In this issue:
1. Firm and Industry News
2. Aircraft Under Charter Not a Common Carrier
3. Charter Party Agreements are not Contracts of Carriage by Water
4. Customs Brokerage Fees and Silence. Who Pays?
5. Radioactive Cargo
6. Maritime Liens - Comfact Corporation v Hull 717 (Ship)
1. Firm and Industry News
Gordon Hearn and David Huard represented
the Firm on November 9th at the Transportation Law Institute in
Gordon Hearn presented a paper on "The
Identity Theft of Cargo: Reducing Losses and the Allocation of Liability
by the Courts" at the Canadian Board of Marine Underwriters
Annual Conference in Toronto on November 27th.
LexisNexis Canada has just released its Halsbury's
Laws of Canada - Maritime Law title. Rui Fernandes is
the author of this new work. This completes Rui's trilogy of works
for LexisNexis' Halsbury's Laws of Canada. Last December his Transportation
- Carriage of Goods and Transportation - Railway Law was published.
The current work is described by LexisNexis with the following introduction:
"The globalization of the economy has ballooned
the international shipping community in size, making the sea an
integral means of modern trade. This title is a complete source
of admiralty law across Canada. Covering both the general issues
of maritime law, such as its legislative and constitutional framework,
and the more specific issues, such as regulatory and safety requirements
and the operation of ships, this title is essential for practitioners
working in fields of trade, administrative and international law."
Under Charter Not a Common Carrier
In this British Columbia Superior Court case (*1),
the claimant, Debra McLean, was the beneficiary of a life insurance
policy on the life of her late husband. She sought a declaration
that she was entitled to an accidental death benefit of $1,000,000
under the policy. The policy was purchased in 2007 as a group policy
available to individuals who held Sears charge accounts. The claimant's
husband, Mark McLean, was killed in a plane crash on August 3, 2008.
He was insured under a policy of life insurance issued by the defendant
through Sears Canada Inc. The defendant acknowledges that the policy
was valid, Mr. McLean was a person insured under the terms of the
policy, and that the plaintiff was entitled to be paid a benefit
under the policy. However, the defendant stated that the claimant
had already been paid the sum of $25,000 under the policy and submitted
that she was not entitled to an additional benefit under the accidental
death benefit rider that formed part of the policy.
To succeed, the plaintiff had to establish that Mr.
McLean died as a direct result of an airplane crash while he was
riding as a fare paying passenger inside
a common carrier. The issue for determination at trial turned on
whether the aircraft, in which Mr. McLean was a passenger at the
time of his death, was a "common carrier" as that term
was defined in the policy.
Under the policy, "common carrier" was defined
COMMON CARRIER means a public conveyance
1. licensed to transport passengers for hire; and
2. provided and operated (a) for regular passenger
service by land, water or air, and (b) on a regular passenger
route with a definite regular schedule of departures and arrivals
between established and recognized points of departure and arrival;
3. provided and operated under a Common Carrier
license at the time of the Loss.
The defendant did not dispute that the carrier, Pacific
Coastal Airlines was licensed to carry passengers or that it was
operating under an appropriate license at the time of the accident.
However, the defendant argued that the flight Mr. McLean was on
at the time of his death was a private charter and not a regular
passenger service operating on a regular passenger route and, therefore,
the flight was not within the definition of "common carrier"
in the policy.
Mr. McLean worked for Seaspan International Ltd. as
a log barge loader at the time of his death. He often worked at
remote locations on the British Columbia coast that are accessible
only by air or water. Seaspan had a standing arrangement with Pacific
Coastal to fly its employees and contractors to the locations where
and when they were needed.
On August 3, 2008, Mr. McLean was on a flight chartered
by Seaspan to transport him and five other Seaspan employees from
Port Hardy to Chamiss Bay, B.C. The flight had been arranged and
paid for by Seaspan. It carried Seaspan employees only and was not
available to any member of the public. Seaspan had given instructions
as to the destination, the departure time and the names of the employees
who were to travel on the flight. The times of departure and arrival
were set by Seaspan to co-ordinate with the arrival of its employees
with the availability of both barge and tugboat. Chamiss Bay was
not a regular destination of Pacific Coastal.
The Court looked at the plain meaning of the words
"common carrier" in the policy and discussed their meaning
in the following statement (*2):
To be a common carrier, a person or business entity
must be available to carry any passengers no matter who they may
be. If the service is available only to certain passengers and
not to the public at large, the carrier cannot be a common carrier,
but is operating under a special contract: Whelan v. Parsons
and Sons Transportation Ltd., 2004 NLSCTD 34.
In this case, the passengers were selected by and
paid for by Seaspan. It directed the time of departure and the
destination of the flight. The entire aircraft was chartered to
Seaspan and no member of the public at large had access to the
In my view, the definition of "common carrier"
under the accidental death benefit rider means the aircraft utilized
for the charter flight. And even though that aircraft was available
at times should Pacific Coastal so direct, to operate within the
definition of "common carrier" and to be within terms
of the accidental death benefit rider, it was not operating within
that definition at the time of the accident.
In the result, the Court found that the words of the
contract were clear and unambiguous. By the terms of the accidental
death benefit rider the words "common carrier" meant a
public conveyance, such as an aircraft, provided that such conveyance,
at the time of an accident, was operating a regular scheduled passenger
service between defined points which was available to members of
the public. In this case, the aircraft was not operating as a regularly
scheduled airline and was, instead, under a charter restricted to
employees or contractors of Seaspan. It was a flight in which Seaspan
determined the identity of the passengers, the time of the departure
and destination. Thus, the aircraft in this case did not fit within
the definition of "common carrier" under the accidental
death benefit rider.
1. McLean v. Canadian Premier Life Insurance
Company, 2012 BCSC 163
2. Ibid, at paragraphs 35-37
3. Charter-Party Agreements are not "Contracts
for the Carriage of Goods by Water"
The recent decision of the Federal Court of Appeal
in Canada Moon Shipping Co. Ltd. v. Companhia Siderurgica Paultista-Cosipa (*1) provides an interesting discussion and insight into the legal
and commercial context of charter-party agreements. What started
out as a standard claim for cargo damage has culminated in a rather
complicated and drawn out legal dispute giving rise the Federal
Court of Appeal ruling on the effect of an arbitration clause in
a voyage charter-party.
Charter-Party Agreements "101"
Before proceeding further into a review of this dispute,
a brief description of the different types of charter-parties may
be helpful in an understanding of the facts and legal issues. To
quote a helpful excerpt from the Court's ruling (*2):
Charter-parties are normally described as contracts
of hire of a ship
. There are three main types of charter-parties:
i) the bareboat or demise charter, which provides
for the hire of an unmanned ship;
ii) the time charter party, which involves a contract for the
hire of a fully manned ship for a specific duration. This can
include a "slot-charter", where for example a carrier
will hire from a competitor specific space or a slot [on a containership]
for a specific time period;
iii) the voyage charter-party, which are used to hire a specific
ship or type of ship for one or more voyages.
T. Co. Metals LLC ("T. Co. Metals") imported
a shipment of steel product to Canada, which it had purchased from
a Brazilian supplier. The steel arrived damaged at destination.
T. Co. Metals commenced a cargo claim in the Federal Court of Canada
against both the owner of the ship involved in the carriage, Canada
Moon Shipping Co. Ltd. ("Canada Moon") and the "time
charterer" of the ship, Fednav International Ltd. ("Fednav").
T. Co. Metals asserted in the claim that one or both of these defendants
were contracting carriers responsible for the safe delivery of the
cargo to destination.
A third party - Companhia Siderugia Paulista-Cosipa
("Cosipa") - had entered into a voyage charter-party with
Fednav in respect of the shipment of the steel from Brazil to Canada.
The bills of lading for the cargo were consigned to the order of
T. Co. Metals and were issued for and on behalf of the master of
the ship to Cosipa, who was endorsed thereon as shipper.
Picture it this way: Canada Moon owned the ship, which
was, in effect, leased to Fednav for a period of time - the "time"
charter. Fednav in turn sub-leased the ship to Cosipa for the voyage
The bills of lading for the cargo were consigned to
the order of T. Co. Metals. The bills of lading included a provision
that they were subject to the terms and conditions of the voyage
charter-party entered into between Fednav and Cosipa. The voyage
charter-party had a provision that any dispute arising thereunder
required arbitration in New York and dealt with the responsibility
for the loading and offloading of the cargo as follows:
5a) The cargo shall be brought into the holds,
loaded, stowed and/or trimmed, tallied, lashed, and /or secured
by the Charterers (i.e. Cosipa) and taken from the holds and discharged
by the receivers, free of any risk, liability and expense whatsoever
to the Owners (i.e. Canada Moon as actual owner, and, as it
might be asserted, as Fednav as the entity standing in place of
the owner granting the voyage charter to Cosipa). (commentary
Accordingly, Cosipa had direct responsibility for
the care of the cargo.
The voyage charter-party also had a provision dealing
with the use of plastic covers over the steel cargo:
45e) Whenever Charterers / Shippers cover the
cargoes with plastic canvas in order to protect them during the
voyage, Owners guarantee that said plastic canvas at load port
will be withdrawn only at the time of discharge of the cargoes
at respective ports. Should Owners fail in fulfilling the above
they will be fully responsible for any penalty, charges, extra
expenses, etc. that Charterers may face arising therefrom.
A dispute arose between Cosipa, the Master of the
vessel (who was employed by the Canada Moon, the owner) and Fednav
with respect to the use of plastic covers on the cargo prior to
loading. To resolve this dispute, such that the voyage could proceed,
Fednav requested a "Letter of Indemnity" on its own behalf
and for Canada Moon from Cosipa. This letter provided as follows:
Provided that the Owners/Master ensure that the
vessel's ventilation system will be properly functioning during
all the voyage, Charterers (i.e. Cosipa) hereby confirm that they
will relieve Master/Vessel/Owners/Managers from any liability,
and will hold them harmless for any possible cargo damage by moisture
condensation under the plastic cover as a result of restricted
ventilation of the cargo. (commentary added)
In effect, Canada Moon and Fednav wanted a release
from liability regarding their cargo obligations in respect of any
moisture condensation problems with the cargo during the voyage.
On October 20, 2008 T. Co. Metals commenced an action
in the Federal Court seeking compensation from Canada Moon and Fednav
for corrosion damage to the cargo. It alleged that the defendants
received the cargo in good order and condition at the port of loading
for carriage and delivery in the same condition to destination at
Toronto. The defendants filed a common statement of defence, denying
that they were bound to load, stow, handle, discharge or store the
cargo, and denying that they, in fact, performed any such services
as these operations had been undertaken by Cosipa or T. Co. Metals.
The defendants pleaded that the bills of lading were expressly subject
to all terms, conditions and clauses in the voyage charter-party.
Canada Moon and Fednav brought a "third party
claim" against Cosipa citing clause 5a) in the voyage charter-party
dealt and the responsibility of Cosipa and/or the receiver for the
loading and offloading of the cargo.
Cosipa applied to the Federal Court for a "stay"
of the claims brought against it, seeking to enforce the terms of
the voyage charter-party that disputes be submitted to arbitration
in New York.
a) The Initial Stay Proceedings before the Prothonotary
Prothonotary Morneau dismissed Cosipa's request for
a stay of the third party proceedings in favour of arbitration proceedings,
as well as Cosipa's alternative basis for a stay, which argued that
Brazil was a "substantially more convenient forum" for
the dispute to be resolved than the Canadian forum. Prothonotary
Morneau refused to give effect to the arbitration clause in the
voyage charter-party since he found that it was a "contract
for the carriage of goods by water" within the meaning of s.
46(1) of the Marine Liability Act (*3), which provides:
46(1) If a contract for the carriage of goods
by water to which the Hamburg Rules do not apply provides for
the adjudication or arbitration of claims arising under the contract
in a place other than Canada, a claimant may institute judicial
or arbitral proceedings in a court or arbitral tribunal in Canada
that would be competent to determine the claim if the contract
had referred the claim to Canada, where
a) the actual port of loading or discharge,
or the intended port of loading or discharge under the contract,
is in Canada;
b) the person against who the claim is made
resides or has a place of business, branch or agency in Canada;
c) the contract was made in Canada.
The Prothonotary reasoned that charter-parties came
within the meaning of "contracts for the carriage of goods
by water", not being expressly excluded from the scope of the
above provision. The Prothonotary also considered Cosipa's request
that that the third party claim be stayed on the ground that Canadian
courts were not the convenient forum for the dispute. He examined
the factors identified in Spar Aerospace Ltd. v. American Mobile
Satellite Corporation (*4) and determined that such factors
were not of sufficient weight to displace the defendants' choice
of forum to wage the third party claim. As a result, the Prothonotary
dismissed the motion for a stay of the third party proceedings.
b) Cosipa appeals of the Prothonotary's Ruling
to a Judge of the Federal Court
On the first level of appeal in the "stay"
proceedings, Justice Scott allowed Cosipa's appeal from the Prothonotary's
decision, finding that subsection 46(1) of the Act did not apply to charter-parties per se. In coming to this conclusion,
the Judge carefully considered the ordinary meaning of the words
used, the scheme of the Act, its objects and the intention
of Parliament as well as Canada's international obligations. While
he found that the expression "contract for the carriage
of goods by water" in subsection 46(1) was wide enough,
in its ordinary meaning, to include charter-parties, the Judge found
that, as a matter of the broader legal context, it did not apply
For its part, Canada Moon argued that subsection 46(1)
should apply by virtue of the fact that, as owner, its relationship
with Cosipa was by virtue of the bills of lading (where Cosipa was
"shipper" and, as a matter of law, Canada Moon was liable
as a carrier) rather than pursuant to the voyage charter-party under
consideration. Canada Moon also argued that it had a stand-alone
claim against Cosipa based on the aforementioned Letter of Indemnity,
which it argued should not be viewed as a part of or an extension
of the voyage charter-party, but rather as being a stand alone agreement
in and of itself. Canada Moon relied on the fact that the Letter
of Indemnity in and of itself did not contain an arbitration clause.
Justice Scott ruled that the operative contract between
both Canada Moon and Fednav was, in fact, the voyage charter-party
as the bills of lading incorporated the terms and conditions of
that charter-party by reference, which thereby remained the applicable
contract between Canada Moon, Fednav and Cosipa. The Judge found
accordingly that the Letter of Indemnity constituted an amendment
to the charter-party rather than a separate stand-alone agreement.
In the result, the Judge stayed the third party claims
of both Canada Moon and Fednav against Cosipa pending the conclusion
of the arbitration in New York under the terms of the voyage charter-party.
c) On Appeal to the Federal Court of Appeal
In her reasons for judgment issued for the panel of
three judges, Justice Gauthier considered Canada Moon and Fednav
to stand in different positions in relation to "stay"
issue and the voyage charter-party and accordingly considered the
positions of those parties separately.
As concerns Fednav, the issue related to whether s.
46(1) applies to charter-parties, the Fednav - Cosipa relationship
being framed directly by the voyage charter-party. As concerns Canada
Moon, the court had to discern the essence of the Letter of Indemnity
and whether it could it be enforced only through arbitration proceedings;
that is, was it an extension of the voyage charter-party or a stand
alone contractual undertaking?. There remained the further issue
for adjudication as to whether the bills of lading evidenced a distinct
contract of carriage of goods between Cosipa and Canada Moon, in
light of Justice Scott's ruling that the relationship between Cosipa
and Canada Moon was governed by the voyage charter-party.
The Court of Appeal, accordingly, addressed the following
i) Is Cosipa entitled to a stay of proceedings of
the third party claim brought against it by Fednav?
ii) Is Cosipa entitled to a stay of proceedings of the third party
claim brought against it by Canada Moon?
iii) If the answer is no in either case, is Canada a forum
non conveniens for the third party claim? (*5)
i) Is Cosipa entitled to a stay of proceedings of
the third party claim brought against it by Fednav?
Justice Gauthier cited the proposition that the courts
will generally respect the choice of commercial entities to resolve
their disputes by arbitration: "Absent legislative intervention,
the courts will generally give effect to the terms of a commercial
contract freely entered into, even a contract of adhesion, including
an arbitration clause" (*6). In the normal course, Fednav
would accordingly be bound by the agreement to arbitrate in the
voyage charter-party. The issue is whether there has been "legislative
intervention" by way of s. 46(1) of the Act to relieve Fednav
of its agreement to arbitrate disputes arising under the charter-party.
Justice Gauthier necessarily had to revisit the meaning of the expression "contract for the carriage of goods by water".
Justice Gauthier agreed that the broader contextual approach to
discern the meaning as taken by Justice Scott was appropriate: "to
give effect to the modern rule of construction, one must consider
the entire context before concluding that there is no ambiguity
in a legislative provision".
Justice Gauthier reviewed the domestic legal context
in the enactment of the Marine Liability Act, and the international
legal regime and the importance of uniformity in the application
of laws between maritime nations. Justice Gauthier considered the
commercial context of charter-party agreements. Citing John Wilson's
text Carriage of Goods by Sea (*7), she found it to be common
A charter-party is a contract which is negotiated
in a free market, subject only to the laws of supply and demand.
While the relative bargaining strengths of the parties will depend
on the current state of the market, shipowner and charterer are
otherwise able to negotiate their own terms free from any statutory
interference. In practice, however, they will invariably select
a standard form of charter-party as the basis of their agreement,
to which they will probably attach additional clauses to suit
their own requirements.
The existence of these standard forms is of considerable
advantage in international trade where the parties may be domiciled
in different countries and their negotiations hampered by language
problems. In such circumstances, parties conversant with the terms
of a standard form are unlikely to be caught by an unusual or
unexpectedly onerous clause
Taking the above into consideration Justice Gauthier
found that by way of contrast that one can readily see the imbalance
in bargaining power between ocean carriers and shippers of goods
- being a far cry from the commercial context in which ship owners
and charterers operate - as a result of which legislative regimes
such as s. 46(1) came to be enacted. In short, there exists no policy
basis to restrict the freedom of contract for those negotiating
the chartering of ships whereas the relationship between shippers
and carriers is entirely different.
Justice Gauthier noted that the ordinary meaning of
a "contract for the carriage of goods by water" could include charter-party agreements - after all, the former are
entered into for the eventual purpose of the performance of contracts
of carriage. This said, taking into consideration the aforementioned
legal and commercial contexts, Justice Gauthier found that this
expression would not and should not be understood to include charter-parties.
As stated in her Reasons for Judgment:
 This legal conclusion is consistent with
commercial reality. Charter-parties are contracts between commercial
entities dealing directly with each other, whose execution and
enforcement are the private concern of the contracting parties.
There is no policy reason why such actors should not be held to
 To reiterate, considering the general purpose
and the mischief that section 46 was meant to cure (that
is, boilerplate jurisdiction and arbitration clauses dictated
by carrier to the detriment of Canadian importers and exporters
who become parties to such contracts), and the different commercial
reality that lead to the conclusion of charter-parties, the Judge's
conclusion that the voyage charter-party under review is not covered
by sub-section 46(1) is correct.
As to Fednav's argument that the Letter of Indemnity
from Cosipa was a stand alone contract unrelated to the voyage charter-party,
Justice Gauthier found that this Indemnity was an amendment to the
charter-party and, in the result, that Fednav would be required
to arbitrate both of its claims on the voyage charter-party itself
and, on the Indemnity against Cosipa, by way of arbitration in New
ii) Is Cosipa entitled to a stay of proceedings of
the third party claim brought against it by Canada Moon?
Justice Gauthier reached a different result in respect
of the claims by Canada Moon against Cosipa, allowing Canada Moon's
appeal and ruling that its third party claim against Cosipa was not stayed and could proceed.
To succeed on the question of a "stay",
Cosipa was required to show that Canada Moon either actually or
constructively agreed to arbitration. While the arbitration clause
in the voyage charter-party formed a part of the bills of lading,
Cosipa could not rely on them as such an agreement would be caught
by s. 46(1) of the Act. Cosipa could not rely on the arbitration
clause in the voyage charter-party agreement as Canada Moon was
not a party to that agreement.
Cosipa asserted that Canada Moon was, in fact, privy
to the agreement to arbitrate in New York by virtue of the Letter
of Indemnity being an amendment to the charter-party, which was
negotiated by Fednav and Cosipa with Canada Moon in mind as a "third
party beneficiary". Justice Gauthier did not give effect to
this argument, noting that Cosipa was trying to impose an obligation
on Canada Moon (i.e. the requirement to arbitrate disputes) that
did not exist when the Letter of Indemnity was issued. For Cosipa
to succeed with this approach, it would have to demonstrate that
the benefit conferred on Canada Moon by way of the Letter of Indemnity
was a qualified benefit in the sense that the Indemnity could
only be invoked through arbitration proceedings. Justice Gauthier
found that even under a theory that, as far as Canada Moon was concerned,
the voyage charter-party was amended by the Letter of Indemnity,
and that there still was no requirement that Canada Moon pursue
the benefit of the Indemnity in arbitration proceedings.
This said, Canada Moon had also argued that the Indemnity
was a free-standing agreement containing no arbitration clause.
Justice Gauthier agreed with this submission, ruling that there
existed all the elements of a stand-alone contract including Canada
Moon having accepted the cargo as it was packaged for carriage.
Accordingly, whether the Indemnity be read as a part of the voyage
charter-party or as a stand-alone document, Canada Moon was simply
not part of any agreement that would require it to arbitrate its
dispute with Cosipa.
Accordingly, Canada Moon's claims were not stayed
and it would be able to proceed with its third party claims against
Cosipa in the pending action by T. Co. Metal.
iii) If the answer is no in either case, is Canada
a forum non conveniens for the third party claim?
As to Cosipa's alternative basis to argue for a stay,
that the courts of Brazil were the "convenient" forum,
Justice Gauthier agreed with the Prothonotary's assessment of the
relevant factors regarding whether Canada was a forum non conveniens.
Applying appellate deference to those findings and ruling that Cosipa
had not convinced the Court that it should exercise its discretion
to stay the third party proceedings in favour of a Brazil venue,
Cosipa was unsuccessful on this argument.
The Federal Court, accordingly, ruled that Cosipa
was entitled to a stay of Fednav's third party claim against it
but that Canada Moon's claim could proceed and that the Canadian
Federal Court was a convenient forum for that purpose.
*1 2012 FCA 284
*2 supra, at paras. 59 - 60
*3 S.C. 2001, c.6
*4  4 S.C.R. 205
*5 Forum non conveniens can be loosely translated from Latin
to "inconvenient forum" in English. As alluded to above,
our courts will agree to stay an action brought in Canada in favour
of a foreign venue if certain tests are satisfied that justice can
be more efficiently pursued in the foreign venue, all factors of
the case being considered.
*6 Seidel v. TELUS Communications Inc.,  1 S.C.R. 531
*7 6th edition (Essex: Pearson Education Limited, 2008) at page
4. Customs Brokerage Fees and Silence, Who Pays?
Dans une décision récente, la Cour
Supérieure du Québec a du trancher sur l'obligation
d'un consignataire de payer les frais de courtages en lien avec
le dédouanement d'une cargaison lorsque le connaissement
est silencieux sur la question. La Cour trancha qu'un consignataire
a l'obligation de payer les frais de courtages en lien avec le dédouanement
d'une cargaison, lorsqu'il s'agit de biens de petite valeur, puisque
ceux-ci sont inséparables du transport pour lequel l'expéditeur
According to the Bills of Lading Act *(1),
a consignee of goods named on a bill of lading, as well as every
endorsee, is subject to all liabilities in respect of the goods
carried under the said bill of lading as if the contract contained
in the bill of lading had been made with them. But is that liability
limited to the transportation fees or is it actually broader than
that, also applying to "other charges" like the customs
brokerage fees? In Leblanc v. United Parcel Service du Canada
Ltée *(2), the Quebec Superior Court had the opportunity
to answer that question.
The petitioner, Mr. Leblanc bought a shirt on Ebay
from a seller in the United States for which he paid the price of
$11.99 plus a shipping and handling fee of $10. Upon delivery of
the shirt by United Parcel Service du Canada Ltée ("UPS"),
the respondent had to pay a further $16.80 in customs brokerage
fees, although his invoice contained no reference to any customs
brokerage fees. In a motion seeking authorization to bring a class
action against UPS, the petitioner claimed for the fees for customs
brokerage services charged by UPS to him, in connection with his
importation of the shirt into Canada. UPS resisted the petition
by pleading, namely, the lack of legal justification of the petitioner's
complaint as the petitioner was bound by the contracts contained
in his bill of lading as if he were an immediate party, by virtue
of section 2 of the federal Bills of Lading Act, which reads
"2. Every consignee of goods named in a bill
of lading, and every endorsee of a bill of lading to whom the
property in the goods therein mentioned passes on or by reason
of the consignment or endorsement, had and is vested with all
rights of action and is subject to all liability in respect of
those goods as if the contract contained in the bill of lading
had been made with himself.
Accordingly, UPS argued that the petitioner was liable
for the payment of the brokerage fees as he was for the cost of
transport per se.
The Legal Issue
In order to decide whether the petitioner was authorized
to bring his class action against UPS, the Court had to decide the
- Is the petitioner bound to pay customs brokerage
fees as liabilities in respect of the imported goods by virtue
of sec. 2 of the Bills of Lading
Act if the bill of lading contained no provision for customs
The Court answered yes, that in the case of low value
casual goods shipped into Canada, the consignee is bound to pay
customs brokerage fees, despite the bill of lading's silence in
regard of the payment of the customs brokerage fees. The provision
of customs brokerage services is inseparable from the uninterrupted
door-to-door transport the shipper contracted for:
"If, as appears to be the case, the consignees
did not expressly authorize the shippers to contract for customs
brokerage services and the shippers did not ask for them either,
but the courier companies provided them anyway and the consignees
accepted the goods and paid for the services on being billed,
they have ratified the act of the courier companies and cannot
complain since being vested with the rights of the shippers, who
could ratify the act of their agents, the courier companies, in
providing the services, the consignees have done so in their stead.
Moreover, despite the bills of lading's silence
on the matter of customs brokerage, I believe that in the case
of low value casual goods being shipper into Canada, section 2
of the BLA becomes applicable once it is recognized that provision
of the service is inseparable from the uninterrupted door-to-door
transport the shipper contracted for.
While in the cases before me I find nothing allowing
me to conclude that either the vendors or the Petitioners were
made aware in advance of shipment of the customs brokerage fees
the latter would be charged, I believe it is correct to impute
knowledge of the requirement of customs clearance to both, as
well as knowledge that only the courier companies could perform
that function for low value casual goods while they were in transit.
Both considerations are matters of law.
Performance of the service was therefore an implied
term of the contracts of transport.
The Court accordingly dismissed the petitioner's motion
for authorization to bring a class action against UPS.
*(1) Bills of Lading Act,
RSC 1985, c B-5.
*(2) Leblanc v. United Parcel Service du Canada Ltée, 2012
QCCS 4619 (CanLII).
5. THE FINANCIAL FALLOUT OF RADIOACTIVE CARGO:
CONTAINER RADIATION & STEPS TO MITIGATE THE ASSOCIATED COSTS
Modern times present modern challenges for participants
in the transportation industry. Long-gone are the days when good
weather and a little bit of luck would be as good as a guarantee
that a shipment would make it from origin to destination without
difficulty. Nowadays, the increasingly complex nature of international
shipping is such that there are now far more opportunities for something
to go wrong; or, to look at from another angle, there are now so
many things that need to go right. As a result, shippers,
consignees, carriers, freight forwarders and any other party with
an interest in the movement of cargo need to be prepared for an
ever-increasing number of contingencies.
In recent times, increased port security and its related
technology has revealed a previously unknown pitfall in connection
with the movement of international cargo into Canada: radiation.
Specifically, in recent years the Canadian Border
Services Agency ("CBSA") installed radiation detection
equipment at the majority of Canada's ports for the purposes of
locating and identifying sources of radiation in marine containers
that could be a potential threat to health and safety.(*1) There
are two main tools used to detect radiation in a marine container:
stationary portals and car-borne mobile units.(*2)
What may come as a shock to the reader is the frequency
with which the CBSA seizes containers on account of the emission
of a radioactive signal. For example, in a sixty-three day period
in 2011, the CBSA stopped 19 containers that tested positive for
low levels of man-made radiation in British Columbia alone.(*3)
Although more recent data is not available, news services reported
that a container was stopped at the Port of Montreal on account
of radiation as recently as October of 2012.(*4)
What is the Source the Radiation and Why Should
You may be thinking to yourself: I'm in the business
of shipping/carrying/receiving innocuous retail products, not in
the business of transporting medical isotopes - I don't need to
worry about radiation.
Unfortunately, if your cargo contains any amount of
metal, however minute in quantity, you are at risk. Fortunately,
the risk is usually not health-related. More often than not, the
radiation is of such low-levels to pose no real health risks; however,
the risk can have significant legal and financial consequences should
your cargo or container be stopped by the CBSA on account of contamination.
i. The Main Offender: Cobalt 60
All nineteen of the containers stopped by the CBSA
on account of radiation, as well as the other incidents referred
to above, shared the same source of radiation: Cobalt-60.
Cobalt-60 is a man-made radioactive material that
has many industrial applications and is commonly used for medical
treatments.(*5) It is usually contained in metallic housings and,
as a result, sources can get mixed in with scrap metal and pass
undetected into scrap metal recycling facilities. If melted in a
mill, they can contaminate entire batches of metal as well as the
Reports are mounting that metal manufacturers and
dealers from China, India, former Soviet-bloc nations and some African
countries export contaminated materials and goods, which is likely
a byproduct of inadequate government regulation of their respective
scrap/recycling industries. (*7)
It may come as a surprise as to the kinds of products
that been found to be contaminated. Citing examples of products
found to have low-levels of contamination in the United States (which
is experiencing the same influx of contaminated cargo as Canada),
one news service compiled the following list: (*8)
Common kitchen cheese graters, reclining chairs,
women's handbags and tableware manufactured with contaminated
metals have been identified, some after having been in circulation
for as long as a decade. So have fencing wire and fence posts,
shovel blades, elevator buttons, airline parts and steel used
Because the contamination occurs when the metal is
recycled (i.e. at the metal's source), contamination can surface
in virtually any product. The Canadian Nuclear Safety Commission
("CNSC") has confirmed that the source of the radiation
recently identified at the Port of Montreal was found to be kitchenware.(*9)
The "take-away" message is that, regardless of the nature
of the cargo being shipped, so long as it contains metal (particularly
steel), there is a risk of contamination.
Often, the level of contamination is too low to merit
any reasonable health concerns; however, the CNSC and the legislative
framework within which it operates allows for no chances when it
comes to radiation. Should your cargo be stopped by the CBSA on
account of radiation, you will have to be prepared for the legal
and economic fallout that can accompany such a finding.
What Happens if my Cargo is Stopped and How will
it Affect my Business?
In the event that the CBSA detects the emission of
radiation from a container, the container will be stopped and immediately
isolated within the port. The CBSA will alert the CNSC, which will,
in turn, ordinarily send out a letter to the owner of the cargo
and/or the owner of the container advising that the container has
been stopped and advise of two options:
(1) the container can be returned to the point of
origin as is; or
(2) the container can be accepted into Canada if
the importer hires a consultant in possession of a license issued
by the CNSC to isolate the goods containing the radioactive material
and safely dispose of the material at a licensed facility in a
matter that complies with the Nuclear Safety and Control Act and associated regulations.
Ignoring, for now, the business consequences of not
being able to deliver/receive the cargo (which are discussed below),
the options provided by CNSC both involve a high degree of difficulty
With that said, one might ask: "Why bother doing
anything at all. If the expense outweighs the value of the cargo
and the consequences of its non-delivery, would it not make sense
to simply abandon the cargo?" The short-answer is that, should
the CNSC formally order that you take the aforementioned action,
the failure to do so could result in "a fine not exceeding
$1,000,000 or [
] imprisonment for a term not exceeding five
years or [
While this article is not intended to be nor is
it offered as legal advice (which must be sought on the unique aspect
of each case) there are some common denominators and steps involved
in cases of the detention of cargo.
i. Returning the Cargo to the Point of Origin
With regard to the first option this option may rarely
be available as a practical matter.
Once a container has been identified as being radioactive,
it is unlikely that an ocean carrier would be willing to transport
the contaminated cargo in light of the carrier's risk of cross-contamination
of other cargo or the vessel for that matter; moreover, it is doubtful
that any country would knowingly allow the import of the contaminated
ii. Isolating the Contaminated Cargo
As directed by the CNSC, you need to isolate the source
of the contamination (i.e. is the container itself previously contaminated
from carrying irradiated material or is it the cargo itself and,
if so, what part of the cargo?).
Step 1: The first step towards isolation is
to retain a surveyor who is licensed by the CNSC to survey and handle
the radioactive material. A licensed radiation surveyor will have
the equipment and know-how necessary to survey the cargo and isolate
the source of the contamination.
Step 2: The CBSA may not allow the survey to
occur on the port premises; in which case the next step will be
to make arrangements with a privately owned and operated warehouse
that is licensed by the CBSA for the short-term storage of imported
goods not yet released by the CBSA (a "sufferance warehouse")
to receive the contaminated cargo and provide facilities for the
de-stuffing, survey and storage of same.(*11)
Step 3: If the contaminated container must
be transported from the port to the sufferance warehouse, one may
have to coordinate with the CBSA, the surveyor, the warehouse and
a transportation company to obtain the necessary approval from the
CNSC to permit the transportation of the contaminated goods.
As mentioned above, more often than not, the contamination
is of such low levels as to present no reasonable risk to humans;
however, should the contamination be found to be of a level such
that a legitimate health risk is present, this step will invariably
be much more complicated and beyond the scope of this general-purpose
Step 4: Once the container has been transported
to the sufferance warehouse, theoretically the container is ready
to be surveyed such that the source of the radiation can be isolated
and identified. Unfortunately, it is unlikely that your radiation
surveyor is capable of physically de-stuffing the container on his/her
own and, more likely, assistance will be required from the warehouse
staff (i.e. to operate a fork-lift, etc.).
Again, you may then have to coordinate with the surveyor
and the warehouse staff to obtain the necessary approval from the
CNSC to permit the warehouse staff to assist in the de-stuffing
of the container. As most incidents of Cobalt-60 contamination pose
a negligible health risk, additional safety equipment will usually
not be required for the warehouse staff; however, should it be needed,
the radiation surveyor may be able to provide same.
Keep in mind that you may not be the only party interested
in attending the radiation survey. Depending on the circumstances
of the shipment, the carrier, shipper and/or consignees may wish
to have their own representative attend the survey.
At the conclusion of the survey, the surveyor ought
to have isolated the source of the radiation and identified whether
the container and/or any of the other cargo was cross-contaminated.
Step 5: In the event that the radiation can
be isolated to a single source and it can be confirmed that there
was no cross-contamination, it would be at this juncture that you
would likely have to obtain approval from the CNSC and the CBSA
to confirm that the uncontaminated container and unaffected cargo
can be removed from the sufferance warehouse and carried on to destination.
iii. Disposing the Contaminated Cargo
Step 1: Once the contaminated cargo has been
isolated, arrangements will need to be made to have it destroyed.
Assuming that your radiation surveyor is licensed to destroy or
arrange the destruction of the cargo, the first step may then be
to arrange to have a sample of the cargo sent to the surveyor's
facilities for laboratory testing to determine the method/level
of disposal as may be required.
Step 2: Again, arrangements may then have to
be made between you, the surveyor, the CBSA and the CNSC for the
necessary approvals with respect to the transport of a sample of
the contaminated shipment from the sufferance warehouse to the surveyor's
Step 3: Once the extent of the contamination
and method of required disposal has been assessed, the surveyor
may then present disposal options. Oftentimes, the cost of disposal
is based on the weight of the cargo to be destroyed and, compared
to the disposal of ordinary materials can be significantly more
Step 4: Once the cargo has been destroyed and
a disposal certificate is obtained and provided to the CNSC, generally
speaking the process is effectively complete. However, as is discussed
below, the process is rarely as simple as following the steps above
(as and to the extent applicable) because, while trying to arrange
for the isolation and disposal of the contaminated cargo, it is
likely that there are legal/business considerations that you will
have juggle throughout the process.
While navigating the above-described steps and necessary
CNSC approvals that come with isolating and destroying the contaminated
cargo, there are a number of business and/legal consideration that
you may have to address depending on the circumstances of the shipment.
The purpose this article for that matter, is to highlight
the fact that shippers, consignees, carriers and freight forwarders
alike, need be aware of this emerging issue. Should you face such
a situation, it is our hope this article will assist you in giving
due consideration to the variety of risks that it presents and,
furthermore, to give you a framework to effectively manage those
risks and ensure the efficient resolution of same with minimal harm
to your business.
*1 Canadian Border Services Agency - Radiation
Detection, website: <http://www.cbsa-asfc.gc.ca/security-securite/detect/rad-eng.html>.
*3 Canadian Border Services Agency - News Release "The CBSA
keeps radioactive goods from entering Canada" (December 5,
2011), website: <http://www.cbsa-asfc.gc.ca/media/release-communique/2011/2011-12-05-eng.html>.
*4 CNews "Radioactive kitchenware detected at the Port of Montreal"
(October 12, 2012), website: <http://cnews.canoe.ca/CNEWS/Canada/2012/10/12/20277406.html>.
*5 Supra at note 3.
*6 United States Environmental Protection Agency - "Radiation
Protection - Cobalt", website: <http://www.epa.gov/radiation/radionuclides/cobalt.html>.
*7 Scripps Howard News Service - "Thousands of consumer products
found to contain low levels of radiation" (June 21, 2009),
*9 Canadian Nuclear Safety Commission - "Regulatory Action
- Hanjin Shipping Canada Inc." (November 16, 2012), website:
*10 Nuclear Safety and Control Act (S.C. 1997, c. 9), s. 51.
*11 Canadian Border Services Agency - "Sufferance warehouses"
(March 6, 2012), website: <http://www.cbsa-asfc.gc.ca/import/codes/menu-eng.html>.
6. Maritime Liens - Comfact Corporation v Hull
In 2010, Parliament amended the Marine Liability
Act to create a maritime lien available to necessaries men involved
in providing certain goods or services. The new section, s. 139(2),
states that "a person, carrying on business in Canada has a
maritime lien against a foreign vessel for claims that arise (a)
in respect of goods, materials or services where supplied to the
foreign vessel for its operation or maintenance including
stevedoring and lighterage; (b) out of a contract relating to the
repair and equipping of the foreign vessel." (*1) In a decision
released October 1, 2012, Comfact Corporation v Hull 717 (Ship),
the Federal Court considered the scope of this section for the first
time. The determinative question was one of statutory interpretation:
whether Parliament intended to include skilled welding services
performed during the construction of a ship as part of "services
for operation and maintenance" and in so doing provide those
performing such services with a maritime lien. Justice Harrington
found that Parliament did not and no such lien was available to
the plaintiffs. (*2)
The plaintiff, Comfact Corporation, was an unpaid
subcontractor of the builder, Davie Yard Inc. Davie went under the Companies Creditors Arrangement Act during the construction;
if Comfact had a maritime lien it would outrank other creditors.
The defendant ship's owners did not appear. Instead, Export Development
Canada appeared for Hull 717 in its capacity as mortgagee. (*3)
The law prior to the amendment was set out by the
Federal Court of Appeal in Mount Royal/Walsh Inc v Jensen Star
"To contend that an action in rem could be
sustained even in the absence of any personal liability on the
part of the owner would go against the whole idea behind the system
which is, again, the protection of the owner. A claim against
a ship cannot be viewed apart from the owner; it is essentially
a claim against the owner. [
] I essentially agree that liability
as a result of some personal behaviour and attitude on the part
of the owner is required." (*4)
This was a mere statutory right in rem that
was contingent on the behaviour or attitude of the owner and would
not survive a transfer of ownership. Conversely, a maritime lien
may exist without personal liability of the ship-owner and survives
change in ownership.
Comfact's services were not in the nature of stevedoring
or lighterage. In order to succeed it had to show that the services
it performed were for Hull 717's operation, maintenance, repair,
and equipping, or that "construction" is an implied item
included in s. 139. Export Development Canada stated that the services
were instead rendered with respect to the construction of the ship
and the maritime lien applies only in respect of services explicitly
referred to in the statute.
Justice Harrington agreed with Export Development Canada. He ruled
that section 139 of the Maritime Liability Act does not apply
to those who have rendered services in the construction of a ship,
and therefore the plaintiff did not enjoy a maritime lien. This
conclusion is the result of comparing the language of the Act with that of other statutes dealing with marine services.
In the Federal Courts Act, s. 22(n) states
that "the Federal Court has jurisdiction with respect to
any claim arising of a contract relating to the construction, repair
or equipping of a ship." (*5) Section 139(2)(b) has a similar
formulation, but omits construction. It refers only to "a
contract relating to the repair or equipping." 139(2)(a)
refers only to services for operation or maintenance. The presumption
of coherence indicates that these should be read together so as
to avoid conflict; the absence of the word "construction"
in (2)(b) is evidence of what services Parliament intended to include
in (2)(a). Justice Harrington wrote that "there is a presumption
that the legislator included in the statute the elements which he
meant to include
when a provision specifically mentions one
or more items but is silent with respect to other items that are
comparable, it is presumed that the silence is deliberate and reflects
an intention to exclude the items that are not mentioned." Parliament thus "could not have intended to grant a maritime
lien to those engaged in the construction of a ship." (*6)
The plaintiff's failure on this point meant it was
not necessary for the Court to rule on other interpretive issues.
One such issue was whether Hull 717 was a foreign vessel, as required
by s. 139. Comfact argued that the ship was recorded in the Canadian
Ship Registry as owned by a Norwegian company, and therefore it
was a foreign vessel. This was not relevant to Justice Harrington's
decision; whether on foreign or domestic vessels, construction services
do not give rise to a s. 139 lien. However, if the Federal Court
were to consider the issue of vessel nationality in different circumstances,
the fact that the vessel was recorded as foreign owned would not
immediately lead to a finding that the vessel was foreign without
the consideration of other factors. In a separate case in 2007,
Justice Harrington wrote that "[recording] is not conclusive
the Court should enquire into all the circumstances affecting
the right of property" in order to determine the owner
of two yachts. In that case, he decided that the builder, not the
recorded owner, was the legal and beneficial owner of the vessels.
Additionally, the Court did not have to decide whether a post-amendment in rem action
still required some personal behaviour or attitude on the part of
the owner. Comfact argued that the enactment of s. 139 did away
with this requirement. Their argument focused on s. 139(2.1) of
the Act, which stated "for the purposes of paragraph (2)(a),
with respect to stevedoring or lighterage, the services must have
been provided at the request of the owner of the foreign vessel
or a person acting on the owner's behalf;" the inclusion
of "stevedoring and lighterage" means Parliament intended
to require no such personal nexus for claims that arise from other
services that were not explicitly listed. Export Development Canada
countered that this subsection is intended only to harmonize s.
139 with s. 251 of the Canada Shipping Act, 2001, which provides "that a bareboat charter, as such, may now bind a ship with
respect to stevedoring and lighterage services." (*8) In
this conception, Parliament's intention was to preserve narrow exceptions
under which a bareboat charter may bind a ship rather than remove
the personal nexus requirement for maritime liens in general.
This section of Comfact's argument is similar to the
reasoning that led to Justice Harrington deciding against them.
Just as the omission of "construction" from s. 139 meant
that Parliament did not intend to grant a maritime lien to those
in construction of a ship, the court might not interpret s. 139
as requiring that services be provided at the request of the owner
or his agent except for the services specifically mentioned in the
statute, stevedoring and lighterage. If the same logic applies,
only maritime liens arising from stevedoring and lighterage will
require a personal connection to the owner.
Justice Harrington's decision offers a look into the
future of s. 139 jurisprudence by setting out both sides of a number
of elements of the maritime lien that remain in contention. Counsel
involved in these claims before the Federal Court in the future
will have the advantage of knowing how a sitting judge framed these
arguments. Moreover, lawyers can help their clients avoid litigation
by advocating for contractual certainty in instances where statutory
interpretation remains unclear.
*1 Marine Liability Act,
SC 2001, c 6 s. 139(2)
*2 Comfact Corporation v Hull 717 (Ship), 2012 FC 1161 (CanLII)
*3 Ibid at para 6.
*4 Mount Royal/Walsh Inc v Jensen Star (The),  1 FC
199 at para 30.
*5 Federal Courts Act, RSC 1985, c F-7 s. 22(n).
*6 Comfact, supra note 2 at paras 29-33.
*7 FC Yachts Ltd v Vessel Bearing Hull No QFY10703E709 (Yacht),
2007 FC 1257 at paras 19-20.
*8 Canada Shipping Act, 2001, SC 2001, c 26 s. 251.
This newsletter is published to keep our clients and friends informed
of new and important legal developments. It is intended for information
purposes only and does not constitute legal advice. You should not
act or fail to act on anything based on any of the material contained
herein without first consulting with a lawyer. The reading, sending
or receiving of information from or via the newsletter does not
create a lawyer-client relationship. Unless otherwise noted, all
content on this newsletter (the "Content") including images,
illustrations, designs, icons, photographs, and written and other
materials are copyrights, trade-marks and/or other intellectual
properties owned, controlled or licensed by Fernandes Hearn LLP.
The Content may not be otherwise used, reproduced, broadcast, published,or
retransmitted without the prior written permission of Fernandes