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Court Upholds Demurrage Charges
Published in the April 2009 issue of Transportation Notes - View Article
On April 8, 2009 the Ontario Superior Court of Justice released a decision upholding a Small Claims Court ruling ordering Fedmar Marine Terminals (“FedMar”) to pay $5,471 in demurrage charges to Southern Ontario Railways (“SOR”), a short track railway operator.
The trial decision described in detail the particulars of how short track railways operate — explaining that, in the normal course, they contract with a main line rail carrier (such as CP or CN) to marshal railcars from main rail lines through their own lines onwards to spur lines which are connected to cargo management operations such as FedMar. Cargo managers then move the cargo on to other modes, such as truck or marine transport.
The trial judgment notes with significance that the contract governing the services that short track railways provide is between the short track operator and the main line rail carrier.
In the case at hand, SOR delivered and retrieved the railcar in question to and from FedMar at the times requested by Fedmar, but there appears to have been an unusual amount of delay in the process of returning the rail car to SOR. Accordingly, even though there was no express contract between SOR and FedMar providing for the imposition of demurrage charges, such fees were levied. It was not contested that SOR’s tariff provides for the payment of demurrage charges. Nor was it contested that FedMar was aware of this fact.
The trial judge ordered that the fees should be paid.
On appeal, FedMar argued that because there is no contract between it and SOR, there is no legal basis upon which the charges can be levied.
In upholding the trial decision, Justice Milanetti referenced the Supreme Court of Canada case of Northwest Elevators v. Canadian Pacific Railway, [1959] SCR 239 where that Court recognized that there is an “implied understanding” that when cargo is delivered to a shipper, “no more than reasonable time shall be taken for [loading or unloading]”.
Justice Milanetti accepted the Northwest Elevators case for the proposition that the “implied understanding” does, in fact, create a situation where demurrage charges are exigible, even though there is no express contract between the parties, when the delay in loading or unloading is the fault of the shipper (which FedMar was found to be on a reading of s. 6 of the Canada Transportation Act).
In making her decision, Justice Milanetti also noted that FedMar had paid demurrage charges in the past and at times makes business decisions to “eat” such charges or pass them on to the customer, depending on the circumstances of the delay.
Railink Canada Ltd. v. Federal Marine Terminals, 2009 CanLII 15893 (ON S.C.