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Motor and Marine Carrier Cargo Claims

Stephen Barbier
Stephen Barbier,

June 7, 2011

By Stephen Barbier
First presented at MB Lunch Seminar


Shipment of goods from one place to another involves complex networks of players, from shippers to cargo carriers, load brokers to stevedores, consignors to freight intermediaries, and so on. Given the volume and value of goods being shipped daily across the country and the world, international and domestic laws have been developed in order to ensure that the interests of the various parties are protected in the event that the goods are damaged while in transit.

From the moment a good is loaded on a ship, to the time it is offloaded onto a truck located on a foreign shore, to the time that it reaches its final destination, the carriage of goods will be subject to different legal regimes. While the sheer number of applicable laws and regulations may appear daunting, the reality is that most of the laws, both domestic and international, impose similar duties and responsibilities on the various parties. The various regimes and the corresponding duties and obligations are discussed below.

The International Regime

Shipment of goods across oceans often involves parties from different countries with different laws. Moreover, as the goods travel across domestic waterways, other laws from other countries may come into effect. If the goods are damaged while in transit, the potential for confusion and conflict in dealing with a claim would be significant in the absence of some harmonized law. Questions would immediately arise as to who is to blame, to what degree, and whether a bill of lading is valid and binding.

In order to address the issues arising from the transit of goods across international waterways, the international community has developed a legal regime to simplify and harmonize the process.

The International Convention for the Unification of Certain Bills of Law relating to Bills of Lading, better known as the Hague-Visby Convention, is the most widely recognized international treaty governing international carriage of goods by sea.

The central premise of the Hague-Visby Convention is that carriers are in a better bargaining position than shippers are and as such, the law should impose minimum conditions on the carrier.

The Hague-Visby Convention imposes various duties on the carrier of goods, including requirements to exercise due diligence when handling the goods; ensure that the ship is seaworthy; properly staff, equip and supply the ship; and issue a bill of lading confirming the apparent order and condition of the goods upon receipt. The shipper, in turn, has duties to provide accurate information to the carrier regarding the marks, number, quantity and weight of the goods being shipped and must ensure that the goods are properly packed prior to shipment.

Generally, the carrier will be liable for damages occurring to the goods while they are in its custody. It is only in certain enumerated circumstances that a carrier may avoid liability for damage. These circumstances include acts of war, acts of God, perils on the sea, negligent navigation, quarantines, riots, insufficient packing, and latent defects in the goods.

The terms of the Hague-Visby Convention are mandatory. There is an express provision stating that any clause or contractual agreement limiting carrier liability from loss or damage arising from negligence, fault or failure will be considered null and void.

The Hague-Visby Convention was originally drafted in 1924 to respond to concerns present at that time. The proliferation of international trade and improved technology created new issues that prompted the international community to revisit the international regime.

The Hamburg Rules were drafted by the United Nations in 1978 to respond to perceived shortcomings in the Hague-Visby Convention. The Hamburg Rules maintain the duties imposed on carriers and shippers by the Hague-Visby Convention but add provisions governing notice periods, shipments of dangerous goods, and the period for which the carrier is responsible for the goods.

The Hamburg Rules explicitly state that the carrier is responsible for the goods from the time that it receives the goods until the time they are delivered. They impose additional duties on shippers such as the requirement to mark or identify dangerous goods and provide that a shipper will be liable to the carrier for any losses arising from the shipment of dangerous goods. The Hamburg Rules imposes a two-year limitation in which to bring a claim arising from loss or damage. Goods will be presumed to be delivered in good order unless written notice is provided within one day and there will be no compensation for damages unless notice is provided within sixty days of delivery.

The international scheme was further revised in 2008 with the drafting of the Rotterdam Rules by the United Nations. The Rotterdam Rules were intended to eventually supplant the Hague-Visby Convention and the Hamburg Rules but have yet to gain widespread support. Some notable features of the Rotterdam Rules include removal of the limitation of liability arising from negligent navigation; a requirement that a notice of loss be made within 21 days of delivery; and imposition of joint and several liability where a carrier and other maritime performing party are at fault.

Under the Rotterdam Rules, the carrier will be liable for loss, damage or delay in delivery if the claimant proves that the loss, damage or delay occurred while the carrier was responsible for the goods. However, the Rotterdam Rules maintain a valuation and maximum liability provision establishing that the carrier’s liability for breaches of its obligations is limited to 875 unites of account per package or other shipping unit, or 3 units of account per kilogram of gross weights of the goods that are the subject of the claim or dispute, unless varied by the carriage contract.

Canada formally adoption the Hague-Visby Convention into Canadian admiralty law with the passing of the Marine Liability Act, S.C. 2001, c. 6 in 2001. Pursuant to that Act, the Hague-Visby Convention is the applicable law in Canada. Although the Act acknowledges that the Hamburg Rules may be adopted in the future, the Hamburg Rules and the Rotterdam Rules are not considered binding law in Canada.

The Provincial Regimes

Once a shipment of goods is unloaded in Canada, it is often loaded onto trucks for shipment to various destinations in Canada. The law governing motor carriage of cargo varies from province to province. However, conditions of carriage that are in place between the provinces are extremely similar.

All provinces except for Prince Edward Island and Newfoundland have enacted regulations establishing conditions of carriage and standard bills of lading. In P.E.I. and Newfoundland, the applicable duties, responsibilities and liabilities of the various parties will depend on the wording of the private contract of carriage.

In general, all of the other provinces have established the following regulations.1 The precise wording of the regulation may vary from province to province but the general scheme is the same.

  • The carrier is liable for loss or damage to the goods unless otherwise stipulated in the bill of lading.
  • In cases of connecting carriage, the carrier issuing the bill of lading and the carrier who assumes responsibility for delivery will be liable for any damage occurring while the goods are in their custody. In British Columbia and Nova Scotia, provisions imposing joint and several liability on the various carriers are expressly included in statute.
  • Indemnity is afforded in favour of the original or delivering carrier where the loss can be established as having occurred while the goods were in the possession of any connecting carrier. With the exception of British Columbia and Nova Scotia, all provinces provide for shared liability in concealed damage claims.
  • Carriers may be excused from liability in circumstances where damage arises from acts of God, riots, strikes, latent defects, quarantines, and war.
  • With the exception of Nova Scotia, there are provisions allowing carriers to limit their liability for delayed delivery.
  • All provinces impose valuation and maximum liability clauses. These clauses will be discussed in detail below. The common clause provides that a carrier will be liable for losses based on the value of the goods, unless a lower value has been declared, but always subject to a maximum liability of $2 per pound ($4.41 per kilogram) unless a higher value has been declared. Some provinces do not include a lower valuation scenario. Ever the unique province, Nova Scotia provides that the amount or loss cannot exceed the greater of the value declared by the consignor or $4.41 per kilogram on the total weight of the shipment, provided that where the consignor releases to the motor carrier a shipment which is stated in writing to have a value of $1.32 per article or loss.
  • Goods are carried at the risk of the consignor. Provisions will only cover those risks necessarily incidental to transportation.
  • A notice of claim for damage must be made within 60 days after delivery or, in the case of a failure to deliver the goods, within 9 months after the date of shipment.
  • The carrier may refuse to carry goods of extraordinary value. The shipper has a duty to advise the carrier of extraordinarily valuable goods.
  • The shipper must disclose the inclusion of dangerous goods to the carrier.


When cargo is damaged, a claimant bears the initial onus of showing that the cargo was damaged and that the damage occurred during the undertaking of carriage.

Once the claimant meets this initial threshold, the carrier has the onus of proving any circumstances entitling it to avoid liability. In other words, the carrier must prove that the loss occurred as a result of an act of God, latent defect, war, and so on, in order to avoid liability. In order to discharge its burden, the carrier needs to satisfy on a balance of probabilities that the loss occurred within an exemptive set of circumstances, if applicable, and that it took reasonable care to avoid the consequences of the excepted peril.

Limitations of Liability

The Hague-Visby Convention and the Hamburg Rules contain articles detailing valuation of loss and maximum liability.

According to Article IV, Clause 5 of the Hague-Visby Convention, the carrier will not be liable for any loss or damage in an amount exceeding the equivalent of 666.67 units of account per package or unit or units of account per kilogram of gross weight of the goods lost or damaged, whichever is higher, unless otherwise agreed to and described in the bill of lading.

Under the Hamburg Rules, the liability of the carrier for losses or damages is limited to an amount equivalent to 835 units of account per package or other shipping unit or 2.5 units of account per kilogram of gross weight of the goods lost or damaged, whichever is higher. Further, the liability of the carrier for delayed delivery is limited to an amount equivalent to 2.5 times the freight payable for the goods delayed but is not to exceed the total freight payable under the contract of carriage of goods by sea.

Most Canadian provinces have enacted regulations detailing valuation and maximum liability. Typically, the carrier is liable for loss based on the value of the goods, unless a lower value has been declared, subject to a maximum liability of $2 per pound ($4.41 per kilogram) unless a higher value has been declared. Not all provinces allow for a lower valuation scenario. Additionally, Nova Scotia imposes a unique scheme, providing that the amount or loss cannot exceed the greater of the value declared by the consignor or $4.41 per kilogram on the total weight of the shipment provided that where the consignor releases to the motor carrier a shipment which is stated in writing to have a value of $1.32 per article or loss.


As mentioned above, both the international and domestic regimes establish various defences that a carrier may invoke to avoid liability.

The common law act of God defence includes occurrences such as climatic changes in temperature, decay and deterioration of cargo from the inherent nature of it, tempest, lightning, storms, freak waves and earthquakes. The defence typically requires that the occurrence was unforeseeable. Further, the carrier must prove that it had taken precautions to avoid reasonably foreseeable risks.

To recap, the other common law defences include war, riots, strikes, quarantines, and latent defects in the goods.

In addition to the common law defences, the carrier may also rely on certain statutory defences to avoid or limit their liability. These defences may include non-payment of freight charges by the shipper, failure to comply with the mandatory notice periods and the maximum liability provisions discussed above. Statutory defences are defined and limited to the terms of the enabling piece of legislation.

Multi-Modal Transit

Multiple parties are frequently involved in the carriage of goods. For example, in addition to the original shipper and carrier, there may also be various freight intermediaries, such as warehousemen, shipping agents and brokers, and so on. When goods are being handled by multiple parties, claims for loss or damage often become more complex. Different schemes are available to the parties to limit or reallocate liability in the event of loss or damage.

Parties may utilize a "through bill of lading" wherein the principle carrier who issued the through bill of lading is liable under a contract of carriage only for its own phase of the journey and then acts as an agent for carriers executing other phases of the journey.

Alternatively, parties may prefer to use multi-modal bills of lading. A multi-modal bill of lading renders the issuing carrier responsible for the goods during all phases of the journey, regardless of whether the goods are in its custody. A multi-modal bill of lading may be desirable because it simplifies the shipping process as there is only one contract governing the shipment. However, it may not be ideal for the issuing carrier if the goods are being handled by various intermediaries and damage occurs while the goods are not in its custody.

Regardless of the choice of bill of lading, the issuing carrier has a duty to select competent subcontractors when arranging for the transport of goods.

1See Appendix A for a description of the applicable statutes and regulations.


British Columbia

Motor Vehicle Act, R.S.B.C. 1996, c. 318


Motor Transport Act, R.S.A. 2000, c. M-21
Traffic Safety Act, R.S.A. 2000, T-6.
Motor Carrier Regulations, Reg. 313/2002


Traffic Safety Act, S.S. 2004, c. T-18.1.
Motor Carrier Conditions of Carriage Regulations, R.R.S. c. M-21.2, Reg. 5.


Highway Traffic Act, C.C.S.M., c. H60.
Bills of Lading and Rules of Carriage Regulation, Man Reg 182/91.
Cargo Securement Regulation, Man Reg 37/2005.


Highway Traffic Act, R.S.O. 1990, c. H-8.
Carriage of Goods Regulation, O. Reg. 643/05


Transport Act, R.S.Q. c. T-12, Reg. 5.1
Civil Code of Quebec, LRQ, c. C-1991.

New Brunswick

Motor Carrier Act, R.S.N.B. 1973, c. M-16.
Motor Vehicle Act, R.S.N.B. 1973, c. M-17.
Commercial Vehicle Bill of Lading and Cargo Insurance Regulation, N.B. Reg.    95-76.
Cargo Securement Regulation, N.B. Reg. 2005-103.

Nova Scotia

Motor Vehicle Act, R.S.N.S. 1989, c. 293.
Carriage of Freight by Vehicle Regulations, N.S. Reg. 24/95.

Prince Edward Island

Highway Traffic Act, R.S.P.E.I. 1988, c. H-5.

Newfoundland and Labrador

Motor Carrier Act, R.S.N.L. 1990, c. M-19.
Highway Traffic Act, R.S.N.L. 1990, c. H-3.


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