T-1719-91
Canadian Pacific Forest Products Limited and all other cargo interests as enumerated in annex "A" attached to the statement of claim (Plaintiffs)
v.
Termar Navigation Co. Inc. and Forest Product Carriers International Ltd. (Defendants)
Indexed as: Canadian Pacific Forest Products Ltd.v. Termar Navigation Co. (T.D.)
Trial Division, Rothstein J."Montréal, September 23, 24, 25 and 26; Ottawa, October 9, 10, 22 and December 3, 1997.
Maritime law — Contracts — Defendants claiming, by counterclaim, costs of discharging, restowing plaintiffs' on-deck lumber cargo " Lumber shifted when ship struck by large wave — Ship diverted before reaching final destination " Responsibility for discharge, restowing expenses determined by bill of lading, freight agreement — Stowage responsibility of carrier, not shipper or other cargo interest — Bill of lading addressing condition of goods themselves, not condition of stowage — Defendants not liable to plaintiffs under bill of lading — Under common law, carrier having duty to preserve plaintiffs' cargo — Carrier not entitled to additional compensation for unforeseen costs while fulfilling contractual responsibilities — Common law principles of bailment, quantum meruit, agency of necessity, unjust enrichment not applicable.
This was a counterclaim, in response to an action for a negative declaration of liability, by which the defendants sought to recover the costs, incurred at Lisbon, Portugal, of discharging and restowing the plaintiffs' on-deck lumber cargo. The lumber had been loaded at western Canadian ports and was bound for Liverpool and Newport in the United Kingdom. The ship carrying the lumber was hit by a large wave in rough North Atlantic seas, which caused its cargo to shift on the deck. Because the lumber had shifted and was no longer secure due to damage to lashings and other equipment, the vessel diverted to Lisbon, where the deck lumber was discharged and restowed. The defendant, Forest Product Carriers (International) Ltd. (FPCI), was time charterer of the vessel Serafin Topic from the other defendant, Termar Navigation Co. Inc. (Termar). Under a freight agreement, the plaintiff, Canadian Pacific Forest Products Ltd. (CPFP), agreed with FPCI to provide certain volumes of packaged lumber at ports in British Columbia to be carried under terms of FPCI bills of lading. The issue was whether the defendants could recover the costs of discharging and restowing the plaintiffs' on-deck lumber cargo.
Held, the counterclaim should be dismissed.
Responsibility for discharge and restowing expenses is to be determined by the terms of the contracts between the parties. It was Clause 12f) of the bill of lading upon which the average adjuster originally relied to assign the costs of discharge and restowage at Lisbon to the plaintiffs' account. Two issues arose regarding that clause: 1) does "condition" refer to condition of cargo as stowed ? and 2) is discharge and restowage covered thereby ? The costs of action taken by a carrier under Clause 12f) are for the account of cargo interests. Therefore, if the costs incurred at Lisbon by the carrier are costs under Clause 12f), CPFP will be responsible for them. However, responsibility for, and costs associated with stowage rest on the carrier. Whether the condition of stowage is or is not satisfactory has nothing to do with the plaintiffs. Clause 12f) is addressing the condition of the goods themselves, not the condition of their stowage. The defendants' argument, that Clause 12f) contemplates discharge and restowage because restowage is more beneficial to cargo interests than simple discharge, would require the Court to read into that clause the word "restowage" which is not there. Nor was there evidence that it was beneficial to cargo interests that the lumber not be discharged at Lisbon. The defendants' claim was not supported by Clause 12f). The carrier has not exercised the options offered by Clause 19a) of the bill of lading. The words "to discharge or otherwise to deal with the goods" in Clause 19a) are only conditions necessary for the carrier to delay the vessel and do not themselves give it the option of discharging and restowing cargo. Clause 19c) of the bill of lading entitles the carrier to extra compensation for services rendered under Clause 19a). However, restowage is not among those services. Neither is discharge in the circumstances, since the carrier did not treat it as performance and fulfilment of the contract as required by Clause 19b) because it retained the goods and continued to Liverpool and Newport with them. The special clause on the front of the bill of lading constitutes an exemption from claims by cargo interests. It did not confer a right on the carrier to make a claim against CPFP for extra costs incurred in the course of a voyage, nor did it release the carrier from the responsibility of performing the freight contract. The defendants were not liable to the plaintiffs under any provision of the bill of lading.
The defendants argued that, if they were not entitled to claim under the freight agreement or the bill of lading, they could rely on the common law principles of bailment, quantum meruit, agency of necessity or unjust enrichment. Although Termar was the bailee of CPFP's goods, the general law of bailment could not avail to the benefit of the defendants. The costs incurred at Lisbon, which were necessary for the performance of Termar's contractual obligations, must be treated as expenses of the voyage and not as incurred for the benefit of cargo interests. For the same reason, agency of necessity was not applicable. Costs of discharge and restowage at Lisbon were not incurred by the defendants as agents of CPFP. They were undertaken and incurred as part of their contractual obligations and not for the benefit of CPFP. The doctrine of quantum meruit requires, among others things, an understanding on the part of the recipient of the services that the party providing the services intended to be compensated and a request, either express or implied, that the work be performed. There was never any understanding on the part of CPFP that the defendants intended to be compensated, nor was there any request by CPFP that the work be performed. Nor was there unjust enrichment. Such a claim requires enrichment of CPFP, a corresponding deprivation of the carrier and the absence of a juridical reason for the enrichment. CPFP contracted to have its cargo carried to Liverpool and Newport and received no benefit to which it was not entitled by contract.
statutes and regulations judicially considered
York-Antwerp Rules, 1974, Rules A, X(b).
cases judicially considered
applied:
BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; (1993), 99 D.L.R. (4th) 577; [1993] 2 W.W.R. 321; 20 B.C.A.C. 241; 75 B.C.L.R. (2d) 145; 14 C.C.L.T. (2d) 233; 5 C.L.R. (2d) 173; 147 N.R. 81; 35 W.A.C. 241; Brown (app.) v. Gaudet (resp.); Cargo ex Argos (1873), 2 Asp. M.L.C. 6 (P.C.).
distinguished:
Wilh. Svenssons Travaruaktiebolag v. Cliffe Steamship Company (1931), 18 Asp. M.L.C. 284 (K.B.); Notara and another v. Henderson and others (1872), 1 Asp. M.L.C. 278 (Ex. Ch.); China Pacific S.A. v. Food Corpn. of India, [1982] A.C. 939 (H.L.).
not followed:
Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd., [1986] A.C. 80 (P.C.).
referred to:
L.D. Seals N.V. v. Mitsui Osk Lines Ltd. The —Darya Tara—, [1997] 1 Lloyd's L. Rep. 42 (Q.B. (Com. Ct.)); Rathwell v. Rathwell , [1978] 2 S.C.R. 436; (1978), 83 D.L.R. (3d) 289; [1978] 2 W.W.R. 101; 1 E.T.R. 307; 1 R.F.L. (2d) 1.
authors cited
Fridman, G. H. L. Restitution. Toronto: Carswell, 1982.
COUNTERCLAIM by defendants seeking to recover from plaintiffs costs of discharging and restowing on-deck lumber cargo. Counterclaim dismissed.
counsel:
J. Kenrick Sproule and Louis Buteau for plaintiffs.
Nicholas J. Spillane and Darren E. G. McGuire for defendants.
solicitors:
Sproule, Castonguay, Pollack, Montréal, for plaintiffs.
McMaster Meighen, Montréal, for defendants.
The following are the reasons for judgment rendered in English by
Rothstein J.: The issue in this case is whether the defendants may recover from the plaintiffs the costs incurred by the defendants at Lisbon, Portugal of discharging and restowing the plaintiffs' on-deck lumber cargo.1 The lumber had shifted on the deck of the vessel Serafin Topic as a result of the vessel being hit by a large wave in very rough seas in the North Atlantic. The plaintiffs' lumber had been loaded at western Canadian ports and was bound for Liverpool and Newport in the United Kingdom. Because the on-deck lumber cargo had shifted and was no longer secure due to damage to lashings and other equipment, the Serafin Topic diverted to Lisbon, where the deck lumber was discharged and restowed. The defendants incurred expenses of US$551,556.29 at Lisbon, of which they say US$527,593.44 is the responsibility of the plaintiffs.2 The plaintiffs say their cargo was in the custody of the owner of the vessel whose responsibility it was, in consideration of the freight paid, to transport the lumber from Canada to the United Kingdom. The plaintiffs say they are not responsible for costs en route which are incurred by the defendants to transport the plaintiffs' cargo.
The relationship between the parties and the documents governing each relationship is as follows:
(1) Forest Product Carriers (International) Ltd. (FPCI) was time charterer of the vessel, Serafin Topic from Termar Navigation Company Co. Inc. (Termar) under a time charter agreement dated December 23, 1988.
(2) Under a freight agreement dated October 6, 1988 the plaintiffs (sometimes Canadian Pacific Forest Products Ltd. (CPFP)) agreed with FPCI, for the calendar year 1989, to provide certain volumes of packaged lumber at ports in British Columbia destined to the United Kingdom and Northern Europe. FPCI agreed to provide vessels (whether owned, chartered, assigned or otherwise controlled by FPCI) for monthly sailings. CPFP's cargo was to be carried under terms of FPCI bills of lading, a sample of which was attached to the freight agreement.
(3) The FPCI bills of lading governing the cargo and voyage in question in this case were issued on or about January 27, 1989. Under clause 4 of the bill of lading, the contract evidenced by the bill of lading is stated to be between CPFP and "the Owner of the ocean vessel named herein" i.e. Termar, as owner of the Serafin Topic.
The cargo was loaded on board the Serafin Topic at various Pacific ports in January 1989. The vessel set sail for the United Kingdom via the Panama Canal on January 28, 1989. The incident involving the large wave in the North Atlantic and the shifting of cargo occurred at approximately 8:00 am on February 26, 1989.
Termar was advised of the incident involving the large wave and the shifting of the deck cargo by the ship's master on February 26, 1989. FPCI was notified shortly afterward. CPFP was also advised. The vessel diverted to Lisbon. At Lisbon, Termar and FPCI decided to discharge and restow the deck cargo as necessary in order to continue the voyage. Termar and FPCI each instructed local agents at Lisbon. FPCI instructed a superintendent to attend at Lisbon. Various surveyors were also instructed. The cost of discharging and restowing was paid by Termar and FPCI on a roughly 50/50 basis. Discharge and restowing was completed on March 13, 1989. Because Termar and FPCI could not agree as to who would pay for the costs incurred at Lisbon (partly because they were found to be extremely high), the vessel did not depart Lisbon until March 20, 1989. The voyage was then completed and CPFP's cargo was discharged at Liverpool and Newport as originally intended.
Shortly following the incident, Mr. Barry Gardiner of the Mediterranean Average Adjusting Company of the United Kingdom, was appointed average adjuster. Mr. Gardiner qualified the expenses involving the discharging and restowing of CPFP's cargo at Lisbon as special charges on deck cargo for the account of CPFP He was of the view that these expenses were not contemplated by Rule X(b) of the York-Antwerp Rules, 1974 and therefore were not admissible as general average.3
Responsibility for discharge and restowing expenses is to be determined having regard to the terms of the contracts between the parties. However, Termar and FPCI say that if CPFP is not liable under the freight agreement or bill of lading, then the Court should find CPFP liable under common law principles of bailment, agency of necessity or restitution, namely quantum meruit or unjust enrichment.
Preliminary Issues: Prematurity and Standing
CPFP argues that the counterclaims by FPCI are premature and hypothetical because the claims asserted depend on the outcome of arbitration proceedings between Termar and FPCI relating to this matter. However, it is CPFP who commenced this action for a "negative declaration" that CPFP is not liable for the costs incurred by the defendants. In these circumstances it is not open to CPFP to argue that the defendants' arguments to the contrary are premature.
CPFP also argues that Termar is only entitled to claim under the bill of lading, and FPCI is only entitled to claim under the freight agreement. While it is true that FPCI is not a party to the bill of lading, clause 18 of the freight agreement provides:
18. BILLS OF LADING
Cargo carried under this Agreement shall be governed by Carrier's Bill of Lading in force at the time of signing this Contract and attached hereto. In the event of conflict between the terms and conditions of the Bill of Lading and this Agreement, the terms and conditions of the Agreement shall govern, unless Bills of Lading have been negotiated, in which case the terms of the Bill of Lading shall apply. [Emphasis added.]
The terms of the bill of lading, to the extent they are applicable to the time charterer are, by clause 18 of the freight agreement, incorporated by reference into the freight agreement. Counsel for CPFP argued that these terms are not incorporated by reference. However, clause 18 is quite clear. It would not have been necessary for the clause to address conflicts between the terms and conditions of the bill of lading and the freight agreement unless both were intended to govern the relationship between CPFP and FPCI.
The Freight Agreement
I have had regard to clauses 9, 13 and 18 of the freight agreement.4 Clause 9 does not itself impose responsibility but requires that the bill of lading contain certain provisions respecting risk and responsibility. The clause has no application to the circumstances of this case. Clause 13 concerns repackaging costs, which are also not at issue in this case. Clause 18, to which reference has already been made, addresses conflicts between the freight agreement and the bill of lading. However, on its own it does not impose liability on either plaintiffs or defendants.
Clause 23 of the freight agreement provides:
23. FORCE MAJEURE
The general understanding between both parties is that any problems that may develop during currency of this Contract shall be considered by both parties in a co-operative and reasonable manner, however, notwithstanding the foregoing, the following shall apply:
(a) Carrier shall be released of their obligations under this Contract to such extent and for such period of time as these obligations become impossible to perform by reason of Act of God, Act of War, Requisition, Restraint of Princes, Rulers and People, Strike, Lockout or any other causes whatsoever beyond Carrier's control and shall be without liability for any consequential loss or damage sustained by Shipper.
(b) Shipper shall be released of their obligations under this Contract to such extent and for such period of time as these obligations become impossible to perform by reason of Act of God, Act of War, Requisition, Restraint of Princes, Rulers and People, Strike, Lockout or any other causes whatsoever beyond Shipper's control and shall be without liability for any consequential loss or damage sustained by carrier.
Neither FPCI nor CPFP are claiming to be relieved of their obligations under the freight agreement. Specifically, FPCI is not claiming to be relieved of the duty to deliver CPFP's cargo "for such period of time as these obligations become impossible to perform". This provision is not applicable in this case.
The Bill of Lading
I shall deal first with the clauses on the back of the bill of lading and then turn to the special clause on the front of the bill of lading.
Clauses 6, 8 and 9 clearly have no application to this case and can be dealt with summarily.5 Clause 6, a deviation provision, pertains to the scope of the voyage and in no way assigns liability to cargo interests for discharging and restowing expenses. Clause 8 is a deck carriage provision. It purports to exempt the carrier from liability for loss or damage which may be attributable to the carriage on deck of the plaintiffs' cargo. As this is not a claim by cargo interests for loss or damage to cargo, clause 8 has no application. As well, no transhipment, lighterage, forwarding, reshipment or storage as contemplated by clause 9 took place here. Therefore clause 9 has no application.
Clause 12f) of the bill of lading provides:
12. f) Should the goods in the Carrier's option be in such condition that he considers it advisable to discharge, tranship, return, remove or destroy them, then he shall be entitled to do so at any port or place. In such case the Merchant shall bear the risk for the goods and the costs directly or indirectly incurred.
It was clause 12f) upon which the average adjuster, Mr. Gardiner, originally relied to assign the costs of discharge and restowage at Lisbon to the account of the plaintiffs.6 Two issues arise with respect to the application of clause 12f): (1) does "condition" in clause 12f) refer to condition of the cargo as stowed ; and (2) is discharge and restowage covered by clause 12f).
It seems plain that the costs of action taken by a carrier under clause 12f) are for the account of cargo interests. Therefore if the costs incurred at Lisbon by the carrier are costs under Clause 12f), CPFP will be responsible for them. Counsel for the defendants says that "condition" in clause 12f) means condition as stowed. In other words, he says that when the plaintiffs' cargo on deck became unsecured, this was a condition contemplated by clause 12f) entitling (and perhaps obligating) the carrier to take the action it took at Lisbon for the account of the plaintiffs. Reliance is placed on Wilh. Svenssons Travaruaktiebolag v. Cliffe Steamship Company (1931), 18 Asp. M.L.C. 284 (K.B.), in which Wright J. stated, at page 286:
I think that in a case like this, and indeed in most cases, the mere reception or dumping down of the cargo on the ship does not involve the completion of loading, because I think the operation of loading involves all that is required to put the cargo in a condition in which it can be carried. [Emphasis added.]
The issue in Cliffe was whether loading had been completed. In the circumstances of that case Wright J. found that the operation of loading was not complete with the dumping down of cargo but rather, it involved all that was required to put the cargo in a condition in which it could be carried. However that finding has no application to the interpretation of clause 12f) of the bill of lading in this case. The issue here is not one of whether loading was completed, which is the context in which Wright J. used the term "in a condition in which it can be carried". In the present case there is no issue as to the proper loading of the cargo. The cargo had been loaded and was in a condition in which it could be carried. The difficulty arose during the voyage when, as a result of the large wave, the plaintiffs' cargo shifted, chain lashings parted, some cargo was lost and the balance was not secured for purposes of continuing the voyage.
There is no evidence that the cargo that remained was damaged. The context of clause 12f) indicates that what is contemplated is a change in the condition of the goods themselves, making it necessary that they be discharged, transhipped, returned, removed or destroyed. Without wishing to limit the generality of the application of clause 12f), I think what readily comes to mind, especially by use of the words returned, removed or destroyed (as well as discharged and transhipped), are perishable goods that might become infested, water-damaged or infected. These are examples of conditions affecting the goods themselves and it is these types of conditions to which clause 12f) is directed. Requiring the merchant to bear the risk and costs directly or indirectly incurred is consistent with this interpretation. If the condition of stowage had been contemplated, words such as restowing or reloading, or words of similar import would appear. The reason they do not, I think, is that stowage is the responsibility of the carrier and not the shipper or any other cargo interest. clause 12a) of the bill of lading provides:
12. a) Notwithstanding any custom of the port to the contrary, all the goods under this contract must be ready for loading alongside the vessel as soon as the vessel arrives at the time requested by the Carrier. Loading shall take place as fast as the vessel can load . . . .
The carrier's responsibility for the transportation of the goods commences when they are placed alongside the vessel so that they may be loaded by the carrier. Responsibility for, and costs associated with stowage are the carrier's. Whether the condition of stowage is or is not satisfactory has nothing to do with the plaintiffs. I am therefore satisfied that in the case of clause 12f), what is addressed is the condition of the goods themselves and not the condition of their stowage.
The defendants' second argument is that clause 12f) contemplates discharge and restowage, because restowage is more beneficial to cargo interests than simple discharge. I have difficulty with this argument for two reasons. The first is that it requires that the Court read into clause 12f) the word "restowage" which is not now there. The Court is not able to construe words which have a relatively clear meaning to include words with entirely different meanings. The second is that I have not been shown in evidence that it was obviously beneficial to cargo interests that the lumber not be discharged at Lisbon. While it seems the defendants are of the view that it is obvious in this case that CPFP was better off with the cargo being restowed and moved to Liverpool and Newport than had it been discharged at Lisbon, I can only base my decision on evidence. Without evidence I cannot tell whether CPFP might have been better off or not.
For these reasons the claim of the defendants is not supported by clause 12f).
Clause 19 of the bill of lading provides:
19. OPTIONS OF THE CARRIER
a) If it shall be considered by the Carrier at any time that the performance or continued performance of this contract may subject the ocean vessel, her crew and cargo or other transport to any hindrance, risk or delay resulting from events such as orders or directions by any government or authority, risk of capture, seizure, detention, war, warlike operations, blockade, riots, civil commotion, piracy, epidemics, quarantine, labour troubles, strikes, lock-outs, congestion, adverse weather or ice conditions, the Carrier shall be entitled whether or not the events in question existed or were anticipated at the time of the entering into this contract and whether the loading has commenced or not to cancel this contract, in whole or in part, or, in any event, to discharge, tranship, land or deliver the goods at any convenient port or place or to forward them at the sole risk and expense of the merchant to delay the vessel at any port or place awaiting an opportunity to discharge or otherwise to deal with the goods as the Carrier may think advisable under the particular circumstances.
b) The discharge from the ship as provided in the preceding paragraph constitutes complete delivery and performance under this contract and the Carrier shall accordingly be deemed to have fulfilled the contract. After cancellation or fulfilment the goods shall be at the Merchant's risk and expense.
c) For any service rendered to the goods as herein provided, the Carrier shall be entitled to a reasonable extra compensation.
d) The Carrier or the Master shall not be required to give notice of any action taken in accordance with this paragraph.
Defendants say that they may invoke clause 19 because adverse weather is the cause of the expenses incurred in this case. Alternatively, they say the Port of Lisbon Authority would not permit the vessel to leave unless the deck cargo had been properly restowed and as a result the "orders or directions by any government or authority" provision is applicable.
I will assume, without deciding, that the defendants can invoke clause 19 based on adverse weather (winds giving rise to a large wave which caused the deck cargo to shift) and/or orders or directions of an authority. In such event the carrier was given certain options. One was to cancel the contract in whole or in part. This option was not exercised. Others were to discharge, tranship, land or deliver the goods at any convenient port or place. None of these options were exercised. Another was to forward the goods at the sole risk and expense of cargo. This option was not taken by the carrier.
The carrier was also entitled "to delay the vessel at any port or place awaiting an opportunity to discharge or otherwise to deal with the goods". Counsel for the defendants argued that these words are unrelated to the prior words in the clause and that they are broad enough to cover discharge and restowage as took place in this case. However they are clearly part of the phrase "to delay the vessel at any port or place awaiting the opportunity to discharge or otherwise to deal with the goods". The option open to the carrier here is to delay the vessel as the carrier may think advisable, which action itself does not give rise to liability on the part of cargo interests for discharge or restowage. Further, use of the word "discharge" which is a repeat of the same word used immediately above suggests that the words "or otherwise to deal with the goods" must mean to "tranship, land or deliver the goods at any convenient port or place or forward them at the sole risk and expense of the merchant". To construe these words as an unlimited right in the carrier to deal with the goods in any way at all including restowage, as suggested by counsel for the defendants, would render meaningless the word discharge and the other specific words used immediately above. The words "to discharge or otherwise to deal with the goods" are only conditions necessary for the carrier to delay the vessel and do not themselves give the carrier the option of discharging and restowing cargo.
There is no doubt that clause 19c) entitles the carrier to compensation for services rendered under clause 19a). However this entitlement to extra compensation for services rendered "as herein provided" is contingent on the services performed being something "herein provided", i.e. provided in clause 19a). Restowage is not such a service. Neither is discharge in the circumstances. This is because clause 19b) indicates that when the carrier exercises the option to discharge, this constitutes complete delivery and performance under the contract and the contract is then deemed to have been fulfilled. That did not occur here. The carrier did not treat discharge as performance and fulfilment because it retained the goods and continued to Liverpool and Newport with them. Therefore the discharge that was performed in this case is not the discharge contemplated by clause 19 of the bill of lading. There is therefore no right to extra compensation for discharge and restowage under clause 19c).
I now turn to the special clause on the front of the bill of lading7 which states:
35 PKGS. S.T.C.
3360 PIECES
149 443 M3
CANADIAN HEMLOCK ROUGH
GREEN LUMBER
LOADED ON BOARD ON BILL
OF LADING DATE
STOWED ON DECK
SHIPPED ON DECK AT
SHIPPER'S RISK AND
RESPONSIBILITY WITHOUT
RESPONSIBILITY TO OWNERS
HOWSOEVER OR WHERESOEVER
CAUSED.
FREIGHT PREPAID
The provision is not well drafted. For example, there is no antecedent to the words "howsoever or wheresoever caused". Be that as it may, it is clear that this clause constitutes an exemption from claims by cargo interests. I am told that this clause, or ones like it, are well-known with respect to deck cargo. The clause seems to preclude CPFP from claiming from the carrier for the loss of lumber stowed on deck. It appears that it is a clause that would pertain to loss or damage that may occur to cargo by reason of it being exposed on deck and being subject to the elements. In the event of damage to or loss of the cargo attributable to deck stowage, the carrier is not responsible to cargo interests. However, the liability of the carrier for loss or damage to deck cargo is not a question that arises in this case. What is clear is that the clause does not confer a right on the carrier to make a claim against CPFP for extra costs incurred in the course of a voyage. Nor is it a clause that releases the carrier from the responsibility of performing the freight contract. Nor does it entitle the carrier to recover costs incurred in the course of a voyage that may not have been anticipated but that may be necessary to ensure that the goods reach their destination (L.D. Seals N.V. v. Mitsui Osk Lines Ltd. The —Darya Tara—, [1997] 1 Lloyd's L. Rep. 42 (Q.B. (Com. Ct.)), at page 50.
For all these reasons I conclude that the defendants are not liable to the plaintiffs under any provision of the bill of lading.
The defendants say that if they are not entitled to claim in contract they may rely upon the common law principles of bailment, quantum meruit, agency of necessity, or unjust enrichment.
The general law of bailment cannot avail to the benefit of the defendants in this case. There is no doubt that Termar is the bailee of CPFP's goods. The terms of the bailment are those set out in the bill of lading. However, counsel for the defendants argues that a bailee in possession of goods owes a further common law duty to the owners of those goods to preserve those goods, and has a correlative right to be indemnified for reasonable expenses incurred in fulfilling this duty.
Counsel for CPFP argues that Termar cannot rely upon the general principles of bailment to provide wider rights of recovery than that which are contained in the terms of the bill of lading. Arguing by analogy to the law of tort, counsel cites as authority Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd., [1986] A.C. 80 (P.C.), in which Lord Scarman states, at page 107:
Their Lordships do not believe that there is anything to the advantage of the law's development in searching for a liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship. Though it is possible as a matter of legal semantics to conduct an analysis of the rights and duties inherent in some contractual relationships including that of banker and customer either as a matter of contract law when the question what, if any, terms are to be implied or as a matter of tort law when the task will be to identify a duty arising from the proximity and character of the relationship between the parties, their Lordships believe it to be correct in principle and necessary for the avoidance of confusion in the law to adhere to the contractual analysis: on principle because it is a relationship in which the parties have, subject to a few exceptions, the right to determine their obligations to each other, and for the avoidance of confusion because different consequences do follow according to whether liability arises from contract or tort, e.g. in the limitation of action . . . .
Their Lordships do not, however, accept that the parties' mutual obligations in tort can be any greater than those to be found expressly or by necessary implication in their contract. If, therefore, as their Lordships have concluded, no duty wider than that recognised in MacMillan [1918] A.C. 777 and Greenwood [1933] A.C. 51 can be implied into the banking contract in the absence of express terms to that effect, the banks cannot rely on the law of tort to provide them with greater protection than that for which they have contracted.
However, I am not satisfied that Tai Hing Cotton Mill Ltd. represents the present state of the law in Canada with regard to the intersection between tort and contract. The current law in Canada is reflected in BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12, where McLachlin J. states, at pages 26-27, that where a given wrong supports an action in tort or contract, the plaintiff may sue in either or both, except to the extent that the contract limits or negatives the right to sue in tort. Significantly, she notes that even where the contract partially modifies one of the parties' liability in tort, a tort action may still lie on the common law duty as modified by the terms of the contract. Therefore, it is only where one can point to an actual contradiction between a tort duty and the terms of the contract that an action in tort will be negated or modified.
Rather than scrutinize each of the numerous provisions of the bill of lading and freight agreement, I will assume, without deciding, that the defendants were under a common law duty to preserve CPFP's cargo, in addition to their obligations under the terms of the bill of lading and freight aqreement.
Counsel for the defendants relies on Notara and another v. Henderson and others (1872), 1 Asp. M.L.C. 278 (Ex. Ch.), at page 281; China Pacific S.A. v. Food Corpn. of India, [1982] A.C. 939 (H.L.), at page 960, and Brown (app.) v. Gaudet (resp.); Cargo ex Argos (1873), 2 Asp. M.L.C. 6 (P.C), at page 17, to support the argument that the carrier in this case was acting under a common law duty to preserve the cargo and therefore may charge the cargo owner for expenses properly incurred in so doing.
However, Notara and China Pacific involved the physical deterioration of cargo caused by exposure to the elements. By contrast, the costs incurred by the defendants did not relate to the physical deterioration of the cargo, but to its stowage and transportation, which were the contractual responsibilities of Termar. Termar undertook these contractual obligations in consideration of the freight paid, and is not entitled to additional compensation for unforeseen costs incurred while fulfilling these contractual responsibilities.
This conclusion is supported by the reasons of Sir Montague Smith in Cargo ex Argos. In that case the carrier was under a contractual obligation to transport and deliver petroleum to the port in Havre. Upon the carrier's arrival at Havre, the port authority refused to allow the petroleum to be discharged. The carrier then made unsuccessful attempts to discharge the cargo at the ports of Honfleur and Trouville. The carrier, having additional cargo to deliver to Havre, transhipped the cargo into a lighter within the port of Havre, and then discharged the rest of its cargo at the Havre dock. Once the ship's cargo was discharged, and a fresh cargo shipped for London, the carrier left the dock and, as required by the port authorities in Havre, reshipped the petroleum and returned it to London.
The carrier claimed against the shipper the freight for transporting the cargo to Havre, additional freight for returning the cargo to London, costs relating to the transhipping of the cargo in the port of Havre, and demurrage and expenses in attempting to enter the ports of Honfleur and Trouville. Sir Montague Smith found that the shipper was liable for the original freight, as the carrier had performed its contractual obligations once the petroleum was delivered to the port in Havre and remained there for four days while the remaining cargo was discharged. The freight for returning the cargo was also allowed on the basis of the same common law obligations and rights asserted by Termar in the case before me. However, Sir Montague Smith distinguished the carrier's claim for demurrage and expenses in attempting to enter the ports of Honfleur and Trouville, at page 17, as follows:
. . . the plaintiff is not entitled to recover the amount claimed for demurrage and expenses in attempting to enter the ports of Honfleur and Trouville. These efforts may have been made by him in the interest of the cargo as well as the ship; but they were made before the ship was ready to deliver at all in the port of Havre, and the expenses of this deviation and of the return to Havre, after permission had been obtained to discharge there, must be treated as expenses of the voyage, and not as incurred for the benefit of the defendant. [Emphasis added.]
Similarly, while counsel for the defendants argues that the discharge and restowage at Lisbon was undertaken in the interest of cargo, Termar was at the time under a contractual obligation to transport and deliver this cargo. Therefore the costs incurred at Lisbon, which were necessary for the performance of Termar's contractual obligations, "must be treated as expenses of the voyage, and not as incurred for the benefit of" cargo interests. For these reasons bailment is not applicable to this case.
For the same reason, agency of necessity does not arise in this case. Discharge and restowage at Lisbon and the costs incurred therefore by the defendants were not incurred in any capacity as agents of CPFP. They were undertaken and incurred as part of the defendants' contractual obligations and not for the benefit of CPFP.
The doctrine of quantum meruit requires: (1) an understanding on the part of the recipient of the services that the party providing the services intended to be compensated; (2) that a special relationship exists between the parties; (3) a request, either express or implied, that the work be performed, and; (4) an acceptance of the work (Fridman, Restitution, at pages 292-296). In this case CPFP considered the discharge and restowage of cargo at Lisbon to fall within the carrier's contractual duties. There was never any understanding on the part of CPFP that the defendants intended to be compensated, nor was there any request by CPFP that the work be performed. Quantum meruit is not applicable in this case.
Nor is there unjust enrichment here. Such a claim requires enrichment of CPFP, a corresponding deprivation of the carrier, and the absence of a juridical reason for the enrichment (Fridman, Restitution, supra, at page 31; Rathwell v. Rathwell, [1978] 2 S.C.R. 436). In this case CPFP contracted to have its cargo carried to Liverpool and Newport. That is what it received. It received no benefit to which it was not entitled by contract. Unjust enrichment is not applicable.
I conclude that the defendants have not demonstrated that they are entitled to recover from the plaintiffs for the costs of discharging and restowing at Lisbon. Their counter-claims are dismissed with costs.
1 In this case the plaintiffs commenced their action for a negative declaration that they are not liable to the defendants. In fact it is the defendants who seek to recover the costs they incurred from the plaintiffs.
2 At trial the parties agreed that if the plaintiffs are liable to the defendants the extent of the plaintiffs' liability US$514,153.44. The defendants claim a further US$13,440 which is disputed by the plaintiffs which brings the total of the defendants' claim to US$527,593.44 referred to above.
3 Rule A of the York-Antwerp Rules, 1974 defines a general average act as follows:
There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.
Rule X(b) of the York-Antwerp Rules, 1974 provides:
(b) The cost of handling on board or discharging cargo, fuel or stores whether at a port or place of loading, call or refuge, shall be admitted as general average, when the handling or discharge was necessary for the common safety or to enable damage to the ship caused by sacrifice or accident to be repaired, if the repairs were necessary for the safe prosecution of the voyage, except in cases where the damage to the ship is discovered at a port or place of loading or call without any accident or other extra-ordinary circumstance connected with such damage having taken place during the journey.
The cost of handling on board or discharging cargo, fuel or stores shall not be admissible as general average when insured solely for the purpose of restowage due to the shifting during the voyage, unless such restowage is necessary for the common safety.
4 Clause 18 of the freight agreement is set out at paragraph 8. Clauses 9 and 13 of the freight agreement provide:
9. DECK CARGO
Lumber may be carried on deck at Carrier's option, except where Shipper requests underdeck stowage for specific parcels. Volume requiring under deck stowage not to exceed 25 (twenty five) percent of total lumber quantity tendered per sailing without consultation with Carrier. If carried on deck, Bills of Lading to be claused "Shipped on deck at Shipper's risk and responsibility without responsibility to owners howsoever or wheresoever caused".
. . .
13. PACKING
Repackaging costs are to be absorbed by Carrier, however, it is Shipper's responsibility to deliver properly banded packages alongside the vessel.
5 Clauses 6, 8 and 9 of the bill of lading provide:
6. SCOPE OF VOYAGE. The voyage herein undertaken shall include usual or customary or advertised ports of call whether named in this contract or not, also ports in or out of the advertised, geographical, usual or ordinary route or order, even though in proceeding thereto the vessel may sail beyond the port of discharge or in a direction contrary thereto, or depart from the direct or customary route. The vessel may call at any port for the purpose of the current voyage or of a prior or subsequent voyage. The vessel may omit calling at any port or ports whether scheduled or not and may call at the same port more than once; may, either with or without the goods on board, and before or after proceeding towards the port of discharge, adjust compasses, drydock, go on ways or to repair yards, shift berths, undergo degaussing, wiping or similar measures, take fuel or stores, land stowaways, remain in port, sail without pilots, tow and be towed, assist vessels in distress, and save or attempt to save life or property, and all of the foregoing are included in the contract voyage.
. . .
8. DECK CARGO AND LIVE ANIMALS. In respect of deck cargo and live animals the Carrier has no obligation specially to equip the vessel for the reception, carriage and preservation of such cargo and has no responsibility for loss or damage which may be attributable to the carriage on deck or for injury to or illness or mortality of live animals, even if caused by want of due diligence on the part of the Carrier or his servants.
9. SUBSTITUTION OF VESSEL, TRANSHIPMENT, LIGHTERAGE ETC. The Carrier has the right, but no obligation to carry the goods to their destination by any other Vessel than the Vessel named herein, either belonging to the Carrier or not, or by land or air transport, and may tranship, land or store the goods either on shore or afloat and reship or forward the same at Carrier's expense but at Merchant's risk, and may also convey the goods in lighters to and from the vessel at Merchant's risk. In all cases of transhipment, lighterage, forwarding, reshipment or storage the Carrier acts as agent for the Merchant only, and is authorized to accept the terms of any warehouseman or carrier, even though less favourable to the Merchant than those contained in this B/L. The responsibility of the Carrier shall be limited to the part of the transport performed in his own vessel, and the Carrier shall not be liable for damage or loss arising during any other part of the transport, even if the freight for the whole transport has been collected by him. The Carrier may delay forwarding awaiting a vessel or conveyance whether in his own service or not.
6 In his evidence at trial he also relied on clause 19.
7 This is bill of lading 971001 which in the agreed book of documents was referred to as a sample bill of lading. The cargo was covered by a number of bills of lading. The only difference appears to be in the identification and quantities shipped under a specific bill. The liability provisions are the same on all bills of lading.