r v. Klipriver Shipping Ltd., 2017 FC 23

[2017] 4 F.C.R. 285 T-2044-15 2017 FC 23 De Wolf Maritime Safety B.V. ( Plaintiff ) v. Traffic-Tech International Inc. ( Defendant ( moving party )) Indexed as: De Wolf Maritime Safety B.V. v. Traffic-Tech International Inc. Federal Court, St-Louis J.—Montréal, November 23, 2016; Ottawa, January 11, 2017.

Maritime Law — Carriage of Goods — Motion by defendant for preliminary determination of questions of law pursuant to Federal Courts Rules , r. 220(1) (a) — Container stored on deck carrying plaintiff’s shipment, lost overboard during voyage — Bill of lading issued by defendant not declaring that container to be carried “on deck” — Plaintiff claiming, inter alia, that defendant failing to carry cargo under deck, not entitled to invoke immunities or limitations provided for in Hague-Visby Rules — Whether undeclared on-deck carriage of cargo preventing defendant from relying on Hague-Visby Rules; if not, what were applicable limitations — Defendant may rely on Hague-Visby Rules — Cargo not “goods” as defined in Hague-Visby Rules, Art.

I(

c) if carried on deck, stated in contract of carriage as being so carried — Hague-Visby Rules applying to cargo carried under deck while bill of lading stating that cargo carried on deck, vice versa — Here, bill of lading not mentioning on-deck carriage, that goods were carried on deck — As one of these two conditions not met, cargo not excluded from definition of “goods” — Hague-Visby Rules, Art. IV(5)(

a) limitation of liability “in any event” applying herein — Words “in any event” meaning “in every case”, encompassing case at bar — Nothing in Art. IV(5)(

a) suggesting words “in any event” referring to events listed under Hague-Visby Rules, Art. IV(2) — Hague-Visby Rules, Art. IV(5)(

e) only exception to limitation rule in Art. IV(5)(a) — However, Art. IV(5)(

e) not in play herein as no evidence of bad faith by defendant tendered — Interpreting words “in any event” as “in every case” compatible with exclusion of doctrine of fundamental breach. This was a motion by the defendant for the preliminary determination of questions of law pursuant to paragraph 220(1) (

a) of the Federal Courts Rules . The plaintiff was the owner and consignee of a shipment that was put into a container loaded on board a vessel. The container was carried under a bill of lading issued by the defendant. The bill of lading did not declare that the container containing the shipment was to be carried “on deck”, while the container was in fact so carried. The container was lost overboard during the voyage.

In the action underlying this proceeding, the plaintiff claimed, inter alia , that the defendant failed to carry its cargo under deck; that the defendant breached its contract and obligations, was grossly negligent, and is not entitled to invoke any of the immunities or limitations provided for in the Hague-Visby Rules . The plaintiff requested damages for its loss. The defendant argued, inter alia , that it could limit its liability towards the plaintiff pursuant to the bill of lading and the Hague-Visby Rules.

At issue was whether the undeclared on-deck carriage of the cargo under the defendant’s bill of lading prevented the defendant from relying on the Hague-Visby Rules ; and, in the negative, what were the limitations applicable to the contract of carriage pursuant to the Hague-Visby Rules. Held , the defendant may rely on the Hague-Visby Rules . In order for cargo not to be regarded as “goods”, as defined in

Article I(

c) of the Hague-Visby Rules , it must not only be carried on deck, but also be stated in the contract of carriage as being so carried. The Hague-Visby Rules will apply to cargo carried under deck while the bill of lading states that the cargo is carried on deck, and vice versa . In this case, the bill of lading did not mention on-deck carriage and that the goods were carried on deck. As one of the two conditions was not met, the cargo could not be excluded from the definition of “goods”, and it was thus subject to the Hague-Visby Rules. The case law confirmed this

interpretation. The limitation of liability provided for in

Article IV(5)(

a) of the Hague-Visby Rules applied in the present case.

Article IV(2) of the Hague-Visby Rules provides complete exoneration to the carrier and the ship for loss or damage under the specific circumstances listed therein.

Article IV(5)(

a) on the other hand provides a limitation of liability to the carrier and the ship “in any event”. Constructing the words as the England and Wales Court of Appeal did in Daewoo Heavy Industries Ltd. & Anor v. Klipriver Shipping Ltd. & Anor , the words “in any event” mean “in every case” and encompassed the case at bar. This could also be inferred from the French wording of

Article IV(5)(a). Neither the wording of

Article IV(5)(

a) nor its context suggest that “in any event” refers to the events listed under

Article IV(2). Hence, the only exception to the limitation rule set out in

Article IV(5)(

a) is the one provided by

Article IV(5)(e). However, the exception in

Article IV(5)(

e) was not in play herein as no evidence was tendered as to whether the defendant acted in bad faith. Finally, interpreting the words “in any event” as “in every case” is compatible with the exclusion of the doctrine of fundamental breach in Canadian law. STATUTES AND REGULATIONS CITED Carriage of Goods by Sea Act , 46 U.S.C. App. s. 1300 (2006). Carriage of Goods by Water Act , R.S.C. 1952, c. 291. Carriage of Goods by Water Act , S.C. 1993, c. 21, s. 7. Federal Courts Act , R.S.C., 1985, c. F-7, s. 22.

Federal Courts Rules, SOR/98-106, rr. 220(1)(a),(2). Marine Liability Act, S.C. 2001, c. 6, s. 43. Water Carriage of Goods Act, 1936 (The), S.C. 1936, c. 49. TREATIES AND OTHER INSTRUMENTS CITED International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, Brussels, 25 August 1924 (HagueRules), Art. I.

International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, concluded at Brussels, August 25, 1924,and Protocol concluded at Brussels, February 23, 1968, and Additional Protocol concluded at Brussels, December 21, 1979, beingSchedule 3 of the Marine Liability Act, S.C. 2001, c. 6 (Hague-Visby Rules), Arts. I(c) “goods”, II, III(1),(2), IV, IV bis. Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, signed atBrussels on 25th August 1924, 1412 U.N.T.S. 128.

Vienna Convention on the Law of Treaties, May 23, 1969, [1980] Can. T.S. No. 37, art. 31, 32. CASES CITED APPLIED: Daewoo Heavy Industries Ltd. & Anor v. Klipriver Shipping Ltd. & Anor, [2003] EWCA Civ. 451 (BAILII); St-Siméon Navigation Inc.v. Couturier & Fils Limitée, (SCC), [1974] S.C.R. 1176, (1973), 44 D.L.R. (3d) 478; Grace Plastics Ltd. v. BerndWesch II (The), [1971] F.C. 273 (T.D.); Timberwest Forest Ltd. v. Gearbulk Pool Ltd., 2003 BCCA 39, 10 B.C.L.R. (4th) 327, affgTimberwest v. Gearbulk, 2001 BCSC 882. CONSIDERED: Searoad Shipping Co. v. E.I.

DuPont de Nemours & Co., 361 F.2d 833 (5th Cir. 1966); Encyclopaedia Britannica Inc. v. SS Hong KongProducer, 422 F.2d 7 (2d Cir. 1969); Falconbridge Nick Mines Ltd. v. Chimo Shipping Ltd., [1969] 2 Ex. C.R. 261; Tercon ContractorsLtd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69. REFERRED TO: Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494; J.D. Irving, Limited v. Siemens Canada Limited, 2016 FC 287. AUTHORS CITED Baughen, Simon. Shipping Law, 3rd ed. London, U.K.: Cavendish Publishing Ltd., 2004. Cooke, Julian et al., Voyage Charters, 4th ed.

London: Lloyd’s Shipping Law Library, 2014. Tetley, William. Marine Cargo Claims, 4th ed. Vol. 1. Cowansville: Les Éditions Yvon Blais, 2008. MOTION by the defendant for the preliminary determination of questions of law pursuant to paragraph 220(1)(

a) of the Federal CourtsRules. The defendant may rely on the Hague-Visby Rules. APPEARANCES Isabelle Pillet and Matthew Hamerman for plaintiff. Jean-François Bilodeau and Jordi Montblanch for defendant. SOLICITORS OF RECORD De Man Pillet, Montréal, for plaintiff. Robinson Sheppard Shapiro, S.E.N.C.R.L., Montréal, for defendant. The following are the reasons for order and order rendered in English by St-Louis J.: I. Introduction [1] These proceedings constitute the second step of the motion for the preliminary determination of questions of law Traffic-TechInternational Inc. (Traffic-Tech) presented under

section 22 of the Federal Courts Act, R.S.C., 1985, c. F-7 and paragraph 220(1)(

a) ofthe Federal Courts Rules, SOR/98-106 (Federal Courts Rules). [2] On August 17, 2016, Prothonotary Morneau, deciding on the first stage as per subsection 220(2) of the Federal Courts Rules,granted the motion, and ordered that the two questions submitted by Traffic-Tech be determined by the Court. II. Background

[ 3 ] In December 2015, the plaintiff, De Wolf Maritime Safety B.V. (De Wolf) introduced an action against the defendant, Traffic- Tech, and served and filed its initial statement of claim in personam , which it amended in September 2016. [ 4 ] In brief, De Wolf claims Traffic-Tech failed to carry its cargo under deck; that the loss is the result of Traffic-Tech’s failure to safely carry, care for, discharge, store and deliver its cargo in good order and condition.

It further claims that Traffic-Tech breached its contract and obligations, was grossly negligent, and important for these proceedings, that Traffic-tech is not entitled to invoke any of the immunities or limitations provided for in the Hague-Visby Rules , being

Schedule 3 of the Marine Liability Act , S.C. 2001, c. 6 ( Marine Liability Act [or Rules]). [ 5 ] De Wolf asks that Traffic-Tech be condemned jointly and severally to pay to it the sum of €71 706 (or the Canadian equivalent of $98 896.92 at the rate of 1.3792 on June 23, 2015) plus interest and costs; and such other relief as the Court might deem appropriate in the circumstances.

This amount represents the value of the goods it shipped from Vancouver to Rotterdam, goods that were lost overboard and therefore did not arrive to the port of delivery. [ 6 ] In its statement of defence, Traffic-Tech argues it can limit its liability towards De Wolf to an amount not exceeding 666.67 units of account per package or unit or 2 units of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher, pursuant to the bill of lading and the Hague-Visby Rules ; that the damages claimed are excessive and remote; and that De Wolf did not take any or adequate steps to mitigate those damages.

III. Facts [ 7 ] As per their agreed statement of facts, the parties agree that at all material time, De Wolf was the owner and consignee of a shipment described as “One piece zodiac and Spare Parts”, which was stuffed into a container (TCLU4132019/3269653), itself loaded on board the vessel Cap Jackson in Vancouver, Canada, for delivery in Rotterdam, Netherlands. [ 8 ] The container was carried under a bill of lading bearing number 40020710, issued by Traffic-Tech on December 6, 2014.

This bill of lading did not declare that the container containing the shipment was to be carried “on deck”, while the container was in fact so carried. [ 9 ] The container was lost during the voyage, did not arrive in Rotterdam, and the loss suffered by De Wolf amounts to €71 706 or CND $98 896.92 at the exchange rate of 1.3792 calculated on June 23, 2015. [ 10 ] At the hearing, the parties have also confirmed that the nature and value of the goods had not been declared by the shipper before shipment nor inserted in the bill of lading. IV. Questions of law [ 11 ] The two questions of law before the Court are: 1.

Does the undeclared on-deck carriage of the cargo under the Traffic-Tech bill of lading prevent the defendant from relying on the Hague-Visby Rules ? 2. In the negative, what are the limitations applicable to the contract of carriage pursuant to the Hague-Visby Rules ? V. Submissions of the parties A. Traffic-Tech (defendant and moving party)

(1) The damaged goods are “goods” as defined in the Hague-Visby Rules [ 12 ] Traffic-Tech first relies on the definition of “goods” contained in

Article I(

c) of the Hague-Visby Rules to argue that they are applicable here. As said definition excludes “cargo which by the contract of carriage is stated as being carried on deck and is so carried”, it follows that cargo which is not stated as being carried on deck by the contract of carriage is not excluded. [ 13 ] The parties agree that the bill of lading bore no indication that the shipment would be carried on deck. Hence, Traffic-Tech submits, as the lost shipment was not stated by contract as being carried on deck, it therefore was “goods”. Since the shipment was in fact “goods”, the claim falls within the scope of the Hague-Visby Rules . According to Traffic-Tech, this

interpretation allows more flexibility to the carrier whereas De Wolf’s position runs against the commercial reality of container shipping, where about 30 percent of containers are stowed on deck.

(2) The carrier’s liability is limited by the provisions contained in the Hague-Visby Rules [ 14 ] Satisfied that the Hague-Visby Rules apply, Traffic-Tech then turns to its

Article IV(5)(

a) to argue that neither the carrier nor the ship shall “in any event” become liable for any amount above the limitation provided for in the convention, and to its

Article IV bis , reproduced in annex, which states the limits shall apply in any action against the carrier, be it found in tort or contract. [ 15 ] Traffic-Tech contends that the only exception to limitation provided for in

Article IV(5)(

a) of the Hague-Visby Rules is the one provided for in

Article IV(5)(

e) that pertains to damage resulting “from

an act or omission of the carrier done with intent to cause damage, or recklessly and with knowledge that damage would probably result”. [ 16 ] In this regard, Traffic-Tech argues that

Article IV(5)(

e) is not at play in these proceedings since De Wolf’s allegation of gross negligence is not supported by allegation or proof that the damage was indeed caused with intent or knowledge on the part of Traffic- Tech that the damage would occur. Furthermore, it argues that in any event,

Article IV(5)(

e) requires a higher threshold than gross negligence, and that no evidence whatsoever has been put forward in these proceedings as the questions to be addressed by the Court are strictly questions of law. It addresses the allegation of bad faith raised by De Wolf in the same way, submitting that bad faith cannot be

presumed and that a simple omission on the bill of lading cannot be inferred as bad faith. In other words, Traffic-Tech contends that thegoal of this hearing is to determine questions of law, and not to examine either the intent or a particular state of mind of the parties. [17] Finally, Traffic-Tech submits that the Canadian courts have not yet tested the question of whether the limitations of the Hague-Visby Rules apply to undeclared on-deck carriage. However, it refers to a decision of the England and Wales Court of Appeal wherebythis question was addressed in Daewoo Heavy Industries Ltd. & Anor v.

Klipriver Shipping Ltd. & Anor, [2003] EWCA Civ. 451(BAILII) (The Kapitan Petko Voivoda) in the context of the old Hague Rules [International Convention for the Unification of CertainRules of Law relating to Bills of Lading, Brussels, 25 August 1924], which provision is alleged to be analogous to

Article IV(5)(

a) of theHague-Visby Rules. This decision is said to be in alignment with the new realities of modern commercial shipping industry, particularlyin respect to containerized shipping, for which the risks of on-deck carriage are considerably diminished.

(3) Conclusion [18] So, Traffic-Tech’s answer to the first question is negative, in that the undeclared on-deck carriage of the cargo under the Traffic-Tech bill of lading does not prevent it from relying on the Hague-Visby Rules. [19] In regards to the second question, Traffic-Tech submits that it can avail itself of the limitations of the Hague-Visby Rules, thatthe amount must be calculated pursuant to its

Article IV(5)(a), and that the only exception to the “in any event” provision is the oneprovided for in

Article IV(5)(

e) which is not at play here. The loss claimed by De Wolf may thus not exceed 666.67 units of account perpackage or 2 units of account per kilogram of gross weight of the goods lost or damaged, whichever is higher. B. De Wolf (plaintiff)

(1) Failure to disclose the on-deck carriage precludes Traffic-Tech from relying on any limitation of liability [20] In its memorandum, De Wolf addresses question 1 differently than the question determined by the Court. De Wolf particularlyquestions if the undeclared on-deck carriage of the cargo under the bill of lading prevents the defendant from relying on the carrier’slimitations of liability provided for in the Hague-Visby Rules.

De Wolf stresses the fact that it was never notified that its containerizedshipment would be stowed on the deck of the vessel, and was only made aware of this once it was alerted of its loss. It submits that theundeclared deck cargo prevents Traffic-Tech from relying on the limitations of liability provided for in the Hague-Visby Rules. [21] De Wolf exposes the special risks associated with on-deck cargo, the additional measures that must be taken to protect and insurethe goods when they are so shipped, and the fact that deck carriage is, as per

Article III(2) of the Hague-Visby Rules, improper stowage.Hence, De Wolf submits that when the place of stowage is not mentioned on a bill of lading, i.e. a clean bill of lading, it is understoodthat the goods are to be carried under deck. To carry them on deck without prior declaration is thus improper. [22] More precisely, De Wolf first submits that the Hague-Visby Rules apply, but that the limitation of liability does not. Indeed, DeWolf submits, contrary to Traffic-Tech’s position, the latter’s failure to disclose the on-deck carriage precludes it from relying on anylimitation of liability.

Concluding otherwise would be to reward the carrier for failing to its obligation to declare on-deck stowage, inbreach of contract, and contrary to the good faith requirement read into

Article I(

c) of the Hague-Visby Rules. [23] De Wolf relies on professor William Tetley’s assertion that the carrier cannot avail itself of the limitation if it has omitted todeclare the on-deck stowage, particularly so in light of the good faith obligation now read into Canadian common law contract (Bhasin v.Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494). De Wolf contends that Traffic-Tech should not benefit from the Hague-Visby Rules as itacted in bad faith in stowing the goods on deck in breach of the bill of lading.

Indeed, according to De Wolf, had Traffic-Tech acted ingood faith, it would have indicated the on-deck stowage on the bill of lading and, as such, would not have benefited from the Hague-Visby Rules. [24] Second, De Wolf submits that the words “in any event” of

Article IV(5)(

a) refer to the events listed under

Article IV(2),reproduced in annex. De Wolf hereby relies on professor Tetley’s assertion that “those words should be construed to mean that thepackage limitation applies where the carrier fails to prove its right to total exoneration from liability under any of the exception of art.4(2)(

a) to (q)” [footnote omitted] (William Tetley, Marine Cargo Claims, 4th ed. Vol. 1 (Cowansville: Les Éditions Yvon Blais, 2008),at page 1587). [25] De Wolf distinguishes the English case law relied upon by Traffic-Tech, pointing out that Canadian courts are not bound bydecisions of English courts, that professor Tetley called the decision “unfortunate and flawed”, and that it was rendered under the oldHague Rules. De Wolf contends that the Court cannot rely on the case of The Kapitan Petko Voivoda as

Article IV(5) of the Hague-Visby Rules comprises an exception to the limitation of liability (Article IV(5)(e)) that was not included in the old Hague Rules. It alsodistinguishes the decision St-Siméon Navigation Inc. v. Couturier & Fils Limitée, (SCC), [1974] S.C.R. 1176 (St-Siméon) where there was a liberty clause, i.e. a liberty to stow on deck clause, and no violation of the contract of carriage, as well as thedecision Timberwest v. Gearbulk, 2001 BCSC 882, where the owner of the cargo was aware that his shipment would either be carried ondeck or under deck.

However, in the case at hand, De Wolf contends that, as there was no liberty clause in the bill of lading, it was notaware that its shipment could be stowed on deck. [26] Thirdly, De Wolf contends that the stowage of the goods on deck constitutes gross negligence.

(2) Contract of carriage is governed by the common law [27] As the contract of carriage between the parties is not subject to the limitations of the Hague-Visby Rules, De Wolf argues that thecase must thus be decided based on the Canadian common law principles, as incorporated within Canadian maritime law, under whichthere are no limitations of liability.

(3) Conclusion

[ 28 ] In conclusion, De Wolf answers question one in the positive, in that the Hague-Visby Rules apply. However, the undeclared on- deck carriage of the cargo prevents Traffic-Tech from relying on the limitations of liability provided for in same Hague Visby Rules. [ 29 ] On question number 2, De Wolf submits that due to bad faith or gross negligence, or because the words “in any event” of

Article IV(5)(

a) refer to the events listed under

Article IV(2), Traffic-Tech cannot rely on the limitation of liability provided for in the Hague- Visby Rules and, as common law applies, it is entitled to the amount of its actual loss without limitation. VI. Analysis A. Does the undeclared on-deck carriage of the cargo under the Traffic-Tech bill of lading prevent the defendant from relying on the Hague-Visby Rules ? [ 30 ] For the reasons exposed hereinafter, the Court sides with Traffic-Tech and answers the first question in the negative.

Hence, Traffic-Tech’s undeclared on-deck carriage of De Wolf’s goods does not prevent it from relying on the Hague-Visby Rules . [ 31 ] This question of law is answered by examining the relevant legislative provisions, the definition of “goods” under the Hague- Visby Rules , and the Canadian and international case law.

(1) Legislative provisions [ 32 ] The International Convention for the Unification of Certain Rules of Law relating to Bills of Lading , better known as the Hague Rules, was concluded at Brussels on August 25, 1924. It was amended in 1968 by the Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading [1412 U.N.T.S. 128] to become the Hague-Visby Rules . The Hague Rules were incorporated in Canadian law through The Water Carriage of Goods Act, 1936 , S.C. 1936, c. 49. Afterwards, the Hague-Visby Rules came into force first through

section 7 of the Carriage of Goods by Water Act , S.C. 1993, c. 21, and then through

section 43 of the Marine Liability Act , being inserted in its

schedule 3. The Hague Rules and the Hague-Visby Rules may herein collectively be referred as the Rules except where reference to a specific convention is required. [ 33 ] The Hague-Visby Rules have force of law in Canada in respect of contracts for the carriage of goods by water between different states, as well as in respect of contracts for the carriage of goods by water from one place in Canada to another place in Canada, unless there is no bill of lading and the contract stipulates that those Rules do not apply ( Marine Liability Act ,

section 43). They enact the responsibilities, liabilities, rights and immunities of the carrier in relation to the loading, handling, stowage, carriage, custody, care and discharge of goods covered by a contract of carriage by water (Hague-Visby Rules,

Article II).

(2) Definition of “goods” in

Article I(

c) of the Hague-Visby Rules [ 34 ] Goods, wares or merchandise excluded by the definition of goods are not subject to the Hague-Visby Rules , while to the contrary goods that are included in the definition will be so subject.

Article I(

c) of the Hague-Visby Rules, like

Article I(

c) of the Hague Rules, defines “goods” as including “goods, wares, merchandise and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried ” (our emphasis). [ 35 ] As per the aforementioned definition, in order for cargo not to be regarded as “goods”, it must not only be carried on deck, but also be stated in the contract of carriage as being so carried. The late professor William Tetley confirms that “neither the carrier nor the shipper may benefit from or be subject to the Rules, provided that:

a) the bill of lading on its face states that the goods are carried on deck, and

b) the cargo is in fact carried on deck” (Tetley, at page 1569). [ 36 ] Therefore, the Hague-Visby Rules will apply to cargo carried under deck while the bill of lading states that the cargo is carried on deck, and vice versa (Julian Cooke et al. , Voyage Charters , 4th ed. (London: Lloyd’s Shipping Law Library, 2014), at page 1018). [ 37 ] In this case, it is undisputed that the bill of lading did not mention on-deck carriage, and that the goods were carried on deck. As one of the two conditions is not met, the cargo cannot be excluded from the definition of “goods”, and it is thus subject to the Hague- Visby Rules .

(3) Case law [ 38 ] The case law confirms this

interpretation. In Grace Plastics Ltd. v. Bernd Wesch II (The) , [1971] F.C. 273 (T.D.) ( Grace Plastics ) , the plaintiff purchased two reactors along with certain equipment and arranged with a forwarder to ship them to Canada. The contract between the forwarder and the shipping company detailed that the reactors would be carried on deck and the rest of the shipment under deck but four parcels were in fact loaded on deck together with the two reactors, with the forwarder’s consent. The Court applied the definition of “goods” in

Article I of the old Hague Rules to decide that the contract of carriage did not contemplate the carriage of the three parcels on deck. Therefore, according to the Court, those three parcel did not fall “within the exception from the definition of ‘goods’ in the Hague Rules even though the forwarder’s Hamburg agent did subsequently verbally acquiesce in their being so carried” ( Grace Plastics , at page 279).

On the contrary, as the contract of carriage provided for the carriage of the two 70 ton reactors on deck, and as they were so carried, the contract of carriage was not governed by the Hague Rules in relation to those two reactors. [ 39 ] In St-Siméon , the Court concluded that a provision that “goods stowed on deck shall be deemed to be stated as so stowed, without any specific statement to this effect, is in violation of the Rules” ( St-Siméon , at page 1179). Indeed, in St-Siméon , the carrier relied on a clause in the bill of lading excluding liability for goods stowed on deck.

The clause provided that the goods “may be stowed on or under the deck at the discretion of the carrier; and when they are stowed on deck they shall, by virtue of this provision, be deemed to be declared as so stowed, without any specific statement to this effect on the face of the bill of lading. With respect to goods stowed on deck or stated on the face of the bill of lading to be stowed, the carrier assumes no liability for any loss, damage or delay” [at page 1178].

This provision was deemed contrary to the then Carriage of Goods by Water Act , R.S.C. 1952, c. 291, and to the Rules, and was therefore null and void. Hence, in order to be excluded from the definition of “goods”, cargo must be stated in the contract of carriage as being carried on deck in addition to being so carried.

[40] Similarly, in a situation where, according to the bill of lading, “some” cargo was to be carried on deck, the Rules have been heldto apply. This indication did not sufficiently identify which parts of a cargo were carried on deck, and made it impossible for the partiesto assess their risks and responsibilities for the future. Indeed, in Timberwest v. Gearbulk, 2001 BCSC 882 [cited above], it was to bedetermined whether the lumber shipped was considered as “goods” under the Rules. If the lumber was “goods”, the exclusion clauseswould be void.

On the bills of lading, the notation “Stowage: 86% OD 14% UD” [at paragraph 9] was included. The Court applied astrict construction of the definition of “goods” in the Hague-Visby Rules. The trial Judge found that the percentages included on the billsof lading were unreliable with respect to each shipment and that the absence of identification of the specific packages carried on deck andunder deck made it impossible to determine the value of the cargo carried on deck. The exclusion clauses included on the bills of ladingwere held not to be valid or enforceable.

This decision was confirmed by the British Columbia Court of Appeal in Timberwest ForestLtd. v. Gearbulk Pool Ltd., 2003 BCCA 39, 10 B.C.L.R. (4th) 327 (Timberwest), at paragraph 46: In my view, the conclusions reached by the trial judge reflect a construction of the definition of “goods” that accords with practicalaffairs and business efficacy, in that certainty is necessary for the parties to commercial transactions to assess their respective risks anddetermine the appropriate price for their goods and services.

It is not a construction that creates a “more extensive restriction [on freedomof contract] than the language used reasonably requires”, to quote McFarlane J.A. in H.B. Contracting Ltd. v. Northland Shipping (1962)Co. Ltd. (1971), (BC CA), 24 D.L.R. (3d) 209 at 215 (B.C.C.A.). [41] In the cases mentioned above, the exclusion included in the definition of “goods” has been interpreted strictly.

The strictapplication of the two requirements of the Rules (contract of carriage stating cargo as being carried on deck and cargo de facto carried ondeck) benefited the shippers when it rendered void the exclusion clauses at the expense of the carriers. [42] Although the situation at hand is different in that the bill of lading contained no exclusion of liability clause, the conclusionsreached namely in St-Siméon and Timberwest, as well as in Grace Plastics, should nonetheless prevail.

(4) Conclusion [43] The containerized shipment of De Wolf does constitute “goods” within the meaning of the Rules as, even if it was carried ondeck, it was not stated as being so carried on the contract of carriage. The Court thus answers the first question in the negative. B. In the negative, what are the limitations applicable to the contract of carriage pursuant to the Hague-Visby Rules? [44] Having answered the first question in the negative, the Court turns to the second question. For the reasons exposed hereinafter,the Court finds that the limitation of liability provided for in

Article IV(5)(

a) of the Hague-Visby Rules applies to the situation at hand.

(1) Legislative provisions [45]

Article IV(2) of the Hague-Visby Rules provides complete exoneration to the carrier and the ship for loss or damage arising orresulting from the circumstances listed in this article, such as acts of war or of public enemies, among others. [46]

Article IV(5)(

a) on the other hand provides a limitation of liability to the carrier and the ship “in any event”, while

Article IV(5)(

e) provides that neither the carrier nor the ship shall be entitled to the benefit of this limitation of liability if “the damage resulted froman act or omission of the carrier done with intent to cause damage, or recklessly and with knowledge that damage would probablyresult”. [47] It is worth reproducing

Article IV(5)(a): 5 (

a) Unless the nature and value of [the] goods have been declared by the shipper before shipment and inserted in the bill of lading,neither the carrier nor the ship shall in any be or become liable for any loss or damage to or in connection with the goods in an amountexceeding 666.67 units of account per package or unit or 2 units of account per kilogramme of gross weight of the goods lost ordamaged, whichever is the higher. [Emphasis added.]

(2) Doctrine and case law [48] The late professor Tetley considered the unauthorized on-deck carriage to be a breach of contract of such magnitude that it shouldcause the carrier to lose the benefit of the exoneration or limitation of liabilities provided for in

Article IV of the Hague-Visby Rules. Heconsidered that when the goods are carried on deck without any indication to that effect, “the carrier may not invoke any of thelimitations in the contract or of the Hague Rules which might benefit him, because there has been a fundamental breach of the contract”[footnote omitted] (Tetley, at page 1581).

Professor Tetley namely referred to the St-Siméon case where the Supreme Court wrote [atpage 1179]: The principle underlying the legislation in question, and the purpose of the Rules annexed thereto, is to prevent shipowners fromreducing their liability below the standard contemplated therein. It must be said, therefore, that without the required statement anexclusion of liability for cargo stowed on deck is void, as held by Pilcher J. in Svenska Traktor v. Maritime Agencies [[1953] 2 All E.R.570], and Jackett C.J. in Grace Plastics Ltd. v.

The “Bernd Wesch II” [[1971] F.C. 273]. [49] Professor Tetley also referred to American case law such as Searoad Shipping Co. v. E.I. DuPont de Nemours & Co., 361 F.2d833 (5th Cir. 1966) (Searoad) where the carrier was found liable for a loss that occurred while the goods were stowed on deck despiteissuing a clean bill of lading: “There being no legal justification for this on-deck stowage of cargo shipped pursuant to an under-deckclean bill of lading, this stowage amounted to a deviation casting the shipowner for the loss which was directly and causally related to thedeck stowage” (Searoad, at paragraph 10).

He also referred to Encyclopaedia Britannica Inc. v. SS Hong Kong Producer, 422 F.2d 7 (2dCir. 1969) where the fact that a container was carried on deck without indication on the bill of lading was considered as a deviationdepriving the carrier of the $500 per package limitation of the Carriage of Goods by Sea Act [46 U.S.C. App. s. 1300 (2006)] of theUnited States.

[ 50 ] The England and Wales Court of Appeal, in The Kapitan Petko Voivoda , held a different opinion. It rather concluded that unauthorized on-deck carriage constitutes a breach of contract with no special added characteristics, and considered the applicability of exception and limitation clauses to be a question of construction of the contract. It concluded that unauthorized on-deck carriage does not exclude the operation of the Hague Rules nor, more particularly, the limitation of liability provided for in

Article IV(5). Moreover, the Court determined that stowing on deck in breach of contract could not be assimilated to deviation from the contractual voyage or storing goods in a warehouse other than that originally agreed, and that the duty of the Court in such a case “is merely to construe the contract which the parties have made” (at paragraph 15). The words “in any event” of

Article IV(5)(

a) are interpreted as “in every case” (at paragraph 16), leading the Court to decide that even when a carrier carried cargo on deck in breach of a contract governed by the old Hague Rules, it could “take advantage of

Article IV rule 5 to limit his liability for loss or damage to that cargo” (at paragraph 1). [ 51 ] It is worth noting that The Kapitan Petko Voivoda decision was rendered under the old Hague Rules. As stated by Simon Baughen in Shipping Law , 3rd ed. (London, U.K.: Cavendish Publishing Ltd., 2004), at page 143, “[a] potential drawback of the latter decision is that, under the Hague Rules, a carrier will still be entitled to limit in circumstances in which, under the Hague-Visby Rules , it would have lost the right to limit by virtue of Art IV(5)(e)”. [ 52 ] This situation was also examined in Canada in Grace Plastics where the same

interpretation prevailed and where

Article IV(5)(

a) was applied literally. As discussed above, in that case, four parcels were loaded on deck although they were supposed to be stowed under deck. Some of the parcels were damaged, as the result of a failure to make the ship seaworthy (Article III(1) of the Rules). The Court decided that the plaintiff could “take judgement in respect of each of these items for the amount of actual loss or $500”, hereby referring to

Article IV(5) of the old Hague Rules ( Grace Plastics , at page 291). In reaching its decision, the Court also referred to Falconbridge Nick Mines Ltd. v. Chimo Shipping Ltd. , [1969] 2 Ex. C.R. 261, at pages 284 and 285 : The situation, then, if the Rules applied to the tractor and generating set until they were lost, appears to me to be this: If the loss resulted from unseaworthiness of the barge caused by want of due diligence on the part of the carrier to make the barge seaworthy, the exceptions from immunity in

Article IV, Rule 2, are of no avail to the carrier, but the limitation of liability in Rule 5, where the words “in any event” are used, applies; [ 53 ] If we stick to “the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose” ( Vienna Convention on the Law of Treaties , May 23, 1969, [1980] Can. T.S. No. 37, paragraph 1 of

Article 31; see also J.D. Irving, Limited v. Siemens Canada Limited , 2016 FC 287 , at paragraph 32 ), hereby constructing the words as the England and Wales Court of Appeal did, it appears clear that the words “in any event” used in

Article IV(5)(

a) mean “in every case” and encompass the case at bar. This can also be inferred from the French wording “ en aucun cas responsables ”, which can be translated as “in no way responsible”. Neither the wording of

Article IV(5)(

a) nor the context of the

article suggest that “in any event” refers to the events listed under

Article IV(2). Hence, the only exception to the limitation rule set out in

Article IV(5)(

a) is the one provided by

Article IV(5)(e), discussed further below. [ 54 ] De Wolf submits that bad faith should bar a carrier from the benefits of the Hague-Visby Rules . However, there is no evidence before the Court that Traffic-Tech actually acted in bad faith as no evidence is to be tendered in these proceedings. Hence, it is not for this Court to assess whether Traffic-Tech acted in bad faith or not. [ 55 ] Finally, on the issue of fundamental breach, the Supreme Court of Canada made it clear that “the time has come to lay this doctrine to rest” ( Tercon Contractors Ltd. v.

British Columbia (Transportation and Highways) , 2010 SCC 4 , [2010] 1 S.C.R. 69, at paragraph 62 ). The Court notes that Professor Tetley associated the unauthorized on-deck stowage to a fundamental breach of contract in its Marine Cargo Claims book, published in 2008, hence two years before the aforementioned decision of the Supreme Court of Canada was rendered.

Interpreting the words “in any event” as “in every case” is thus compatible with the exclusion of the doctrine of fundamental breach in Canadian law. [ 56 ] De Wolf argues that Traffic-Tech cannot invoke the benefit of the limitations of liability contained in

Article IV(5)(a), hereby relying on

Article IV(5)(

e) of the Hague-Visby Rules . Traffic-Tech submits that this exception is not at play as, while De Wolf alleges that the damage was caused by Traffic-Tech’s negligence, “the proceedings contain no allegation or proof of the damage having been caused with the intent or knowledge on the part of the Defendant that the damages would occur” (defendant’s memorandum of fact and law, at paragraph 23). [ 57 ] The Court sides with Traffic-Tech as, once again, it is not for the Court to decide if

Article IV(5)(

e) applies in these proceedings as this would require an assessment of the facts.

(3) Conclusion [ 58 ] Traffic-Tech may invoke the limitation of liability provided for at

Article IV(5)(

a) of the Hague-Visby Rules , despite the unauthorised on-deck carriage. Hence the limitations applicable to the contract of carriage pursuant to the Hague-Visby Rules shall not exceed “666.67 units of account per package or unit or 2 units of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher” pursuant to

Article IV(5)(a). [ 59 ] Whether the exception provided at

Article IV(5)(

e) applies or not is not for this Court to examine or decide. ORDER THIS COURT’S ORDER is that: 1. The undeclared on-deck carriage of the cargo under the Traffic-Tech bill of lading does not prevent the defendant from relying on the Hague-Visby Rules ; 2. The applicable limitations to the contract of carriage are the ones provided for in

Article IV(5)(

a) of the Hague-Visby Rules . The limitation applicable to the bill of lading is 666.67 units of account per package or unit or 2 units of account per kilogramme of gross

weight of the goods lost or damaged, whichever is the higher, the whole pursuant to

Article IV(5)(

a) of the Hague-Visby Rules; 3. Costs are granted in favor of the defendant (moving party). Annex Hague-Visby Rules , Arts. IV(2), IV bis , being

Schedule 3 of the Marine Liability Act , S.C. 2001, c. 6

Article IV Rights and Immunities … 2 Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from (

a) act, neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship; (

b) fire, unless caused by the actual fault or privity of the carrier; (

c) perils, dangers and accidents of the sea or other navigable waters; (

d) act of God; (

e) act of war; (

f) act of public enemies; (

g) arrest or restraint of princes, rulers or people, or seizure under legal process; (

h) quarantine restrictions; (

i) act or omission of the shipper or owner of the goods, his agent or representative; (

j) strikes or lock-outs or stoppage or restraint of labour from whatever cause, whether partial or general; (

k) riots and civil commotions; (

l) saving or attempting to save life or property at sea; (

m) wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods; (

n) insufficiency of packing; (

o) insufficiency or inadequacy of marks; (

p) latent defects not discoverable by due diligence; (

q) any other cause arising without the actual fault and privity of the carrier, or without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage. …

Article IV bis Application of Defences and Limits of Liability 1 The defences and limits of liability provided for in these Rules shall apply in any action against the carrier in respect of loss or damage to goods covered by a contract of carriage whether the action be founded in contract or in tort. 2 If such an action is brought against a servant or agent of the carrier (such servant or agent not being an independent contractor), such servant or agent shall be entitled to avail himself of the defences and limits of liability which the carrier is entitled to invoke under these Rules. 3 The aggregate of the amounts recoverable from the carrier, and such servants and agents, shall in no case exceed the limit provided for in these Rules. 4 Nevertheless, a servant or agent of the carrier shall not be entitled to avail himself of the provisions of this Article, if it is proved that the damage resulted from

an act or omission of the servant or agent done with intent to cause damage or recklessly and with knowledge that damage would probably result.