The Federal Court of Appeal may now have written the final chapter in the saga of Boutique Jacob and its claim for goods damaged in a train derailment . Our readers will recall that BLG had been retained by four international ocean carriers and the International Group of P & I Clubs to intervene in the appeal and put forward the views of the marine industry.
Our readers will also recall from our earlier reports that Boutique Jacob, a Montreal clothing retailer, had contracted with Pantainer, a non-vessel-operating carrier (NVOC), to transport a container of clothing from Hong Kong to Montreal. Pantainer issued its a multimodal bill of lading for the shipment and then contracted with ocean carrier Orient Overseas Container Lines (OOCL) to move the goods from Hong Kong to Vancouver under OOCL’s multimodal electronic waybill. In Vancouver, OOCL booked the cargo with Canadian Pacific Railway Company (CPR) for rail carriage to destination under the railway’s confidential rate agreement with OOCL, which incorporated the railway’s Tariff. En route to Montreal, the train derailed, due to CPR’s admitted negligence, destroying the cargo.
In first instance, the Federal Court found that CPR could not limit its liability because Boutique Jacob, as “shipper”, had not signed any written agreement with CPR, a requirement of ss. 137(1) of the Canada Transportation Act (CTA). That provision allows a railway to limit its liability only if it is done by way of a signed contract with the “shipper”. In the eyes of the Trial Judge, “shipper” was synonymous with cargo owner.
Moreover, the Court considered that to allow the railway to invoke the limits of liability in the bills of lading, by way of the Himalaya clauses, would be to circumvent the effect of the CTA. CPR was therefore required to pay Boutique Jacob the full value of the goods destroyed.
CPR appealed the Federal Court’s ruling on the limitation issue. Ocean carriers as well as the International Group of P & I Clubs were alerted to the risk that if a railway could not limit its liability, it may seek to invoke the indemnity provisions in its contracts with the ocean carriers and thereby seek compensation for payments made over and above its limits of liability. These representatives of the marine industry were granted intervener status and were represented before the Federal Court of Appeal by BLG.
On March 6, 2008, the Federal Court of Appeal reversed the trial decision, confirming CPR’s right to limit its liability. On the central issue, the Federal Court of Appeal agreed with the position taken by the Interveners. The ocean carrier, not the cargo owner, was the “shipper” contemplated in the CTA for the purposes of rail carriage because it is the ocean carrier that contracted with CPR and it is the same ocean carrier that remitted the container to CPR in Vancouver. OOCL was thus the “shipper” vis-à-vis CPR, even though it was the carrier with respect to Boutique Jacob.
The Court went on to apply the doctrine of sub-bailment on terms. CPR was entitled to invoke the limitation of liability of its Tariff, incorporated into the confidential rate agreement, under which its liability was restricted to that of the ocean carrier (US $2/KG of the goods damaged). Because both the NVOC and the ocean carrier, under their respective bills of lading, had authority to sub-contract the carriage on any terms, cargo interest was bound by the terms of these sub-contracts. The confidential rate agreement, which established a maximum liability of $250,000, did not supersede the Tariff limitation. Alternatively, the Court concluded that CPR was entitled to invoke the same limits of liability because of the Himalaya clauses found in both the NVOC and the OOCL bill of lading.
By clarifying the longstanding uncertainty over the meaning of “shipper” in the CTA, the Federal Court of Appeal’s decision in Boutique Jacob makes a major contribution to Canadian transport law in the everexpanding domain of multimodal carriage. The judgment further reinforces the doctrine of bailment on terms as part of Canadian maritime law, and the applicability of Himalaya clauses, both points stressed by the Interveners and dear to ocean carriers and their P & I Clubs.