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Delivery under “Straight Bill of Lading”: Cami Automotive v Westwood Shipping

As Canadian counsel, we are frequently asked to discuss differences between Canadian and American law. Of course, the most significant and obvious distinctions is Canada’s lack of a central regulatory authority (like the FMC in the US). There are, however, many more subtle differences.

One difference is the force given to a ‘straight’ bill of lading under the law. Negotiable or ‘to order’ bills are documents of title, and presentation of an original is required to obtain delivery. Under US law, presentation of an original is generally not required where there is a ‘straight’ non-negotiable bill of lading.

Not so in Canada: The Federal Court of Canada, which has specific jurisdiction over Admiralty matters, has affirmed that under Canadian law presentation of an original straight bill is required to obtain delivery: Cami Automotive, Inc. v. Westwood Shipping Lines Inc., 2009 FC 664. There, the characterization of the nature of the transport document was key to resolving the issue of applicable damage limitations.

In that case, Cami brought a claim against Westwood seeking $1,213,386.20 in compensation for damage to cargo arising out of a derailment in Canada that was part of a multimodal carriage by sea on FOB terms from Japan. The shipping line also claimed against the rail carrier. Westwood relied on the limitation of liability in its shipping document, while the rail carrier CN attempted to rely on its tariff or, in the alternative, the Westwood limitations. By Order under Rule 107 the parties argued the issue of applicable limitations on interlocutory hearing.

The Court first considered the nature of the shipping documents in question:

“The courts have generally accepted that a bill of lading serves three purposes: it is a receipt for the goods, it represents the contract of carriage and it is a document of title: see Canadian General Electric Co. v. Armateurs du St-Laurent Inc., [1977] 1 F.C. 215 at para. 14; The Rafaela S. [2005] 1 Lloyd’s Rep. 347 at para. 38 (The Rafaela S. (HL)). […]As a result of [multimodal development], a variety of new transport documents have been developed and put increasingly into use in place of bills of lading. These new documents include straight bills of lading and waybills. Bills of lading, straight bills of lading, and waybills are now all commonly issued in connection with contracts for the carriage of goods.”

Importantly, the Court noted [at 15] that Straight Bills “are those which make the goods deliverable to an identified person as consignee and either contain no words importing transferability or contain words negativing transferability. […] Straight bills of lading remain… documents of title and… must be presented at the port of discharge in order to effect delivery (The Rafaela S. (HL), at para. 20).” [emphasis mine]

“A waybill, on the other hand, is distinguished from both bills of lading and straight bills of lading based on the fact that waybills are not documents of title. As such, they need not be presented to the carrier.” [at 17]

On examination of the actual shipping document used in the disputed carriage, the Court found that it was marked “Non-Negotiable Waybill”, contained a “Bill of Lading number”, indicated 1 copy only was produced, and was stamped “Non-Negotiable Waybill” but also a stamp declaring the document to be a “Straight Bill of Lading (Waybill)”, which stamp also noted delivery terms.

While these descriptions on the face of the document were contradictory, the Court noted that stamped terms take precedence over printed terms (Metalfer v. Pan Ocean [1998] 2 Lloyd’s Rep. 632 at 636-637), and, comparing this document with Westwood’s Bills of Lading, concluded that the document was a Waybill and that an original did not need to be produced for delivery.

With these findings in place, the Court determined that CN could benefit from its rail tariff as against Westwood, and Westwood could rely on its Waybill terms as against Cami. The Waybill incorporated the COGSA limitation, except in respect of a carriage to which the Hague-Visby rules were compulsorily applicable. While Canada and Japan are both signatories, the Hague-Visby rules only apply to Negotiable Bills of Lading or similar documents of title. Having found that the waybill was not a document of title, the Court concluded that the Hague-Visby rules were not of compulsory application.

In the result, Westwood’s terms imposed the COGSA limitation of USD$500 per package, and not the Hague-Visby limitation.

The Court then turned its attention to the number of packages. The Waybill indicated “15 containers only” in the space provided for identifying number of packages, and the Court noted that no party submitted that a container was an appropriate package. The question was whether each assembly was a package, or whether all assemblies on a given pallet constituted a single package: the 15 containers held 300 custom pallets, most containing 8 assemblies but 15 of which contained 152 modules, for a total of 4,560 units.

Citing the Australian Federal Court case of El Greco (Australia) Pty. Ltd. and Another v. Mediterranean Shipping Co. S.A. , [2004] 2 Lloyd’s Rep. 537 the Court held that “If the bill identifies X packages each containing Y pieces or items of cargo then there will be X packages not Y units enumerated.” The pallets in question were custom built for and at the request of the plaintiff for the shipment and defined the shipping unit. The maximum recoverable by the plaintiff against Westwood was therefore the COGSA limit of USD$150,000.

Finally, the Court turned its attention to the rail carrier’s tariff. Citing the seminal English case of Morris v. C.W. Martin and Sons Ltd, [1966] 1 Q.B. 716, applied in Canada in Boutique Jacob Inc. v. Canadian Pacifique Railway Co. , 2008 FCA 85, the Court found that under Canadian law “an owner, in suing a sub-bailee for reward, is bound by the terms of the contract between the bailee and sub-bailee if the owner had expressly or impliedly consented to the terms of the subcontract.”

The Westwood shipping document had specifically reserved its right to subcontract on terms, and accordingly Cami had expressly agreed to be bound by the terms of the sub-bailment by Westwood to CN. Those terms were binding at law as they were set out in a confidential tariff signed by the shipper – in this case, Westwood, which was the contractual shipper from the perspective of CN (see also Boutique Jacob). Strangely, the tariff did not incorporate specific limitation provisions at that time and accordingly the rail carrier was able to benefit only from the regulatory provisions established by Federal law, which established defences but no limitation on liability.

However, the rail carrier was able to benefit from the “Himalaya Clause” in Westwood’s waybill. Accordingly, in the result, both defendants were entitled to benefit from the clause in the Waybill that incorporated the COGSA Limit of USD$500.00/package and limit the plaintiff’s total loss on the shipment to USD$150,000.00.

The plaintiffs appealed this decision, but the appeal was dismissed: 2012 FCA 16.

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