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Newsletter > December 2007

In this issue:  1. Firm News 2. Automobile Insurance Doesn’t Cover Hunting! 3. Receivers of Goods Can Be Held Liable for the Payment of Freight Charges Even Though They Did Not Hire the Carrier

1. Firm News

Fernandes Hearn LLP’s 2008 Maritime and Transportation Law Conference will be held on January 18, 2008 in Toronto, Ontario. Details are on our firm’s News and Upcoming Events page at www.fernandeshearn.com/news/.

Gordon Hearn will be speaking at the Transportation Lawyers Association “Chicago Regional Seminar” on January 11, 2008. Gordon will be giving a presentation comparing the truck carriage limitation of liability regimes in Canada and the United States.


2. Automobile Insurance Doesn’t Cover Hunting!

In Lumbermens Mutual Casualty Co. v. Herbison [2007] S.C.C. 47 Justice Binnie of the Supreme Court of Canada starts his decision with the following question and answer:

Can it be said that when a hunter steps away from his pick-up truck under cover of darkness, leaving the engine running, and negligently shoots at a target he cannot see 1,000 feet away, and hits a companion in the leg thinking him to be a deer, that the injury arose “directly or indirectly from the use or operation” of the insured truck within the meaning of s. 239(1) of the Insurance Act, R.S.O. 1990, c. I.8? A majority of the Ontario Court of Appeal gave an affirmative answer to this question.

Fred Wolf was driving to his designated hunting stand when he thought he saw a deer. It was before sunrise. He stopped and got out of his truck. He removed his rifle, loaded it and, seeing a flash of white in the headlights (which he concluded was the tail of a deer about to take flight), he shot. Unfortunately, he hit another member of the hunting party, Harold George Herbison.

At trial Mr. Wolf was found liable in negligence to Mr. Herbison and members of the Herbison family for negligence and ordered to pay damages in the amount of about a million dollars. Mr. Wolf was insured under a standard motor vehicle insurance policy with Lumbermens Mutual Casualty Co. The policy provides for coverage for loss or damage “arising from the ownership or directly or indirectly from the use or operation” of an automobile owned by the insured. At trial the Herbisons argued that the injuries arose “directly or indirectly” from the use or operation of Mr. Wolfe’s truck because:

(a) Wolfe was using a 4 wheel drive truck which is commonly used by game hunters to access difficult terrains and drive in the bush. (b) [Wolfe was in] poor physical condition, having a heart condition and difficulty walking, [he] was dependent on his truck to get to his hunting stand . . . (c) The muffler on the Wolfe truck was in poor condition and noisy, and had it not been, it is possible that Wolfe could have heard Herbison and his nephew talk. (d) Although Wolfe says he was not intending to use the headlights on his truck to illuminate the target, he does not believe that he would have taken that shot had it not been for the headlights of the truck illuminating the general area to some extent.

The trial judge concluded that the negligent shooting by Mr. Wolfe constituted an intervening act that was merely incidental to the use and operation of the vehicle. The claim against the insurer was dismissed.

The Ontario Court of Appeal allowed the appeal. One of the three judges, J.A. Cronk, dissented and stated that when Mr. Herbison was shot, Mr. Wolf’s vehicle was not being used for a purpose from which the injuries resulted.

In the Supreme Court of Canada Justice Binnie begins his analysis with this most insightful quote:

In a tragic case like the present, it is tempting to look to an insurer’s deep pockets as the only available source of compensation for a seriously injured and innocent victim. However, the insurance in this case is automobile insurance, and s. 239 requires the victim to demonstrate that the “liability imposed by law upon the insured [Wolfe]” is for “loss or damage . . . arising from the ownership or directly or indirectly from the use or operation of [the insured Wolfe’s] automobile”. Can it be said that Wolfe’s negligent shooting was fairly within the risk created by his use or operation of the insured truck, or did the use of the truck merely create an opportunity in time and space for the damage to be inflicted, without any causal connection direct or indirect to the legal basis of Wolfe’s tortious liability? Clearly, I think, the latter is the case. [Emphasis added]

Finally, reason and logic trumps emotion!

Rui Fernandes

  3. Receivers of Goods Can Be Held Liable for the Payment of Freight Charges Even Though They Did Not Hire the Carrier S.G.T. 2000 Inc. v. Molson Breweries of Canada Ltd. 2007 Q.C.C.A. 1364 (Can. L.I.I.)

In a recent decision having national ramifications, the Quebec Court of Appeal recently overturned a lower decision of the Quebec Superior Court in ruling that the receiver (or consignee) of a shipment of goods, (Molson Breweries of Canada Ltd.), was liable to pay two motor carriers for their freight charges initially incurred by Molson’s supplier. Molson’s supplier was Consumers Glass, who contracted two carriers, S.G.T. 2000 Inc. and XTL Transport Inc. to move glass bottles from its Ontario facility to Molson plants located in other provinces. Unfortunately, Consumers Glass went bankrupt without paying these carriers in full for their services.

The carriers sought to recover the unpaid freight charges from Molsons, adopting an argument that appears to have little modern judicial precedent. The carriers cited section 2 of the Federal [Canada] Bills of Lading Act which prescribes that:

Every consignee of goods named in a bill of lading, and every endorsee of a bill of lading to whom property in the goods therein mentioned passes on or by reason of the consignment or endorsement, has and is vested with all rights of action and is subject to all liabilities in respect of those goods as if the contract contained in the bill of lading has been made with himself. [emphasis added]

A similar wording is found at the provincial level, in the Mercantile Law Amendment Act, being Ontario legislation.

The legislative intent behind the above provision is clear. Under general contract law, only a party who is “privy” to a contract, that is, who personally enters into a contract, may enjoy its benefits and be held accountable for any obligations there under. Thus, as concerns the consignee of goods contemplated by the above provision, there is both a potential benefit and a burden. The benefit is that the consignee in such cases has rights of action against the carrier in the event of cargo loss, damage or delay – but it would however be subject to the liabilities of the shipper (as S.G.T. 2000 and XTL Transport Inc. argued in this case) for the payment of freight charges.

In this case the bill of lading documentation contained an endorsement that freight charges were ‘pre-paid’. Once the delivery was effected, two invoices were issued, one by the carriers to Consumers Glass for the freight charges, and the other by Consumers Glass to Molson for a sum based on the supply cost of the cargo which included a component for the freight charges. Molson paid Consumers Glass the supply invoice [including the component for freight charges] however Consumers Glass only paid a portion of the freight charge amounts it owed to the carriers. This paved the way for a difficult question: given the demise of Consumers Glass, do the carriers go without payment in full, or does Molson pay ‘extra’ beyond what they contemplated paying for freight?

Insofar as the shipment of the cargo involved the carriage of goods between provinces, the parties to the dispute agreed that the federal legislation (the Federal Bills of Lading Act) would apply as opposed to the equivalent provincial legislation.

The Lower Court Ruling

The lower court concluded that Molson Breweries could not be held to respond to pay the unpaid freight charges, because the use of the word “pre-paid” on the bill of lading amounted to a renunciation or a relinquishment by the carriers of the right to be paid by the consignee. In short, this deprived the carrier of the benefit of the above statutory provision: the carriers were effectively announcing that they would only look to the shipper for payment.

It should be recalled that there are various requirements under section 2 above – in that it will not be in each and every case that a carrier can look to a consignee (with whom it did not contract) for the payment of freight charges:

  1. The consignee must be named in the bill of lading.
  2. The property must have “passed” by reason of the tender of the freight to the carrier (a fact that, granted, is the usual presumption absent an agreement to the contrary between the seller and the buyer of goods).
These requirements were satisfied in this case. The question simply remained as to whether the carriers had done something to prevent the application of this statute.

On Appeal

The issue on the appeal concerned the general question as to the circumstances upon which a carrier of goods might claim from the consignee payment of the freight charges otherwise generally owed to it by the shipper.

The Court of Appeal found that Molson became the owner of the cargo by virtue of the same being tendered by Consumers Glass to the carriers for shipment. The Court found that it was therefore incumbent on Molson to show that the statute did not apply, by showing that the carriers in fact waived their entitlement to this protection. This required Molson to show that there was something both intentional and binding with the reference to “pre-paid” on the bill of lading (Note: such a reference on a bill of lading is usually intended only to ease billing logistics between the shipper and the carrier – the carrier being directed to forward invoicing to the shipper as opposed to a third party or the consignee paying on ‘collect’ terms). The Court of Appeal ruled that the ‘prepaid’ reference was accordingly not enough by itself to deprive the carriers of the protection of the statute. This manifestation of the standard intent of initially looking to the shipper for freight charges does not by itself equate to a carrier choosing not to avail itself of this statutory ‘fall back’ position of looking to the consignee for payment if necessary. This however does not mean that in a certain fact situation that a carrier might represent to a shipper or consignee that it will not exercise its right to look to the consignee for payment having the effect of the loss of this protection. Something more is however is needed in this regard than a mere ‘prepaid’ reference on the bill of lading. Absent specific arrangements whereby the carriers were not to take the benefit of the legislation that this provision should govern, the Court ruled that parties cannot be presumed to have relinquished or waived rights by mere silence.

In conclusion, the notion or concept of “pre-paid” services does not by itself constitute a relinquishment by the carrier of the rights afforded to it under the legislation.

Accordingly, the carriers were able to recover their freight charges, which were significant (exceeding $200,000) from Molson Breweries. While this no doubt worked an injustice in the mind of Molson, the legislative trade off was clear. Molson would have been able to claim against the carrier for cargo loss damage or delay, but equally having received the shipment and benefiting thereby it had to make the carriers whole for unpaid freight charges.

Gordon Hearn

This newsletter is published to keep our clients and friends informed of new and important legal developments. It is intended for information purposes only and does not constitute legal advice. You should not act or fail to act on anything based on any of the material contained herein without first consulting with a lawyer. The reading, sending or receiving of information from or via the newsletter does not create a lawyer-client relationship. Unless otherwise noted, all content on this newsletter (the “Content”) including images, illustrations, designs, icons, photographs, and written and other materials are copyrights, trade-marks and/or other intellectual properties owned, controlled or licensed by Fernandes Hearn LLP. The Content may not be otherwise used, reproduced, broadcast, published,or retransmitted without the prior written permission of Fernandes Hearn LLP.

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