Facebook Icon. Twitter Icon. LinkedIn Icon. 

A Premier

Toronto Law Firm

serving all of Canada and International clients since 1996.

Fernandes Hearn LLP law firm logo with stylized F and H letters.

Telephone: 416-203-9500

1. News & Upcoming Events

  • Aerospark Press has just published the 2022 release by Rui Fernandes for his 3 Volume Transportation Law.
  • Rui Fernandes, Gordon Hearn, Kim Stoll and Carole McAfee Wallace will be attending the Transportation Lawyers Association Annual Conference and Canadian Transport Lawyers Association Mid-Year Meeting being held in Williamsburg, Virginia on May 11-14, 2022. Kim Stoll will be attending in her capacity as Executive Committee Member-at- Large. Carole McAfee-Wallace will be attending as President of the Canadian Transport Lawyers Association.
  • The Canadian Board of Marine Underwriters will be holding its Spring Conference (virtually) on May 26th, 2022.
  • Fernandes Hearn LLP is a proud member of Globlalaw™, a global network of more than 100 independent law firms with over 4500 lawyers in 165 cities.
Return to Table of Contents

2. Whodunit? Silver Ingot Theft in International Carriage, Jurisdiction, Forum non Conveniens and the Dodo Bird

In the recent decision of Brink’s Global Services Korea Ltd. v. Binex Line Corp. 2022 FC 571 Judge Aalto described the case as follows:

This case has all the elements of an Agatha Christie whodunit. A valuable stolen cargo, a secure location, multiple possible suspects, an unknown perpetrator, and, a trucking company that was given the pickup code with instructions to deliver the cargo to a location unknown to any of the parties. Except for a small portion of the cargo recovered well after the fact, the cargo was never seen again.

The issue in this case was who was liable for the loss of the cargo (the Cargo) of 18,276.02 kg of silver ingots valued at approximately USD $10,262,242.37. The Cargo was in transit from Korea to New York via Montreal. The shipping container disappeared from a Canadian National (“CN”) railyard in Montreal. The facts of the case were straightforward albeit involving many parties as is common in international shipments. Sumitomo Corporation (“Sumitomo”) owned the Cargo. Sumitomo purchased it from Korea Zinc Company Ltd (“Korea Zinc”), which is listed as the shipper of the Cargo. Both were non-parties to the present action. On January 1, 2019, Korea Zinc entered into an International Valuables Transport Contract with Brink’s Global Services Korea Ltd. and Brink’s Global Services International Inc. (“Brink’s”) to ship the Cargo from Korea to Sumitomo in New York, via Canada. Brink’s engaged Ex-Logistics Co. Ltd. to arrange for the shipment of the cargo by rail and sea to Canada. Binex Line Corp. (“Binex”) was appointed as the consignee of the cargo. Ex-Logistics engaged Woowon Sea & Air Co. Ltd. (“Woowon”) as the carrier of the Cargo. Woowon issued a multimodal Bill of Lading, no. WSAMTR192351 (“Bill of Lading”) in Seoul, Korea, on December 25, 2019. The type of move was described as “CY/CY” (container yard to container yard). The port of loading was Busan, Korea. The place of delivery was the CN Railyard in Montreal. Woowon engaged Maersk Lina A/S (“Maersk”) to transport the Cargo from Korea to Canada. Maersk generated and released a pick-up code to the consignee, Binex, without which the CN railyard could not release the Cargo. The sole role of Binex was to receive the pick-up code from Maersk and release it to Brink’s, which would transport the cargo to its final destination in New York. The Cargo departed from the Busan port on December 26, 2019, transported by Maersk on a vessel to British Columbia. On January 6, 2020, Maersk e-mailed the pick-up code to Binex. The reception of that email and the subsequent access to it by the thieves are the subject of ongoing investigations. The vessel arrived in Vancouver on January 7, 2020. On January 10, 2020, the cargo was loaded onto a CN railcar bound for Montreal, where it arrived on January 16, 2020. On January 20, 2020, a pick-up e-mail was sent to Oriental Cartage, a trucking company in Laval, Quebec, instructing it to pick up the cargo at the CN Railyard. The email contained the correct container number, pick-up code, and weight of the Cargo. The Cargo was transported to a warehouse, as instructed. It was never seen again except for the small portion that was recovered. It was later determined that the pick-up email sent to Oriental Cartage was fraudulent. As a result of the stolen Cargo, Korea Zinc became indebted to Sumitomo for the value of the Cargo. On May 12, 2020, Korea Zinc assigned its rights to Brink’s in exchange for payment of the amount owing. It was the amount paid by Brink’s, as well as related costs, which Brink’s claimed for in the action. Woowon brought a motion objecting to the jurisdiction of the Federal Court of Canada to deal with the matter. Woowon sought to have the matter decided in Korea. Woowon is incorporated under the laws of Korea where it has its principal place of business. Woowon is a carrier and international freight forwarder. It has no physical presence in Canada. Woowon did not voluntarily submit to the jurisdiction of the Federal Court. The motion was opposed by the plaintiffs Brink’s and Binnex. Judge Aalto was also advised that Woowon had commenced proceedings in the Seoul Southern District Court in Korea against Brink’s, seeking an order on the merits that it was not liable for the stolen Cargo. Judge Aalto stated that the Bill of Lading was the key document governing the carriage of the Cargo. The bill of lading listed Korea Zinc as the shipper and Brink’s as the consignee. Woowon had entered into an agreement with Binex whereby Binex was the “party to contact for cargo release”. Judge Aalto was satisfied that Binex acted in a business capacity for Woowon in Canada by virtue of being the recipient of the pick-up code for the Cargo on behalf of Woowon. Woowon argued that the Federal Court should decline its jurisdiction and stay proceedings in favour of Korea, the jurisdiction stipulated in Article 4 of the Bill of Lading. It also asked the Court to stay proceedings pursuant to section 50 of the Federal Court which grants the Court discretion to stay proceedings (on the ground that the claim is being proceeded with in another court or jurisdiction, or where for any other reason it is in the interest of justice that the proceedings be stayed). Brink’s and Binex both argued that the Court had jurisdiction despite the forum selection clause by virtue of s. 46 of the Marine Liability Act, S.C. 2001, c. 6 (“MLA”) because the port of discharge of the Cargo was in Canada. The motion raised the following issues: A. Does the Federal Court have jurisdiction simpliciter over this matter? B. If not, does s. 46 of the MLA apply to establish the Federal Court’s jurisdiction? C. If jurisdiction is within the Federal Court, should it nevertheless exercise its discretion to grant a stay on the basis that Korea is a more appropriate forum under the forum non conveniens test? D. If s. 46 of the MLA does not apply, does “strong cause” exist for the Court to decline to stay the action pursuant to s. 50 of the Federal Courts Act? Issue #1 Does the Federal Court have jurisdiction simpliciter over this matter? Judge Aalto noted that this was a marine cargo theft claim. In order to have jurisdiction simpliciter, the Court must have jurisdiction over the subject matter of the claim, the theft of the Cargo, and in personam jurisdiction over Woowon. Judge Aalto found that, jurisdiction simpliciter was established on the facts of this case and on an analysis of the law. To determine this Court’s jurisdiction, the first step is to ascertain the essential nature or character of the claim. Judge Aalto found that in this case, the essence of the claim was for loss incurred as a result of the carriage of goods pursuant to a multimodal through bill of lading. This brought the claim within subsection 22(1) of the Federal Courts Act. This section grants jurisdiction to the Federal Court “with respect to any claim arising out of an agreement for the carriage of goods on a ship under a through bill of lading . . .for loss or damage to goods at any time or place during transit.” Therefore, prima facie, this claim fell within that section. Issue 2: Does section 46 of the MLA establish the Federal Court’s jurisdiction over this matter? The MLA provides for statutory liability issues involving shipping and carriage of goods, including apportionment of liability and limitations on liability. At issue in this case was whether s. 46 applied to the facts of the case. This issue was important because s. 46 can defeat the jurisdiction clause which Woowon relied on to oppose the jurisdiction of the Court. S. 46 exists to establish Canada’s jurisdiction in spite of a jurisdiction clause stipulating a foreign jurisdiction in cases where there is a contract for carriage of goods by water. Judge Aalto was of the view that s. 46 of the MLA applied to the facts of this case and was supported by the jurisprudence. Paragraph 46 (1) (a) applied because the actual port of discharge on the carriage by water component of the multimodal Bill of Lading was Canada. The carriage of the goods was not limited by the Bill of Lading to only the water carriage component. While the MLA speaks only to carriage of goods by water, Woowon’s obligations under the Bill of Lading extended to the entire transport of the Cargo. Thus, prima facie, Brink’s was able to rely upon s. 46 to pursue this claim in Canada. As well, s. 46 lists three separate circumstances which give rise to the right to institute judicial proceedings in Canada. The three circumstances are disjunctive as noted by the “or” between paragraphs 46 (1)(b) and (c). Therefore, having met the requirement of paragraphs 46 (1) (a) this action was properly brought in Canada notwithstanding the jurisdiction clause in the Bill of Lading. Judge Aalto noted that arguably, paragraphs 46 (1) (b) is also satisfied as Woowon had an agency presence in Canada through the auspices of Binex which it appointed its agent for the U.S. and Canada pursuant to the agreement between them. Judge Aalto noted, the Federal Court of Appeal has opined that this provision allows a party to proceed in Canada for a cargo loss where there is a jurisdiction clause in favour of a place other than Canada. In Mitsui O.S.K Lines Ltd. v Mazda Canada Inc., 2008 FCA 219 (Mitsui) a claim was brought in Canada for the loss of a shipment of automobiles. The jurisdiction clause in the bill of lading named Japan as the jurisdiction for determining disputes. Judge Aalto noted:

As far as the issue concerning “carriage of goods by water” is concerned, I am of the view that one can refer to The Hague-Visby Rules (Rules) to assist in understanding this concept. The parties all agree that there is no definition of “carriage of goods by water” in the MLA. S. 43 of the MLA imports the Rules into the law of Canada. Article X specifies that those Rules apply to all contracts for the carriage of goods. [74] All three of the provisions of Article X are met in this case. First, the Bill of Lading specifies that the Cargo will be carried in an ocean going vessel and therefore the carriage will be by water. Second, the Bill of Lading was issued in Korea, a contracting State. Third, the carriage by water was from one contracting State, Korea, to another, Canada. It is illogical that a Bill of Lading should be parsed into separate pieces and that only one segment of the carriage is captured by s. 46.

Judge Aalto was satisfied that this claim was properly brought subject to whether Woowon’s allegation of forum non conveniens would be made out on the facts of this case. Issue 3: If jurisdiction is within the Federal Court, should it nevertheless exercise its discretion to grant a stay on the basis that Korea is a more appropriate forum under the forum non conveniens test? Judge Aalto noted that the jurisprudence “teaches that to stay the action in favour of another jurisdiction on the basis of forum non conveniens it must be clearly and distinctly a more favourable jurisdiction, noting:

In Mitsui, the Federal Court of Appeal set out the non-exhaustive list of factors that apply. At paragraph 11 the Court identified the ten non-exhaustive factors that a court should weigh in exercising the discretion to determine the issue of forum non conveniens: 1. the parties’ residence, and that of witnesses and experts; 2. the location of the material evidence; 3. the place where the contract was negotiated and executed; 4. the existence of proceedings pending between the parties in another jurisdiction; 5. the location of the defendants’ assets; 6. the applicable law; 7. advantages conferred upon the plaintiff by its choice of forum, if any; 8. the interests of justice; 9. the interests of the parties; 10. the need to have the judgment recognized in another jurisdiction.

Judge Aalto reviewed the facts and on an assessment of the Mitsui factors supported the proposition that a stay should not be granted. Accordingly, he found that the action should be maintained in Canada. He noted that the Zoom age is upon us and stated:

[79]The majority of the parties and witnesses are resident in Canada. All of the key witnesses are located in Canada. Woowon may potentially be calling a fact witness and an expert at trial. The geographical distance between Canada and Korea is of no moment. Discoveries in this technological age now take place over Zoom or other virtual platforms. Similarly, trials in this Court can be entirely conducted over Zoom or in a hybrid model where some witnesses are in person and others over Zoom. [80] [We all now live and work in this new digital age. The law is not static but has always evolved to recognize new social contexts and to respond to new technologies. One need only recall that the fax machine was a new and exciting innovation over 40 years ago which has now, for the most part, been entirely superseded by email and the use of digital communication. [81] This is a factor that must be considered when weighing the location of witnesses or material evidence. It might very well be that some of the traditional factors of forum non conveniens will go the unfortunate way of the dodo bird.

Issue 4: Is there strong cause not to enforce the jurisdiction clause? In maritime matters, when a plaintiff brings an action in a jurisdiction other than the one stated in the bill of lading, the “strong cause test” is applied to determine whether to stay the proceedings and uphold the jurisdiction clause. A plaintiff has the burden to demonstrate to a court that there is good reason not to be bound by a forum selection clause. The test was set out in The Eleftheria, [1969] 1 Lloyd’s Rep. 237 as “Once the court is satisfied that a validly concluded bill of lading otherwise binds the parties, the court must grant the stay unless the plaintiff can show sufficiently strong reasons to support the conclusion that it would not be reasonable or just in the circumstances to require the plaintiff to adhere to the terms of the clause. In exercising its discretion, the court should take into account all of the circumstances of the particular case.” In conclusion Judge Aalto stated on this last issue:

[101] Since I have found that subsection 46 (1) of the MLA applies it is not necessary to dwell at length on the strong cause test. However, in the event that reliance on subsection 46 (1) is misplaced, a brief consideration of the strong test factors demonstrate that strong cause has been made out. [102] The factors relevant to the strong cause test are set out in Eleftheria at p. 242. They include: (a) in what country the evidence is situated or more readily available; (b) the relative convenience and expense as between the two forums; (c) whether the law of a foreign court applies and if it differs from Canadian law in any material way; (d) whether the defendants are seeking a procedural advantage; (e) with what country a party is connected and how closely; and, (f) whether there is prejudice to the plaintiff by having to sue in a foreign court. Prejudice may be inferred from being deprived of security for the claim, an inability to readily enforce any judgment, a limitations period, or for some other reason they would not get a fair trial in the foreign jurisdiction. [103] The strong cause test and the forum non conveniens factors overlap to a large extent and are reviewed above. The conclusions reached are equally applicable to the Eleftheria factors. [104] However, I have taken into account that they are discrete approaches with different burdens. In my view, if I am wrong on the applicability of subsection 46 (1) of the MLA, based on my analysis of the Eleftheria factors there is strong cause not to stay the action in favour of Korea. Similarly, as noted, based on my analysis of the forum non conveniens factors, those factors do not support exercising the Court’s discretion under subsection 50 (1) of the Federal Courts Act to grant a stay.

The motion was dismissed and Brink’s and Binex entitled to their costs. The case continues in Federal Court.(*1) Rui M. Fernandes Endnotes (*1) Fernandes Hearn LLP acted for Binex Lines Corp. in the Federal Court motion. Return to Table of Contents

3. The Carriage of Food Products: When Can a Consignee Reject a Shipment?

The resolution of transit claims for loss, damage, or delay of cargo presents factual and legal issues. The resolution of cross-border claims involving food products can be particularly complex. Canada and the United States each have their own body of law governing transportation and food product integrity. Mixing these complex ingredients together in the course of evaluating a cargo claim can result in prolonged disputes. This article, being an abbreviated version of that published in the April, 2022 edition of The Transportation Lawyer, provides a review of risk management considerations from the points of view of a shipper or receiver and a carrier of food products. The discussion addresses both “point to point” moves taking place wholly within Canada or the United States, being subject to the domestic laws cited below, as well the cross-border movement of food product between the two countries. A Review of the Law Generally Governing Cargo Claims in Both Jurisdictions In evaluating a cross-border claim involving loss, damage, or delay to a food product, parties should first understand the general law governing cargo claims in each of the two jurisdictions involved. The United States The Carmack Amendment—which generally governs a motor carrier’s liability for cargo loss, damage, or delay—is part of a comprehensive and uniform legislative enactment in the U.S. The Carmack Amendment defines the parameters of carrier liability for loss and damage to goods transported under interstate bills of lading or a continuous bill of lading for the shipment of goods into Canada from the United States. It states, in relevant part:

A carrier providing transportation or service . . . shall issue a receipt or bill of lading for property it receives for transportation . . . . That carrier and any other carrier that delivers the property and is providing transportation or service . . . are liable to the person entitled to recover under the receipt or bill of lading. The liability imposed under this paragraph is for the actual loss or injury to the property . . . (*1).

A shipper must only prove three elements to establish a right to relief for cargo loss or damage under the Carmack Amendment: (1) the goods were in good condition upon receipt by the carrier; (2) the goods were not delivered or arrived damaged; and (3) the amount of damages measured by “actual loss.” While carriers lost some common law defenses under the Carmack Amendment, they retained certain defenses (e.g., shipper’s negligence, Act of God and inherent vice) and gained the certainty of a nationally uniform liability regime. Notwithstanding the foregoing, Congress has recognized the value in freedom of contract and, accordingly, federal law also permits parties to waive application of the Carmack Amendment if they do so expressly (*2). In other words, parties are generally free to agree that a different liability regime (such as negligence) will displace the Carmack Amendment’s particular liability regime. Canada Under Canadian law a carrier will be liable for loss or damage to goods unless the liability is limited by bill of lading, statute, or contract. The essential test is the same “good in/bad out” concept as noted above in the United States: was the cargo lost or damaged during the carrier’s period of responsibility? Similar to the United States, carriers are not liable for delay claims absent any delivery timing requirement. Unlike the U.S., the “cross-border” carriage of goods by motor truck is however not regulated at the federal level insofar as carrier cargo liability is concerned. While cross-border carriage of goods is a matter of federal legislative jurisdiction, the authority to regulate in the area has been delegated by Parliament to the individual provinces and territories by the Conditions of Carriage Regulations SOR/2005-404 (*3). Section 1(1) provides that “the conditions of carriage and limitations of liability that apply to transport by an extra-provincial truck undertaking are those set out in the laws of the province in which the transport originates . . . .” Accordingly, carrier liability for cargo loss, damage, or delay is regulated at the provincial level in Canada. Most provinces prescribe minimum substance and content requirements for bills of lading (*4) in addition to the prescription of what is often referred to as “uniform bill of lading” terms and conditions. These include terms on the carrier standard of liability, carrier defenses to cargo claims, the “deemed” $2 per pound limit of liability for cargo loss or damage (absent a shipper declaration of value) and notice of claim requirements. Those provinces that regulate in the area of motor truck cargo liability (i.e., all except Newfoundland, Prince Edward Island and the territories of Yukon, Northwest, and Nunavut) have adopted the virtually identical “uniform bill of lading” terms and conditions, which usually apply to contracts between shippers and motor carriers originating from points within those provinces, with the exception of cases involving specified types of certain cargo or routing. The common law defences to a claim for loss, damage, or delay to goods being the subject of a contract of carriage have been incorporated into the uniform bill of lading. Similar to the United States, the general rule in Canada under the above set of laws is that a carrier will not be liable for loss, damage caused by a finite series of circumstances (i.e. an Act of God, the Queen’s enemies, riots, strikes, a defect or inherent vice in the goods, an act or default of the consignor, owner or consignee, authority of law, quarantine or difference in weights of grain, seed or other commodities caused by natural shrinkage). The following basic “good in/bad out” concepts accordingly govern the claimant’s burden of proof to recover a claim for cargo loss or damage, whether under the standard uniform bill of lading language used in Canada or otherwise under the governing common law in those provinces or territories where it is not in effect:

i) the claimant has to show the existence of a contractual carriage mandate for the carrier to provide the service, and the necessary status to advance a claim, ii) that the cargo was in good order and condition at the point of origin tender to the carrier (“good in”) as compared to when delivered (or, as the case might be, a total non-delivery such as a case of theft) at destination, and iii) the fact of and the amount of any resulting damages suffered.

A fundamental feature of the “uniform bill of lading” where it is in effect and its augmentation of the common law is the presumptive ability of a carrier to limit liability for cargo loss or damage to $2 per pound of the weight of the cargo, absent a declaration of a value on the bill of lading (or, specifically, in the province of Ontario, on the “contract of carriage”) by the shipper tendering freight. Freedom of Contract The language of the legislation in the different “uniform bill of lading provinces” contemplates in varying degrees shippers and carriers being able to contractually deviate from or alter the uniform bill of lading script. Note, for example, Section 4 of the Ontario Carriage of Goods Regulation, which provides: “(2) The uniform conditions of carriage in Schedule 1 are deemed to be terms and conditions of every contract of carriage to which this section applies.” The generally accepted view is that the above “deeming” language simply serves to provide presumptive terms in a contract of carriage, in recognition that in most cases shippers (at least of the “one-off” or non-commercial variety) will not have negotiated the terms of a contract of carriage with a carrier prior to the tender of freight. That is, there being no express regulatory statement to the effect that the deemed terms are “compulsorily applicable,” the parties then may be left to the practice of negotiating terms, the enforcement of which being naturally subject to general contract law requirements on enforceability. There may, however, be some room left for debate on the point in light of provincial differences in statutory language giving effect to the uniform bill of lading. Consider, for example, the “Specified Conditions of Carriage” in effect in British Columbia by the Motor Vehicle Act Regulations 26/58, section 37.39 of which provides that: “[t]he carrier of the goods described in this bill of lading is liable for any loss or damage to the goods accepted by the carrier or the carrier’s agent except as provided in these Articles.” Arguably, this—being just one example of the relevant regulatory language in effect—suggests that the uniform bill of lading terms are compulsory and cannot be deviated from or augmented by contract. While a detailed discussion on the point (and as concerns those compliance conditions precedent that must be observed for a carrier to rely on the limitation of liability) is beyond scope of this article, the simple fact—and industry reality—is that specifically negotiated contracts are increasingly the norm in Canada. While there is no language in any of the provincial legislation giving effect to a “contracting out” of the uniform bill of lading application analogous to the Carmack Amendment’s express “opt-out waiver” feature noted above, it is hard to picture a court not wanting to give effect to how parties to a transportation contract framed their relationship and allocated risk. The above all said, as with the U.S. experience described above, parties to a contract for carriage of goods by road enjoy freedom of contract. Accordingly, it then remains free under the laws of both countries for shippers and carriers to contractually alter the “good in/bad out” burden of proof on the shipper for the shipments of food product. Examples of what this augmenting language might look like appear below. Such terms might serve to relieve the shipper or claimant from the requirement that it prove transit loss or damage on the occurrence of an event with loss or damage then being conclusively deemed to have occurred, or for that matter for the shipper to be expected to take steps in mitigation or to salvage the remains of an affected shipment. Understanding the Law Governing Food Cargo Claims in Each Jurisdiction Cargo claims involving food products frequently implicate issues distinct from cargo claims involving other types of freight. For instance, questions involving seal integrity, temperatures, humidity, shelf life, insect infestation, and even odors can have an impact. So, after developing an understanding of the governing law in each jurisdiction, one should next drill down into each jurisdiction’s body of law governing food claims in particular. United States In general, whether a shipper can establish “damages”—the third element of a case under the Carmack Amendment—is usually the key question in a claim involving a food product. Not surprisingly, shippers and carriers have different views of the matter. The Shipper’s Argument Shippers frequently focus on federal law to establish that food cargo has been damaged. The Food, Drug & Cosmetic Act (“FD&C Act”) was enacted to protect the public from food products that are exposed to unsanitary conditions (*5). Accordingly, food shippers are at risk for, among other things, criminal prosecution if they attempt to introduce “adulterated” food into the supply chain. The FD&C Act (*6) defines a food product as “adulterated” if “it has been . . . held . . . under unsanitary conditions whereby . . . it may have been rendered injurious to health.” (*7) Shippers therefore take the position that, by virtue of this statute, the threshold for establishing that a food product is adulterated is quite low. For instance, nearly forty years ago, a shipper successfully advanced this argument in Pillsbury Company v. Illinois Central Gulf Railroad (*8). There, the shipper tendered sealed loads of flour products to a railroad for interstate transportation. Upon arrival at destination, the loads were found to be infested with foreign grain beetles. The beetles were discovered in the rail cars and on top of bags or boxes of flour products, but the beetles were not inside the packages themselves. The federal district court found that the cargo of flour was nevertheless “damaged” within the context of the Carmack Amendment:

The necessity of ensuring that rail cars loaded with bulk flour reach their destination in a pristine condition is mandated by federal law. Under the [FD&C Act], processors and distributors of food stuffs intended for human consumption are held to very strict sanitary standards in order to ensure the safety and purity of their raw and finished products. The [FD&C] Act requires that Pillsbury avoid any situation in which the pure condition of their products may be changed by subjection to contamination; proof of actual contamination is irrelevant (*9).

Subsequently, other courts have accepted this analysis in analogous situations. (*10) In addition to reliance on precedent under the FD&C Act, shippers often rely on other, related federal statutes—such as the Sanitary Food Transportation Act of 2005, the Food Safety Modernization Act of 2011, and the more recent Sanitary Transportation Rule (“STR”) promulgated by the U.S. Food & Drug Administration (“FDA”)—to bolster their position (*11). The Carrier’s Argument The above-referenced principles, which are favorable to shippers, sometimes tempt a shipper to be fairly lackadaisical about its burden of proof. Therefore, a motor carrier responding to a claim involving a food product should start by evaluating whether the shipper actually has established its alleged damage. For instance, in the recent case of Scotlynn USA Division, Inc. v. Titan Trans Corp. (*12), a consignee hired a broker to arrange for the transportation of a load of beef from a packaging plant to the consignee’s location. The plant packaged the beef into cardboard bins, each of which was covered with a plastic sheet. During transit, some of the beef tipped over inside the trailer. At destination, it was apparent that some of the cardboard boxes had torn or been split open, but it was unclear that the plastic had been torn or that the beef itself ever spilled from the cardboard boxes. Nevertheless, the consignee rejected the entire load on the basis that further handling might damage the packaging or risk contaminating the beef. That said, the packaging plant ultimately accepted some of the returned beef for repackaging. The broker paid the consignee for a full loss, took an assignment of claim, and then sued the motor carrier. The court, however, found that the broker (in its capacity as assignee of its customer’s claim) failed to establish actual damages under the Carmack Amendment:

Even though the Cargo sustained some damage during transit, due to [the consignee’s] immediate rejection of the Cargo as worthless, [the consignee’s] failure to have the load inspected at its facility by its on-site USDA inspector, and [the consignee’s and the broker’s] other stumbling actions over the next several days, the Court is without a sufficient evidentiary basis to ascertain the extent of the damage to the beef when the Cargo arrived at [the consignee’s] facility. Simply stated, [the broker] has failed to establish a specified amount of damages here.(*13)

Of course, the court also noted that, even if the broker had been able to establish damages, the same set of facts would have demonstrated its failure to mitigate its damages reasonably. As in most disputes, all parties have an obligation to mitigate their damages. For example, in Land O’Lakes, Inc. v. Superior Service Transportation of Wisconsin, Inc.,(*14) a shipper sold a load of butter to a consignee. The shipper, through a broker, tendered the butter to a motor carrier. During transit, the motor carrier’s driver was involved in an accident. The motor carrier’s insurer inspected the truckload and determined that the butter was still in good condition. After all, the butter was intact in its cardboard containers, wrapped in plastic, and none of it had been exposed to the elements. Only 20% of the boxes were deformed. Nevertheless, the shipper elected to declare the load a total loss and ultimately sued the motor carrier to recover for its claimed loss. One of the various issues litigated in the Land O’Lakes case was the motor carrier’s argument that, even if the accident had never occurred, the consignee would have rejected the load because it lacked a seal. The applicable internal policies indicated that loads without seals would be rejected. The court rebuffed this argument, finding that “[the seal’s] absence [did] not mean that the shipment [was] contaminated or otherwise damaged.” Therefore, again, motor carriers rely on findings like this as yet further support for the argument that an absent (or broken) seal does not automatically establish actual damage under the Carmack Amendment. Further, the court found that the shipper had arguably failed to mitigate its damages, though the court also noted that, if the butter had been exposed to the elements, then the shipper’s duty to mitigate may have been relaxed. Finally, motor carriers should push back against arguments that the FDA-issued STR has a bearing on how the Carmack Amendment applies in the context of a food-based cargo claim. Motor carriers can point to the FDA’s own written comments made during development of the STR itself. For instance, the FDA noted in the course of the rulemaking that:

Several comments express concern about food being considered adulterated under this rule simply because of the failure of a carrier to adhere to a shipper’s specified conditions during transport, such as maintaining a specified temperature, regardless of whether the food is actually unsafe.  In particular, these comments speak to concerns about the impact the rule, as proposed, would have on the cargo claims process governed by the “Carmack Amendment” found in 49 U.S.C. 14706.(*15)

The FDA responded to these and related concerns as follows:

An inconsequential failure by a carrier to meet the shipper’s temperature control specifications will not necessarily create a per se presumption that the affected food has become adulterated . . . .  [U]nder this rule we will apply section 402 of the FD&C Act, as it addresses food safety, to determine whether food has become adulterated during transport.  Persons engaged in transportation operations should not expect that we will apply a different standard or different criteria for evaluating compliance with this rule.  Therefore, we do not anticipate that this rule will have a significant impact on the cargo claims process. . . .  A broken cargo seal or any evidence of food cargo tampering would not necessarily create a per se presumption of adulteration (*16).

Stated differently, the STR does not materially change the fundamental analysis applied under the Carmack Amendment. What all of the foregoing means is that, absent clear contractual language, resolution of a food-based cargo claim in the U.S. turns on the specific facts involved in the claim and frequently calls for expert analysis. This is the case whether one is evaluating a shipper’s ability to establish a cargo claim case in the first instance or whether the parties have reasonably mitigated their damages. For instance, the FDA noted in its responsive comments to the promulgation of the STR that: “we advise persons engaged in transportation operations that, if such situations should arise, they should carefully evaluate the facts and circumstances of each incident, on a case-by-case basis, to determine whether the safety of the food cargo may have been compromised.” (*17) In short, despite the natural desire for a fixed standardized test in food-based claims, the reality is that analysis of these claims is highly fact-sensitive unless the parties have waived application of the Carmack Amendment (in whole or in part) and negotiated and agreed in advance in a contract what rules will apply to a claim. Canada The Shipper’s Argument Cases involving both general freight and foodstuffs and the rejection of cargo at destination by a consignee are becoming increasingly common in Canada. There is limited case law on point in comparison to the U.S. experience. This said, in rejecting shipments of food products shipped from the U.S. to Canada, consignees sometimes cite the U.S. “shipper arguments” listed above with general reference to the “FDA Regulations” (or similar wording). This may be a function of the U.S. legislation having been publicized through the rollout of the proposed STR under the Food Safety Modernization Act, or an increasing awareness of the U.S. laws cited above that “adulterated” food cannot be introduced to the food distribution chain. While there is regulation on food safety distribution in Canada, it appears to be less directly geared toward carriers than the U.S. statutory language (or at least, how it has been litigated in court proceedings). This said—interestingly, there is not yet reported case law on point—a shipper or food cargo claimant might cite one of two Canadian pieces of legislation in justifying the rejection of cargo at destination on account of the proven fact of, or perhaps mere apprehension of, contamination in transit. i) The Safe Food for Canadians Act (“SFCA”) SC 2012, c. 24 and the Safe Food for Canadians Regulations (“SFCR”)(*18) The legislative intent giving rise to the SFCA is as follows:

An Act respecting food commodities, including their inspection, their safety, their labelling and advertising, their import, export and interprovincial trade, the establishment of standards for them, the registration or licensing of persons who perform certain activities related to them, the establishment of standards governing establishments where those activities are performed and the registration of establishments where those activities are performed.

The SFCA contemplates the enactment of regulations addressing various aspects of the design, construction, hygiene, sanitation and maintenance of motor vehicles, trailers, and cargo containers (collectively defined to in the legislation as “Conveyances”). The SFCR came into force on January 15, 2019, prescribing food safety production and handling requirements for certain food commodities, activity types and business sizes. Thus far, the SFCR is the only regulation enacted under the SFCA. Relevant provisions for our present discussion in the SFCR are as follows:

Exception — person who conveys

20(1) Subject to subsection (2), the provisions of the Act and these Regulations do not apply to any person who conveys a food commodity if their sole concern, in respect of the food commodity, is its conveyance.

Exception (2) Sections 122 and 123 and subsection 359(3) and any provisions of the Act and these Regulations that are necessary to give effect to them, apply to the person referred to in subsection (1).

Sections 122, 123 and 359(3) do not pertain to the subject matter of this article. The language of section 20 is curious, in suggesting that the regulation is not aimed at carriers of goods operating as a third-party independent from a shipper operation or fleet. The language appears to be squarely focused on regulating shipper and food distributor activity in what they can and cannot do when food product is established as having been contaminated. It remains, however, that a shipper can cite and may rely on s. 53 of the SFCR, which provides:

Preventative Controls Conveyances and Equipment

[A]ny conveyance or equipment that is used in the manufacturing, preparing, storing, packaging or labelling of a food or in the slaughtering of a food animal must (a) be appropriate for the food or the food animal, as the case may be, and for the activity being conducted; (b) be designed, constructed and maintained to prevent contamination of the food; and (c) be constructed of, and maintained using, certain specifically listed material characteristics to prevent the risk of contamination of the food.

Notably, the words “transportation” or “carriage” are missing as a defined activity. “Storing” is not a defined term. It is curious that the “conveyances” should be regulated without an express transit context being provided. It may well be that future regulatory enactments on point will be forthcoming. It remains to be seen how the word “storing” will be interpreted. Might this mean “stored” while in transit? Section 72 of the SFCR in turn provides:

Unloading, Loading and Storing Any conveyance that is used to convey a food to or from an establishment and that is unloaded or loaded at the establishment (a) must be designed, constructed and maintained to prevent contamination of the food; (b) must be constructed of, and maintained using, materials likewise, certain specifically listed material characteristics to prevent the risk of contamination of the food; (c) must be capable of maintaining the temperature and humidity at levels that are appropriate for the food and, if necessary to prevent contamination of the food, be equipped with instruments that control, indicate and record those levels; (d) must be clean and in a sanitary condition at the time of unloading or loading.

Section 73 provides that “[a]ny unloading and loading of a food or of a food animal that is intended to be slaughtered, from or onto a conveyance at an establishment, must be conducted in a manner that does not present a risk of contamination of a food.” While it might be asserted in light of Section 20 above that the carrier might not be a regulated entity in terms of the conveyance, a shipper or consignee may raise the argument that it is or they are as a basis to rejecting shipments having presented a “risk of contamination.” ii) The Food and Drugs Act R.S.C. 1985, c. F-27 (“FDA”) This statute regulates food, drugs, cosmetics, and therapeutic devices. The regulations enacted thereunder prescribe standards for the composition, strength, potency, purity, quality, or other property of certain foods and drugs. The FDA defines “sell” to include “(a) offer for sale, expose for sale or have in possession for sale — or distribute to one or more persons, whether or not the distribution is made for consideration, and (b) lease, offer for lease, expose for lease or have in possession for lease.” It defines “unsanitary conditions” to mean “such conditions or circumstances as might contaminate with dirt or filth, or render injurious to health, a food, drug or cosmetic.” Section 4 of the FDA also prohibits the sale of food in certain situations:

No person shall sell an article of food that (a) has in or on it any poisonous or harmful substance; (b) is unfit for human consumption; (c) consists in whole or in part of any filthy, putrid, disgusting, rotten, decomposed or diseased animal or vegetable substance; (d) is adulterated; or (e) was manufactured, prepared, preserved, packaged or stored under unsanitary conditions.

The above language raises issues as to whether shipments can be rejected on account of proven or suspected adverse transportation incidents affecting cargo. What is storage under “unsanitary conditions”? Does this regulate the storage of goods outside the ordinary course of transit? The shipper or consignee might cite the remedial and safety intention behind the legislation as a basis to reject a shipment from a carrier. Why should it have to accept delivery of a product carried in an “offending” conveyance? For that matter, why should it have to receive product that it is prohibited from selling? With these arguments, however, the claimant would be overlooking what appears to be the requirement that it be shown that a non-compliant conveyance was used to carry food, or for that matter that food was actually contaminated such that it could not be sold. Certainly, the carrier will assert that mere fear or speculation that there could have been contamination will not be enough. The above all said, there is not yet any reported case law considering the statutory language in the food product transportation context. The Carrier’s Argument The carrier may assert as a starting argument that, given the language of sections 20 in the SFCR and 4 of the Food and Drugs Act, they do not regulate the transportation of food product. The carrier also may assert the usual burden of cargo claim proof together with the argument that the regulatory prohibitions listed above require a determination as a matter of fact that food in transit was in fact contaminated or adulterated as a basis for rejection; and that the fear that it happened is not enough. A related argument is that the above statutory language regulates what a shipper can or cannot offer to the market as opposed to carrier liability. It might be that a shipper suffers a loss in not being able to sell product, but it will have to prove that loss and in so doing cannot simply reject the delivery of cargo. To this end, the carrier may assert that there is a critical difference between the delivery of fresh produce at destination on a “rust bucket” trailer and the case of a seal broken when there is no indication that the cargo was subject to tampering. Inevitably, in addition to raising the usual “good in/bad out” burden of proof—that is, the carrier’s fundamental defense that there is no proof of actual damage—the carrier will raise the cargo claimant’s duty to mitigate at law. The principle of mitigation is a universal concept in Canada in the law of damages. The carrier will assert that the shipper or consignee ought to have undertaken a sorting, inspection and salvage review process. Could product that was not patently affected (or perhaps ordered to be disposed of by relevant authority) be repackaged, cleaned and/or sold for a different purpose? Under basic mitigation principles, the carrier has the burden of proof to establish the claimant’s duty to take reasonable steps in mitigation and its failures in that regard. To the extent established, the claimant’s claim will be nullified or reduced accordingly, but the claimant will be able to recover reasonable expenses incurred in the mitigation process. One interesting issue that sometimes arises in the perishable goods industry comes with carrier delay or a carrier equipment malfunction mid-transit. Can the shipper impose then expedite on-carriage to destination by a different (and more expensive) means of carriage? This will be a factual matter to be resolved on a case-by-case basis. Understanding the Meaning of and Use of Contract Language As noted above, both the U.S. and Canada recognize freedom of contract in transportation law. While the Carmack Amendment can only be waived with certain express and unambiguous language, many transportation contracts do in fact contain a partial or complete waiver of federal law, including the Carmack Amendment. To that end, resolution of a cross-border, food-based claim naturally requires a review of the applicable agreement/s. The following are examples of contract language that can arguably affect what would otherwise be the default rules applicable in the U.S. and Canada with respect to adulteration as well as the obligation to mitigate damages:

– “Carrier is liable for any and all claims, losses, or liabilities arising from or as a result of any unauthorized removal of seal, broken seal, missing seal, tampered seal, or mismatched seal number.” – “Carrier shall have no right of salvage credit or entitlement to affected goods.” – “Customer may determine in its sole discretion, not subject to a reasonableness standard, whether the Goods may be salvaged and, if salvageable, the value of the salvage.” – “The seals which are required to use under [Shipper’s] sanitation policy after loading shall be seals supplied by [Shipper], and shall be affixed to all points of potential entry into the trailers. Such seals shall not be removed or replaced without the prior approval of Shipper, except for government customs inspection and with appropriate resealing.” – “The Company and, to the extent applicable, Hired Carriers, must follow all [Shipper] Security Procedures as per the Contract Driver Orientation Training Program. Sign off by each driver is required.”

As a result of provisions like these, parties to transportation contracts are encouraged to scrutinize their obligations carefully. The Application of One Country’s Food Safety Laws in the Other Arguments may exist as to the application of the above food safety legislation in a country or origin in respect of delivery in the other, or vice versa. For example, can a Canadian consignee reject a load from the U.S. citing U.S. food safety laws? Seemingly, one country’s laws will not apply in the other by their own terms and legal effect unless a court finds there was an express contract term either adopting particular statutory language in accordance with its own terms or incorporating by reference (the adoption of statutory language that might not apply in the normal course by its own terms). In this latter scenario, parties might provide for the adoption of language from a statute to govern “in any event of the origin point of cargo” or “in any event of the routing of cargo” in an effort to inject predictability into the parties’ relationship. Conclusion The transportation of food products is a particularly complex area, and all the more so when the transportation is cross-border. The cardinal rule for mindful, deliberate shippers and carriers is to determine how they structure their contractual dealings and allocate responsibilities and risk for loss. The fact that food products may trigger special regulatory concerns and safety issues—not to mention being carried between countries with different laws—makes it essential that parties engaged in cross-border carriage be vigilant in their contracting, risk management, and pricing. Gordon Hearn and Marc Blubaugh [Benesch, Friedlander, Coplan & Aronoff LLP, Columbus, Ohio] Endnotes (*1) 49 U.S.C. §14706 (*2) Under 49 U.S.C. § 14101(b)(1). (*3) Enacted under the federal Motor Vehicle Transport Act, R.S.C. 1985, c. 39 (3d Supp.) (*4) In Ontario, such regulations pertaining to the “contract of carriage.” (*5) United States v. Gel Spice Co., Inc.</eM., 773 F.2d 427, 428-29 (2d Cir. 1985). (*6) At 21 U.S.C. § 342(a)(4) (*7) Emphasis added (*8) 687 F.2d 241 (8th Cir. 1982) (*9) Pillsbury, No. 4-7-289 at 9 (emphasis added). (*10) For example, in Oshkosh Storage Co. v. Kraze Trucking LLC, 65 F. Supp. 3d 634, 637 (E.D. Wis. 2014), a shipper tendered a load of cheese to a motor carrier who transported the load to destination. The shipper verbally instructed the motor carrier’s driver that the consignee’s personnel would break the seal when the load arrived at destination. At destination, a sign stated: “Please DO NOT break the seal on the trailer. Our warehouse staff will verify the seal number and break the seal prior to unloading.” Nevertheless, the motor carrier’s driver parked his truck, broke the seal, and opened the trailer doors. The consignee rejected the entire load because of the broken seal and sued the motor carrier for cargo damage under the Carmack Amendment. The motor carrier defended by, among other things, arguing that the cheese could not be deemed “damaged” simply because of the prematurely broken seal. The court, however, disagreed: “this argument ignores the purpose of the seal and the requirements of [the consignee]. Food distributors have a duty to ensure that the food they provide to the public is safe, and the requirement that shipments be unsealed only by authorized personnel is intended to provide assurance that the shipment has not been contaminated. Given the risk to customers and a distributor’s own potential liability, it is not unreasonable for a company to adopt a policy of rejecting shipments of food products when the seal has been broken as long as that policy has been clearly announced. For these reasons and based on the undisputed facts, the Court concludes that [the shipper] has established a prima facie case under the Carmack Amendment.” (*11) For example, the STR requires those who transport food to use sanitary transportation practices to ensure food safety and to avoid practices that create food safety risks, including the failure to properly refrigerate food, inadequate cleaning of vehicles between loads, and failure to properly protect food during transportation. (*12) WL 3704087 (M.D. Fla. 2021). (*13) Emphasis added. (*14) 500 F. Supp. 2d 1150 (E.D. Wis. 2007). (*15) 81 Fed. Reg. 20091 at 20110 (Apr. 6, 2016). (*16) See footnote (*15) at 20111 (emphasis added). (*17) See footnote (*15) and see also Mecca & Sons Trucking Corp. v. White Arrow, LLC, 763 Fed. Appx. 222 (3d Cir. 2019) (noting that experts can “reasonably disagree” about whether the cheese cargo in question was safe, but that carrier agreed by contract to comply with certain requirements). (*18) SOR/2018-108 Return to Table of Contents

4. Athens Convention Limit Application Appealed

Knight v Black et al 2022 BCCA 130 (CanLII)(*1) The Knight v Black 2022 BCCA 130 (CanLII) appeal decision is owed significant consideration as there are relatively few court decisions internationally regarding the application of the statutory limitation of liability under the Athens Convention, as described below, concerning maritime losses whether for damages for personal injuries or to goods. Here, the British Columbia Court of Appeal reminds us of the nature of those limits and that same will not be applied too broadly. At trial, the defendants were successful in their bid to limit their liability pursuant to the Athens Convention Relating to the Carriage of Passengers and their Luggage by Sea, 1974 (“Athens Convention”) as adopted in the Marine Liability Act S.C. 2001, c. 6 (“MLA”). The trial judge found that the injured plaintiff was a “passenger” pursuant to a “contract of carriage” and that the respondents were “carriers” entitled to rely on the limit on recovery of damages for personal injury. The plaintiff appealed, the damages for her alleged injuries substantially exceeding the limitation of 175,000 “units of account” or SDRs pursuant to Part 4 of the MLA and Articles 1 to 22 the Athens Convention. This amount equated to about $310,000 CAD. Facts The plaintiff, Francesca Knight, was injured while on a boat that collided with a sandbar on the Lillooet River in British Columbia. Ms. Knight’s injuries were not disputed and the only issue on the application was whether the defendants’ liability for those injuries was limited by Part 4 of the MLA, which incorporates the limitation of liability in the Athens Convention. In the time leading up to the accident, Mainroad Howe Sound Contracting Ltd. (“Mainroad”) was under contract with the British Columbia Ministry of Transportation (“MoT”) to provide highway maintenance services for designated provincial roadways, including the one running adjacent to the Lillooet River (the “River”) in several areas north of Pemberton, British Columbia. The plaintiff, Francesca Knight, an employee of the Department of Fisheries and Oceans (“DFO”), as part of her mandate with the DFO had issues with the work involved and reconnaissance was undertaken to identify the riverbank erosion sites that would require emergency works for the DFO’s review. Mainroad was unable to find a commercial jet boat operator to provide transportation on the river at that time of year. Mainroad approached the defendant Stephen Black, who did not normally rent out his boat, but did agree to do so at a fee of $200 per hour. On October 18, 2011, Mr. Black operated the boat for the reconnaissance trip and on the return trip, his boat struck a sandbar in the River. Ms. Knight was thrown and struck her head sustaining significant injuries as a result the impact. On October 18, 2011, Mr. Black operated the boat for the reconnaissance trip and on the return trip, his boat struck a sandbar in the River. Ms. Knight was thrown and struck her head sustaining significant injuries as a result the impact. After the trip, Mr. Black invoiced Mainroad in the amount of $600 for his services and MoT reimbursed Mainroad for this amount under the terms of their road maintenance contract.  The trial judge found that Ms. Knight was a “passenger” who was “under a contract of carriage”, and that all three defendants were “carriers” as defined by the MLA. The plaintiff appealed to the British Columbia Court of Appeal. The Law The Court of Appeal reviewed the law. The statutory limitation of liability does not apply to all carriage by water in Canada. Section 37(2) of the MLA describes the types of carriage to which the limits apply: 

37(2)   Articles 1 to 22 of the [Athens Convention] also apply in respect of 

(a) the carriage by water, under a contract of carriage, of passengers or of passengers and their luggage from one place in Canada to the same or another place in Canada, either directly or by way of a place outside Canada; and  (b) the carriage by water, otherwise than under a contract of carriage, of persons or persons and their luggage, excluding (i) the master of a ship, a member of the ship’s crew or any other person employed or engaged in any capacity on board a ship on the business of the ship,  (ii) a person carried on board a ship other than a ship operated for a commercial or public purpose, (iii) a person carried on board a ship in pursuance of the obligation on the master to carry shipwrecked, distressed or other persons or by reason of any circumstances that neither the master not the owner could have prevented, and (iv) a stowaway, a trespasser or any other person who boards a ship without the consent or knowledge of the master or the owner.  (Emphasis added in the original) 

The Court went on to state that Sections 37(2)(a) and (b) draw a distinction between “passengers” and “persons”. In S. 37(2)(a) the word “passengers” is used in a narrow sense to mean those being carried by water under a contract of carriage; this is consistent with the definition of “passenger” in Article 1 of the Athens Convention. In s. 37(2)(b), “person” is used to include those aboard a vessel “otherwise than under a contract of carriage” where the vessel is being operated “for a commercial purpose” (with certain exclusions such as the ship’s employees and stowaways). Apart from those excluded categories, the combined effect of the two subsections is the application of the limits in the Athens Convention to those aboard vessels being operated for a commercial purpose, either with or without a contract of carriage. Issues The parties agreed that Mr. Black, although not generally a commercial carrier, was operating his vessel for a commercial purpose at the date of loss. On appeal the Court considered whether Ms. Knight was a “passenger” or “person” to whom the limitations on liability applied, and whether or not Mainroad and the MoT were “carriers”, who could apply the statutory limitation. The British Columbia Court of Appeal agreed with the trial judge that Ms. Knight was a passenger under a contract of carriage, and that Mr. Black was a carrier who could limit his liability.  The Court of Appeal, however, overturned the trial judge’s finding that Mainroad and MoT were carriers entitled to the benefit of the Athens Convention limits on liability. The Decision of the Court of Appeal The Court first considered whether Ms. Knight was a passenger pursuant to a contract of carriage. The trial judge had concluded that an agreement that meets the definition of a “charterparty” may also constitute a contract of carriage. The Court of Appeal, at paragraph 18, agreed stating that even if the agreement between Mr. Black and Mainroad could be characterized as a time charter, that would not preclude the agreement from coming within the MLA definition of a contract of carriage.  The plaintiff on appeal also argued that a contract of carriage is an agreement that is concluded between a “passenger” and a “carrier”. Only Mainroad and Mr. Black entered into the contract under which passengers were to be transported on the river and the plaintiff did not. The plaintiff argued that she was not a passenger “under a contract of carriage”. The Court of Appeal disagreed stating that such a conclusion went against UK authority and further that the Athens Convention does not define a passenger as someone who has “entered into” a contract of carriage, but rather stated that a passenger is any person carried in a ship “under” a contract of carriage. Similarly, the Court stated, s. 37(2)(a) of the MLA provides that the Athens Convention applies in respect of “the carriage by water, ‘under’ a contract of carriage, of passengers”. The definition of “contract of carriage” in the Athens Convention also focuses on “the carriage by sea of a passenger” and does not specify that the contract must be made with a passenger. The Court of Appeal went on to state that the limitation of liability in question is imposed by statute, not by virtue of the contract of carriage, and nothing in the MLA obliges carriers to include contractual notice of their limited liability. Limiting contracts of carriage to those entered into by passengers directly would not guarantee their knowledge of the cap on potential recovery for injuries and losses during carriage. As the plaintiff was a passenger being carried under a contract of carriage between Mr. Black and Mainroad when she was injured, the plaintiff was subject to the Athens Convention limit on recovery of damages in respect of her claim against Mr. Black. The limitation against Mr. Black was 175,000 SDRs or about $310,000 CAD. The MoT and Mainroad however were not as successful in maintaining the protection of the limitation of liability. Application of Limitation to Mainroad and MoT The Appeal Court went on to consider whether the limitation of liability applied to Mainroad and the MoT. The trial judge had found that Mainroad, on behalf of the MoT, had concluded a contract with Mr. Black to transport Ms. Knight and her colleagues by boat on the River. The trial judge was satisfied that both Mainroad and MoT fell within the definition of “carrier”.  At paragraph 91, of the trial decision, the trial judge had stated:

A finding that Mainroad and MoT are “carriers” is consistent with the distinction between “carrier” and “performing carrier” in the Athens Convention. If the drafters of the Athens Convention intended that only those persons who actually performed the carriage are “carriers”, there would be no need for that distinction.

The Court of Appeal, however, disagreed stating that the trial judge erred by focusing on the provision in the Athens Convention for two types of carriers and by assuming that entering into a contract to have people transported by boat sufficed to make the contractor a “carrier”.  The Appeal Court concluded, at paragraph 31, that “only a person who enters into a contract pursuant to which he is obliged to transport passengers or goods is a ‘carrier’. To find otherwise would lead to an absurdity. If anyone entering into a contract involving the carriage of people or goods becomes a ‘carrier’, as the judge found, those contracting to be transported—i.e., passengers—would be carriers.” (emphasis in the original). Then at paragraph 32, “At no point did Mainroad or MoT assume a contractual obligation to Ms. Knight to transport her on the river. If the respondents had left the dock that fateful day without the appellant on board, neither she, nor her employer, could have sued them for breach of contract for failing to carry her.” The Court went on to state that Mr. Black could also not be described as a person “other than the carrier” who “performed the carriage” as there was no “other” entity obligated to perform the carriage who hired him to carry it out as the “performing carrier”. There were only those who contracted with Mr. Black to be carried by him, and Mr. Black who contracted to carry them.  The Court of Appeal provided a reminder that the provisions in the Athens Convention adopted by the MLA were intended to limit the potential liability of “shipowners” being those in the position to cause injury or loss during carriage and to contract out of liability. At paragraph 34,

Under the Athens Convention, carriers are presumptively negligent if the loss arises in connection with shipwreck, collision, stranding, explosion or fire, or defect in the ship—matters that generally fall within the control and responsibility of the shipowner. It is difficult to see, on any principled basis, why those who contract on their own behalf or on behalf of their employees to be carried should be presumptively at fault for injuries occurring during carriage by the person who has assumed the obligation to do the transporting.

The Court of Appeal specifically rejected attempts to widen the net to include others as “carriers” concluding that Mainroad and MoT were not carriers because they had not assumed a contractual obligation to transport passengers. Instead, Mainroad and MoT were passengers (as corporate entities acting through their employees), who had contracted with the shipowner to be transported. As such, there was no connection to potential liability of Mainroad and MoT for the injuries suffered by the plaintiff. Mainroad and MoT were not presumptively liable for the plaintiff’s injuries and were not entitled to the Athens Convention limit on recoverable damages.  Conclusion The Court of Appeal found that the judge did not err in concluding that the plaintiff was a “passenger” pursuant to a “contract of carriage” and that the defendant boat owner, Mr. Black, was a carrier and, therefore, entitled to rely on the statutory limitation of liability.  Further, the trial judge’s finding that the plaintiff was not required to be privy to the contract of carriage was also upheld. The trial judge’s decision, however, that Mainroad and MoT were “carriers” entitled to rely on the limitation of liability was overturned as Mainroad and MoT did not assume an obligation to transport passengers or goods but were instead themselves passengers who were being transported under the contract of carriage. The Court of Appeal’s decision of course also effectively exposed Mainroad and MoT regarding their respective liability and satisfaction of the plaintiff’s damages. Mr. Black’s liability was limited to the approximately $310,000 CAD. While a calculation of the damages based on percentage liability (whether litigated or agreed upon is unknown) will still be made, Mainroad and MoT would be compelled to fill any gap caused as concerns recovery of such damages by the plaintiff. Mainroad and MoT would also not be able to crossclaim against Mr. Black, whose liability was statutorily limited. (*3). Kim E. Stoll Endnotes (*1) The trial decision (2021 BCSC 19 CanLII) of this case was reported by Rui Fernandes in the January 2021 edition of The Navigator. (*2) For instance, section 36 of the MLA extends the application of Articles 1 to 22 of the Athens Convention to Canada’s freshwater lakes and inland waterways. (*3) The insurance policy indemnity limits available to Mr. Black are irrelevant and there is no personal exposure to Mr. Black. Return to Table of Contents

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.

Fernandes Hearn LLP
155 University Avenue, Suite 700, Toronto, Ontario, Canada  M5H 3B7
Telephone: 416-203-9500 | Fax: 416-203-9444

A proud Canadian law firm specializing in Transportation, Insurance, Trade, Technology and Commercial Law.

Copyright © Fernandes Hearn LLP. All Rights Reserved. | Copyright | Disclaimer | Privacy Policy | Designed By: Christopher Chong Productions Inc. | SEO By: Spider Choice Inc.