Judgments

Decision Information

Decision Content

A-47-79
Miida Electronics, Inc. (Appellant) v.
Mitsui O.S.K. Lines Ltd. and ITO—International Terminal Operators Ltd. (Respondents)
Court of Appeal, Pratte and Le Dain JJ. and Lalande D.J.—Montreal, December 2 and 5, 1980; Ottawa, May 22, 1981.
Maritime law — Torts — Contracts — Bill of lading — Appeal from dismissal of action for theft of cargo from transit shed after discharge — Stevedoring contract required terminal operator to perform watching and guard services subject to limitations of liability in bill of lading — Terminal operator did not make a security check in accordance with regulations — Whether Court has jurisdiction — Whether terminal oper ator was negligent in the performance of its duties — Whether terminal operator is relieved of liability for negligence by the bill of lading — Appeal allowed in part — Quebec Civil Code, arts. 1053, 2388 — Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 2.
Appeal from dismissal of appellant's action against the carri er and the terminal operator for theft of cargo after discharge. The goods were stolen from a transit shed operated by ITO in which they were stored. National Harbours Board regulations require that each shed must be checked inside at least once every two hours. ITO failed to have a guard make a security check for a period of five hours. The contract with the carrier required ITO to perform "such ... terminal services as may be required" including "watching and guard services". ITO agreed to perform those services with the benefit of the "rights, immunities and limitation of liability" provided by the bill of lading. Clauses 4 and 7 of the bill of lading give ITO the benefit of the rights and immunities, exemption from and limitation of liability afforded by the Hague Rules. Appellant's action was in breach of contract and in delict. The Trial Judge held that as the whole loss had occurred after the goods had left the ship, the carrier's liability was excluded by the bill of lading and that the plaintiff had failed to prove fault within the meaning of the general law and that ITO was protected by the bill of lading from liability for after-discharge negligence. The questions are whether the bill of lading relieved the carrier from liability when the loss resulted from a failure to exercise due care for the safety of the goods; whether the Court has jurisdiction to hear the claim; whether ITO was negligent in the performance of its duties; and, whether ITO is relieved of liability for negligence by the bill of lading.
Held, the appeal is allowed with respect to ITO (Pratte J. dissenting) and is dismissed with respect to Mitsui O.S.K. Lines Ltd. (Le Dain J. dissenting).
Per Pratte J. dissenting with respect to ITO: The appellant failed to show that the stevedoring company, ITO, had a duty to take care of the goods. In the absence of such a duty, the failure of ITO to do more than it actually did to preserve the appellant's goods is not a fault within the meaning of article 1053 of the Civil Code. Regardless, the appellant's claim must fail because ITO is protected by the Himalaya clause in the bill of lading. Another more fundamental reason why the appel lant's claim cannot succeed is that a claim of that nature is not within the jurisdiction of the Federal Court. The Trial Judge was correct in dismissing the action against the carrier because the bill of lading relieved it from the duty to take care of the goods once they had left the ship.
Per Le Dain J. dissenting with respect to Mitsui O.S.K. Lines Ltd.: The claim of the cargo owner against the terminal operator is a maritime matter and the Court has jurisdiction to entertain the claim. The terminal operator was paid by the shipowner for the terminal services performed. The terminal operator was therefore a sub-bailee for reward. As such it had a duty to the cargo owner to take reasonable or due care to keep the goods safe. The degree of care required of a bailee depends upon the circumstances in which and the purposes for which the goods were delivered to him. The terminal operator as sumed a duty of care which included the provision of an adequate system of security. This results from the nature of the function and responsibility assumed by the terminal operator as indicated by the stevedoring and terminal services agreement and by the National Harbours Board regulations. Failure to carry out the inspection was negligence in the care of the cargo. The Himalaya clause provides that the various classes of persons who are to enjoy the carrier's exemptions, immunities and limitation of liability are to be entitled to "same, but no further" exemptions of liability as the carrier. Clauses 8 and 18 do not exclude liability for negligence. They do not contain an express reference to negligence. The words "in any capacity whatsoever" do not constitute such a reference. As against the carrier, the appeal should be allowed. Since clauses 8 and 18 of the bill of lading do not relieve the carrier of its contractual obligations to deliver the cargo and care for it pending delivery, the carrier could not relieve itself of these obligations by delegating their performance to a third person. Also, in provid ing the terminal services, the terminal operator was acting as agent of the carrier. On either view, the carrier would be liable for the negligence which caused the loss of the cargo.
Per Lalande D.J.: The action was properly dismissed as against the carrier on application of clause 8 of the bill of lading. ITO was negligent in the performance of "watching and guard" services and its fault is actionable. The appellant agreed by the Himalaya clause that the carrier would engage a terminal operator in the performance of its contract to deliver the goods. ITO agreed to perform those services with the benefits of the "rights, immunities and limitations of liability" provided by the bill of lading. ITO became a depositary or bailee of the goods. The claim of the cargo owner can be said to be ex contractu. The Himalaya clause and clause 7 have nothing to do with the after-discharge negligence. These clauses
give the terminal operator the benefit of the rights and immuni- ties, exemption from and limitation of liability afforded by the Hague Rules. Nothing in those Rules exonerates the carrier from liability for loss of goods by theft because of negligence in the care and custody of the goods after their discharge. The Federal Court does have jurisdiction to entertain the plaintiff's claim against the terminal operator because it is a matter connected with "navigation and shipping" and was within the jurisdiction of the Exchequer Court of Canada.
R. v. Domestic Converters Corporation A-247-77, judg ment dated October 29, 1980, disagreed with. Gilchrist Watt & Sanderson Pty. Ltd. v. York Products Pty. Ltd. [1970] 1 W.L.R. 1262; [1970] 3 All E.R. 825, referred to. National Gypsum Company Inc. v. Northern Sales Lim ited [1964] S.C.R. 144, referred to. Associated Metals & Minerals Corp. v. The "Evie W" [1978] 2 F.C. 710, referred to. Inverness Railway and Coal Co. v. Jones (1908) 40 S.C.R. 45, referred to. Building and Civil Engineering Holidays Scheme Management Ltd. v. Post Office [1966] 1 Q.B. 247, referred to. Moyer Stainless & Alloy Co. Ltd. v. Canadian Overseas Shipping Ltd. [1973] 2 Lloyd's Rep. 420, referred to. Executive Jet Aviation, Inc. v. City of Cleveland, Ohio 1973 A.M.C. 1, referred to. Morris v. C. W. Martin & Sons, Ltd. [1965] 2 All E.R. 725; [1966] I Q.B. 716, referred to. British Road Services, Ltd. v. Arthur V. Crutchley & Co., Ltd. [1968] 1 All E.R. 811, referred to. Canada Steamship Lines Ld. v. The King [1950] S.C.R. 532; [1952] A.C. 192, referred to. Smith v. South Wales Switchgear Ltd. [1978] 1 All E.R. 18, referred to. Tropwood A.G. v. Sivaco Wire & Nail Co. [1979] 2 S.C.R. 157, referred to. Scruttons Ltd. v. Mid land Silicones Ltd. [1962] A.C. 446, discussed. New Zea- land Shipping Co. Ltd. v. A. M. Satterthwaite & Co. Ltd. (The "Eurymedon") [1975] A.C. 154, discussed. Port Jackson Stevedoring Pty. Ltd. v. Salmond & Spraggon (Australia) Pty. Ltd. (The "New York Star") [1980] 3 All E.R. 257, discussed. Canadian General Electric Co. Ltd. v. Pickford & Black Ltd. (The "Lake Bosomtwe") [1971] S.C.R. 41, considered. Greenwood Shopping Plaza Ltd. v. Beattie [1980] 2 S.C.R. 228, considered. Robert Simpson Montreal Ltd. v. Hamburg-Amerika Linie Norddeutscher [1973] F.C. 1356, applied.
APPEAL. COUNSEL:
Marc Nadon for appellant.
R. Cypihot for respondent Mitsui O.S.K.
Lines Ltd.
D. F. H. Marler for respondent ITO—Inter-
national Terminal Operators Ltd.
SOLICITORS:
Martineau, Walker, Allison, Beaulieu, MacKell & Clermont, Montreal, for appel lant.
Brisset, Bishop, Davidson & Davis, Montreal, for respondent Mitsui O.S.K. Lines Ltd. Chauvin, Marier & Baudry, Montreal, for respondent ITO—International Terminal Operators Ltd.
The following are the reasons for judgment rendered in English by
PRATTE J. (dissenting): On September 14, 1973, a theft was committed in the Port of Mon- treal. In the early evening, a large number of desk calculators were stolen from shed 50. The stolen goods belonged to the appellant, Miida Electron ics, Inc.; they had just arrived from Japan on board the Buenos Aires Maru, a vessel- of the respondent, Mitsui O.S.K. Lines Ltd. (Mitsui), and had been discharged and placed in shed 50 by the other respondent, International Terminal Operators Ltd. (ITO). Most of those goods were never recovered.
Following that loss, the appellant sued both Mitsui, the carrier which had transported the stolen goods from Japan to Montreal, and ITO, the terminal operator in whose care Mitsui had placed the goods after their discharge. As against Mitsui, the action was founded on the contract of transport; the plaintiff contended that Mitsui's failure to deliver the goods in Montreal was a breach of the contract evidenced by the bill of lading issued by Mitsui with respect to the stolen goods. As against ITO, the action was based on the allegation that ITO had been negligent in failing to take the proper steps to prevent the theft of the goods which had been committed to its care. The Trial Division dismissed the action against both defendants [[1979] 2 F.C. 283]. The appel lant appeals from that judgment.
1. The action against Mitsui
The Trial Judge dismissed the action against Mitsui because, having found that the whole loss had occurred after the goods had left the ship and been placed in shed 50, he held that Mitsui's liability was excluded by clause 8 of the bill of lading that had been issued with respect to the appellant's goods. That clause reads as follows:
8. The carrier shall not be liable in any capacity whatsoever for any delay, non-delivery, misdelivery or loss of or damage to or in connection with the goods occurring before loading and/or after discharge, whether awaiting shipment landed or stored or put into craft, barge, lighter or otherwise belonging to the carrier or not or pending transhipment at any stage of the whole transportation. "Loading" provided in this bill of lading shall commence with the hooking on of the vessel's tackle or, if not using the vessel's tackle, with the receipt of goods on deck or hold or, in case of bulk liquids in the vessel's tank. "Dis- charging" herein provided shall be completed when the goods are freed from the vessel's tackle or taken from deck or hold, or the vessel's tank.
At the hearing of the appeal, counsel for the appellant did not challenge the finding that the loss suffered by his client resulted in its entirety from the theft that was committed when the goods were stored in shed 50. He argued, however, that clause 8 of the bill of lading did not relieve the carrier from liability when, as in this case, the loss resulted from a failure to exercise due care for the safety of the goods. Non-liability clauses, said counsel, must be construed strictly and do not protect those in whose favour they are made from liability for damage caused by negligence save when it is clear that the parties intended to exclude that type of liability; he quoted, in support of that proposition, the decision of the Privy Council in Canada Steamship Lines Ld. v. The King'.
In my view, clause 8, particularly when it is read with clause 18, 2 has the effect of excluding the carrier's liability in a case like the present one when the loss occurred after discharge without any fault or negligence on the carrier's part. It cannot be said that Mitsui did not exercise due care for the safety of the goods because, in my view, claus es 8 and 18 relieved Mitsui from the duty to take
' [1952] A.C. 192.
2 That clause provided, inter alia, that:
In any case the carrier's responsibility shall cease at the time when the goods are discharged from the vessel and in any case all risks and expenses (including expenses for landing, lighterage, storage, cartage, port charges etc.) incurred by delivery otherwise than from the vessel's side shall be borne by shipper and/or consignee notwithstanding any custom of the port to the contrary.
care of the goods once they had left the ship. The fact that the loss may, as contended by the appel lant, have been caused by the negligence or fault of ITO is irrelevant since ITO was an independent contractor and never acted as Mitsui's servant. The decision of the Privy Council in Canada Steamship Lines Ld. v. The King (supra) has no application here; it was merely held in that case that a non-liability clause does not normally exon erate the party in whose favour it is made from the liability arising from the negligence of that party and of that party's servants.
I am therefore of opinion that the Trial Judge was correct in dismissing the appellant's action against Mitsui.
2. The action against ITO
ITO is a stevedoring firm which also provides its customers with terminal services. In 1973, it occupied various sheds in the Port of Montreal which had been leased from the National Har bours Board; shed No. 50 was one of them. In April 1973, ITO had made a contract with Mitsui and agreed to load and discharge all Mitsui's vessels, and supply terminal services, at the Port of Montreal and at other specified Canadian ports. Pursuant to that contract, ITO discharged the appellant's goods and placed them in shed 50 until they be claimed by their owner.
According to counsel for the appellant, the action against ITO is based solely on delict or tort. The appellant, said he, never contracted with ITO and, being not a party to the contract made by ITO with Mitsui, cannot avail itself of its stipula tions. Accordingly, counsel did not challenge the Trial Judge's conclusion that the action against ITO could not succeed in so far as it was based on contract.
Counsel's sole argument on this branch of the case was that the appellant's claim against ITO, envisaged as a purely delictual claim, was entitled to succeed, whether it be governed by the law of Quebec or by English law, because the appellant's
loss had been caused by the failure of ITO to exercise due care for the safety of the goods.
In order to understand that argument, it is necessary to have in mind the circumstances in which the appellant's goods were stolen from shed 50. Those circumstances, as well as some of the inferences that the appellant draws from them, are accurately summarized in the following pas sage of the judgment of the Trial Division [at pages 293-294]:
The theft took place on the evening of September 14. An employee of the firm used by defendant to provide the neces sary security measures surprised the thieves in the act while making his round. Owing to the darkness and the distance, he could see only shadows that fled toward the water and disap peared over the end of the wharf. The thieves had evidently made use of a boat which they had moored along the wharf opposite the shed in which the goods were stored. When they fled they even left a pallet loaded with cartons halfway between the door of the shed and the side of the wharf. The port police were alerted and arrived on the scene at once. It was soon discovered that a hole about six or eight inches in diameter had been made in the wall of the warehouse beside one of the large front doors. Through this hole it was possible to reach the endless chain inside, which is used to operate a lever and raise the door.
This sequence of events leaves a number of questions unan swered, however, and it is in the replies to these questions that plaintiff finds proof of the faults which it alleges against defendant. First, how long were the thieves able to work undisturbed? Normally the security guards make their rounds at least every two hours after 5:30 p.m., and in fact this is suggested by the by-laws of the National Harbours Board, from which defendant leased its space. On that particular evening, however, as one of the two guards on duty had been delayed in another shed where work had gone on after normal hours and the other one had to stay in the security guards' shelter, there was no round at 7:30. The first round was the one during which the thieves were discovered. Secondly, was it only necessary for the thieves to reach the chain in order to open the door? Was there no security bolt on the door? Usually, these doors were locked using a padlock that held the two sections of the chain to a metal ring attached to the wall. That evening, however, the padlock was only holding the two sections of chain together, thus leaving two or three feet of play, and this allowed the door to be raised enough to permit entry. Thirdly, could the thieves handle the cases without any equipment? It was discovered that a motorized lifter had been left in the shed that evening, which was unusual, and that its motor was still warm shortly after the theft. Fourthly, are the premises not provided with some light ing that might hinder operations of this kind at night? Some lights are in fact left on, but there are not many of them and that evening there were even fewer than usual in the shed, since burned-out bulbs had not yet been replaced.
Plaintiff argues that the theft was unquestionably facilitated by defects in the security measures used to protect the goods: insufficient rounds by security guards, somewhat ineffective bolting, the presence of a lifter in the shed, poor lighting. In plaintiffs view this is enough to justify the conclusion that defendant was at fault and is therefore liable.
Counsel for the appellant first submitted that the claim was entitled to succeed under the law of Quebec. He said that the failure of ITO to exercise due care for the safety of the goods was a fault which made ITO liable under article 1053 of the Quebec Civil Code. Now, in determining the valid ity of that submission, it must be borne in mind that the appellant cannot take advantage of the provisions of the contract for terminal services made by ITO and Mitsui. Those provisions are, in so far as the appellant is concerned, "res inter alios acts". It follows that the fact that ITO may have failed in its contractual duty of care toward Mitsui does not help the appellant. In order for the action to succeed, it must be shown that, even if the contract for terminal services had not imposed any duty on ITO with respect to the safety of the goods after their discharge, that company would nevertheless have had the duty to take care of the goods in the manner suggested by the appellant. This the appellant has not established. Had not the contract for terminal services imposed any obliga tion with respect to the safety of the goods after discharge, ITO would, in the circumstances of this case, have been under no legal or moral duty to take special measures for the safekeeping of those goods. In the absence of such a duty, the failure of ITO to do more than it actually did to preserve the appellant's goods is not a fault within the meaning of article 1053 of the Civil Code.
Counsel for the appellant also argued, however, that the claim was not governed by the law of Quebec but by the common law of England which would be applicable as part of the "Canadian maritime law" as well as by virtue of article 2388 of the Civil Code of Quebec. Under English law, Mitsui was bailee of the appellant's goods while ITO was a sub-bailee. The decisions of the English Court of Appeal in Morris v. C. W. Martin & Sons, Ltd. ([ 1966] 1 Q.B. 716) and of the Privy
Council in Gilchrist Watt and Sanderson Pty. Ltd. v. York Products Pty. Ltd. ([1970] 1 W.L.R. 1262) are authorities for the proposition that a sub-bailee of goods, although there is no contrac tual relation between himself and the owner, nevertheless owes the owner a duty to take due care of his goods. It follows, according to counsel, that ITO, as a sub-bailee of the appellant's goods, owed a duty of care to the appellant. As the loss would not have occurred, according to counsel's argument, if ITO had exercised reasonable care, it also follows that ITO should be held liable for that loss.
Assuming for the sake of argument that English law is applicable in this matter (a point on which I have, to say the least, strong doubts), I am still of the view that the appellant's claim must fail because ITO would then be protected by the Himalaya clause contained in clause 4 of the bill of lading issued by Mitsui with respect to the appellant's goods. That clause reads as follows:
4. It is expressly agreed between the parties hereto that the master, officers, crew members, contractors, stevedores, long shoremen, agents, representatives, employees or others used, engaged or employed by the carrier in the performance of this contract, shall each be the beneficiaries of and shall be entitled to the same, but no further exemptions and immunities from and limitations of liability which the carrier has under this bill of lading, whether printed, written, stamped thereon or incorpo rated by reference. The master, officers, crew members and the other persons referred to heretofore shall to the extent provided be or be deemed to be parties to the contract in or evidenced by this bill of lading and the carrier is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all such persons.
If the validity of such a clause is still a subject of discussion in Canadian law, it can no longer be doubted, I think, in English law when the clause has been stipulated by the carrier with the author ity of those it is intended to protect. (See the decisions of the Privy Council in New Zealand Shipping Co. Ltd. v. A. M. Satterthwaite & Co. Ltd. (The "Eurymedon") [1975] A.C. 154 and Port Jackson Stevedoring Pty. Ltd. v. Salmond & Spraggon (Australia) Pty. Ltd. (The New York Star) [1980] 3 All E.R. 257.) In the present case, the terms of the second paragraph of clause 7 of the terminal services contract make clear that ITO had conferred on Mitsui the authority to stipulate a Himalaya clause in the bill of lading:
7. Responsibility for Damage or Loss. It is expressly under stood and agreed that the Contractor's responsibility for damage or loss shall be strictly limited to damage to the vessel and its equipment and physical damage to cargo or loss of cargo overside through negligence of the Contractor or its employees. When such damage occurs to the vessel or its equipment or where such loss or damage occurs to cargo by reason of such negligence, the vessel's officers or other repre sentatives shall call this to the attention of the Contractor at the time of accident. The Company agrees to indemnify the Contractor in the event it is called upon to pay any sums for damage or loss other than as aforesaid.
It is further expressly understood and agreed that the Com pany will include the Contractor as an express beneficiary, to the extent of the services to be performed hereunder, of all rights, immunities and limitation of liability provisions of all contracts of affreightment as evidenced by its standard bills of lading and/or passenger tickets, issued by the Company during the effective period of this agreement. Whenever the customary rights, immunities and/or liability limitations are waived or omitted by the Company, as in the case of ad valorem cargo, the Company agrees to include the Contractor as an assured party under its insurance protection and ensure that it is indemnified against any resultant increase in liability.
There is another more fundamental reason why the appellant's claim against ITO, whether gov erned by Quebec or English law, could not suc ceed: as was decided by this Court in The Queen v. Domestic Converters Corporation,' a claim of that nature is not within the jurisdiction of the Federal Court.
For these reasons, I would dismiss the appeal
with costs.
* * *
The following are the reasons for judgment rendered in English by
LE DAIN J.: The facts and the issues in this appeal are set out in the reasons of my brothers Pratte and Lalande which I have had the advan tage of reading.
Because the conclusion I have reached with respect to the appeal from the judgment dismissing the action of the appellant cargo owner as against the carrier Mitsui O.S.K. Lines Ltd. differs from that of my colleagues it is convenient for me to deal first with the appeal from the judgment dis missing the action as against the terminal operator
3 Court File No. A-245-77; that decision was pronounced on October 29, 1980, after the decision of the Trial Division in this case.
ITO. I agree with the inference drawn from the evidence by the learned Trial Judge that the loss occurred after discharge while the cargo was in the custody of the terminal operator. The appeal in respect of the claim against the terminal operator raises three questions: (a) whether the Court has jurisdiction to entertain the claim; (b) whether the loss of the cargo was attributable to negligence for which ITO is responsible; and (c) whether ITO is relieved of liability for negligence by the Himalaya clause in the bill of lading.
On the question of jurisdiction, I am now of the view that I was wrong in the conclusion which I reached in the Domestic Converters case 4 . I am, however, still of the opinion for the reasons indicated in that case that there is no contractual foundation for the claim of the cargo owner against the terminal operator. I am unable, with great respect, to see how the stevedoring and ter minal services contract between the shipowner and Logistec Corporation (which by agreement of the parties is to be regarded for purposes of the case as one and the same with ITO) can be said to have been entered into by the shipowner on behalf of the individual shipper or cargo owner or to contain a stipulation pour autrui in his favour. It was a general operating agreement entered into by the shipowner as principal for its own account and benefit without regard to any particular contract of carriage. It created no contractual relationship between the terminal operator and a particular shipper or cargo owner. The terminal operator took possession of the cargo pursuant to this gener al agreement and not pursuant to any agreement with the cargo owner. I have been persuaded, however, by further argument and reflection that the question of jurisdiction should be considered on the assumption that if the claim of the cargo owner against the terminal operator were governed by Canadian maritime law it would be based on the common law liability of a sub-bailee arising apart from contract, as in the case of Gilchrist Watt & Sanderson Pty. Ltd. v. York Products Pty. Ltd. [1970] 3 All E.R. 825, and that because of the special nature of the liability upon bailment it is inappropriate to apply to it the test of locality that has traditionally been applied to admiralty jurisdiction in tort. If the liability of the terminal
4 Domestic Converters Corporation v. Arctic Steamship Line A-247-77, judgment October 29, 1980.
operator to the cargo owner should be regarded as a maritime matter within the definition of "Canadian maritime law" in section 2 of the Fed eral Court Act, R.S.C. 1970 (2nd Supp.), c. 10, because of the close practical relationship of the terminal operation to the performance of the con tract of carriage, the law which governs it should be uniform throughout Canada. Cf. National Gypsum Company Inc. v. Northern Sales Limited [1964] S.C.R. 144 at pages 153 and 163; Associated Metals & Minerals Corporation v. The "Evie W" [1978] 2 F.C. 710 at page 717. I am reinforced in this view by the fact that the common law of bailment provides a more coherent and certain basis for the duties and liability of the terminal operator than does the civil law of delic- tual responsibility. Such a result is in the interests of maritime commerce and it is certainly not against the general spirit of the Quebec civil law as indicated by article 2388 of the Civil Code, which appears to have been treated as of general import in the judgment of Girouard J. in Inverness Rail way and Coal Company v. Jones (1908) 40 S.C.R. 45 at page 55. On the assumption, then, that the liability of the terminal operator to the cargo owner, if governed by Canadian maritime law, would be the common law liability of a sub-bailee arising apart from contract, I do not think it should be regarded as falling within the traditional distinction or dichotomy, for purposes of jurisdic tion, between maritime contracts and maritime torts because of the body of opinion that has characterized the liability upon bailment as sui generis or independent of contract or tort. See Winfield, The Province of the Law of Tort, 1931, chapter V; Building and Civil Engineering Hol idays Scheme Management Ltd. v. Post Office [1966] 1 Q.B. 247 per Lord Denning M.R. at page 261; Palmer, "The Application of the Torts (Inter- ference with Goods) Act 1977 to Actions in Bail- ment" (1978) 41 M.L.R. 629 at page 630. More over, to the extent that the liability upon bailment arising apart from contract is to be regarded, according to some authorities (cf. Winfield and Jolowicz on Tort, 11th ed., 1979, pages 9-10) as essentially tortious, I do not think that the test of locality should be determinative of jurisdiction because of the close relationship of the terminal operation to maritime commerce. It must not be forgotten that in addition to its post-discharge services the terminal operator receives cargo for
shipment and issues a dock receipt on behalf of the carrier that is subject to the terms and conditions of the carrier's standard bill of lading for which it is exchanged on shipment. This aspect of the ter minal operator's services is necessitated by the provisions of section 657 of the Canada Shipping Act, R.S.C. 1970, c. S-9, as was pointed out by Madam Justice Rejane Colas in Moyer Stainless & Alloy Co. Ltd. v. Canadian Overseas Shipping Ltd. [1973] 2 Lloyd's Rep. 420, at page 426. I have no doubt that the regulation of a terminal operator would fall within federal legislative juris diction with respect to navigation and shipping. As for the test of locality as a criterion of what should be considered to be a maritime tort, counsel for the cargo owner in this appeal pointed out that that test was the subject of considerable critical reser vation by the Supreme Court of the United States in Executive Jet Aviation, Inc. v City of Cleve- land, Ohio 1973 A.M.C. 1. While the issue in that case was the very particular one of whether the federal courts had admiralty jurisdiction in respect of an action in tort arising out of the crash of an aircraft in Lake Erie shortly after taking off from an airport in Cleveland, and turned essentially on the conclusion that the flight had no connection with traditional maritime activity, the following general observation of Mr. Justice Stewart, [at page 10] who delivered the opinion of the Court, is of significance as a guide to the application of the test of locality as a criterion of maritime jurisdic tion: "In sum, there has existed over the years a judicial, legislative, and scholarly recognition that, in determining whether there is admiralty jurisdic tion over a particular tort or class of torts, reliance on the relationship of the wrong to traditional maritime activity is often more sensible and more consonant with the purposes of maritime law than is a purely mechanical application of the locality test." For these reasons I am of the opinion that the claim of the cargo owner against the terminal operator is a maritime matter within the definition of Canadian maritime law in section 2 of the Federal Court Act and that accordingly the Court has jurisdiction to entertain the claim.
Under the stevedoring and terminal services agreement the terminal operator was paid by the shipowner for the terminal services performed. The terminal operator was therefore a sub-bailee for reward. As such it had a duty to the cargo owner to take reasonable or due care to keep the goods safe, and the burden was on the terminal operator in case of loss to show that the loss occurred without neglect, default or misconduct on its part or those to whom it had delegated its duty: Morris v. C. W. Martin & Sons, Ltd. [1965] 2 All E.R. 725 at page 731; Gilchrist Watt & Sanderson Pty. Ltd. v. York Products Pty. Ltd., supra, page 829. The degree of care required of a bailee depends upon the circumstances in which and the purposes for which the goods were delivered to him: Morris v. C. W. Martin & Sons, Ltd., supra, at page 734.
In the present case the terminal operator assumed a duty of care which included the provi sion of an adequate system of security. This results from the nature of the function and responsibility assumed by the terminal operator as indicated by the terms of the stevedoring and terminal services agreement, which required "Watching and guard services", and by section 54A of the National Harbours Board's "Regulations Governing the Occupancy and Use of Transit Sheds for the Handling of Cargo", which reads in part: "There must be a security guard on duty inside a shed whenever the shed is open. When a shed is closed, unless in the opinion of the Harbour Master the type of cargo justifies a security guard being on duty at all times, continuous watching is not required; each shed must however be checked inside frequently (at least once every two hours) to ensure that cargo is safe and no fire hazards exist." The foundation of the duty and liability of a bailee is the voluntary assumption of the posses sion or custody of the property of another under certain circumstances and for certain purposes. It is this which I think makes the security require ment in the stevedoring and terminal services agreement and the Board's "regulations" appli cable as a measure of the standard of care required of the terminal operator. But even if the matter is
to be regarded from the point of view of privity of contract I think there is a significant distinction to be made with respect to the "regulations" of the Board. While these "regulations" are not strictly speaking true regulations or provisions of law but rather conditions of the permit of occupation, they are imposed by the Board acting as a public authority upon the occupants of transit sheds in the exercise of what is essentially a regulatory responsibility. As such I think they should be taken as affecting the scope of the duty of care and safekeeping that was owed by the terminal opera tor to the cargo owner.
Having regard to the requirement that each shed be checked inside at least every two hours, the failure to carry out an inspection of shed 50 between the hours of 7:30 p.m. and 10:30 p.m. on September 14, 1973, was negligence in the care of the cargo for which the terminal operator is responsible. I agree with the reasons of Mr. Justice Lalande for concluding that had the necessary inspection been carried out it is probable that the loss would have been prevented. The terminal operator cannot escape this responsibility by reason of having arranged for the security guard service to be provided by an independent contrac tor: British Road Services, Ltd. v. Arthur V. Crutchley & Co., Ltd. [1968] 1 All E.R. 811.
I turn now to the question whether the terminal operator is relieved of liability for negligence by clause 4 (the Himalaya clause) of the bill of lading which reads:
4. It is expressly agreed between the parties hereto that the master, officers, crew members, contractors, stevedores, long shoremen, agents, representatives, employees or others used, engaged or employed by the carrier in the performance of this contract, shall each be the beneficiaries of and shall be entitled to the same, but no further exemptions and immunities from and limitations of liability which the carrier has under this bill of lading whether printed, written, stamped thereon or incorpo rated by reference. The master, officers, crew members and the other persons referred to heretofore shall to the extent provided be or be deemed to be parties to the contract in or evidenced by this bill of lading and the carrier is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all such persons.
By virtue of this clause the terminal operator invokes the limitation or exclusion of liability in clause 8 of the bill of lading, which provides in part that "The carrier shall not be liable in any capacity whatsoever for any delay, non-delivery, misdelivery or loss of or damage to or in connec tion with the goods occurring before loading and/or after discharge, whether awaiting shipment landed or stored or put into craft, barge, lighter or otherwise belonging to the carrier or not or pend ing transhipment at any stage of the whole trans portation", and in clause 18, which provides in part that "In any case the carrier's responsibility shall cease at the time when the goods are dis charged from the vessel and in any case all risks and expenses (including expenses for landing, lighterage, storage, cartage, port charges, etc.) incurred by delivery otherwise than from the ves sel's side shall be borne by shipper and/or con- signee notwithstanding any custom of the port to the contrary".
The Privy Council has held in two decisions, on the basis of the requirements suggested by Lord Reid in Scruttons Ltd. v. Midland Silicones Ltd. [1962] A.C. 446, at page 474, that a form of Himalaya clause could be invoked by stevedores. In the first of these cases, New Zealand Shipping Co. Ltd. v. A. M. Satterthwaite & Co. Ltd. (The "Eurymedon"), (supra), the loss occurred in the course of discharge and the immunity that was applied was the one-year time bar in Article III, paragraph 6, of the Hague Rules. In the second case, Port Jackson Stevedoring Pty. Ltd. v. Sal- mond & Spraggon (Australia) Pty. Ltd. (The New York Star), (supra), the loss occurred after dis charge while the goods were in the custody of the stevedores pending delivery to the cargo owners and again the immunity that was applied was the one-year time bar.
The Supreme Court of Canada has not had an opportunity to rule on the effect of a Himalaya clause in the light of these decisions. In Canadian General Electric Company Limited v. Pickford & Black Limited (The "Lake Bosomtwe") [1971] S.C.R. 41 at page 43, Mr. Justice Ritchie, deliver-
ing the judgment of the Supreme Court of Canada, cited with approval the decision of the House of Lords in Midland Silicones, supra, and said that "as the stevedoring company is a com plete stranger to the contract of carriage it would not be affected by any provisions for limitation of liability or otherwise contained in the bills of lading", although the nature of the provision that was being invoked is not clear. In Greenwood Shopping Plaza Limited v. Beattie [1980] 2 S.C.R. 228, at pages 237-238, Mr. Justice McIn- tyre, delivering the judgment of the Supreme Court of Canada, noted the adoption in The Lake Bosomtwe case of the rule of privity of contract as affirmed and applied in Midland Silicones and referred without commentary to the decision of the Privy Council in The Eurymedon as an example of the "agency exception".
In this state of the law, I am of the respectful opinion that the decisions of the Privy Council in The Eurymedon and The New York Star cases should be taken as having correctly applied the requirements of the agency theory indicated by Lord Reid in Midland Silicones and thus to have properly permitted the stevedores to invoke the Himalaya clauses in those cases, and that this conclusion is not in conflict with what has so far been said by the Supreme Court of Canada with reference to this question.
In the present case the requirements of the agency theory appear to have been clearly satis fied, in particular by the agreement in clause 7 of the stevedoring and terminal services contract be tween the shipowner and the stevedoring and ter minal services contractor that the shipowner "will include the Contractor as an express beneficiary, to the extent of the services to be performed hereunder, of all rights, immunities and limitation of liability provisions of all contracts of affreight- ment as evidenced by its standard bills of lading .... "
The issue, as I see it, is whether clause 4 of the bill of lading—the Himalaya clause—contem- plates the exclusion of liability for after-discharge loss in clauses 8 and 18 of the bill of lading, and if so, whether the latter exclude liability for negligence.
It is true that none of the decisions recognizing that the Himalaya clause may be invoked by steve dores or terminal operators has applied the after- discharge clause as one of the immunities covered by it, but I am, with respect, of the view that the words "shall be entitled to the same, but no further exemptions and immunities from and limitations of liability which the carrier has under this bill of lading" are broad enough to include the exclusion of liability for after-discharge loss in clauses 8 and 18 of the bill of lading in the present case. As I read these words they apply to all exemptions, immunities and limitations of liability provided by the bill of lading and not merely to those provided by the Hague Rules and made applicable by the clause paramount. The exclusion of liability pro vided by the after-discharge loss clause falls into the category of provisions expressly permitted by Article VII of the Hague Rules, which reads: "Nothing herein contained shall prevent a carrier or a shipper from entering into any agreement, stipulation, condition, reservation or exemption as to the responsibility and liability of the carrier or the ship for the loss or damage to or in connection with the custody and care and handling of goods prior to the loading on and subsequent to the discharge from the ship on which the goods are carried by water."
In The New York Star there was a question as to whether the immunity in issue in that case—the one-year time bar—applied to a case of after-dis charge loss. The Privy Council held, on the basis particularly of clause 5 of the bill of lading, which spelled out the nature of the carrier's liability, if any, after discharge, that the carrier's immunity covered the period of responsibility for the cargo after discharge and in consequence the immunity of the stevedore covered the same period. In the present case there is no clause in the bill of lading, comparable to clause 5 of the bill of lading in The New York Star case, which expressly contemplates that the carrier may have a defined liability as bailee where delivery is not taken at the time and place of discharge. Clause 4 (the Himalaya clause) of the bill of lading extends to persons engaged or employed by the carrier "in the performance of
this contract"—that is, in the performance of the contract of carriage as evidenced by the bill of lading. The bill of lading provides that the goods are to be carried to the port of discharge and "there to be delivered or transhipped", and that "If requested, one signed bill of lading duly endorsed must be surrendered in exchange for the goods or delivery order." In my opinion clause 8 of the bill of lading does not purport to define the carrier's obligations under the contract of carriage, which include the obligation to deliver the goods to the consignee or other holder of the bill of lading and the obligation to care for the goods pending delivery. See Carver's Carriage by Sea, 12th ed., 1971, vol. 2, para. 1018, p. 865, and paras. 1022 and 1023, p. 869. What clause 8 purports to do is to relieve the carrier of liability for non-perform ance of these obligations. This is apparent from the words "shall not be liable in any capacity whatsoever for any delay, non-delivery, misdeliv- ery or loss of or damage to or in connection with the goods occurring before loading and/or after discharge .... " The implication of this clause is that the carrier would otherwise be liable for non-performance of the obligations of delivery and safekeeping. The words in clause 18, "In any case the carrier's responsibility shall cease at the time when the goods are discharged", when read in the light of clause 8, do not in my opinion purport to define the scope or duration of the contract of carriage but rather purport to limit or exclude liability. Clause 18 does define the carrier's right to discharge the goods, but discharge is not synonymous with delivery. The place at which the goods are discharged is normally the place at which the consignee or other holder of the bill of lading is required to take delivery (Carver, op. cit., par. 1004, p. 855; par. 1008, pp. 857-858), but clause 18 of the bill of lading contemplates that the goods may be discharged into a warehouse selected by the carrier and that there may be "delivery otherwise than from the vessel's side", and the stevedoring and terminal services agree ment, the occupation and operation of the transit shed, and the testimony in the case show that delivery as a general rule was to be taken from the terminal operator. The case therefore discloses a mode of operation or course of dealing essentially similar to that which was described by Barwick C.J. in the High Court of Australia in The New York Star case [1979] 1 Lloyd's Rep. 298 at page
308, and in the Privy Council by Lord Wilber- force, who said at page 264: "These provisions must be interpreted in the light of the practice that consignees rarely take delivery of goods at the ship's rail but will normally collect them after some period of storage on or near the wharf. The parties must therefore have contemplated that the carrier, if it did not store the goods itself, would employ some other person to do so." I am, there fore, of the opinion that the provisions of bill of lading in the present case necessarily contemplated that the contractual obligations of the carrier extended beyond discharge and the carrier's limi tation or exclusion of liability was intended to cover the period between discharge and delivery, so that what was held by the Privy Council in The New York Star case with reference to the question that was referred to as the "capacity" point is applicable to the present case.
It is necessary, then, to consider whether clause 8 and that portion of clause 18 which has been quoted exclude liability for negligence. It is to be noted that clause 4 (the Himalaya clause) provides that the various classes of persons who are to enjoy the carrier's exemptions, immunities and limita tions of liability are to be entitled to "same, but no further" exemptions, immunities and limitations of liability as the carrier has under the bill of lading. It is thus necessary to determine the effect of such exemptions, immunities and limitations in respect of the carrier's liability. In the light of the princi ples affirmed by the Privy Council in Canada Steamship Lines Ld. v. The King (supra) at page 208 it is my opinion that clause 8 and that portion of clause 18 that has been quoted do not exclude liability for negligence. They do not contain an express reference to negligence. The words "in any capacity whatsoever" do not constitute such a reference: Smith v. South Wales Switchgear Ltd. [1978] 1 All E.R. 18 at pages 22 and 26. In so far as they may be considered broad enough to include
negligence they are not directed to liability which could only be based on negligence, but they could be intended to exclude the carrier's liability as an insurer of the safety of the goods, apart from negligence. The relevant authorities in support of this distinction with respect to carriers were reviewed in the dissenting opinion of Locke J. in the Canada Steamship Lines case, [ 1950] S.C.R. 532 at pages 560 ff. In the result, then, I am of the opinion that the Himalaya clause in this case does not have the effect of relieving the terminal opera tor of liability for the loss of the cargo.
As indicated at the outset of these reasons, I must with respect differ from my colleagues con cerning the proposed disposition of the appeal from the judgment dismissing the action as against the carrier Mitsui O.S.K. Lines Ltd. In my opinion that appeal should be allowed. Since I am of the view that clauses 8 and 18 of the bill of lading did not relieve the carrier of its contractual obligations to deliver the cargo and care for it pending deliv ery, the carrier could not relieve itself of these obligations by delegating their performance to a third person, even one who was an independent contractor. But I am also of the view, in any event, that in providing the terminal services the terminal operator was acting as agent of the carrier. This is reflected in clause 2 of the standard terms and conditions attached to the stevedoring and termi nal services contract between the shipowner (referred to therein as the "Company") and Logis- tec Corporation (referred to therein as the "Con- tractor"), which reads in part as follows: "In the event that receiving, delivery, checking and/or watching services are required, it is expressly agreed that the Contractor will arrange for such services as Agent only for the Company .... " On either view the carrier would be liable for the negligence which caused the loss of the cargo.
For these reasons I would allow the appeal, set aside the judgment of the Trial Division and order the respondents jointly and severally to pay the appellant the sum of $26,656.37 with interest at the rate of 8% from September 14, 1973, with costs in this Court and in the Trial Division.
The following are the reasons for judgment rendered in English by
LALANDE D.J.: This is an appeal from a judg ment of the Trial Division [supra] dismissing plaintiff's (now appellant's) action for loss of cargo by theft after discharge in the Port of Montreal. The goods had been carried under a bill of lading on the vessel Buenos Aires Maru from Kobe, Japan, to Montreal "there to be delivered" to the consignee. On September 14, 1973, burglars broke into a terminal transit shed operated by respondent ITO who also had discharged the shipment of 250 cartons containing 500 electronic desk calculators, 169 of which were stolen and not delivered.
The action was taken in breach of contract and in delict against both the carrier and the terminal operator (paragraph 12 of the statement of claim).
It was dismissed as against the carrier on application of the tackle-to-tackle clause (clause 8) of the bill of lading and with that judgment I agree.
As to the terminal operator, an independent contractor, the learned Trial Judge found "defects" in its security measures on the night of the break-in but concluded that if the case were to be decided on "the purely delictual level" the plaintiff had in his view "failed to prove fault within the meaning of the general law" (loc. cit. page 295), that is to say under article 1053 of the Quebec Civil Code.
Principally what was found to be defective in the watch kept over the cargo was failure to have a guard make a security check of the shed for a period of some five hours when rounds should have been made at least every two hours. 5
As a consequence there was failure to ascertain, as it would have been if an earlier round had been made, that a door to the shed was not securely locked and fastened down. The burglars, by cut
s The terminal operator occupied and ran the shed under regulations requiring that it be "checked inside" at least once every two hours (section 54A of the National Harbours Board's Regulations Governing the Occupancy and Use of Transit Sheds for the Handling of Cargo).
ting a small hole in the shed wall near the door, were able to reach in, pull a chain, raise the door a few feet, gain entry and take the stolen goods out on the wharf to two small boats. Their activities were interrupted by the first security round at about 11:30 p.m. If the 7:30 p.m. security round had not been cancelled, the padlock on the cargo door dockside inside shed 50 would have been checked and the door secured early in the evening, and it is a reasonable assumption that the burglars would not have been able to move the door as they did, gain entry and get away with the stolen goods.
By its contract with the carrier defendant ITO agreed to perform "such ... terminal services as may be required" including "watching and guard services". In my opinion ITO was negligent in the performance of those services and its fault is actionable, by a damaged person such as the plain tiff, under article 1053.
The Trial Judge, however, did not limit the plaintiff "solely to delictual grounds" because, as he says at page 301:
... plaintiff can avail itself of this contract for services between the carrier and ITO, concluded in part for its own benefit as owner [of the goods] and with its express authorization.
By this I understand that the plaintiff as holder of the bill of lading must be taken to have agreed by clause 4 thereof that the carrier would engage a terminal operator in the performance of its con tract to deliver the goods to the consignee at Montreal. By the second paragraph of clause 7 of its contract with the carrier, ITO agreed to per form those services with the benefit of the "rights, immunities and limitation of liability" provided by the bill of lading.
I conclude from these arrangements that ITO became a depositary or bailee of the goods and it is sued for failure in its duty with respect to their safekeeping. I agree with the Trial Judge that the claim of the cargo owner can be said to be ex contractu, in so far as it arises from a fault in the performance of a contract, though there be no
direct or immediate contractual relationship be tween plaintiff and defendant ITO.
The Trial Judge then considered whether ITO could have the benefit of clause 4 of the bill of lading, and be protected by that clause from liabil ity for after-discharge negligence. He came to the conclusion, on a review of authorities, that ITO was entitled to oppose the action by relying on that clause and he dismissed it for that reason in so far as it was founded on grounds other than delict.
I am in respectful disagreement with the Trial Judge on the applicability of clause 4 of the bill of lading and of the second paragraph of clause 7 of the stevedoring contract to this case. I think these clauses are irrelevant because they have nothing to do with the after-discharge negligence that we have here.
Clause 4 of the bill of lading reads as follows:
It is expressly agreed between the parties hereto that the master, officers, crew members, contractors, stevedores, long shoremen, agents, representatives, employees or others used, engaged or employed by the carrier in the performance of this contract, shall each be the beneficiaries of and shall be entitled to the same, but no further exemptions and immunities from and limitations of liability which the carrier has under this bill of lading, whether printed, written, stamped thereon or incorpo rated by reference. The master, officers, crew members and the other persons referred to heretofore shall to the extent provided be or be deemed to be parties to the contract in or evidenced by this bill of lading and the carrier is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all such persons.
The second paragraph of clause 7 of the printed clauses of the stevedoring contract between Mitsui and ITO reads as follows: 6
It is further expressly understood and agreed that the Com pany will include the Contractor as an express beneficiary, to the extent of the services to be performed hereunder, of all rights, immunities and limitation of liability provisions of all contracts of affreightment as evidenced by its standard bills of lading and/or passenger tickets issued by the Company during the effective period of this agreement. Whenever the customary rights, immunities and/or liability limitations are waived or omitted by the Company, as in the case of ad valorem cargo,
6 I omit the first paragraph because it deals with negligence during the discharging operations and not with care of the cargo after discharge.
the Company agrees to include the Contractor as an assured party under its insurance protection and ensure that it is indemnified against any resultant increase in liability.
These clauses give the terminal operator the benefit of the rights and immunities, exemption from and limitation of liability afforded by the Hague Rules to which the bill of lading is subject by clause 1 (Clause Paramount). There is nothing in those Rules that exonerates the carrier from liability for loss of goods by theft because of negligence in the care and custody of the goods after their discharge.
We are not concerned in this case with limita tion of liability under Article IV, paragraph 5 of the Hague Rules (the package limitation), nor with exemption or discharge from liability under paragraph 6 if suit is not brought within one year, nor with a loss resulting from any of the causes enumerated in Article IV, paragraph 2.
Having found defendant ITO negligent and not exonerated from liability for that negligence by any provision of its contract with the carrier or of the bill of lading, my conclusion is that the appeal as against International Terminal Operators Ltd. must be allowed with costs and that it be ordered to pay the plaintiff, as was agreed in that event, the sum of $26,656.37 with interest at the rate of 8% from September 14, 1973, with costs in the Trial Division.
The appeal as against Mitsui O.S.K. Lines Ltd. should be dismissed with costs.
With regard to this Court's jurisdiction, the subject was not raised at the trial,' but it was canvassed before us, the matter having come to the fore since this Court's decision of October 29, 1980, in The Queen v. Domestic Converters Cor poration, (supra).
In my opinion the Federal Court does have jurisdiction to entertain the plaintiff's claim against the terminal operator here because it is a
7 See footnote 2, page 292 (ioc. cit.).
matter "connected with" navigation and shipping in the words of section 4 of The Admiralty Act, 1891 of Canada, S.C. 1891, c. 29, and therefore was within the jurisdiction of the Exchequer Court of Canada under the provisions of that Act. 8
Moreover I agree with the view expressed by Mr. Justice Thurlow (as he then was) in The Robert Simpson Montreal Limited v. Hamburg- Amerika Linie Norddeutscher [1973] F.C. 1356 where, referring to the definition of "Canadian maritime law" in section 2 of the Federal Court Act, he says at page 1369:
... if the Exchequer Court had had on its Admiralty side unlimited jurisdiction in relation to maritime matters it would plainly have had jurisdiction to administer the law which governed the rights inter se of ocean carriers and terminal operators in respect of the performance by terminal operators on behalf of the ocean carriers of the obligations of the ocean carriers to discharge, care for and deliver cargo to the persons entitled thereto. That seems to me to be as maritime a matter as is the contract for the carriage of the cargo by sea. The arrangements between these parties are for the performance of a part of that contract and the activities which the terminal operators carry out under them are "part and parcel of the activities essential to the carriage of goods by sea". (Re Indus trial Relations and Disputes Investigation Act [1955] S.C.R. 529 per Locke J. at page 578.)
In the Robert Simpson case the issue was be tween carrier and terminal operator, here it is between cargo owner and terminal operator, but the arrangements for the care after discharge and delivery of the cargo were the same. I can see no reason for a distinction to be made between the two cases.
If the foundation of plaintiff's claim were purely delictual I would be faced with the opinion I expressed on jurisdiction in Domestic Converters, an opinion that was not necessary to the judgment I came to in that case and needs to be reviewed.
8 Laskin C.J. for the Court in TropwoodA.G. v. Sivaco Wire & Nail Company [1979] 2 S.C.R. 157, at 162, 163.
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