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August 2016

Declaring Values on "Contracts of Carriage" in Ontario

It is often said that a bill of lading is not a contract of carriage, but is merely "excellent evidence" of its terms.1 However, the courts are divided on how far beyond the bill of lading we can go, specifically in terms of declaring the value of a shipment. This unpredictability in the law can mean the difference of hundreds of thousands of dollars for a carrier who has lost or damaged cargo in its possession.

The reason is due to the limitations of liability imposed by Ontario legislation in contracts of cargo by motor carriers. Pursuant to s. 9 of Sch. 1 of Ontario Regulation 643/05,2 the liability of such carriers is limited to $4.41 per kilogram of the transporting cargo. Typically the value to replace those goods, in the event that delivery is not effected in good condition, will be far above that amount (consider gold, while an extreme example, is over $60,000 CAD / kg!) If, however, a value is declared on the face of the contract of carriage, this "declared value" becomes the limit of the carrier’s liability (usually the full amount of the goods).

...the regulation uses the words "contracts of carriage" and not bills of lading...

As the regulation uses the words "contracts of carriage" and not "bills of lading", this door has been left open to argue that the bill of lading may not be the complete contract. It is now common to see a carrier relying on the absence of a declared value in the bill of lading in order to limit their liability to $4.41 per kilogram, whereas the consignor/consignee relies on other external documentation to claim the full value of the consignment.

Justice Bielby of the Superior Court in A&A Trading Ltd. v. DIL’s Trucking Ltd.3 found that an invoice attached to the bill of lading (with the invoice number written on the bill) had effectively been incorporated into the contract of carriage. It was likely significant that there were purported discussions around the value of the goods between the parties, as well as the existence of adequate insurance. In any event, the limitation of liability did not apply, and the consignor recovered the full value of his goods being $263,520.00. If the limitation were to apply, the carrier would have only been liable for approximately $100,000.00.

Fast forward a year to the May 2016 decision of the Court of Appeal for Ontario in National Refrigeration v. Celadon.4 The trial judge in this case had found that a copy of a commercial invoice issued by the Mexican shipper to the consignee, and subsequently passed to the carrier, was incorporated into the contract of carriage. In a very different outcome, the Court of Appeal strongly disagreed with the trial judge, unanimously stating that the invoice 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". As such, the statutory limitation applied. The value by weight was $110,830.00 CAD, whereas the full value of the goods totalled $220,928.98 USD.

Interestingly, many of the Canadian provinces specifically require declarations of value to be made on the bills of lading themselves – the major exception being Ontario. While the Ontario regime allows for the courts to apply their discretion and examine the entirety of the contract, this obviously injects a definite level of uncertainty which I find counterproductive in cargo transactions.

Despite the Court of Appeal’s decision in National Refrigeration, I suspect that trial level courts will continue to expand the definition of the "contract of carriage" falling back on a "case-by-case" analysis to justify the resulting inconsistency. What is certain, though, is that the bill of lading cannot simply be taken at "face" value in these claims.

1 The Ardennes, [1951] 1 K.B. 55 at p. 59 per Lord Goddard C.J.
2 This is a regulation made under the Highway Traffic Act, R.S.O. 1990, c. H.8.
3 2015 ONSC 1887.
4 2016 ONCA 339.


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