Time-Bar incorporated through CIFFA STCs results in Summary Judgment

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By Gavin Magrath

Document used with permission of Magrath’s International Legal Counsel and originally posted here.

A recent decision of the Federal Court of Canada provides an important analysis and application of contractual time bars, as well as particular discussion in respect of the application of the CIFFA STCs. It provides precedent of interest to all freight forwarders, and to CIFFA Members in particular.

Ref: Labrador-Island Link General Partner Corporation vs Panalpina Inc et al., 2019 FC 740, Lafrenière J.

Facts

The plaintiff shipper of project cargo brought a claim for CAD$3.7 million (USD$2.8 million) for alleged damage to two cargoes of aluminum conductor steel-reinforced cable against the freight forwarder Panalpina, the carrier Desgagnés Transarctik Inc. and the Stevedore Logistec Stevedoring Inc. The damage had been noted on delivery of the cargoes in June and October 2015, respectively, and the plaintiff had provided notice of its intent to claim for those losses in September and November 2015, respectively. These were the 299th and 459th shipments moved at Panalpina’s direction on behalf of the plaintiff for the project.

All arrangements had been made pursuant to an executed freight forwarding services agreement (FFSA) dated 3 October 2013, under which Panalpina was to be the sole provider of freight forwarding services for the Lower Churchill Project, which it agreed to provide as a principal fully responsible for performance of subcontracted work. This agreement nonetheless involved direct oversight by the plaintiff, which would sign-off on selection of carriers and other service providers as well as individual freight rates and other particulars relating to the project cargo.

The plaintiff had in fact approved the contractual arrangements with Logistec Stevedoring and Desgagnés Transarctik in respect of the movement of the subject cargoes. In these cases, as in all cases, Panalpina’s quotations to the plaintiff made the following reference:

“Rates are subject to latest CIFFA Terms and Conditions (available upon request)”

Panalpina’s invoices to the plaintiff similarly contained a section entitled “Terms and Conditions”, the first of which noted that:

“All business will be accepted… subject to the Standard Trading Conditions of the Canadian International Freight Forwarders Association, Inc. currently in effect which Conditions contain provisions which exonerate the Company from liability and limit the amount recoverable, and each Condition shall be deemed to be incorporated in and to be a Condition of any agreement between the “Company” and the “Customer”. In transacting such business with the “Company”, the “Customer” acknowledges that he is familiar with and accepts such Conditions.”

Section 19 of the CIFFA STCs provides that suit must be brought with nine months of the date of delivery of goods for claims of damage to goods, failing which the Forwarder would be discharged from all liability.

The Paramount Clause of Desgagnés’ Sea Waybill provides that:

The parties acknowledge and agree that the carriage performed under this contract is not governed by a Bill of Lading but rather by this Sea Waybill.  However, they agree that the terms, provisions and conditions of Articles II to IX of the International Convention for the Unification of Certain Rules Relating to Bills of Lading signed at Brussels on August 25, 1924 (The Hague Rules) are incorporated by agreement into this contract. The Carrier’s rights and immunities including the $500.00 limitation of liability per package or unit are more specifically herein incorporated. In the event said rules are in contradiction with the other terms, provisions and conditions of this contract, said other terms, provisions and conditions shall prevail.

The plaintiff brought suit in May 2017, and the parties agreed this was more than one year after the delivery of the allegedly damaged cargoes. The defendants brought a motion for summary judgment, taking the position that the claim had no reasonable prospect of success as it was contractually time-barred by one or both of the 9-month time-bar contained in the CIFFA STCs and the one-year time-bar incorporated under the Hague Rules by Desgagnés’ Sea Waybill.

Decision

Summary Judgement Appropriate: The Court first determined that the case was an appropriate one for summary judgment: there was an ample evidentiary record setting out the relevant facts, and determination of the time-bar issue in favour of the defendants would be determinative of the action. Real issues of credibility, which should not be addressed on summary judgment, were not present in this case.

Incorporation by reference of CIFFA STCs: The Court then addressed the question of whether the CIFFA STCs had been appropriately incorporated into the contract such that the plaintiff ought to be bound by them. As is often the case, the plaintiff took the position that it had not read those terms and ought not be bound by them. Justice Lafrenière found, however, that the plaintiff was a sophisticated shipper and:

“it remains that it is a matter of common knowledge that freight forwarders in the market of carriage of goods commonly offer their services on the basis of standard terms and conditions that apply to all activities in arranging transportation or providing related services.” (para.59)

Noting that the STCs had been incorporated in all quotations, and specifically the two subject quotations, the Court found that the plaintiff had appropriate notice of the CIFFA STCs and their application to the quoted movements, and had approved those movements thereby accepting those terms, and that it would be bound by those terms incorporated by reference in spite of the plaintiff’s evidence that they had not in fact read or attended to those terms. The Court noted that the plaintiff could have taken issue with or rejected those terms but failed to do so.

Sole Contract: The plaintiff also argued that the FFSA contained a clause describing it as the “sole contract” for the transportation services to be provided by Panalpina, and therefore it did not agree to the application of the CIFFA STCs, inter alia, as they had not been incorporated into the FFSA under its amending formula. The Court rejected this argument as well. First, the evidence was clear that the FFSA contained no information or terms in respect to the movement of the aluminum conductor coils – or any other specific cargo – and that the parties to the FFSA clearly contemplated that individual contracts for each specific cargo movement would be quoted by Panalpina and confirmed by the plaintiff, as in fact was the case. Second, the FFSA contained no provisions relating to delay of suit or time bar, and in the absence of specific language in the FFSA that would conflict with the terms of the individual quotations, Panalpina was free to put forward such terms in its quotations to the plaintiff.

Himalaya Clause: The Court then considered whether the benefit of the time bar under section 19 of the CIFFA STCs protected the other defendants, in addition to Panalpina. Clause 2 of the CIFFA STCs governs “claims against others” and is a form of what is commonly known as a Himalaya Clause:

These Conditions also apply whenever any claim is made against any employee, agent or independent contractor engaged by the Company to perform any transport or related service for the Customer’s goods, whether such claims are founded in contract or in tort, and the aggregate liability of the Company and all such persons shall not exceed the limitations of liability in these conditions. For purposes of this clause the Company acts as agent for all such persons who may ratify such agency at any subsequent time.

The Court noted the decision of New Zealand Shipping Co v AM Satterthwaite & Co, [1975] AC 154 (PC), which confirmed that a Himalaya clause may be effective in extending limitations on suit to third parties where the contracting party acts as agent for those parties in respect of those limitations, language clearly incorporated into the CIFFA STCs. The Court also took note that Himalaya clauses have since this time “been accepted as forming a part of Canadian law”, and are “well recognized terms in transport contracts,” citing Boutique Jacob Inc v Pantainer Ltd, 2006 FC 217 (overturned on appeal on other grounds 2008 CAF 85).

Alternative: Sea Waybill: The Court held that, in the alternative, if the quotations and incorporated CIFFA STCs did not reflect the agreement between the parties than the Desgagnés Sea Waybill would be the best evidence for the terms of the carriage, which bills of lading would bind the plaintiff as the named shipper and incorporated the Hague Rules 1-year time bar through its Paramount Clause.

The Court did not conclude before making a passing reference to other possible lines of attack on the contractual time-bar and damage limitations concluding at para 84:

 I agree with the Defendants that attempts by cargo claimants to circumvent the carriers’ limitations of liability and other terms, whether it be by suing in tort or by artificially raising privity of contract issues, are long passé now. Sub-bailment on terms and the increased recognition of Himalaya Clauses have brought an end to these artificial attempts, especially in cases such as the present one where [the plaintiff] was fully aware that Panalpina would not be the party actually performing the stevedoring and carriage by sea of the Conductor Reels.

In the result, the motions for summary judgment were granted with costs.

Comments

The author is counsel to CIFFA (not a party to this action) and has had a substantial hand in the crafting of its current Standard Trading Conditions. These conditions are the intellectual property of CIFFA and may not be used by non-members. Well crafted STCs are one of the benefits of CIFFA Membership.

This judgment recognizes that the key to incorporating terms by reference is not whether they are actually read by the party resisting their application, but whether they were presented in such a way that the party had reasonable notice of them and opportunity to dispute them. Panalpina’s practice of including those terms by reference in each and every quotation was a key factual element supporting their position. These quotations were reviewed by and subject to approval by the plaintiff, who would issue a document confirming acceptance, and these were clearly circumstances in which a commercial party to a transaction has sufficient notice of conditions and ought to have given them their attention. While Panalpina’s invoices also incorporated the CIFFA STCs, invoices are generally issued subsequent to a transaction and therefore do not provide strong evidence of an agreement or an appropriate opportunity to dispute those terms; the Court noted these references in the facts, but did not rely on them in making its determination.

Accordingly, Freight Forwarders should take care to ensure their practice is to reference STCs in each and every quotation.

Of course, the absence of a reference to the CIFFA STCs in the FFSA complicated matters in this case: Freight Forwarders should also take care to reference the STCs in credit applications, GSAs, and in sui generis project cargo agreements.

Freight Forwarders should also take comfort in the judicial notice taken by the Court that adoption of STCs by reference is common in the Freight Forwarding business as well as through carrier Paramount clauses, and that sophisticated shippers will not be able to evade their application simply by not attending to them.  Certainly, the Court’s scathing commentary on “passé” efforts to circumvent such standard terms is very welcome.