Tuesday, April 18, 2017

Courier Limits Liability to $1

In the recent decision of Distribution de produits Vican Canada inc. c. Federal Express Canada Ltd., 2017 QCCS 717, a courier was sued for $443,456.00 for handing over an envelope containing negotiable bills of lading to a fraudster.

The claimant was a shipper of seven containers of recycled metal from Canada to China. The claimant entered into contracts of carriage with a number of ocean carriers, receiving original bills of lading that were required to be handed over to the carriers in China for receipt of the cargo.
The claimant contracted with Federal Express Canada Ltd. (“Fedex”) for it to deliver an envelope containing the seven original bills of lading to The Industrial Bank in Taizhou China. The shipment was “door to door.” Unfortunately, for the claimant, a fraudster named Madam Wu attended at the Fedex sorting facility in Taizhou claiming to be a representative of the bank and picked up the package. The fraudster gave the Fedex employee the tracking number and the employee verified the identity of the recipient by taking a photograph of Madam Wu. The package was then handed over to Madam Wu. Fedex advised the claimant of the delivery.
Realizing there was a problem, the claimant then advised the ocean carriers of the fraudulent obtaining of the bills of lading and then requested them not to deliver the goods. It was informed by the ocean carriers that an injunction was required to do this. The Federal Court of Canada issued an interim injunction ordering the ocean carriers not to deliver the cargo. The claimant, however, also applied to the Chinese court for a similar interim injunction. The application was rejected, and the claimant seller lost control of the goods. The claimant alleged that the Chinese government and the buyer were corrupt. The buyer thus obtained the cargo, having the original bills of lading, without paying for the goods. The bills of lading had not been processed through the bank system for collections.
The claimant brought the claim in the Quebec Superior Court against Fedex alleging that the delivery of the parcel to a person other than the designated recipient to the contract of carriage constituted a serious misconduct for which Fedex should be held responsible under the provisions of the Civil Code in respect of transportation. Fedex pleaded that it had fulfilled its obligations under the contract of carriage, pleaded that it committed no fault, and that that, in any event, its liability was limited to the value of $1, being the declaration on the courier waybill for the package.

Certain Articles of the Civil Code of Quebec were reviewed. These Articles provide:

1474. A person may not exclude or limit his liability for material injury caused to another through an intentional or gross fault; a gross fault is a fault which shows gross recklessness, gross carelessness or gross negligence.

2033. A carrier who provides services to the general public shall carry any person requesting it and any property he is requested to carry, unless he has serious cause for refusal; the passenger, shipper or receiver is bound to follow the instructions given by the carrier, in accordance with the law.

2049. The carrier is bound to carry the property to its destination. He is bound to make reparation for injury resulting from the carriage, unless he proves that the loss was caused by superior force, an inherent defect in the property or natural shrinkage.

2052. The liability of the carrier, in the case of loss, may not exceed the value of the property declared by the shipper. If no value has been declared, it is determined on the basis of the value of the property at the place and time of shipment.

2053. No carrier is bound to carry documents, money or property of great value. If a carrier agrees to carry that type of property, he is not liable for loss unless its nature or value has been declared to him; any deceitful declaration which misleads as to the nature of the property or inflates its value exempts the carrier from all liability.

The court noted that the claimant chose the cheapest Fedex service ($53) being a type "door to door" service to carry parcels containing "Export papers" (as described on the waybill filled out by the claimant) and with a declared value of $1. The court noted that the claimant had the opportunity to choose another service offered by the defendant at a higher cost.

The court also noted that, in selecting the service, the claimant failed to declare to Fedex the true nature and the true value of the delivered documents while knowing that the sending of the parcel contained significant risks.

The court also noted that the claimant’s employee had given the tracking number to the buyer’s representative and not just to the bank.

In setting out the law, the court commented that the very high burden of proof of the gross negligence of a carrier belongs to the shipper. The judge noted that courts have upheld the existence of a serious misconduct in the presence of a proof establishing an extreme recklessness, gross negligence and a total lack of consideration for the interests of others.

The judge reviewed prior decisions establishing that the loss of goods constitutes negligence but not gross negligence; that the late delivery of an envelope containing a certified cheque in the amount constitutes negligence, but not gross negligence or misconduct.

Fedex was negligent in failing to properly deliver the parcel. However, it was not grossly negligent nor did it display misconduct. The court noted that after the loss Fedex’s behavior was difficult to reconcile with the commission of a serious misconduct because it worked with the claimant during several weeks including:

• In tracing the packages and the person who had committed fraud;
• By providing all the information that it had;
• In attempting several times to obtain a police report in China;
• Communicating with the claimant on an almost daily basis during the month of August; and
• Assisting the claimant in China in their representations to the police and the courts.

The court noted that the claimant had received the Fedex service guide prior to shipment. It noted that the guide specifies the terms and conditions of the contract, and the types of service available. The claimant could not ignore the fact that the transport of a regular package with a value of $1 allowed Fedex to take arrangements for different delivery to meet the needs of the recipient wishing a faster delivery or to retrieve the package at the counter. The claimant had not acted with due diligence because it had not notified Fedex of the nature and the actual value of the bills of lading, nor the risk associated with transportation of the package.

The judge bolstered her decision by finding that the claimant was negligent in entrusting the tracking number of the parcel to the buyer in Taizhou. The court noted that even before the Fedex shipment, the buyer, according to the testimony of the President of the claimant, had tried to avoid paying the cargo by invoking all kinds of excuses. The evidence also established that the claimant had not made any diligent “audits” in respect of the buyer before concluding a contract with it.

The court concluded that Fedex was liable but could limit its liability to the declared value of $1. It had not committed an intentional or gross fault.


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