Declaration of Value on Bills of Lading: Clarification by Ontario Court of Appeal

The Ontario Court of Appeal released its decision in National Refrigerator & Air Conditioning Canada Corp. v. Celadon Group Inc., 2016 ONCA 339 and clarified how a shipper must declare the value of cargo in order to receive the full value of the cargo if the cargo is lost or damaged.

The trial had been heard before Justice Chapnick. The following evidence was established. National Refrigeration & Air Conditioning Canada Corp. was a manufacturer of commercial refrigeration products. In October and November 2011, National hired Celadon Group Inc., Celadon Canada Inc., and Celadon Trucking Services Inc. (collectively “Celadon”) to transport two shipments of copper tubing from Mexico to Ontario. Both shipments were hijacked in Mexico and never recovered. National submitted a claim for loss and damage for US$122,228.46 and US$98,700.52 respectively. Celadon denied both claims relying on exclusion of liability clauses contained in Celadon’s Rules and Regulations and posted on Celadon’s website. National commenced an action to recover damages.

 After a three-day trial, the trial judge found that Celadon could not rely on the exclusionary terms, not having notified National of those terms, and, that in any event, the exclusionary terms were unconscionable.  She also found that the value of the goods had been declared on the commercial invoice contained in the shipping documents and that those documents formed part of the contract of carriage. Consequently, Celadon could not rely on the statutory limitation of liability to $4.41 per kilogram pursuant to Carriage of Goods, O. Reg. 643/05 under the Highway Traffic Act, R.S.O. 1990, c. H.8.

The trial judge also found that independent of the carriage agreement, Celadon was liable in negligence. This was because Celadon had specific knowledge about the enhanced risk of hijacking in Mexico that gave rise to a duty to warn National of the increased danger and it failed to do so.

At trial, the trial judge found that Celadon could not rely on the exclusionary terms, not having notified National of those terms. This despite the fact that the parties had prior dealings with each other where Celadon had specifically brought those terms to National’s attention. The terms were also on Celadon’s website. The logistics manager for National testified that there was no discussion, either in writing or orally, about limiting liability when transporting goods from Mexico [other than references to the tariffs and website in an email]. The Court of Appeal refused to overturn Justice Chapnick’s ruling that the terms and conditions applied. The trial judge had specifically held that:

[T]he clauses in question were not brought to [National’s] attention at the time that the agreement for shipment was reached with respect to the October or November shipments. [National] cannot be said to have assented to the inclusion of the exclusion of liability clause in the parties’ contract.

The Court of Appeal held that that finding was not tainted by legal error and was clearly supported by the record. They saw no basis for appellate intervention. Surprisingly, this is in contrast to other court decisions that reference to terms and conditions in a website are sufficient for incorporation by reference into a contact. Warning to carriers: terms and conditions on a website and reference to a web site are not sufficient to incorporate those terms into a contract of carriage. To be safe carriers should send a copy of the tariff to the customer and have them sign off on the terms.

With regards to the statutory limitation of liability, Celadon submitted on Appeal that, even if the exclusion of liability clause did not apply, liability was limited by s. 9 of Schedule 1 of Ontario Regulation 643/05 because the contract was governed by Ontario law. Section 9 provides that carrier liability is limited to $4.41 per kilogram unless s. 10 is satisfied. Section 10 provides the following:

If the consignor has declared a value of the goods on the face of the contract of carriage, the amount of any loss or damage for which the carrier is liable shall not exceed the declared value.

There was no declared value on the bill of lading. The trial judge found that as a copy of the commercial invoice issued by the Mexican consignor to was provided to the carrier, s. 10 was satisfied.

The Court of Appeal found that the trial judge erred in law in so finding stating:

[20] The terms of s. 10 are clear. The consignee must declare the value of the goods on the face of the contract of carriage. Section 4(1) of the regulation specifies what a contract of carriage must contain and that specification includes “(i) a space to show the declared valuation of the shipment, if any”.

[21] The bill of lading used for these shipments met the specifications of s. 4 and included a space to show the declared value of the shipment. That space was not completed for these shipments. The invoice issued to National by the consignor had nothing to do with the contract of carriage and providing a copy of the invoice to the carrier was not declaring the value of the goods on the face of the contract of carriage within the meaning of the regulation.

The Appeal Court concluded that the trial judge erred by failing to limit National’s claim to the value permitted by the regulation, namely, $110,830 (Canadian).

With respect to the trial judge’s finding that the exclusion term in the tariff was unconscionable, the Court of Appeal in obiter in essence implied that the trial judge was wrong, stating “As we have concluded that the trial judge did not err in holding that the exclusion of liability clause did not apply, it is not necessary for us to deal with her finding of unconscionability. Our silence, however, should not be taken as agreeing with that finding.”

Lastly, the Court of Appeal had to deal with the trial judge’s finding that Celadon was independently negligent (and could not limit liability) for its failure to adequately warn National about the enhanced risk of hijacking in Mexico. The Court found that the trial judge erred on this issue as well. The Court agreed with Celadon that the trial judge erred in law by holding that could be liable in tort in the circumstances of this case. Any failure or neglect on the part of Celadon with regard to the shipments arose directly out of the duties associated with performance of the contract of carriage and as such did not give rise to an independent duty in tort.

Accordingly, Celadon was entitled to limit its liability to the $4.41 per kilogram ($2 per pound) Ontario statutory limitation of liability.

[Rui M. Fernandes and David Huard of Fernandes Hearn LLP were counsel for Celadon in this matter]