International trade has become more seamless over the years, and bills of lading which represent a receipt, contract and proof of ownership all at the same time, play a key role in this. It is important for parties to a bill of lading to be aware and understand their responsibilities, liabilities and limitations under the contract.
- Bills of Lading
Bills of lading are regulated in Canada by a variety of federal and provincial legislations.[1] For example, in Ontario, the Sale of Goods Act (“SGA”) defines a document of title as a bill of lading issued by a carrier (e.g., an operator of a container ship) to the consignor acknowledging that it has received goods for shipment.[2] Bills of lading have several functions:
- allows carriers to process shipments, invoice customers, and properly deliver goods to their destination;
- serves as proof that a contract of carriage is in place, and functions as a receipt evidencing successful delivery of the goods, in good condition, to the carrier/bailee for shipment; and
- is a contract that states the terms and conditions under which the carrier agrees to transport the goods.
Bills of lading are issued after the goods have departed from their original destination and are subject to the contractual clauses in the document. For example, bills of lading may include clauses pertaining to a carrier’s liability, subject carriers to freight charges or assign responsibilities to carriers following non-delivery. It is important for parties to read and understand the contractual clauses in a bill of lading. In situations where bills of ladings have not been issued or entered into, parties should turn to federal and provincial legislations.
- Jurisdiction
Bills of lading often contain jurisdiction clauses specifying the laws of the jurisdiction the parties will be subject to, and the court or forum where any legal action or dispute related to the shipment of the goods must be brought. In the event that a jurisdiction is not specified, the law of the place of origin of the carrier is most likely to apply in Canadian law, although it is a case-by-case analysis[3]. It is very important to have the specific facts of the case to make this determination.
Parties should be aware of bills of lading requiring any legal action to be brought in a particular jurisdiction as they may be disregarded if that jurisdiction has no connection with the contract.[4] Further, a clause in a bill of lading conferring exclusive jurisdiction over all disputes on the courts of another country is void if the effect of the clause is to relieve the shipowner of liability.[5]
- Limitation on liability
Subject to statutory restrictions, carriers can limit their liability by contract in respect of the goods they carry. However, carriers may not limit their liability if such limitation breaches a prohibitive statue. For example, a clause in a bill of lading relieving a carrier from liability for loss of goods arising from a breach of duty as provided in the Hague-Visby Rules is null and void.[6]
Absent written contractual terms or bills of lading, parties must turn to provincial legislations and regulations governing bills of lading which almost always state that carriers are presumed liable for any losses or damages to the goods, but this liability is limited to $2 per pound ($4.41 per kilogram) or the actual value of the goods, whichever is less. It is always a good idea to include an express provision in the bill of lading that works around this limit.
- Working around the limitation on liability
In the event parties do not have a bill of lading, or a bill of lading has the basic liability limitations, aggrieved parties can work around the $2 per pound limitation if the loss to the goods resulted from either:
- an act or omission of the carrier done with intent to cause damage, or recklessly and with knowledge that damage would be a probable result (willful acts / misconduct); or
- an act of gross negligence [7].
Before concluding that the carrier’s liability is limited to $2 per pound, consignors should look to see if they can claim that the loss to the goods was a result of reckless behavior or gross negligence. Consigners may also seek damages from carriers in relation to business interruption losses.[8]
- An Act of Gross Negligence
Where a carrier is found to be negligent in handling the goods, and this negligence is gross (generally defined by the Courts as “very big negligence”), Courts have generally held that the limitation of liability does not apply. For example, in Deagle v. Southern Messenger Alta Ltd., Justice Sullivan, of the Court of Queen’s Bench of Alberta found that the Bill of Lading and Conditions of Carriage Regulation in Alberta, which limits damages to $2 per pound, cannot be applied in cases of gross negligence.[9] Recent decisions have upheld this reasoning and have found it to be binding.[10]
- Business Interruption Losses
Similar to gross negligence, where an aggrieved party has experienced business interruption losses as a result of a carrier’s actions in handling the goods, the party’s claim is not necessarily limited (providing that the downstream damages are foreseeable), as the limitation of liability exclusion in bills of lading typically caps liability for damages to the goods delivered, and nothing more. A consignor is typically entitled to claim business interruption losses from the carrier.[11]
- Final considerations
While bills of lading have very important functions, it is crucial for parties to a bill of lading to understanding how to use this contract and enforce their rights. It is always advisable for parties to negotiate and include express provisions in a bill of lading. Absent express provisions, parties will be subject to statutory limitations.
If you have any questions, please feel free to reach out to the authors of this article.
[3] Imperial Life Assurance Co. of Canada v. Segundo Casteleiro Y Colmenares, 1967 SCC 443.
[4] R. J. Polito v. Gestioni Esercizio Navi Sicilia Gens, 1960 EX CR 233 and Brink’s Global Services Korea Ltd. v. Binex Line Corp., 2022 FC 571.
[5] Agro Co. of Canada Ltd. v. Regal Scout (Ship), 1983 FC 2818.
[6] Canadian Klockner Ltd. v. D/S A/S Flint, 1973 FC 988 and Fednav International Ltd. v. Sidmar N.V., 1997 FCA 4842.
[7] McColman v. Duckering’s International Freight Services Inc. 2007 ABPC 17; and Deagle v. Southern Messenger Alta. Ltd. 1999 ABQB 528.
[8] Cathcart Inspection Services Ltd. v. Purolator Courier Ltd. 1982 ONCA 2056; and Dow Chemical Canada ULC v NOVA Chemicals Corporation 2018 ABQB 482.
[9] Supra note 7 and 1999 ABQB 528 at para 18.
[10] McColman v. Duckering’s International Freight Services Inc., 2007 ABPC 17.
[11] Supra note 8.