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Walking a Fine Line - Bill of Lading Stomps Liability for Cargo Theft

 Apr 30, 2019 5:00 PM
by Tim Gillibrand

The Federal Court recently released the decision of Black & White Merchandising Co. Ltd. v. Deltrans International Shipping Corporation. The case involved the transportation and theft of over 8000 pairs of children's shoes. While the decision is silent as to the brand of the shoes, we can only assume the perpetrator was disappointed with his luck on the black market. The cargo loss resulted in a lawsuit brought by the consignee, with some interesting findings regarding liability and jurisdiction of the Federal Court. 

Background

Black & White Merchandising Co. Ltd ("B&W") purchase the shoes from a Chinese manufacturer and hired Delmar International Inc. to transport the shoes from China to Montreal.  Behind the scenes, Delmar hired Deltrans International Shipping Corporation  as well as a logistics company, which in part arranged for storage. 

Delmar dealt directly with B&W as to the various details of the shipping. Deltrans issued a through Bill of Lading on January 12, 2017, which indicated that the cargo was to be delivered to Montreal and the type of move was "CY/CY" ("container yard to container yard"). 

The goods made their way from China to Quebec, where they were then stored at Canchi's warehouse. Next, the cargo was to be "de-stuffed", repackaged, and transported to the B&W warehouse which was also in Quebec. The cargo, however, was stolen from the Canchi warehouse.

B&W asserted that Deltrans was responsible under the BoL and that it was reckless in hiring the storage facility. Deltrans denied liability as it no longer had possession of the cargo at the time of loss and had no role in arranging for the warehousing. It further argued that its contract of carriage ended upon delivering the goods to the CN yard, prior to being taken to Canchi.

B&W argued that the BoL, on its face, did not fully capture the entire delivery. It was standard practice in its dealings with Delmar that deliveries would go to the B&W warehouse. Deltrans argued that, if there was some agreement between Delmar and B&W for further delivery beyond the Canchi warehouse, that was beyond the scope of its contract of carriage.

Deltrans brought a motion to strike the Statement of Claim. It argued that the contract of carriage had ended and thus the Federal Court did not have jurisdiction over the claim. Secondly, Deltrans brought a motion for summary judgment on the basis that it had discharged its obligations under the BoL. Deltrans also relied upon a clause in the BoL that relieved it of liability for events beyond its control.  The two motions were intertwined as they depended on a finding as to when Deltrans' contract of carriage ended. 

B&W argued that the Federal Court had jurisdiction over the matter in accordance with Section 22(2)(f) of the Federal Courts Act, which provides jurisdiction over the following:

"any claim arising out of an agreement relating to the carriage of goods on a ship under a through bill of lading, or in respect of which a through bill of lading is intended to be issued, for loss or damage to goods occurring at any time or place during transit". 

In responding to the motions, B&W argued that Delmar and Deltrans were effectively "one in the same". Deltrans put forth evidence that the two were at least distinct corporate entities. B&W did not specifically argue what the legal effect would be of the two entities operating together; however, the thrust of its position was that Deltrans' BoL should be extended to cover the entire delivery up to the point it would be delivered to the B&W warehouse, which would mean that the through BoL was still in effect at the time of loss.

Issues and Findings

Strickland, J. found in favour of Deltrans, concluding that the Federal Court did not have jurisdiction over the matter.  Although it was moot, given the decision on jurisdiction, the court also granted summary judgment.

The court found that the contract of carriage ended when Deltrans delivered the cargo to the Canchi warehouse. It was important that the BoL specifically stated the delivery was to be from one container yard to another and did not state that delivery would be to the B&W warehouse. The court was not convinced by B&W's argument that Delmar and Deltrans were "one in the same" and seemed satisfied that B&W's initial dealings were with Delmar.  Therefore, any dispute as to what "ought to have been" in the BoL was a dispute between B&W and Delmar - who was not a party. 

The court surmised that, even if Delmar usually arranged for transport to the B&W warehouse, this did not necessarily mean that such deliveries were part of the through BoL. They may very well have been part of some other arrangement.

It is notable that the BoL had a specific clause granting the Federal Court jurisdiction over any disputes. Here the court reiterated the status of the common law: parties cannot confer jurisdiction upon the court which it does not otherwise have.

Importantly, the court found that there was no genuine issue for trial because the through BoL had been completed and did not include transport to the B&W warehouse. The court did not comment on whether it would have had jurisdiction had Delmar been named as a defendant.

This case highlights the importance of ensuring bills of lading accurately reflect the intended delivery destination. It further highlights the need to investigate the roles of each party involved in a shipment to best frame a cause of action.

See Black & White Merchandising Co. Ltd. v. Deltrans International Shipping Corporation, 2019 FC 379 (CanLII)


Tim Gillibrand has been practicing insurance litigation since 2012. He has dealt extensively with property-related claims, including subrogation and coverage matters. Read more ...


  

 

 
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