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Federal Court of Appeal Allows Canadian Pacific Railway to Limit its Damages in Freight Forwarding Case
Published in the March 2008 issue of Transportation Notes - View Article
On March 6, 2008 the Federal Court of Appeal released its decision in the matter of Canadian Pacific Railway Company v. Boutique Jacob Inc. We reported on the trial decision in the April 2006 edition of Transportation Notes. Readers may also wish to consult our summary in the matter of Canadian National Railway Company v. Sumitomo Marine and Fire Insurance Company Ltd., discussed in the August 2007 edition of Transportation Notes, as the conclusions with respect to the ability of Canadian railways to limit their liability are substantially the same in both cases. As noted in this month’s “End of the Line”, the Supreme Court of Canada refused to grant leave to appeal in the Sumitomo case
In the Boutique Jacob case Boutique Jacob, a fashion retailer in Montreal, retained Panalpina Inc. (“Panalpina”), a Canadian freight forwarder, to arrange for the carriage of a cargo of clothing from Hong Kong to Montreal. Panalpina retained the services of Pantainer Ltd. (“Pantainer”), a non vessel operating common carrier, which issued bills of lading containing the same terms and conditions which had existed in the case of previous shipments carried on behalf of Boutique Jacob in the previous two years.
Pantainer retained Orient Overseas Container Line Ltd. (“OOCL”), which undertook to carry the goods from Hong Kong to Montreal. OOCL did not issue a hard copy of bill of lading as everything was done electronically. However, Pantainer was familiar with the terms and conditions of carriage which would be found on OOCL’s bill of lading and which were available on its website.
OOCL carried the goods from Hong Kong to Vancouver and retained the services of Canadian Pacific Railway Company (CPR) for the carriage of the goods from Vancouver to Montreal. That contract was pursuant to a confidential rate agreement entered into between OOCL and CPR.
During the rail carriage from Vancouver to Montreal the cargo was damaged by reason of a train derailment which occurred near Sudbury, Ontario on April 27, 2003. Boutique Jacob sued Pantainer, Panalpina, OOCL and CPR seeking damages in the amount of $71,550.47. The trial judge found that Panalpina was not liable as it acted in an agency capacity only. Pantainer had contractual liability to the plaintiff, but was protected by the terms of its bill of lading which held that it would not be liable for “any cause or event which the Carrier could not avoid and the consequences of which the Carrier could not prevent by the exercise of due diligence”. Since Pantainer could not have prevented the train derailment by the exercise of due diligence, it was not liable. The trial judge also found that OOCL was not liable as it also had a clause in its bill of lading exonerating it from liability for circumstances which it could not have prevented by the exercise of due diligence. As the Pantainer bill of lading expressly authorized it to subcontract on terms, Boutique Jacob should be deemed to have accepted the limitations contained in the OOCL bill of lading.
CPR took the position that it should be able to rely on limitations contained in its confidential rate contract with OOCL, or in the alternative with the limitation clause in either the OOCL or the Pantainer bill of lading. The limitations in all three cases were the same, namely US $2 per kilogram which would limit CPR’s liability to $1,432.89. However, the trial judge felt compelled to apply s. 137 of the Canadian Transportation Act, which provides that a railway company can only restrict its liability to a shipper by means of a written agreement signed by the shipper. The trial judge found that CPR did not have a written agreement signed by the shipper, namely Boutique Jacob and consequently could not limit its liability.
The Federal Court of Appeal reversed the trial judge on this latter point. In his reasons, Nadon, J. A. agreed with the reasoning of the Quebec Court of Appeal in the Sumitomo Case and concluded that in this case the “shipper” was OOCL and not Boutique Jacob. The Court stated “..in effect, not only was OOCL the entity which contracted directly with CPR by way of a confidential rate contract, it was OOCL which handed over the container to CPR in Vancouver…the fact that OOCL was the carrier retained by Pantainer to carry the goods from Hong Kong to Montreal does not deter from the fact that OOCL was the “shipper” in so far as the contract of carriage by rail in concerned”.
CPR was therefore entitled to limit its liability to $1,432.89.
Canadian Pacific Railway Company v. Boutique Jacob Inc., 2008 FCA 85 (Can LII)