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Liability for Transportation Charges
Published in the June 2009 issue of Transportation Notes - View Article
Cargo Dynamics, a shipping company which carries on business in British Columbia, became involved in a dispute with Apex-Micro Manufacturing, a company which assembles components to produce electronic devices such as cell phones. In the course of its business, Apex regularly obtained components from suppliers in the Far East and had them shipped to ports in British Columbia and Washington State. Cargo Dynamics made the shipping arrangements and, in the normal course of things, Apex paid Cargo’s invoices directly. Eventually, one of the suppliers of components, SR Telecom, became insolvent. Apex, which had paid Cargo invoices for the shipping of Telecom products in the past, now took the position that there was no contract in place between Cargo and itself. The transportation contract was, in each case, between Cargo and SR Telecom. Indeed, Apex maintained this was the case with all the transportation contracts between Cargo and the various original equipment manufacturers (OEMs) who shipped goods to Apex via services arranged by Cargo.
In support of this position, Apex tendered an affidavit from its chief operating officer who described the shipping arrangements typically made for the delivery of parts and components to the Apex facilities in North America. She had no direct involvement in the particular case and could speak of general practice only. Apex entered into agency agreements with OEMs in Asia and acted as the manufacturing agent of those OEMs. The latter were responsible for making shipping arrangements, although Apex did play a role in coordinating with carriers and forwarders to ensure orderly receipt of the product. It would occasionally pay the carriers and forwarders, but only as agent of the OEMs.
The COO also deposed that Apex had an agency agreement with SR Telecom and that, for the shipment of Telecom products, it was the latter, not Apex, which placed the shipping orders. She pointed to the fact that Telecom was shown as the shipper on the shipping documents, packing lists and invoices. Apex relied on the proposition that, in the normal course and in the absence of a contract to the contrary, it is the shipper which is responsible for transportation charges. Apex was only the consignee and without responsibility for those payments.
Cargo Dynamics responded with the evidence of its general manager of cargo operations, Ritchie So. Mr. So described his contact with April Zhang who was identified to So as a senior buyer for Apex. He provided Zhang with a proposal setting out shipping rates from various locations in China and a rate was agreed to. Shortly thereafter, Zhang began placing orders with So who, on receiving an order, would contact a company in China which had been identified to him as a normal supplier for Apex. He would arrange a pick-up from one of these manufacturers, arrange ocean shipping, warehousing and trucking to the Apex facility in Washington State or British Columbia. After delivery, Cargo would invoice Apex and received payment from Apex.
Between April and late July, this pattern was followed on a number of occasions but there was nothing in writing to confirm the arrangement. On July 25, 2006, So wrote to Zhang to confirm an increase of Apex’s credit limit from USD $20,000 to $30,000. The brief letter states that payment is to be made in 15 days and that a 2% interest charge would be levied on overdue invoices. The letter also stipulated that if the payment terms were not met, Cargo would withhold pending shipments and charge Apex for storage or detention fees incurred due to late payment.
Zhang signed the letter to signify her agreement. Mr. So swore that she did not advise him that Apex was acting as an agent of another party and never stated that Apex would not be responsible for paying Cargo’s invoices. Until October of 2007, Apex did in fact pay all invoices, including invoices related to product shipped by SR Telecom.
In resisting payment, Apex relied heavily on the shipping documents and in particular on the fact that it was not named as shipper on any of the documents. However, the Court was not persuaded by these documents, noting that a bill of lading is not a transportation contract but merely evidence of such a contract. The contract itself could be in writing or not and indeed could be express or implied, citing Chitty on Contracts for the proposition that “express and implied contracts are both contracts in the true sense of the term, for they both arise from the agreement of the parties, though in one case the agreement is manifested in words and in the other case by conduct”.
The Court also noted that Apex did not raise any issue respecting the authority of Ms Zhang to enter into agreements on its behalf and that the July letter agreement makes no reference to Apex contracting on behalf of OEMs.
Although Ms Zhang was still employed by Apex, at least at the time the action was commenced, her evidence was not tendered. The only evidence offered by Apex was that of the COO who had no direct involvement in the transactions which gave rise to the dispute. Nor did the COO attempt to offer evidence that she had discussions with those who were directly involved. The weight of evidence was on the side of Cargo Dynamics and judgment was rendered in its favour.
Cargo Dynamics v. Apex, 2009 BCSC 832