TWO SUPREME COURT OF CANADA CASES OF IMPORTANCE
1. Supreme Court of Canada: Arrest of Cargo - Phoenix
Bulk Carriers Ltd. v. Kremikovtzi Trade 2007 SCC 13: This recent
decision involved the arrest of a shipment of coal on a vessel.
In Canada the Federal Court of Canada Rules allow the arrest of
"property that is the subject of an action." The court
rejected the "physical nexus" interpretation of this section
in favour of the "identifiability" approach. The cargo
arrested was supposed to be cargo for a particular vessel but was
loaded on a competitor's ship. In applying the "identifiability"
test a court asks whether the cargo is the cargo designated in the
contract of affreightment alleged to be breached. Applying this
approach the court had no problem in confirming the arrest of the
cargo was valid. The fact that it was not on the vessel specified
in the contract ("the physical nexus" approach) did not
make the arrest invalid.
2. Supreme Court of Canada: Rail Carriage and Disability
- Council of Canadians with Disabilities v. Via Rail Canada Inc.,
2007 SCC 15: The Canadian Transportation Agency ordered VIA
Rail to modify 13 economy coach cars and 17 service cars to make
them personal wheelchair accessible. The issue at the hearing was
whether this accommodation imposed undue hardship on VIA Rail and
whether the Agency's decision ordering VIA Rail to retrofit some
of its newly purchased cars was patently unreasonable. In a 5-4
decision the Supreme Court of Canada held that the standard of care
applicable to the Agency's decision as a whole is patent unreasonableness.
The court stated "Section 5 of the Canada Transportation Act,
together with s. 172(1), constitute a legislative direction to the
Agency to determine if there is an "undue obstacle" to
the mobility of persons with disabilities. Section 5(g)(ii) of the
Act states that it is essential that "each carrier or mode
of transportation, as far as is practicable, carries traffic to
or from any point in Canada under fares, rates and conditions that
do not constitute an undue obstacle to the mobility of persons,
including persons with disabilities". The Agency's authority
to identify and remedy "undue obstacles" to the mobility
of persons with disabilities requires that it implement the principle
that persons with disabilities are entitled to the elimination of
"undue" or "unreasonable" barriers, namely those
barriers that cannot be justified under human rights principles."
The court further added "The Agency uniquely has the specialized
expertise to balance the requirements of those with disabilities
with the practical realities - financial, structural and logistic
- of a federal transportation system."
The court found that where an expert tribunal has charted an appropriate
analytical course for itself, with reasons that serve as a rational
guide, a reviewing court should not lightly interfere with the tribunal's
interpretation and application of its enabling legislation. Here,
the Agency interpreted its authority to proceed with appellants'
complaint under s. 172(1) in a manner that was rationally supported
by the relevant legislation. It also defined the analytical process
to be followed in identifying undue obstacles in the federal transportation
network in a way that is supported by the Agency and human rights
jurisprudence. Viewed as a whole, the Agency's reasons showed that
it approached and applied its mandate reasonably.
CORNSTARCH AND SEAWEED DON'T MIX: THE SHIPPER,
THE CONSOLIDATOR, THE FREIGHT FORWARDER AND THE CARRIER: HIGWAY
FREIGHT SYSTEMS LIMITED V. EMO TRANS (CANADA) FREIGHT LIMITED
The recent decision of the Ontario Superior Court
in Highway Freight Systems Limited v. EMO Trans (Canada) Freight
Limitedi highlights how the common law of Ontario
regards the duties and standard of care of the freight forwarding
The "Comedy of Errors"
Highway Freight Systems Limited ("Highway Freight")
is a freight forwarder operating in the Toronto area. As a part
of its business, it has a warehouse and cargo consolidation operation.
In August, 2004, one of its customers, Nacan Products Limited ("Nacan")
hired Highway Freight to ship a load of cornstarch being stored
in the latter's warehouse to Nacan's customer in Saskatoon, Saskatchewan.
In or about the same time, another customer of Highway
Freight, Gum Products, asked it to load a shipment of seaweed stored
in the Highway Freight facility into a container to be "spotted"
at that warehouse. This shipment of seaweed was destined for a buyer
in Germany. The container in which the Gum Products seaweed was
to be carried was delivered to Highway Freight pursuant to arrangements
made by its logistics provider being a freight forwarder named EMO
Trans (Canada) Freight Limited ("EMO").
Employees of Highway Freight erred in loading the
cornstarch into the container intended for the carriage of the seaweed.
By the time that this error was discovered, the cornstarch (intended
for Saskatoon) was on a railcar traveling to the Port of Montreal
to be laden onto a vessel for carriage to Germany.
In the bizarre tale that follows, EMO will find itself
as a defendant.
Highway Freight had to do something. It sought the
intervention of EMO who had been involved (through its logistics
mandate) in arranging the various carriers by which the container
of seaweed was to be carried to Germany. Thus, EMO seemed to be
a logical entity for Highway Freight to turn to. EMO informed Highway
Freight that the first interception could only be upon the arrival
of the container at Montreal, and that the cornstarch shipment could
then be returned to the Toronto origin rail yard the following week.
Were the container of cornstarch simply rerouted back
"home" after arrival at Montreal, this article would not
have been written. For the moment, all seemed happy, with Highway
Freight confirming to EMO that the former would pay for all return
freight charges back to Toronto. However, the mood turned when it
was learned that the container could not be easily accessed at the
Montreal wharf facility that it had been delivered to, it being
landlocked by other containers. A charge of $50.00 would be assessed
by stevedores on a per container basis to move various containers
to gain ready access to that containing the cornstarch. Accordingly,
Highway Freight decided to wait until those containers impeding
access were moved in their normal course of handling for the cornstarch
container to be accessed for return to Toronto.
Unfortunately, contrary to this plan, the stevedores
at Montreal loaded the container onto a vessel bound for Germany,
operated by Mediterranean Steamship Company ("MSC"). Upon
learning of this development, EMO tracked the container and it made
arrangements for the same to remain on the vessel upon her call
at the German port. The container was accordingly returned to the
Montreal port, and on-carried by rail to the origin Toronto rail
yard, arriving some six weeks after its initial escape from the
Highway Freight warehouse.
Unfortunately, the usual manifest documentation (generated
by MSC), indicating what cargo was "arriving" at Canada
referenced the seaweed (as per the original voyage intention) instead
of the actual contents being the cornstarch. As such, there was
a conflict between that manifest and the Canada Customs invoice
documentation as had been provided by Narcan (as shipper of the
cornstarch), to facilitate its re-entry. This contradiction in documents
delayed customs clearance and caused another couple of months worth
of delays in the return of the cornstarch to Highway Freight. Demurrage
charges started to mount at the Toronto rail terminal where the
container was "held up" as there arose an impasse between
Highway Freight and EMO as to who had to take the lead in clearing
up the confusion with Canada Customs as to what was in the container.
The plaintiff wanted EMO to fix the problem given that the immediate
issue emanated from the incorrect MSC documentation, MSC having
been engaged for the original seaweed carriage by EMO. Highway Freight
argued that EMO was the exporter of record for the container and
that it had an obligation to correct the record for the eventual
import with Canada Customs. For its part, EMO took the position
that the import clearance of the shipment was not its responsibility,
being that of the importers who would be consuming or disposing
of same namely, Highway Freight or Nacan. EMO cited its efforts
in trying to convince MSC to waive the ocean freight charges with
MSC ultimately only charging a modest amount for ocean freight.
The "insult to injury" in the eyes of Nacan and Highway
Freight arose with the reality that in order to complete the customs
clearance process they had to undertake and guarantee the payment
of demurrage and other handling charges incurred as a result of
the aforesaid delays, which ultimately totaled over $15,000.00.
Highway Freight commenced an action against EMO, blaming
EMO for the problems that caused the delays and, consequently, seeking
relief for the monies paid.
The Ontario Superior Court of Justice
The matter culminated in litigation in the Ontario
Superior Court of Justice, with Highway Freight seeking damages
from EMO. This claim included claims for the ocean freight paid
as well as the demurrage charges for the container while remaining
at the rail yard at Toronto while matters were being worked out
EMO defended on the basis that it was only a voluntary
intermediary between Highway Freight and MSC in the steps being
taken to return the container of cornstarch. EMO maintained that
it acted reasonably in locating the container, where it had ended
up initially at the Port of Montreal and in creating and providing
the option to Highway Freight that the container could be "dug
out" of the export pile (at the aforementioned cost). EMO argued
that Highway Freight was the author of its misfortune in both the
original error and in its decision to wait for the normal course
extrication of the container. EMO protested that it instructed MSC
that there would be no bill of lading instruction for the container
as it was to be returned to Toronto, only to thereafter learn that
the container had been mistakenly loaded onto the steamship headed
for Germany. EMO further cited the steps taken to track the container
and that it forwarded the MSC arrival notice documentation to Highway
Freight. EMO also cited the "normal practice" that upon
the arrival of an import container, and the provision of the steamship
lines' "arrival notice" it is then the responsibility
of the cargo owner and/or their customs broker to attend to the
necessary clearances from Canada Customs.
Thus, the essential dispute then turned to the plaintiff
arguing that EMO "dropped the ball" with the incorrect
MSC documentation and the failure to facilitate the customs clearance,
while EMO argued that it had no obligations in that regard. The
plaintiff admitted at trial that it was looking to EMO as a "last
resort" while the crisis grew, preferring to involve EMO as
the solution rather than forcing the involvement of its customer,
Nacan, by virtue of the sequence of events having initially unfolded
by virtue of its own error.
The plaintiff essentially argued that EMO owed it
a duty of care, in having assumed the duty to make arrangements
for the cornstarch or that alternatively, EMO had assumed a contractual
obligation for the redelivery of the cornstarch, it having had a
direct relationship with MSC.
Analysis of the Obligations of EMO as the Freight
Freight forwarders are not regulated in Canada, and
therefore the duty of care and expectations of the logistics professional
are a function of developing standards of care as developed in the
case law. Where freight forwarders act as "principals",
or in effect "contracting carriers", their duties of care
and their obligations are then framed by the rules binding carriers
in the particular mode of carriage in question.
The term "freight forwarder" is not defined
by statute in Canada, however the label is generally applied to
one facilitating the movement of freight, acting either as an agent
or as a principal placed between the shipper/customer (or consignee/customer,
as may be the case) and the actual "performing carrier".
As such, the freight forwarder might in a particular case be a "contracting
carrier", or it may only act as a true agent, the latter not
assuming responsibility of for delivery of cargo to destination.
In this particular case, EMO never issued a bill of lading or any
other transportation document as concerned the carriage of any cargo
belonging to Nacan and, as such, it was not alleged that it failed
as a carrier. As such, the court's analysis proceeded on the basis
of analyzing what the obligations are of the "freight forwarder
agent", which more readily fit the EMO mold, relative to the
In this regard, the plaintiff cited the leading case
law precedent in Ontario on point of Al-Qahtani-Shaw-Leonard
Ltd. v. Cross World Freight Ltd.ii, which reasons
for judgment incorporated the earlier decision of Rowlett L.J. in Jones v. European & General Express Companyiii :
It must be clearly understood that a forwarding
agent is not a carrier; he does not obtain possession of the
goods; he does not undertake the delivery of them at the other
end, unless prevented by some accepted cause of loss or something
which affords an excuse. All that he does is to act as an agent
for the owner of the goods, to make arrangements with the people
who carry - steamships, railways and so on - and to make arrangements,
so far as they are necessary, for the immediate steps between
ship and the rail, the customs, or anything else; so that the
liability of the defendants, if there is any, depends on their
failing - if they have failed - to carry out those duties which
I have thus described.iv
In the Al-Qahtani-Shaw-Leonard Ltd. decision,
the Ontario Court ruled that the duty of the freight forwarder was
then to "make arrangements on behalf of the shipper for
the carriage of goods. Included within this responsibility are any
additional duties taken on by the freight forwarder, explicitly,
such as the preparation of necessary customs documentation and the
duty which is that of any agent to follow the instructions of its
The judge in this decision nicely cited the reality
that "legal principles are easily stated in the abstract.
Intelligently applied, however, they have to be read and understood
in context". Quite simply, did EMO breach any standard,
or fail to do something, as a freight forwarder agent?
EMO protested liability on the following basis:
- There was no contract, express
or implied, between Nacan or Highway Freight and itself;
- There was no relationship between Nacan or Highway
Freight and itself giving rise to a duty of care, EMO in effect
arguing that it was cast in the role of a "Good Samaritan"
in regards of which it acted reasonably;
- It was the plaintiff's error that set the whole
series of events in motion;
- The plaintiff had the opportunity of extricating
the container from the Montreal container facility when it had
the earliest opportunity to do so, but opted otherwise;
- There were unforeseeable and uncontrollable events
thereafter taking shape, in the errors of the Montreal stevedores
loading the container onto the ship, and in the incorrect completion
of the manifest by MSC as to the contents of the container for
importation back into Canada;
- The redelivery back to the Toronto warehouse was
ultimately resolved by the plaintiff and/or Nacan who both always
had the responsibility of facilitating the importation of the
shipment as well as the ability to mitigate the situation.
The court agreed with EMO's defence that the facts
of the case could not support an action either in contract or in
tort. Clearly, the "optics" of this case did not favour
the plaintiff. It was the plaintiff's error that set the events
in motion and the plaintiff had an opportunity early on to "save"
the container at the Montreal yard facility but chose not to. There
were then the further unforeseen developments in the mistaken shipment
of the container to Germany and the incorrect documentation for
which it would be unfair and remote to hold EMO accountable. Quite
simply, EMO was seen to have acted over and beyond the call of any
duty, working diligently to keep the plaintiff informed with information
as to the status of the container as soon as that information became
Ultimately, what worked against the plaintiff in this
case, was the fact that it always enjoyed an element of control
over the equation and that it could have taken more timely steps
to prevent the loss in question but chose not to. However, the court
did not have to resort to causation principles in this regard in
exonerating EMO, it being found that EMO did not have a contract
nor did it create a duty of care in effectively acting as a "Good
Samaritan". While the Al-Qahtani-Shaw-Leonard Ltd. cited
above remains valid precedent, it speaks to cases where there is
privity and proximity between the parties, governed by a written
agreement setting out in considerable detail what is expected of
the freight forwarder agent. In this case, to quote the trial judge,
EMO was at most a "Good Samaritan spectator to a series
of events of other's creation" and to fix EMO with liability
would "require the creation of a new category of legal obligation".
Accordingly, the action was dismissed.
This case underscores the importance of the parties
to any transaction clearly identifying their obligations and the
involvement of others, and the reality that courts may only find
that reasonable reliance was placed on others in the performance
of clearly defined functions.
i. (2007) Can. LII 11722.
ii.  60 O.R. (2d) 565 (Ont. H.C.) at para. 71-72.
iii. (1920), 90 L.J.K.B. 159-160.
iv. It is clear from the year of this case (1920) that this is very
much an analysis of the nature of the historical and conventional
freight forwarding agency, before the advent of "3PLs"
or, in the ocean context, Non-Vessel Operating Common Carriers (NVOCC).
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