The Warsaw Convention Limitation of Liability:
Canadian Court Forecloses Extra-Contractual Remedies,
and Adopts Subjective Test: Case Comment
The limit of liability of an air carrier under the
Warsaw Convention, which has been incorporated into the Carriage
By Air Act in Canada, has received little judicial consideration
in Canada. So much so that the question of whether a court should
apply a subjective test or an objective test when determining a
carrier's entitlement to limit liability under Arts. 22 and 25 of
the Convention has been decided at the trial level only recently.
Two notable cases were litigated against air carriers in the last
two years: Connaught Laboratories v. British Airways (2002),
61 O.R. (3d) 204 (Ont. S.C.J.) and Nuvo Electronics v. London
Assurance (2000), 19 C.C.L.I. (3d) 195 (Ont. S.C.J.).
In Connaught Laboratories the plaintiff sought to
recover its losses when the defendant air carrier failed to keep
a shipment of vaccines under refrigeration, during the flight from
Toronto to Melbourne, as stipulated in the air waybill and as indicated
on the shipping cartons. Due to a number of flight delays and exposure
to temperatures outside the permitted range, the vaccines were not
acceptable to the customer and had to be destroyed.
British Airways sought to limit its liability to about
$2,500 under Art. 22 of the Convention. Connaught argued that the
carrier could not rely on the limit because:
1. The carrier had no available refrigeration facilities
in Toronto, London and Melbourne. By agreeing to refrigerate the
cargo, the carrier, by its silence, negligently misrepresented to
the plaintiff that it had refrigeration facilities. Thus, there
was a breach of an independent duty of care prior to the contract
of carriage which was not subject to the Convention.
2. The damage resulted from an act or omission of
the carrier's servant or agent done with intent to cause damage
or recklessly and with knowledge that damage would probably result.
Thus Art. 25 of the Convention deprived the carrier of this defence.
No Cause of Action Outside the Convention
As a question of law, the court held that the Warsaw
Convention would not be ousted by a claim that there was an independent
duty to advise the shipper of the lack of refrigeration. The goods
were damaged in the course of transit between countries. There is
a remedy for that damage provided for in the Warsaw Convention.
That being the case, the Warsaw Convention applied regardless of
whether there might be other remedies available as a matter of domestic
law. The Warsaw Convention is meant to be an exhaustive source of
remedies for damage sustained as a result of international carriage
by air. It does not matter that the plaintiff might also be able
to recover more substantial damages based on a cause of action not
covered by the Convention but relating to the same harm. As long
as there is a remedy for the damage available under the Convention,
that remedy is exclusive.
Subjective Test Applied
The court found that the cargo was damaged as a result
of the failure of British Airways to refrigerate the cargo in London.
The British Airways staff involved were acting within the scope
of their employment. There was no evidence that their handling of
the cargo was done deliberately "with an intent to cause damage".
The key issue was whether the act or omission was done "recklessly
with knowledge that damage would probably result".
The court observed that there has been considerable
controversy as to whether the words "recklessly with knowledge
that damage would probably result" in Art. 25 call for a subjective
or objective test in determining whether the reckless actor had
knowledge that damage would probably result. If the test is purely
subjective, it is an extremely difficult one to meet.
The court surveyed a number of Canadian decisions
which were not conclusive on the issue. The court commented that
the interpretation of an international convention, the purpose of
which is the unification of the law, cannot be done by reference
to the domestic law of one of the contracting States. The purpose
of drawing up an international convention designed to become a species
of international legislation would be wholly frustrated if the courts
of each State were to interpret it in accordance with concepts that
are specific to their own legal system. The court therefore adopted
an approach favouring consistency of interpretation among nations,
rather than one in which each country applies its own domestic principles.
After reviewing decisions from the U.K., the U.S.,
Belgium and Switzerland Justice Molloy held that the subjective
test has been adopted by virtually all courts of nations that are
parties to the Convention. France was a notable exception, adopting
the objective test. Therefore, the court applied a subjective test
in this case to determine whether British Airways acted recklessly
in failing to refrigerate Connaught's cartons and that British Airways
knew that the shipment would probably be damaged as a result.
Proof of Subjective Elements and Adverse Inferences
The court noted that:
Connaught gave notice of its claim to British Airways
within a matter of days. British Airways took no steps to investigate
or preserve evidence until two years later when the statement of
claim in this action was delivered. Given the large volume of cargo
that moves through London's Heathrow airport, it is perhaps not
surprising that British Airways was unable to find the relevant
information two years after the fact. Connaught gave timely notice.
If British Airways had made the appropriate inquiries in a timely
manner, there is good reason to believe that directly relevant information
as to what happened would have been forthcoming.
The court then went on to state:
[I]t is appropriate in these circumstances to draw
an adverse inference from the failure of British Airways to call
any evidence as to why the cargo came to be stored in the manner
it was. This was information solely within the power of British
Airways to obtain, and it has not put forward any acceptable reason
to explain its absence. The protection afforded to air carriers
under Article 25 of the Convention is considerable. In the face
of prompt notice of a claim in respect of this cargo, and bearing
in mind the provisions of Article 25, it is not acceptable for British
Airways to have done nothing to obtain the information relevant
to Article 25 and then take the position that the plaintiff has
failed to meet the Article 25 test.
The court observed that it is very difficult for a
shipper to prove subjective intent, since the evidence is usually
solely in the possession of the carrier. However, the requirement
of proving actual knowledge under a subjective test does not carry
with it a requirement that the knowledge be proven by direct evidence.
In some cases, the risk of damage is so obvious that it can be inferred.
Following the approach taken in S.S. Pharmaceutical
Co. Ltd. v. Qantas (1988), 22 N.S.W.L.R. 734 (Comm. Div.), Justice
In the case before me, there is no direct evidence
available as to the state of mind of the persons who handled the
cargo in London. However, the requirement of refrigeration was clearly
marked on the packages and on the waybills, and they were labeled
as perishable. Refrigeration was available in London but not used.
It is obvious that perishable goods requiring refrigeration will
probably be damaged if they are not refrigerated. In my view, this
gives rise to the inference that British Airways personnel deliberately
took the risk of the damage. At the very least, it gives rise to
circumstances requiring some response from British Airways and no
explanation has been provided. This supports the drawing of an adverse
inference against British Airways.
As a result, British Airways could not limit its liability
under Art. 22 of the Convention. The result here was similar to
an earlier decision in Nuvo Electronics v. London Assurance (2000), 19 C.C.L.I. (3d) 195 (Ont. S.C.J.) where the court, in the
absence of any direct evidence that the cargo had been stolen by
the carrier's employees, applied the civil burden of proof and drew
the inference from all the evidence that it was more likely than
not that the carrier's employees committed theft. There, the court
considered the fact that the missing shipment of computer chips
required a forklift to move, there were previous instances of similar
shipments going missing at the same terminal, only the carrier's
employees were authorized to enter the cargo area, and the location
of the cargo in the warehouse was close to the supervisor's desk.
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