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Federal Court of Appeal extends application of Hague-Visby Rules in Canada

“It was dark at Brigade Bay. It was cold. The tide was dropping.” This is how the Federal Court set the stage for the facts and judgment in Wells Fargo Equipment Finance Company and C&C Machine Movers And Warehousing Inc. v The Owners And All Others Interested In The Barge “Mlt-3”, et al 2012 FC 738. It would not be long before the truck that was the intended cargo, as well as its driver, were in 55 feet of that cold water, but it would be five years before the parties arrived at trial – a trial which has now had its final appeal (styled Mercury XII (Ship) v. MLT-3 (Belle Copper No. 3), 2013 FCA 96.

One of the issues at first instance was whether or not an in rem claim against the vessel could be maintained. The Federal Court of Canada, having jurisdiction over admiralty matters, provides for actions in rem against a vessel when the action is in respect of damage “caused by a ship”. The barge involved had been re-sold since the incident, and of course the new owners were not happy about the prospect of the vessel itself being held liable for this damage (and subject to enforcement). The Court concluded that “damage caused [or done] by a ship” required that the vessel itself be the actual instrument by which the damage was done. In this case the damage resulted from the combined actions of the truck driver and tug skipper. The truck was not damaged by the vessel, and accordingly the court rejected the in rem claim.

The Court also considered whether the Hague-Visby Rules should apply. Canada’s Marine Liability Act gives the Hague-Visby Rules the force of law in international carriage of goods by sea, but under s.43 also extends that application to domestic carriage of goods by water, unless such carriage is arranged without a bill of lading and provides contractually that the Rules will not apply:

s.43(2) The Hague-Visby Rules also apply in respect of contracts for the carriage of goods by water from one place in Canada to another place in Canada, either directly or by way of a place outside Canada, unless there is no bill of lading and the contract stipulates that those Rules do not apply.

The plaintiffs had brought suit more than one year after the incident, and accordingly the suit would be time-barred if the Hague-Visby Rules applied to the benefit of the carrier. The key issue was the nature of the contract between the parties: according to the defendants, there was no written contract between the parties, and therefore there was no contract that provided contractually that the Rules would not apply, which meant the Rules would apply by virtue of s.43.

The Trial judge did not agree. Justice Hughes read the word “contract” in the MLA consistently with the way it is used in the Hague-Visby Rules at Article I: a contract evidenced by a Bill of Lading or similar document of title. In the absence of such a contract evidenced by a Bill of Lading, the Hague-Visby Rules do not apply. Accordingly, the application of the Hague-Visby Rules extended to domestic carriage by s.43 of the MLA is restricted to those contracts for carriage by sea evidenced by a Bill of Lading or similar document of title, just as the application of the Rules internationally is limited in the same way by Article I. They Rules could not apply to an oral contract. In the result, as there was no Bill of Lading the Hague Visby Rules did not apply to bar the claim, and the defendants were held 90% liable for the loss – $137,864, plus costs.

This finding was the only one appealed, and indeed this reasoning was rejected by the Court of Appeal, who revisited the issue of the application of the rules de novo. Justice Evans, delivering the opinion of the Court, was unable to ignore the clear “and” in s.43(2): this required both that there be no bill of lading and that the contract for carriage exclude the Hague-Visby Rules. It was wrong to exclude oral contracts from the application of the Rules under s.43(2).

The Court was also able to quickly deal with several other arguments of the Respondent C&C. They took the position that the arrangement was for the carriage of the truck to a place and back again, and therefore it was not carriage “from one place in Canada to another place in Canada” as required by the act. The Court found this “unduly formalistic” and that the resulting distinction between a one-way and round trip contract for carriage would make “no sense.” C&C also claimed that, if effective, the Hague Visby Rules would act only to bar a claim in contract, not a claim in tort. The Court noted that this position was inconsistent with the plain language of the Rules:

“…paragraph 1 of Article IVbis expressly provides that the defences to and limits on carriers’ liability contained in the HVR apply to [u]any actions against the carrier[/u] in respect of damage to or the loss of goods covered by a contract for the carriage of goods whether “[u]the action is founded in contract or tort[/u]”. [emphasis original]

However, the Court found on the evidence in the record that the hire was not a contract for the carriage of goods, but rather a charterparty. The Hague Visby Rules do not apply to Charterparties, and s.43(2) extends they application to “contracts for carriage of goods…”. The Court required that this term be read consistently throughout the MLA and consistently with its use in Canadian Maritime Law, to include contracts for carriage and not vessel charters.

In the result, for different reasons, the appeal was dismissed with costs.

Commentary: While it ignored the clear “and” in s.43(2), Justice Hughes decision had the merity of making international and domestic application of the Rules consistent: they apply only to carriage under a bill of lading or similar document of title as provided for in Article I. The effect of the Court of Appeal’s decision is that the legislatures choice of language at s.43(2) provides for a much broader application of the Rules in domestic carriage than in international carriage.

Although not specifically an issue in this action, it is clear that the plain meaning of the “and” term in s. 43(2) means that

A)    the Hague-Visby Rules apply to all contracts for carriage of goods by water in Canada for which a bill of lading is issued; and

B)     Even where a bill of lading is not issued and the contract is formalized either in another kind of document (not a document of title) or simply an oral contract, the Hague Visby Rules will still apply unless that agreement specifically excludes their application.

Domestic carriers and short-sea shippers will need to explicitly exclude the Rules as a matter of course, or be prepared to brush up on (and be bound by) the Hague-Visby Rules!

-Gavin Magrath

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