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December 2007
In this issue:
1. Firm News
2. Automobile Insurance Doesn't Cover Hunting!
3. Receivers of Goods Can Be Held Liable for the Payment of Freight
Charges
Even Though They Did Not Hire the Carrier
1. Firm News
Fernandes Hearn LLP's 2008 Maritime
and Transportation Law Conference will be held on January 18, 2008
in Toronto, Ontario. Details are on our firm's News and Upcoming
Events page at http://www.fernandeshearn.com/news_&_upcoming_events.htm.
Gordon Hearn will be speaking at the
Transportation Lawyers Association "Chicago Regional Seminar"
on January 11, 2008. Gordon will be giving a presentation comparing
the truck carriage limitation of liability regimes in Canada and
the United States.
2. Automobile Insurance Doesn't Cover Hunting!
In Lumbermens Mutual Casualty Co. v. Herbison
[2007] S.C.C. 47 Justice Binnie of the Supreme Court of Canada starts
his decision with the following question and answer:
Can it be said that when a hunter steps away from
his pick-up truck under cover of darkness, leaving the engine
running, and negligently shoots at a target he cannot see 1,000
feet away, and hits a companion in the leg thinking him to be
a deer, that the injury arose "directly or indirectly from
the use or operation" of the insured truck within the meaning
of s. 239(1) of the Insurance Act, R.S.O. 1990, c. I.8? A majority
of the Ontario Court of Appeal gave an affirmative answer to this
question.
Fred Wolf was driving to his designated hunting stand
when he thought he saw a deer. It was before sunrise. He stopped
and got out of his truck. He removed his rifle, loaded it and, seeing
a flash of white in the headlights (which he concluded was the tail
of a deer about to take flight), he shot. Unfortunately, he hit
another member of the hunting party, Harold George Herbison.
At trial Mr. Wolf was found liable in negligence to
Mr. Herbison and members of the Herbison family for negligence and
ordered to pay damages in the amount of about a million dollars.
Mr. Wolf was insured under a standard motor vehicle insurance policy
with Lumbermens Mutual Casualty Co. The policy provides for coverage
for loss or damage "arising from the ownership or directly
or indirectly from the use or operation" of an automobile owned
by the insured. At trial the Herbisons argued that the injuries
arose "directly or indirectly" from the use or operation
of Mr. Wolfe's truck because:
(a) Wolfe was using a 4 wheel drive truck
which is commonly used by game hunters to access difficult terrains
and drive in the bush.
(b) [Wolfe was in] poor physical condition, having a heart condition
and difficulty walking, [he] was dependent on his truck to get
to his hunting stand . . .
(c) The muffler on the Wolfe truck was in poor condition and noisy,
and had it not been, it is possible that Wolfe could have heard
Herbison and his nephew talk.
(d) Although Wolfe says he was not intending to use the headlights
on his truck to illuminate the target, he does not believe that
he would have taken that shot had it not been for the headlights
of the truck illuminating the general area to some extent.
The trial judge concluded that the negligent shooting
by Mr. Wolfe constituted an intervening act that was merely incidental
to the use and operation of the vehicle. The claim against the insurer
was dismissed.
The Ontario Court of Appeal allowed the appeal. One
of the three judges, J.A. Cronk, dissented and stated that when
Mr. Herbison was shot, Mr. Wolf's vehicle was not being used for
a purpose from which the injuries resulted.
In the Supreme Court of Canada Justice Binnie begins
his analysis with this most insightful quote:
In a tragic case like the present, it is
tempting to look to an insurer's deep pockets as the only available
source of compensation for a seriously injured and innocent victim.
However, the insurance in this case
is automobile insurance, and s. 239 requires the victim to demonstrate
that the "liability imposed by law upon the insured [Wolfe]"
is for "loss or damage . . . arising from the ownership or
directly or indirectly from the use or operation of [the insured
Wolfe's] automobile". Can it be said that Wolfe's negligent
shooting was fairly within the risk created by his use or operation
of the insured truck, or did the use of the truck merely create
an opportunity in time and space for the damage to be inflicted,
without any causal connection direct or indirect to the legal
basis of Wolfe's tortious liability? Clearly, I think, the latter
is the case. [Emphasis added]
Finally, reason and logic trumps emotion!
Rui Fernandes
2. Receivers of Goods Can Be Held Liable for the Payment of Freight
Charges
Even Though They Did Not Hire the Carrier
S.G.T. 2000 Inc. v. Molson Breweries of Canada
Ltd. 2007 Q.C.C.A. 1364 (Can. L.I.I.)
In a recent decision having national ramifications,
the Quebec Court of Appeal recently overturned a lower decision
of the Quebec Superior Court in ruling that the receiver (or consignee)
of a shipment of goods, (Molson Breweries of Canada Ltd.), was liable
to pay two motor carriers for their freight charges initially incurred
by Molson's supplier. Molson's supplier was Consumers Glass, who
contracted two carriers, S.G.T. 2000 Inc. and XTL Transport Inc.
to move glass bottles from its Ontario facility to Molson plants
located in other provinces. Unfortunately, Consumers Glass went
bankrupt without paying these carriers in full for their services.
The carriers sought to recover the unpaid freight
charges from Molsons, adopting an argument that appears to have
little modern judicial precedent. The carriers cited section 2 of
the Federal [Canada] Bills of Lading Act which prescribes
that:
Every consignee of goods named in a bill of lading,
and every endorsee of a bill of lading to whom property in
the goods therein mentioned passes on or by reason of the consignment
or endorsement, has and is vested with all rights of action and
is subject to all liabilities in respect of those goods as if
the contract contained in the bill of lading has been made with
himself. [emphasis added]
A similar wording is found at the provincial level,
in the Mercantile Law Amendment Act, being Ontario legislation.
The legislative intent behind the above provision
is clear. Under general contract law, only a party who is "privy"
to a contract, that is, who personally enters into a contract, may
enjoy its benefits and be held accountable for any obligations there
under. Thus, as concerns the consignee of goods contemplated by
the above provision, there is both a potential benefit and a burden.
The benefit is that the consignee in such cases has rights of action
against the carrier in the event of cargo loss, damage or delay
- but it would however be subject to the liabilities of the shipper
(as S.G.T. 2000 and XTL Transport Inc. argued in this case) for
the payment of freight charges.
In this case the bill of lading documentation contained
an endorsement that freight charges were 'pre-paid'. Once the delivery
was effected, two invoices were issued, one by the carriers to Consumers
Glass for the freight charges, and the other by Consumers Glass
to Molson for a sum based on the supply cost of the cargo which
included a component for the freight charges. Molson paid Consumers
Glass the supply invoice [including the component for freight charges]
however Consumers Glass only paid a portion of the freight charge
amounts it owed to the carriers. This paved the way for a difficult
question: given the demise of Consumers Glass, do the carriers go
without payment in full, or does Molson pay 'extra' beyond what
they contemplated paying for freight?
Insofar as the shipment of the cargo involved the
carriage of goods between provinces, the parties to the dispute
agreed that the federal legislation (the Federal Bills of Lading
Act) would apply as opposed to the equivalent provincial legislation.
The Lower Court Ruling
The lower court concluded that Molson Breweries could
not be held to respond to pay the unpaid freight charges, because
the use of the word "pre-paid" on the bill of lading amounted
to a renunciation or a relinquishment by the carriers of the right
to be paid by the consignee. In short, this deprived the carrier
of the benefit of the above statutory provision: the carriers were
effectively announcing that they would only look to the shipper
for payment.
It should be recalled that there are various requirements
under section 2 above - in that it will not be in each and every
case that a carrier can look to a consignee (with whom it did not
contract) for the payment of freight charges:
- The consignee must be named in the bill of lading.
- The property must have "passed" by reason
of the tender of the freight to the carrier (a fact that, granted,
is the usual presumption absent an agreement to the contrary between
the seller and the buyer of goods).
These requirements were satisfied in this case.
The question simply remained as to whether the carriers had done
something to prevent the application of this statute.
On Appeal
The issue on the appeal concerned the general question
as to the circumstances upon which a carrier of goods might claim
from the consignee payment of the freight charges otherwise generally
owed to it by the shipper.
The Court of Appeal found that Molson became the owner
of the cargo by virtue of the same being tendered by Consumers Glass
to the carriers for shipment. The Court found that it was therefore
incumbent on Molson to show that the statute did not apply, by showing
that the carriers in fact waived their entitlement to this
protection. This required Molson to show that there was something
both intentional and binding with the reference to "pre-paid"
on the bill of lading (Note: such a reference on a bill of
lading is usually intended only to ease billing logistics between
the shipper and the carrier - the carrier being directed to forward
invoicing to the shipper as opposed to a third party or the consignee
paying on 'collect' terms). The Court of Appeal ruled that the 'prepaid'
reference was accordingly not enough by itself to deprive the carriers
of the protection of the statute. This manifestation of the standard
intent of initially looking to the shipper for freight charges does
not by itself equate to a carrier choosing not to avail itself of
this statutory 'fall back' position of looking to the consignee
for payment if necessary. This however does not mean that in a certain
fact situation that a carrier might represent to a shipper or consignee
that it will not exercise its right to look to the consignee for
payment having the effect of the loss of this protection. Something
more is however is needed in this regard than a mere 'prepaid' reference
on the bill of lading. Absent specific arrangements whereby the
carriers were not to take the benefit of the legislation that this
provision should govern, the Court ruled that parties cannot be
presumed to have relinquished or waived rights by mere silence.
In conclusion, the notion or concept of "pre-paid"
services does not by itself constitute a relinquishment by the carrier
of the rights afforded to it under the legislation.
Accordingly, the carriers were able to recover their
freight charges, which were significant (exceeding $200,000) from
Molson Breweries. While this no doubt worked an injustice in the
mind of Molson, the legislative trade off was clear. Molson would
have been able to claim against the carrier for cargo loss damage
or delay, but equally having received the shipment and benefiting
thereby it had to make the carriers whole for unpaid freight charges.
Gordon Hearn
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