreed that:
followed by all the terms of the domestic bill of
lading and it is significant that there is no time
limit for bringing of action incorporated in these
terms and conditions.
James Orr, a professional engineer, now
assistant works manager at defendant's Angus
shops in Montreal, testified as an expert wit
ness. He has an M.Sc. degree in metallurgical
engineering from the University of California
and has worked for defendant from 1958 to
1970 as engineer for tests at the systems tests
laboratory at Angus shops. He makes perhaps
1,000 chloride analyses a year. His analysis of
the paper sample given in the present case
showed 667 parts per million which is 0.11%,
close to the 0.14% testified to by Dr. Lipsett.
He testified that if paper was originally saturat
ed with salt water it could be diluted by fresh
water if the dilution continued long enough,
especially if it was flowing or dripping water,
until the chloride percentage would be reduced
to practically nil. He testified that it would take
about 2g ounces of salt to ten gallons or 100 lbs.
of water to reach the concentration found. Nor
mally nylon would not absorb water so that if it
was saturated, as some of the evidence indicat
ed, a great deal of water must have got into the
container. His conclusion was that it was im
possible for the quantity of salt he found to
result from rain washing the surface of the
container and he therefore concluded that it
must have resulted from salt water, later diluted
by fresh water. He denied that any significant
quantity of chloride can normally be found in
paper. He only saw the sample on May 27, 1969
and his letter reporting on it referred to a very
diluted salt water solution. He does not believe
that 22 ounces of salt could have built up on the
roof of the container; even if it had, it would not
necessarily have all washed through the holes.
The weather report produced from Dorval
Weather Office shows that there was 2.60
inches of precipitation between April 14 and 21
alone, the month of April 1969 being substan-
tially wetter than normal. No similar figures
were given for May but defendant does not
deny that the container was unprotected from
the elements while in transit from Saint John
until it was delivered to plaintiff. It is evident
that most of the water found in the container
when it was opened must have got into it
through the leaks in the roof during this period.
It may be that the roof of the container had
holes in it when it was delivered to the shipper
by Sea Containers or the steamships company
and it was suggested that if this were so, the
shipper, in packing the container, should have
noticed these holes and rejected it. On the other
hand, the parties furnishing the container have
the primary obligation to ensure that a sound
and waterproof one is furnished to the custom
er. While the defendant herein had nothing to do
with the inspection of the container before
delivery or delivery of same to the customer it
was one of the parties to the through bill of
lading, and the original bill of lading contains a
clause added by rubber stamp reading "contain-
ers used and damaged by wear and tear but no
indication of damage to contents or unsuitability
for carriage of contents". Another stamped on
clause reads in part "the containers is/are the
property of the Canadian Pacific Steamship
Company". As one of the parties to the through
bill of lading, defendant must assume responsi
bility toward the shipper of providing a sound
container, although relying on the other party,
the steamships company, to provide such a con
tainer. On the basis of the evidence before me I
can find no negligence in the manner in which
the goods were packed in the container by the
shipper, which would justify rejecting the claim
on this basis.
It is also possible that the holes arose from
the handling of the container when loading same
or discharging it from the ship, but on the evi
dence with respect to this and especially in view
of the clean receipt given by defendant railway
company to the steamships company when
accepting the container from it, it must be found
that defendant has failed to establish fault on
the part of the steamships company. Probably a
closer inspection of the container should have
been made, including examination of the roof of
same before accepting it as being in apparent
good order and condition, as the evidence dis
closed is now done. There was some evidence
to the effect that the existence of holes could
only really be determined by opening an empty
container and going inside to see if daylight
showed through. It appears to me, however, that
a close examination of the roof could hardly
have failed to disclose holes between one-half
inch and one and one-half inches in diameter. In
any event, if the holes were there when defend
ant accepted delivery, it has failed to disclose
their existence by any direct evidence to this
effect. Instead, it has relied on expert evidence
as to very dilute traces of salt in the samples of
paper in which the merchandise was wrapped to
establish that the merchandise had been
exposed to salt water which had got in and
damaged the goods before- it took possession of
them. In this connection the opinions of the
experts are contradictory. While they agree that
the quantity of salt was very small in the range
of 0.11 to 0.14%, they differ in the conclusions
they draw from this. Dr. Lipsett believes that
these traces could result partially from salt
already in the paper itself, partially from salt
absorbed from the atmosphere, and partially
from salt washed into the container by the sub
sequent rain, from the roof of same on which
there was a salt deposit from ocean spray
accumulated during previous voyages or from
the atmosphere. Mr. Orr, on the other hand,
does not believe that sufficient quantities of salt
could have been washed into the container in
this manner due to the quantities found but, on
the contrary, concludes that if the merchandise
had been soaked with salt water, the subsequent
rainfall washing over it through the leaks could
have diluted it to the concentration found.
The cargo was stowed in the hold below the
deck and there is no indication that there was
any leakage into it during transit whereas, on
the contrary, there is evidence that it was
exposed to a great deal of rainfall after it came
into the care and custody of defendant. Both
experts appear to be competent and experienced
witnesses. In order to rebut the presumption
created by the clean receipt given by defendant
for the container, however, it would require a
great deal more than the somewhat tenuous
evidence submitted by its expert (which was
disputed by the evidence of plaintiff's expert) to
the effect that because slight traces of salt were
found in the water-soaked paper in which the
merchandise was wrapped, the damage to same
must have been caused while in the possession
of the steamships company. I conclude there
fore that the damage was caused by rainwater
saturating the contents of the container through
holes in the roof of same primarily, if not entire
ly, while same was in the possession, custody
and control of defendant.
Aside from its defence on the facts, however,
defendant has several interesting and serious
legal defences.
Defendant invokes Part III, section 3 of the
bill of lading (being one of the conditions
attached to the carriage by rail) which reads in
part as follows:
When in accordance with general custom, on account of the
nature of the goods, or at the request of the shipper, the
goods are transported in open cars, the Carrier (except in
case of loss or damage by fire, in which case the liability
shall be the same as though the goods had been carried in
closed cars) shall be liable only for negligence, and the
burden of proving freedom from such negligence shall be on
the Carrier.
Defendant contends that this eliminates the
possibility of basing plaintiff's claim on the doc
trine of res ipsa loquitur. Plaintiff's claim rests
on breach of contract and not on tort but this
would not relieve defendant from the burden of
proof of establishing freedom from negligence
in accordance with this condition. Containeriza-
tion is a relatively new method of shipping and
there are many questions left to be settled by
the jurisprudence in connection with the car
riage of goods in containers. Certainly contain
ers would, in accordance with general custom,
be carried in open cars but the condition in the
said section 3 seems to be devised for goods
which, on account of their nature, can be car
ried in open cars without suffering damage
unless there is negligence on the part of the
carrier. Certainly nylon piece goods would not
normally "in accordance with general custom,
on account of the nature of the goods, or at the
request of the shipper" be carried in open cars
and it is only because they were in a presumably
waterproof container that they could be so car
ried. It is indisputable that there were holes in
the roof of the container through which water
entered damaging the goods. The fact that
defendant did not inspect the roof of the con
tainer, as is now the practice, before accepting
delivery of same and, in fact, gave a clean
receipt for it as being in apparent good order
and condition, prevents it from establishing that
it has discharged the burden of proving freedom
from negligence so as to avoid its contractual
responsibilities for damage to the merchandise
in the supposedly watertight container. This
defence must therefore fail.
Defendant's next argument in law is to the
effect that the present proceedings are time-
barred. In this connection it invokes the one
year prescription of the Hague Rules incorpo
rated in the through bill of lading and contends
that even if this were extended to two years by
virtue of the Gold Clause Agreement, the
present proceedings would still not have been
brought in time. It further points out that any
extensions of time for bringing proceedings
granted by the steamships company do not avail
to interrupt prescription against the railway
company. The one year period in which action
must be brought after delivery of the goods is
set out in section 17 which appears in Part II of
the bill of lading conditions and I accept plain
tiff's contentions that this only applies to the
ocean carriage portion of the contract, that is to
say, to the portion for which the steamships
company would be liable. This is an unusual
type of bill of lading made jointly by the railway
company and the steamships company and the
bill of lading conditions are clearly broken down
into three parts. The preambles of these parts
are as follows:
PART I—With respect to the service to the port of tranship-
ment (if any) named on the face hereof:
PART n—With respect to the service after arrival at the port
of transhipment, if any such be named on the face hereof,
until arrival at the port of discharge on the face hereof first
before mentioned or if no port of transhipment be so named
with respect to the service until arrival at the said port of
discharge:
PART ui-With respect to the service after arrival at the port
of discharge first before mentioned, it is agreed that:
It is clear that different conditions apply to
different periods in which the goods are in
possession of the carriers. There is not one
carrier only but two. On the face of the bill of
lading the name of the vessel is shown, the port
of loading is London, the port of discharge is
Saint John, New Brunswick and the final desti
nation is Montreal, and after providing for car
riage to the port of discharge, the face of the bill
of lading states:
... after arrival there to be transported by Canadian Pacific
Railway or other railway company and/or steamship com
pany or carriers to the station nearest to the destination of
the goods above-mentioned and there to be delivered with
and subject to all the liberties, terms and conditions herein
contained whether written, printed or stamped on the face
or back hereof to the consignee named above or his assigns
on payment of the charges thereon.
While this makes the rail carriage subject to "all
the liberties, terms and conditions" of the bill of
lading, the bill of lading itself clearly states that
it is the Part III conditions (i.e. the rail carriage
conditions) which apply to the delivery from the
port of discharge. Plaintiff contends that the
limitations of liability and time for bringing
action applicable to the sea portion of the
voyage by virtue of the Hague Rules and the
terms of the bill of lading cannot be applied to
the land portion since the railway company is
bound to comply with terms and conditions
which have been approved by the Canadian
Transport Commission and cannot derogate
from them and that it is for this reason that
these conditions were inserted in full in Part III
of the bill of lading. Defendant referred to the
French case of Nossi-Bé (Tribunal du Com
merce du Havre, June 11, 1963) 16 D.M.F. 430
which pointed out the difficulty of applying
different periods for limitation of action to dif
ferent parties to a contract of carriage with the
result that one such party might be sued after its
rights against another such party for indemnifi
cation against such a judgment had been time-
barred, but I do not find this reasoning suffi
cient to override the clear distinctions in the bill
of lading itself between the conditions and limi
tations applicable to the two carriers.
Defendant also invokes section 21 of the bill
of lading which reads as follows:
21. All claims arising hereunder shall be settled according to
the law of England.
but I cannot interpret this as overriding regula
tions made by virtue of the Railway Act with
which defendant is bound to comply, and in any
event this section 21 appears in Part II of the
bill of lading conditions which, as I have already
indicated, I believe applies only to the sea por
tion of the carriage. Subsections 294(1) and (2)
of the Railway Act, R.S.C. 1970, c. R-2, which
are identical with subsections 353(1) and (2) of
the Railway Act, R.S.C. 1952, c. 234, in effect at
the time this claim arose, read as follows:
294. (1) No contract, condition, by-law, regulation, decla
ration or notice made or given by the company, impairing,
restricting or limiting its liability in respect of the carriage of
any traffic, shall, except as hereinafter provided, relieve the
company from such liability, unless such class of contract,
condition, by-law, regulation, declaration or notice has been
first authorized or approved by order or regulation of the
Commission.
(2) The Commission may, in any case, or by regulation,
determine the extent to which the liability of the company
may be so impaired, restricted or limited.
The limitation of action against the railway com
pany is set out in subsections 342(1) and (2) of
the present statute which are identical with sub-
sections 398(1) and (2) of the old Act and read
as follows:
342. (1) All actions or suits for indemnity for any dam
ages or injury sustained by reason of the construction or
operation of the railway shall, and notwithstanding anything
in any Special Act may, be commenced within two years
next after the time when such supposed damage is sus
tained, or if there is continuation of damage, within two
years next after the doing or committing of such damage
ceases, and not afterwards.
(2) Nothing in subsection (1) applies to any action
brought against the company upon any breach of contract,
express or implied, for or relating to the carriage of any
traffic, or to any action against the company for damages
under the provisions of this Act respecting tolls.
Since the action is based on breach of contract,
it is the present section 342(2) which applies. In
the Province of Quebec, where the damage
appears to have occurred, the action would be
prescribed by five years by virtue of article
2260 of the Quebec Civil Code. In the Province
of New Brunswick the period would be six
years [see R.S.N.B. 1952, c. 133, s. 9] and
section 38(1) of the Federal Court Act provides
as follows:
38. (1) Except as expressly provided by any other Act,
the laws relating to prescription and the limitation of actions
in force in any province between subject and subject apply
to any proceedings in the Court in respect of any cause of
action arising in such province, and a proceeding in the
Court in respect of a cause of action arising otherwise than
in a province shall be taken within and not after six years
after the cause of action arose.
so that even if the proceeding were considered
to be in respect of a cause of action arising
otherwise than in a province, the period would
be six years. The proceedings were therefore
brought in time against the present defendant,
the railway company, and this defence also
fails.
Defendant also invokes the argument that
since there was no demise charter of the Alex,
clause 18 of the conditions of the bill of lading
(supra) applies. As a result it contends that
neither it nor the steamships company was
acting in any capacity other than as agent for
the owners of the vessel and that they are
therefore under no personal liability whatsoever
to plaintiff. Here again it must be pointed out
that this condition appears in the section of the
bill of lading dealing with ocean transport. The
cases to which I was referred which uphold this
clause, namely Apex (Trinidad) Oilfields, Ltd. v.
Lunham & Moore Shipping, Ltd. [1962] 2
Lloyd's L. Rep. 203; Grace Kennedy & Co.,
Ltd. v. Canada Jamaica Line [1967] 1 Lloyd's
L. Rep. 336 and Delano Corporation of America
v. Saguenay Terminals Limited [1965] 2
Ex.C.R. 313, all deal with damages to the cargo
while at sea. The purpose of such a condition is
that where the vessel is not operated under a
demise charter, since the owners maintain
responsibility for the operation of same by the
captain and crew, they are primarily liable for
damages suffered as a result of such operation.
To extend this to the land portion of the car
riage and hold that defendant railway company
is not liable for any damages to the owner of the
merchandise shipped because even during such
land carriage it is acting only as agent for the
owners of the vessel by which the goods were
delivered to Saint John, New Brunswick and
accepted in apparent good order and condition
according to defendant's own receipt, and that
there is no contractual liability of the railway
company to the shipper or consignee would be
an application and extension of this condition
which was clearly never intended. It must once
again be pointed out that this is a condition in
Part II applicable only until arrival at the port of
discharge.
One further argument was raised by defend
ant, namely that in any event its liability is
limited to the sum of £ 100 per package 3 and that
the container itself constituted such a package.
In support of this argument it invokes section
16 of the conditions of the bill of lading, which
reads as follows:
16. In case of any loss or damage to or in connection with
goods exceeding in actual value £100 per package, or, in
case of goods not shipped in packages, per customary
freight unit, the value of the goods shall be deemed to be
£ 100 per package or per unit, on which basis the freight is
adjusted, and the Carrier's liability, if any, shall be deter
mined on the basis of a value of £ 100 per package or per
customary freight unit, or pro rata in case of partial loss or
damage, unless the nature of the goods and a valuation
higher than £ 100 shall have been declared in writing by the
shipper upon delivery to the Carrier and inserted in this Bill
of Lading and extra freight paid if required and in such case
if the actual value of the goods per package or per custom
ary freight unit 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 damage shall be adjusted pro rata
on the basis of such declared value.
This is in accordance with the Hague 'Rules
although in accordance with the Gold Clause
Agreement (if it applied) this limit would be
raised to £200 per package or unit of freight. In
addition to the printed clause 16, the bill of
lading has stamped on the face of it the follow
ing clause:
Shipper hereby agrees that carrier's liability is limited to
£100 with respect to the container and entire contents
except when shipper declares a higher valuation and shall
have paid additional freight on such declared valuation
pursuant to appropriate rule in the Canadian North Atlantic
West-bound Freight Conference Tariff.
This condition may well have been added with
the intent of imposing this limit on the "contain-
er and entire contents", since the standard
clause 16 states "... in case of goods not
shipped in packages, per customary freight unit,
the value of the goods shall be deemed to be
£100 per package or per unit, ...". In the
present case there was evidence that the cus
tomary freight unit for bales of material of this
sort would be to put 4 to 6 of them in a package
and since this would result in between 67 and
100 packages the limitation to £ 100 per package
might, in the absence of the stamped special
condition, have been applied to this number of
packages which would not have reduced the
total claim of $10,386.43.
There has been considerable jurisprudence,
especially since the introduction of containeri-
zation as to what constitutes a package or unit.
The American case of Inter-American Foods
Inc. v. Coordinated Caribbean Transport Inc.
[1970] A.M.C. 1303, discusses this pointing out
that when the bill of lading shows the number of
packages in the container, the limitation of lia
bility should apply to each of these packages
and not to the container as a whole. The present
bill of lading refers to the fact that the container
is "said to contain 400 pieces knitted nylon
piece goods plus 50 pieces knitted nylon piece
goods", (the latter being consigned to another
consignee, Molyclaire Limited, with which we
are not here concerned). In a French case, the
Tribunal du Commerce d'Oran (Strasbourgeois)
February 7, 1949, (1950) D.M.F. 126, held:
[TRANSLATION] The unit mentioned in article 5 of the law of
April 2, 1936 [the Hague Convention] to serve as a base of
calculation of the limitation of responsibility of the maritime
carrier applies to merchandise which in current language is
not usually called packages, such as bales of wool or cotton,
casks of wine, bags of produce.
This would seem to be very close to the present
case. The package limitation is discussed gener
ally in Tetley, Marine Cargo Claims at pages
234 and following.
The question was considered at length in a
recent judgment of the United States Court of
Appeals for the Second Circuit, decided on
August 13, 1973, in the case of Royal Typewrit
er Co., Division Litton Business Systems, Inc. v.
MI V Kulmerland, her engines, etc., v. Hamburg-
Amerika Linie 483 F. 2d 645, which upheld the
judgment of Tyler J. holding that 350 cartons of
adding machines placed in a container for ship
ping constituted a single package. In rendering
judgment the Court discussed and distinguished
the case of Leather's Best, Inc. v. S.S. Morma-
clynx (451 F. 2d 800, 814-816) in which, when
the bill of lading referred to one container said
to contain 99 bales of leather and the ocean
carrier's agent which furnished the containers
gave receipts specifically for 99 bales, it was
held that each bale constituted a package where
as in the case before the Court the container
was said to contain merely "machinery" and the
applicable freight rate was the same whether or
not the bill of lading referred to the number of
bales or cartons in the container. The judgment,
while upholding Tyler J., pointed out that he had
changed his position somewhat in the case of
Rosenbruch v. American Export Isbrandtsen
Lines, Inc., (357 F. Supp. 982) by calling a
container a package when it contains the goods
of a single shipper without regard to the acci
dent of notations on the bill of lading on the
basis that the underlying policy of COGSA (the
U.S. Carriage of Goods by Sea Act) was intend
ed to let the shipper obtain at his option marine
insurance coverage if he prefers the cheaper
freight rates of larger packages. This judgment
is under appeal, however, and the Court did not
agree with this distinction pointing out that
since the real parties in interest may be the
marine insurers themselves, it is no answer to
say that the availability of marine insurance is
the determinative factor as a ruling that each
bale constitutes a package may simply be con
ferring a windfall on the cargo insurer if it bases
its premium on the assumption that the carrier's
liability was limited to $500. The judgment in
the Royal Typewriter case opts for a decision
based on whether the contents of the container
could have easily been shipped overseas in the
individual packages or cartons in which they
were packed by the shipper. In that case they
could not and it was pointed out that in the days
before containers they were shipped in wooden
crates or cases containing twelve to twenty-four
individual packages or cartons of typewriters
each. The judgment likens the containers in
which they are shipped in lots of 350 to the
wooden crates or cases used in the past. It
further distinguishes the Leather's Best case
(supra) by pointing out that the bales there
could have been shipped individually rather
than in the container ultimately held not to be a
package. The judgment concludes by saying:
The "functional package unit" test we propound today is
designed to provide in a case where the shipper has chosen
the container a "common sense test" under which all parties
concerned can allocate responsibility for loss at the time of
contract, purchase additional insurance if necessary, and
thus "avoid the pains of litigation".
The question was again carefully considered
in the light of Canadian law by Collier J. in this
Court in J.A. Johnston Company Limited v. The
"Tindefjell" [1973] F.C. 1003. In that case the
two containers in question contained 173 and
148 cartons of shoes respectively. The bill of
lading indicated the number of cartons in each
container. The freight was calculated on a
weight basis. The containers and contents
arrived in a damaged condition and the claim
was for $10,000, the question before the Court
being whether the limitation of liability should
be $500 on each container. The defendants
argued that if the liability was not so restricted
to $1,000, it should be restricted on the basis of
"the customary freight unit" and that since the
two containers when packed weighed 10.07
metric tons and the freight was calculated at a
rate per metric ton, this constituted the custom
ary freight unit and the limitation should be
somewhere between $5,000 and $5,500. This
judgment discusses the Leather's Best (Morma-
clynx) case (supra) and the trial court judgment
in the Royal Typewriter case (supra) as well as
some of the French jurisprudence to which I
was referred. Collier J. states [at page 1009]:
To a large extent the facts of each particular case must
govern, and equally important, the intention of the parties in
respect of the contract of carriage must be ascertained. I
think it proper in a case such as this to determine if the
cargo owner and the carrier intended the container should
constitute a package for purposes of limitation, or whether
the number of packages in the container was to be the
criterion.
After discussing the Mormaclynx case, Collier J.
concludes [at page 1012]:
Where the shipper knows his goods are to be shipped by
container and specifies in the contract (usually by means of
the bill of lading) the type of goods and the number of
cartons carried in the container, and where the carrier
accepts that description and that count, then in my opinion,
the parties intended that the number of packages for pur
poses of limitation of liability should be the number of
cartons specified.
He concludes that in the case before him each
carton did not exceed $500 in value but by
putting the carrier on notice as to the number of
packages being carried, although they were
grouped together in one large receptacle, the
shipper was protecting himself against the limi
tation being applied to the container itself. He
distinguishes the Royal Typewriter and Rosen-
bruch cases (supra) on the basis that in those
cases the bills of lading gave no indication as to
the number of cartons in the container. Having
concluded that the containers themselves were
not packages, he then proceeds to a considera
tion as to whether they were units, referring to
the Supreme Court case of Falconbridge Nickel
Mines Ltd. v. Chimo Shipping Limited
(unreported judgment of May 7, 1973). There a
tractor and generator were carried on board a
vessel and lost when off-loaded. It was contend
ed by respondent that the liability should not
exceed $500 for each as each should be consid
ered as a shipping unit. The appellant had con
tended that the weight should be taken into
consideration in order to determine the number
of customary freight units, the tariff being based
on units of weight. The Supreme Court did not
accept that contention, holding that there was a
clear difference in wording between the Canadi-
an and English rules and the American rule and
that in Canada "unit" meant a unit of goods or
an item of cargo and not a unit of freight.
Accordingly, there were only two units and the
liability was limited to $1,000. Collier J. distin
guishes this case, however, in that it dealt with
large pieces of machinery which were not pack
ages in the usual sense.
Discussing the clause in the bill of lading in
the case before him which uses the words "per
customary freight unit", as does the bill of
lading in the present case, Collier J. comments
that it appears that the bill of lading was drafted
with the wording of the American statute
(COGSA) in mind where the limitation may be
calculated per customary freight unit but that as
a result of the Supreme Court decision in the
Falconbridge case (supra) that method of cal
culating the limitation is not permissible under
Canadian law as the words "per customary
freight unit" do not appear in the Canadian
statute.
Applying the reasoning of this judgment to
the case before me defeats plaintiff's contention
that since, in the absence of a container, 4 to 6
rolls of nylon piece goods of the size of these
with which we are concerned would normally be
placed in a. package, this should constitute a
"customary freight unit" resulting in the ship
ment consisting of 67 to 100 such units. Since it
is also evident that the rolls, wrapped as they
were, would not normally be shipped separately,
it appears that each roll cannot be considered as
a package by itself if the reasoning of the
American case of Royal Typewriter (supra) is
adopted in preference to the conclusion reached
by the American courts in the Leather's Best
case (supra) where it was held that a bale of
leather was a package. The present case is dif
ferent from the Johnston Company case (supra)
in that there the shoes were packed in cartons
that were apparently packages and could con
ceivably have been shipped as such individually.
With respect to the validity of the clause
stamped on the bill of lading, Tetley, in his book
Marine Cargo Claims, reviewing the American
jurisprudence has this to say at pages 237-38:
To allow a carrier absolute freedom to define the term
"package" in the bill of lading would be, in effect, to allow
the carrier to limit his liability in any shipment, of no matter
how many packages, to $500.00 or its equivalent for the
whole shipment. This principle is set out clearly in Gulf
Italia Co. v. American Export Lines (SS. Exiria) ([1958]
A.M.C. 439 at p. 442 (at first instance); [1959] A.M.C. 930
(on appeal)). A tractor weighing 43,319 lbs., shipped without
skids, but with superstructure partially encased with wooden
planking, was held not to be a package within the meaning
of Cogsa, s. 4(5). The carrier's liability for damage was
limited to $500.00 per measurement ton, which was the
basis on which the freight was computed:
To allow the parties themselves to define what a "pack-
age" is would allow a lessening of liability other than by
terms of the Act since a carrier could always limit its
liability to $500.00 by merely extracting a stipulation from
the shipper that everything shipped in no matter what
form would be deemed for the purposes of limitation of
liability a package.
In Pannell v. U.S. Lines, ([1959] A.M.C. 935 at p. 936) an
uncrated yacht was carried on deck, and so declared on the
face of the bill of lading. Therefore the Rules would not
normally apply. The bill of lading invoked Cogsa particularly
and so it applied by agreement. The bill of lading also
defined package to include "any shipping unit". The Court
noted that, had Cogsa applied, not by agreement, but ex
proprio vigore, (i.e. by its own terms and authority), the
definition of package would be invalid, as ruled in Gulf
Italia Co. v. American Export Lines (SS. Exiria). But, in this
case, "Where a statute is incorporated by reference its
provisions are merely terms of the contract evidenced by
the bill of lading. Our task therefore is to construe the
contract to give consistent effect, if possible, to all of its
terms." The yacht was therefore held to be a package with a
total limitation of $500.00.
Since both the British Carriage of Goods by
Sea Act (1924) and the Canadian Carriage of
Goods by Water Act (R.S.C. 1970, c. C-15)
which was formerly the Water Carriage' of
Goods Act (R.S.C. 1952, c. 291) contain in
Article III, paragraph 8 of the Schedule a clause
reading in part as follows:
8. Any clause, covenant or agreement in a contract of
carriage relieving the carrier or the ship from liability for
loss or damage to or in connection with goods arising from
negligence, fault or failure in the duties and obligations
provided in this Article or lessening such liability otherwise
than as provided in these Rules, shall be null and void and of
no effect.
identical with section 8 of the U.S. Carriage of
Goods by Sea Act (COGSA) and all are repro
ductions of part of Article III, paragraph 8 of
the Hague Rules, I am inclined to the view that
the reasoning of the American courts in the case
of Gulf Italia Co. v. American Export Lines (SS.
Exiria) (supra) that the limitation cannot be
avoided or diminished indirectly by allowing a
carrier absolute freedom to define the term
"package" in the bill of lading would be applic
able to the present case also, with the effect of
invalidating the stamped clause applying the
limitation of £ 100 to the container and entire
contents. However, this question does not need
to be settled here since, as already indicated, I
have concluded that the individual bales of ma
terial cannot be considered as packages or units
so that the container as such must, under the
circumstances of this case, be considered as the
package and the limitation of £100 (or $500)
would apply if the defendant in the present case
was the steamships company.
As I have indicated previously, however, I
consider that all the clauses of the bill of lading
deriving from the Hague Convention or other
wise relating to the sea portion of the carriage
are applicable only to the steamships company
and that the railway company is bound by the
conditions set out in Part III relating to carriage
of goods by land, which conditions have been
approved by the Canadian Transport Commis
sion and constitute the relevant regulations gov
erning the carriage of the goods by the railway
company. The railway company cannot, by join
ing in a bill of lading with the steamships com
pany, diminish its liability either with respect to
the amount of the claim which can be made
against it or with respect to the time an action
against it may be brought save to the extent that
this is permitted by the railway regulations. The
liability of the railway company, therefore, can
only be limited to the extent provided in the
Railway Act and regulations made thereunder
and the Court's attention was not directed to
any such regulation limiting the liability to less
than the amount claimed.
Judgment will therefore be rendered in favour
of plaintiff against defendant for $10,386.43
with interest at 5% from May 6, 1969 and costs.
1 Place Viger yards are in Montreal.
2 The car movement record indicates that it did not arrive
in Montreal (St-Luc yard) until April 16 and at Hochelaga
yard (Montreal) on April 17, but the slight discrepancy in
dates is not significant.
3 The limitation is expressed at $500 in Article IV, para
graph 5 of the Schedule to the Canadian Carriage of Goods
by Water Act, R.S.C. 1970, c. C-15.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.