T-3177-74
Marubeni America Corporation, Miida Electron
ics, Inc., and Mastercraft Enterprises (Plaintiffs)
v.
Mitsui O.S.K. Lines Ltd. and ITO—International
Terminal Operators Ltd. (Defendants)
Trial Division, Marceau J.—Montreal, October 5,
1978; Ottawa, January 5, 1979.
Maritime law — Torts — Contract — Bill of lading —
Goods shipped by sea not delivered due to theft — Plaintiff-
owner seeking compensation and joint and several condemna
tion of defendants — Action against carrier based on contract
of carriage and non-delivery of goods — Action against steve-
doring firm based primarily in delict — Limitation of liability
clause in bill of lading, to which stevedore not privy, claimed
to be applicable to stevedore by incorporation by reference in
contract between carrier and stevedore — Quebec Civil Code,
articles 1029, 1053.
Goods were shipped by sea from Japan under a bill of lading
and unloaded and stored by a cargo handling company (ITO)
under a contract with the carrier, but some of the goods were
stolen before the owner was to take delivery. The owner claims
compensation from the two defendants who successively had
custody of the goods throughout the period in which the loss
could have occurred and seeks a joint and several condemnation
of the defendants. The action against the carrier is based only
on the contract of carriage and the failure to deliver. Although
the action against ITO._ is based primarily in delict or quasi-
delict, ITO, in addition to denying any negligence, contends
that the goods were not lost while in its custody and that the
protections accorded the carrier and extended to it in the bill of
lading apply.
Held, the action is dismissed. Defendant carrier relies on a
clause in the bill of lading limiting its liability. In order to
benefit from that clause, however, defendant carrier must prove
that the goods were lost after being unloaded in Montreal. The
evidence contains a cluster of presumptions leading to the
conclusion that the goods were all unloaded at Montreal and
that the loss of some of those goods only occurred subsequently.
The normal obligations of a cargo handling firm include the
adoption of a faultless security system, but these obligations do
not exist where there is no contractual relationship. The general
obligation of prudence and diligence required by the Civil Code
cannot include all the duties that a cargo handling firm might
have to assume in its capacity of a commercial undertaking
within a framework of a contract. On a purely delictual level,
plaintiff has failed to prove fault within the general meaning of
the law. Defendant ITO can rely on the limitation of liability
clause in the contract it signed with the carrier with a reference
to the Himalaya clause originally provided in the contract of
carriage itself. If the plaintiff shipper-owner can take action
against the defendant ITO in its capacity as a professional
cargo handler, and thus otherwise than on a strictly delictual
basis, it is because plaintiff can avail itself of this contract for
services between the carrier and ITO, concluded in part for its
benefit as owner and with its express authorization. It cannot
act in this way, however, without accepting the contract in its
entirety.
Eisen Und Metall A.G. v. Ceres Stevedoring Co. Ltd.
[1977] 1 Lloyd's Rep. 665, discussed. Circle Sales &
Import Ltd. v, The "Tarantel" [1978] 1 F.C. 269, dis
cussed. Alder v. Dickson [1954] 2 Lloyd's Rep. 267,
discussed. Midland Silicones, Ltd. v. Scrutions, Ltd.
[1961] 2 Lloyd's Rep. 365, discussed. Canadian General
Electric Co. Ltd. v. Pickford & Black Ltd. (The "Lake
Basomtwe") [1971] S.C.R. 41, discussed. The New Zea-
land Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd.
(The "Eurymedon") [1974] 1 Lloyd's Rep. 534 (P.C.);
[1971] 2 Lloyd's Rep. 399 (N.Z.S.C.); [1972] 2 Lloyd's
Rep. 544 (N.Z.C.A.), discussed.
ACTION.
COUNSEL:
Marc Nadon for plaintiffs.
Robert Cypihot for defendant Mitsui O.S.K.
Lines Ltd.
David Marler for defendant ITO—Interna-
tional Terminal Operators Ltd.
SOLICITORS:
Martineau, Walker, Allison, Beaulieu,
MacKell & Clermont, Montreal, for plain
tiffs.
Brisset, Bishop, Davidson & Davis, Montreal,
for defendant Mitsui O.S.K. Lines Ltd.
Chauvin, Marler & Baudry, Montreal, for
defendant ITO—International Terminal
Operators Ltd.
The following is the English version of the
reasons for judgment rendered by
MARCEAU J.: The basic facts that gave rise to
this multi-party liability action have the simplicity
and attraction of a textbook case. A marine carrier
agreed, under a contract attested by a bill of
lading, to carry 250 cartons containing electronic
desk calculators from the city of Kobe in Japan to
Montreal, where the consignee, in fact the other
party to the contract and the owner, could receive
and take delivery of them. On their arrival in
Montreal, the goods were picked up by a cargo
handling company which had made an agreement
with the carrier to unload and store them until
they were delivered. When the owner arrived to
take delivery, a number of cartons had disap
peared; disappearance that may be explained, at
least in part, by the fact that a few days previously
there had been a theft at the warehouse in which
the cartons were stored. The owner naturally
claimed compensation, but both the carrier and
the stevedore and provider of terminal services
denied all liability: the owner felt that it was not
for him to apportion liability between the two and
asked the Court for a joint and several condemna
tion against both of them.
There is thus nothing special or exceptional
about the facts and the action that has been
instituted is certainly not the first of its kind. The
legal difficulties raised by the issue are neverthe
less extremely perplexing, first because they are
tied up to some of the most obscure aspects of the
rules for giving effect to civil liability; secondly,
and most importantly, because neither the courts
nor legal authors are agreed as to the principles
that should govern their solution. They concern in
particular the legal situation of the parties in
respect of one another, from which the causes of
action would arise; the rules of evidence applicable
when it comes to verifying the existence of the
conditions of liability, having regard to the actual
circumstances in which the loss occurred; and
finally, and in particular, the effect of the no-lia
bility clauses in the contracts under which the
goods were carried and stored. These difficulties
are moreover especially acute in this case, as will
be seen from the respective contentions of the
three opposing parties: Miida Electronics, Inc.
("Miida"), the owner; Mitsui O.S.K. Lines Ltd.
("Mitsui"), the carrier; ITO—International Ter
minal Operators Ltd. ("ITO"), the stevedore and
provider of terminal services.
First, attention should be given to a series of
admissions made by the parties through their
counsel at the opening of the hearings, and con
tained in a document that I prefer to reproduce
verbatim in view of its nature, its significance and
the importance of the terms used therein:
The parties, through their undersigned attorneys, hereby
admit the following facts:
1. THAT Plaintiff Miida Electronics, Inc. ("Miida") was, at all
material times herein, the owner of a cargo of 250 cartons of
electronic desk calculators ("the cargo"), each carton contain
ing 2 sets of electronic desk calculators;
2. THAT Plaintiff Miida is entitled to sue under the contract of
carriage;
3. THAT Defendant Mitsui O.S.K. Lines Ltd.'s ("Mitsui's")
Bill of Lading No. KBMR-0007, dated Kobe, Japan, July 31,
1973, is produced by consent as Plaintiff Miida's Exhibit P-1;
4. THAT the terms and conditions of Bill of Lading No.
KBMR-0007 (Exhibit P-1) constitute the contract of carriage
under which Plaintiff Miida's cargo was carried;
5. THAT Defendant Mitsui was the carrier of the cargo and
issued Bill of Lading No. KBMR-0007 (Exhibit P-1) and is
bound by the terms and conditions thereof;
6. THAT Plaintiff Miida is bound by the terms and conditions
of Bill of Lading No. KBMR-0007 (Exhibit P-1);
7. THAT Defendant ITO—International Terminal Operators
Ltd. ("ITO") was the stevedore and provider of terminal
services who discharged Defendant Mitsui's vessel, the BUENOS
AIRES MARU, at Montreal, pursuant to a contract entered into
by it with Defendant Mitsui, it being agreed by all parties that
ITO and Logistec Corporation Limited are to be considered by
the Court as one and the same and synonymous from all points
of view;
8. THAT the production of the contract between Defendants
ITO and Mitsui is admitted;
9. THAT Defendant ITO was the lessee of Sheds 49, 50, 51 and
52 of the Port of Montreal;
10. THAT Defendant ITO admits that 250 cartons of electronic
desk calculators, each containing 2 sets thereof, were loaded at
Kobe on board the BUENOS AIRES MARU, but does not admit
that the same quantity was discharged from the BUENOS AIRES
MARU at Montreal;
11. THAT 169 sets of electronic desk calculators (84.5 cartons)
were not delivered to Plaintiff Miida;
12. THAT Plaintiff Miida has suffered a loss of $26,656.37,
which is admitted by the Defendants;
13. THAT in the event of a judgment being rendered in favour
of Plaintiff Miida, the Defendants admit that Plaintiff Miida
will be entitled to receive $26,656.37, with interest at a rate of
8% from September 14, 1973.
These carefully worded admissions clarify, by
relieving them of their routine and precautionary
allegations, the written pleadings filed by the par
ties, which contain the position already taken by
each of them. In fact, plaintiff commits itself to
very little in legal terms in its statement of claim.
It is clearly trying to avoid closing any possible
avenue in advance. Its goods were lost and it is
claiming the value of those goods from the two
defendants who successively had custody thereof
throughout the period in which the loss could have
occurred. Since it is seeking a joint and several
condemnation, its allegations treat the two defend
ants as if they were both in the same position,
using general terms of negligence, imprudence and
so on applicable to both of them. These allegations
must be analyzed, however, and the claims they
contain must be interpreted differently in order for
them to be validly applied to one defendant or the
other, in view of their different situations. The
statements of defence filed provide just such an
analysis and interpret plaintiff's claims in this way.
The action against the carrier Mitsui can of
course be based only on the contract of carriage
and the failure to deliver. Mitsui first makes the
general reply that it fulfilled all its obligations as a
marine carrier, both under the Act and under the
contract it has signed, and that the goods were
carried and unloaded at Montreal in good condi
tion after the arrival of its vessel, the Buenos Aires
Maru, on September 10, 1973. It then adds more
specifically that the loss did not occur until after
the goods had been unloaded from hold No. 6 in
which they had been stowed for the voyage, thus
after they had been picked up by the cargo han
dler, ITO; and that this loss was due to an event
equivalent to an act of God, namely a theft, and in
any case occurred at a time when Mitsui was
exempted from all liability by clause 8 of the
contract, which reads as follows:
The carrier shall not be liable in any capacity whatsoever for
any delay, non-delivery, misdelivery or loss of or damage to or
in connection with the goods occurring before loading and/or
after discharge, whether awaiting shipment landed or stored or
put into craft, barge, lighter or otherwise belonging to the
carrier or not or pending transhipment at any stage of the
whole transportation. "Loading" provided in this bill of lading
shall commence with the hooking on of the vessel's tackle or, if
not using the vessel's tackle, with the receipt of goods on deck
or hold or, in case of bulk liquids in the vessel's tank. "Dis-
charging" herein provided shall be completed when the goods
are freed from the vessel's tackle or taken from deck or hold, or
the vessel's tank.
Against defendant ITO the cause of action is
not as clearly defined, and in fact this definition
poses a delicate problem which I regard as funda
mental. For the time being, however, it should be
seen that the statement of claim appears to base its
argument primarily on delict or quasi-delict. Plain
tiff does not expressly claim to be suing ITO in
contract; ITO would be liable delictually, since the
goods were in fact in its custody. The traditional
general allegations of negligence in caring for
goods are made, along with more specific allega
tions regarding the lack of appropriate security
measures to prevent thefts. ITO defends itself:
first, by disputing the claim that the loss occurred
while the goods were in its custody; secondly, by
denying any negligence whatever on its part that
might have caused the loss of the goods that it had
picked up; and thirdly, by stating that in any case
it was protected by the same limitation of liability
clauses as the carrier itself, in view of clause 4 of
the bill of lading which reads as follows:
4. It is expressly agreed between the parties hereto that the
master, officers, crew members, contractors, stevedores, long
shoremen, agents, representatives, employees or others used,
engaged or employed by the carrier in the performance of this
contract, shall each be the beneficiaries of and shall be entitled
to the same, but no further exemptions and immunities from
and limitations of liability which the carrier has under this bill
of lading, whether printed, written, stamped thereon or incorpo
rated by reference. The master, officers, crew members and the
other persons referred to heretofore shall to the extent provided
be or be deemed to be parties to the contract in or evidenced by
this bill of lading and the carrier is or shall be deemed to be
acting as agent or trustee on behalf of and for the benefit of all
such persons.
The three parties to the dispute thus confront
one another; even though they are being sued
jointly and severally, defendants' means of defence
cannot be mingled since each is claiming specifi
cally that the loss occurred while the goods were in
the custody of the other and that if an obligation
to reimburse plaintiff exists, it must be assumed by
the other. It is therefore impossible to avoid divid
ing the action for purposes of analysis and consid
ering the claim with respect to each defendant
separately.
I
First, the action against Mitsui.
Here the cause of action is clear and plaintiff
has no problem of evidence to establish its position
at the outset: the contract of carriage, the admis
sion that the goods were received on board the
vessel, the non-delivery owing to loss, provide suffi
cient support for the claim. It is up to defendant to
clear itself by providing, if it can, the existence of
a cause for exoneration.
As we have seen, defendant claims to find just
such a good defence in the clause contained in
clause 8 of the terms and conditions of the con
tract of carriage. Plaintiff has no difficulty in
seeing this provision as a limitation of liability
clause. In fact, some of the terms contained there
in could be thought as having an even more basic
purpose, that of establishing the specific limits of
the contract, which would cover exclusively only
the time between loading and unloading. I think,
however, that such an interpretation would be
contrary to the wording used ("not be liable ... for
... loss of or damage to ..." ) and would not be an
accurate reflection of reality, since practice cer
tainly does not support the idea of dividing the
transportation operation into sections in this way,
especially if one looks at the operation from the
point of view of the shippers. Consequently, I too
see it as a limitation of liability clause.
Interpreted in this way, the clause gives defend
ant a means of defence that is certainly admissible
in law since there is no doubt as to its validity so
far as it covers the part of the transportation
process that is not strictly from port to port. Such
clauses are, in fact, in common use and their effect
is well known: liability will remain only in case of
gross negligence. In order to benefit from the
clause, however, defendant must prove that the
goods were lost after being unloaded in Montreal.
This will not be an easy task.
Indeed, defendant cannot provide direct proof
that the cartons in question were unloaded in
Montreal, because the goods unloaded at the port
of Montreal were not checked or sorted either by
itself or by the cargo handler ITO, and the cartons
made up only a part of these goods which included
several thousand packages. This may seem surpris
ing to a layman, but the evidence has shown that
this was the customary procedure in the port of
Montreal, a procedure that was introduced, there
as elsewhere, in an effort to reduce the time
required for unloading, which could otherwise take
considerably longer and involve a corresponding
increase in costs. In the absence of direct evidence,
defendant had no choice but to resort to indirect
evidence, by presumption, which it was entitled to
do since the unloading of the goods is a fact which
may be proved in any manner whatever.
Defendant first undertook to locate the goods in
the vessel when it left Kobe, and show that from
Kobe to Montreal no other goods were put in or
taken out through the same hatchway (hatch No.
5, 'tween decks). To do this, it used all the docu
ments in its possession concerning the loading and
stowing of the cargo, the route followed by the
vessel, the operations carried out during the
voyage and the safety measures taken, the most
important of these being the manifest, the loading
cargo list, the stowage plan, the loading exception
report, the mate's receipt, the instructions to the
captain and the ship's abstract log. (I should point
out here in passing that a problem arose during the
trial as to whether such documents could be placed
in evidence without the presence of their authors.
However, the objection raised on this ground, on
which I initially reserved judgment, is in my opin
ion without merit.) All of these documents were
prepared in the normal course of defendant's busi
ness and all were customary and necessary to the
carrying out of the normal activities of a marine
carrier. They were therefore covered by the excep
tion provided for in section 30 of the Canada
Evidence Act, R.S.C. 1970, c. E-10, and could be
produced by a representative provided that prior
notice of the intention to do so was given, which it
was (see on this point Sopinka and Lederman, The
Law of Evidence in Civil Cases, 1974, pp. 80 et
seq.).'
Defendant then showed, using documents pro
vided by its co-defendant ITO, that the unloading
of the goods stowed in the space served by hatch
1 Section 30(1) of the Canada Evidence Act reads as follows:
30. (1) Where oral evidence in respect of a matter would
be admissible in a legal proceeding, a record made in the
usual and ordinary course of business that contains informa
tion in respect of that matter is admissible in evidence under
this section in the legal proceeding upon production of the
record.
way No. 5 had proceeded normally and had even
required overtime.
Finally, defendant had its Montreal agent testify
in order to explain the steps that had been taken to
ensure that goods that had disappeared had not
been left in the vessel by error or accident when it
was unloaded. (Another problem of evidence arose
with regard to the possibility of having the agent
himself produce the letters of reply that he had
received without the presence of those who wrote
the letters, but this is of little importance since the
point is that these steps produced no results.)
All these facts, argues defendant Mitsui, are
conclusive when taken together with these other
known facts, namely that a theft took place at the
warehouse of defendant ITO, during which many
of the cartons containing the calculators were
stolen and that a number of these were subse
quently traced as a result of the investigation and
police searches. In its view they establish a cluster
of presumptions showing that the 250 cartons of
machines that it had undertaken to carry had in
fact been unloaded at Montreal and picked up by
the cargo handler ITO. If the evidence had con
tained the slightest positive indication that the
cartons might have disappeared during the voyage
or been left on board the vessel, I would have
hesitated, but as the record stands, I agree with
defendant that the evidence is satisfactory. I recog
nize that this evidence contains a cluster of pre
sumptions leading to the conclusion that the goods
were all unloaded at Montreal and that the loss of
some of these goods only occurred subsequently.
(On the force and quality of the evidence required
in a civil matter, see Hanes v. The Wawanesa
Mutual Insurance Company [1963] S.C.R. 154.)
Defendant Mitsui is therefore correct. Since no
gross negligence in choosing the cargo handling
firm used or in any other doings on its part has
been alleged against it, and since the loss has been
proved to have occurred after the vessel was
unloaded, defendant Mitsui is fully protected by
the limitation of liability clause in the contract
under which it is being sued. The action brought
against it therefore cannot succeed.
II
Now, the action against defendant ITO.
I have already pointed out that in its statement
of claim plaintiff did not try to give a precise
definition of the legal cause of its action against
ITO, the cargo handling firm. At the hearing, its
counsel had to be more specific: he pleaded delic-
tual liability. Under Quebec law, the law appli
cable because the delict or quasi-delict would have
been committed in Montreal by a person domiciled
there, the liability would be that defined by article
1053 of the Civil Code of the Province of Quebec. 2
In my view, as I will explain later, the circum
stances of the case at bar and the legal relations
that these circumstances create between the par
ties indicate that the cause of action cannot be
defined merely in delictual terms. For the time
being, however, the action may be examined on
this ground to determine whether the conditions
giving rise to a remedy in delictual liability under
the ordinary law exist, and especially whether
defendant can be said to have committed a fault
that caused the loss within the meaning of article
1053 of the Civil Code.
Seen in this way the action again poses a prob
lem of evidence from the outset. It is an estab
lished principle that a person suing under article
2 The wording of this article is well known:
Art. 1053. Every person capable of discerning right from
wrong is responsible for the damage caused by his fault to
another, whether by positive act, imprudence, neglect or
want of skill.
One might wonder, however, whether on this basis the
action does not raise a problem of jurisdiction in this Court.
No mention of it was made however, and it seems to me, in
any case, that the activity of the cargo handling company is
so closely linked to the contract of carriage by sea that any
action in which it is directly involved, especially when joined
to an action against the carrier itself, may be regarded as
within the jurisdiction of this Court. (Compare Davie Ship
building Limited v. The Queen (supra page 235).)
There remains the question of whether in exercising this
jurisdiction in a maritime matter this Court can base itself on
provincial law. On this point, however, it may be remem
bered that the principles of the common law in matters of
tort refer to the law of the place in which the tort was
allegedly committed. (Compare: Stein v. The "Kathy K"
[1976] 2 S.C.R. 802.)
1053 of the Civil Code cannot take advantage of
any legal presumption freeing him of his obligation
to establish the existence of the components of
liability; he must prove that defendant committed
a wrongful act that caused the damage on which
his claim is based. If the defendant at bar had
given no explanation of the loss that occurred
while the goods were in its custody, it would have
been possible to speak of a presumption of fact,
but the explanation is known: there was a bur
glary. In order to succeed in its action, plaintiff
must prove that the theft was made possible or at
least facilitated by wrongful acts for which defend
ant can be held liable. What, then, is shown by the
evidence?
It does not appear necessary to analyze in detail
the evidence concerning the circumstances of the
theft. A summary will be sufficient. The theft took
place on the evening of September 14. An
employee of the firm used by defendant to provide
the necessary security measures surprised the
thieves in the act while making his round. Owing
to the darkness and the distance, he could see only
shadows that fled toward the water and disap
peared over the end of the wharf. The thieves had
evidently made use of a boat which they had
moored along the wharf opposite the shed in which
the goods were stored. When they fled they even
left a pallet loaded with cartons halfway between
the door of the shed and the side of the wharf. The
port police were alerted and arrived on the scene at
once. It was soon discovered that a hole about six
or eight inches in diameter had been made in the
wall of the warehouse beside one of the large front
doors. Through this hole it was possible to reach
the endless chain inside, which is used to operate a
lever and raise the door.
This sequence of events leaves a number of
questions unanswered, however, and it is in the
replies to these questions that plaintiff finds proof
of the faults which it alleges against defendant.
First, how long were the thieves able to work
undisturbed? Normally the security guards make
their rounds at least every two hours after 5:30
p.m., and in fact this is suggested by the by-laws of
the National Harbours Board, from which defend
ant leased its space. On that particular evening,
however, as one of the two guards on duty had
been delayed in another shed where work had gone
on after normal hours and the other one had to
stay in the security guards' shelter, there was no
round at 7:30. The first round was the one during
which the thieves were discovered. Secondly, was it
only necessary for the thieves to reach the chain in
order to open the door? Was there no security bolt
on the door? Usually, these doors were locked
using a padlock that held the two sections of the
chain to a metal ring attached to the wall. That
evening, however, the padlock was only holding the
two sections of chain together, thus leaving two or
three feet of play, and this allowed the door to be
raised enough to permit entry. Thirdly, could the
thieves handle the cases without any equipment? It
was discovered that a motorized lifter had been
left in the shed that evening, which was unusual,
and that its motor was still warm shortly after the
theft. Fourthly, are the premises not provided with
some lighting that might hinder operations of this
kind at night? Some lights are in fact left on, but
there are not many of them and that evening there
were even fewer than usual in the shed, since
burned-out bulbs had not yet been replaced.
Plaintiff argues that the theft was unquestion
ably facilitated by defects in the security measures
used to protect the goods: insufficient rounds by
security guards, somewhat ineffective bolting, the
presence of a lifter in the shed, poor lighting. In
plaintiff's view this is enough to justify the conclu
sion that defendant was at fault and is therefore
liable. I do not agree.
In order for such a claim to have merit and for
the defects in security brought to light by the
evidence to constitute faults on the part of defend
ant, it would of course have to be assumed that
defendant was required to adopt and maintain a
flawless system of security for safeguarding the
goods. But I do not see how it can be claimed, in
the context of a purely delictual action, independ
ent of any contractual relationship, that defendant
had to maintain such a foolproof security system. I
agree that the normal obligations of a cargo han
dling firm include that of adopting a faultless
security system, but in my opinion these obliga
tions do not exist where there is no contractual
relationship. The general obligation of prudence
and diligence that the ordinary law imposes on
everyone through article 1053 of the Civil Code
must certainly be analyzed in accordance with the
circumstances, and clearly does not correspond to
a uniform objective concept. Its content must be
defined having regard to the personality, profes
sion, calling of the individual sued in liability and
to the activity he was engaged in when the damage
occurred. This general obligation, however,
analyzed with respect to a commercial firm such
as defendant, cannot include all the duties that a
cargo handling firm might have to assume when
acting in its capacity of a commercial undertaking
within the framework of a contract. Plaintiff
cannot claim to bring its action independently of
any contractual relationship and at the same time
expect to judge defendant's conduct as if it were a
cargo handling firm that had signed a contract
assuming in full all the obligations of such an
undertaking.
On the purely delictual level plaintiff has, in my
view, failed to prove fault within the meaning of
the general law.
Such a finding clearly weakens plaintiff's posi
tion, especially since the argument defeated is, as I
said, the one on which plaintiff's counsel sought to
rely most heavily at the trial; it is not, however,
decisive. As above noted, the action as instituted
does not allow a precise definition of the cause of
action and consequently cannot be fully disposed
of by a statement that it has no merit in delictual
terms: it must also be determined whether it can
be admitted on other grounds.
Can plaintiff not proceed against defendant as a
cargo handling firm professionally responsible for
safeguarding its goods and then criticize the fail
ure in its security system as such? Two conditions
would have to be fulfilled, however. First, it would
have to establish its legal entitlement to act on that
nrn,1n rl • and enrnnrll , i* n,nnlrl havn to chasm that
the defence argument based on the no-liability
clause in the contract of carriage is not an ob
stacle. It would normally be logical to ensure that
the first of these conditions is fulfilled before
inquiring about the second, but I shall adopt the
contrary approach nevertheless. The means of
defence drawn from the limitation - of liability
clause is in fact relied on by defendant against any
remedy that may be claimed against it; secondly, it
has given rise to decisions in the courts that cannot
be ignored in trying to determine the merits of an
action such as this one; and finally, its consider
ation will, I believe, automatically lead us to admit
the fulfilment of the first condition, namely that
plaintiff need not limit itself solely to delictual
grounds.
This brings me to the heart of the debate which
has occurred in the past few years, in academic
forums and in the courts, regarding the legal effect
of this clause, now common in marine carriage
contracts, by which the carrier, the owner of the
vessel, seeks to extend to its agents and those it
calls upon to participate in performing the con
tract of carriage the benefit of the limitation of
liability agreements that the shipper or owner of
the goods has made with it. The clause is known in
the trade as a "Himalaya" clause. It may be
worded in various ways (and reading the decisions
shows in effect a constant effort to improve its
form in order to avoid any allegation of obscurity
or ambiguity), but it can easily be identified by its
objective. Clause 4 of the bill of lading here in
question is certainly a Himalaya clause, and in my
view, it cannot be ignored on the pretext that it
would have failed to say clearly what it was
intending to say. Neither can defendant be denied
the right to avail itself of the means of defence it
implies on the ground that a limitation of liability
agreement has no effect in a case of gross negli
gence (see in particular Eisen Und Metall A.G. v.
Ceres Stevedoring Co. Ltd. [1977] 1 Lloyd's Rep.
665; Circle Sales & Import Limited v. The
"Tarantel" [1978] 1 F.C. 269). The shortcomings
which may be found in defendant's behaviour as a
cargo handling firm, in light of the facts that have
been proved, in no way correspond to this concept
of gross negligence, which, in my view, can be
defined as negligence so serious that it can only be
the result of stupidity and is for that reason social-
ly intolerable. It is necessary therefore, to dispose
of the argument raised by defendant on the basis
of the clause, to come to a decision as to the
effectiveness of a stipulation of that nature.
The history of the Himalaya clause in the courts
is well known. My brother Walsh J. recently
restated it in The "Tarantel" (cited above), and
Tetley devoted several pages to it (pp. 373 et seq)
in the second edition of his book Marine Cargo
Claims, published quite recently. It is not neces
sary for me to repeat it here except for a very brief
review of its main stages.
The clause takes its name from an English
decision of the Court of Appeal in 1954, Alder v.
Dickson (the Himalaya), [1954] 2 Lloyd's Rep.
267, [1955] 1 Q.B. 158, wherein its validity was
admitted in principle for the first time. In 1961,
however, in Midland Silicones, Ltd. v. Scruttons,
Ltd. [1961] 2 Lloyd's Rep. 365, [ 1962] A.C. 446,
the House of Lords refused to allow it any effect,
holding in essence that in that particular case the
stipulation was not specific enough and that in any
event the stevedores had not participated in the
contract between the shipper-owner and the carri
er, nor been represented by the latter when the
contract was signed. In 1970, in Canadian General
Electric Co. Ltd. v. Pickford & Black Ltd. (The
"Lake Bosomtwe") [1971] S.C.R. 41, Ritchie J. of
the Supreme Court, in a passage from his reasons
for judgment, disputed the stevedore's right (and I
quote intentionally) "to have its liability for dam
ages limited in accordance with the provisions of
art. IV, Rule 5 of the Rules in the Schedule to the
Water Carriage of Goods Act, R.S.C. 1952, c.
291, which are incorporated in the contracts of
carriage evidenced by the `through bills of lad
ing' ". The passage was short: the only argument
put forward was that the stevedore could not rely
on a clause in a contract to which it had not been a
party, and reference was made to the authority of
Midland Silicones.
Four years later the Privy Council, faced with a
real Himalaya clause in The New Zealand Ship
ping Co. Ltd. v. A,M. Satterthwaite & Co. Ltd.
(The "Eurymedon") [1974] 1 Lloyd's Rep. 534
(P.C.); [1971] 2 Lloyd's Rep. 399 (N.Z.S.C.);
[1972] 2 Lloyd's Rep. 544 (N.Z.C.A.), concluded
this time that the clause did in fact protect the
stevedore. The majority judges took care first of
all to specify clearly the significance of Midland
Silicones, whose principles they were not seeking
to contradict. On the contrary, they wished to
follow the reasoning expressed by Lord Reid in
that case regarding the conditions under which the
"agency" doctrine could be applied in the case of
agreements of this type. On the technical level, the
reasoning adopted by the judges is difficult to
condense, but its essential points, at least in so far
as I understand it, may be summed up in two
propositions. First, the unilateral undertaking that
the shipper had made in the contract of carriage
with regard to the stevedore, then represented by
the carrier, had become a bilateral and complete
contract when the stevedore actually picked up the
goods. Secondly, by performing its work the steve
dore had provided the shipper with services which
formed the "consideration" which, as a contract
ing party, it had to provide, according to the
principles of the common law, if the contract was
to be binding upon it. In the final analysis, how
ever, behind these technical explanations, it was
the idea of respecting the intent of the parties that
was decisive. Lord Wilberforce stated this quite
clearly (at p. 540): "In the opinion of their Lord
ships, to give the appellant the benefit of the
exemptions and limitations contained in the bill of
lading is to give effect to the clear intentions of a
commercial document, and can be given within
existing principles. They see no reason to strain the
law or the facts in order to defeat these intentions.
It should not be overlooked that the effect of
denying validity to the clause would be to encour
age actions against servants, agents and independ
ent contractors in order to get round exemptions
(which are almost invariable and often compulso
ry) accepted by shippers against carriers, the exist
ence, and presumed efficacy, of which is reflected
in the rates of freight. They see no attraction in
this consequence".
Finally, the last stage to be mentioned is in
1974, in Eisen Und Metall A.G. v. Ceres Steve-
doring Co. Ltd. (cited above), where the Court of
Appeal of the Province of Quebec, while finding
against a stevedore on the ground that the loss was
the result of its gross negligence, nevertheless rec
ognized from the outset its right in principle to
avail itself of the Himalaya clause which it was
relying on. The Court avoided technical explana
tions: its decision was based essentially on the
finding that the clause reflected the clear intent of
the parties.
As can be seen, supporters and opponents of the
Himalaya clause can both claim to find support in
the case law. Those in Canada who maintain that
the clause is ineffective often claim to be in a
better position in this respect because they can cite
a decision of the Supreme Court (cf. Tetley, op.
cit., pp. 383 et seq.). I think, however, that it
would be wrong to exaggerate the significance of
the incidental observations of Ritchie J. in his
decision on The "Lake Bosomtwe", which are, in
fact, so incidental that they seem to have com
pletely escaped the official reporter who did not
even mention them in his presentation. There is in
fact no reason to assume that these observations
were specifically concerned with a Himalaya
clause, and taken literally they merely constitute a
reminder of a specific principle: a person cannot
avail himself of a contract to which he is not a
party. It is true that this decision cannot be
ignored, in view of its reference to Midland Sili-
cones and the importance of the principle cited in
the discussion of the problem that was raised, but
it does not provide a clear solution and is not
irremediably opposed to the idea that a clause of
that nature may be valid.
For my part, I think that it must not be forgot
ten at the outset that the principle of the relative
effect of the contract, the one reaffirmed by Rit-
chie J., is as applicable in Quebec law as in the
common law. It is true that Quebec law more
generally admits the possibility of a "stipulation
for the benefit of another" within the meaning of
article 1029 of the Civil Code of the Province of
Quebec,' but it would be difficult to interpret a
Himalaya clause in a contract of carriage as such
a "stipulation for the benefit of another", since it
3 Art. 1029. A party in like manner may stipulate for the
benefit of a third person, when such is the condition of a
contract which he makes for himself, or of a gift which he
makes to another; and he who makes the stipulation cannot
revoke it, if the third person have signified his assent to it.
clearly does not make anyone, and especially not
the stevedore or cargo handler, a creditor of the
promisor, the shipper-owner. The conclusion that
as a result of this principle of the relative effect of
the contract the stevedore or cargo handler cannot
avail itself directly of a clause in the contract of
carriage to which it was not a party, either directly
or through an agent, seems to me to be unavoid
able. I do not see how, at least in Quebec law and
on the basis of the facts in the case at bar, it is
possible (despite the affirmation found at the end
of the clause in question here) to speak of the
carrier as an agent or representative of the steve
dore or the cargo handler at the time the contract
of carriage was signed.
If, however, pursuing the reasoning in the con
text of Quebec law as required by the action as
instituted, the facts of the case at bar are con
sidered in their entirety, I do not think defendant's
position can be defined simply as that of a steve
dore relying on a clause in the contract of carriage
between the shipper-owner and the marine carrier.
To do this would, I think, be to forget that defend
ant ITO is here relying primarily on its own
contract for services with the carrier, in which it
was careful to provide, by means of a clause whose
purpose is clear despite its obscure wording, 4 that
its liability for the custody of the goods would be
limited to the extent permitted by the contract of
4 Namely, clause 7:
Responsibility for Damage or Loss. It is expressly under
stood and agreed that the Contractor's responsibility for
damage or loss shall be strictly limited to damage to the
vessel and its equipment and physical damage to cargo or
loss of cargo overside through negligence of the Contractor
or its employees. When such damage occurs to the vessel or
its equipment or where such loss or damage occurs to cargo
by reason of such negligence, the vessel's officers or other
representatives shall call this to the attention of the Contrac
tor at the time of accident. The Company agrees to indemni
fy the Contractor in the event it is called upon to pay any
sums for damage or loss other than as aforesaid.
It is further expressly understood and agreed that the
Company will include the Contractor as an express benefici
ary, to the extent of the services to be performed hereunder,
of all rights, immunities and limitation of liability provisions
of all contracts of affreightment as evidenced by its standard
bills of lading and/or passenger tickets issued by the Com
pany during the effective period of this agreement. Whenever
the customary rights, immunities and/or liability limitations
are waived or omitted by the Company, as in the case of ad
valorem cargo, the Company agrees to include the Contrac
tor as an assured party under its insurance protection and
ensure that it is indemnified against any resultant increase in
liability.
carriage itself and the Himalaya clause contained
therein. It was under this contract for services with
the carrier that defendant agreed to take charge of
the goods that had been carried and it is in this
contract that its obligations with regard to these
goods were defined. The shipper-owner itself knew
that this contract for services would intervene at
one point during the carriage of its goods: this had
been revealed by the Himalaya clause and the
terms, in so far as they could affect it as owner,
had been foreseen and authorized by it. It was this
contract that made possible the meeting of the
minds of the three parties. The shipper-owner did
not formally subscribe to it, but since it was to
benefit from it and since it had agreed to it in
advance, it must be regarded as present, and
whether through a representative or as a third-par
ty beneficiary (in accordance with the theory of
stipulation for the benefit of another found in
Quebec law) is of little importance.
In my view, if plaintiff, the shipper-owner, can
take action against defendant ITO in its capacity
as a professional cargo handler, and thus otherwise
than on a strictly delictual basis, it is because
plaintiff can avail itself of this contract for services
between the carrier and ITO, concluded in part for
its own benefit as owner and with its express
authorization it cannot, however, act in this way
without accepting the contract in its entirety. This
is why I think that defendant is entitled to oppose
the action by relying on the limitation of liability
clause in the contract that it signed, with a refer
ence to the Himalaya clause originally provided in
the contract of carriage itself. In my opinion, legal
analysis not only permits but requires that the
clear intent of the parties be given effect, as
recommended by the Privy Council (in The
Eurymedon") and by the judges of the Court of
Appeal of Quebec (in Eisen Und Metall A.G. v.
Ceres Stevedoring Co. Ltd.).
Those opposed to the Himalaya clause in con
tracts of carriage seek to use technical arguments
to avoid giving effect to the intent of the parties on
the pretext, essentially, that the contract is a
standard-form contract imposed on the shipper-
owner and that limitation of liability clauses con
tained in it are likely to encourage negligence. I
wonder whether giving effect to the intention of
the parties places the shipper in a more disadvan
tageous situation than he would be in if the carrier
simply required him to contract directly with the
cargo handlers. I also doubt whether the practical
effect of these clauses would be anything other
than to clarify the division of insurance costs
among the parties. In any case, while such con
siderations (contract of adhesion, abuse of limita
tion of liability clauses) may well lead to legisla
tive intervention, as was the case for the actual
marine carrier, they can hardly serve as the basis
of a judge's decision.
I therefore find that defendant ITO cannot be
held liable for the loss on the sole ground of delict
because it committed no fault that could be
regarded as a delict; and that on any grounds other
than delict it was protected by the limitation of
liability clause provided in its contract with
Mitsui, which plaintiff agreed to when it accepted
the Himalaya clause in the contract of carriage.
The action is consequently without merit against
defendant ITO as well as against defendant
Mitsui, and must therefore be dismissed.
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.