T-3106-72
Swiss Bank Corporation (Plaintiff)
v.
Air Canada, Swissair and Swiss Air Transport Co.
Ltd. (Defendants)
Trial Division, Walsh J.—Montreal, October 6, 7
and 8; Ottawa, October 22, 1981.
Aeronautics — Claim for loss of cargo shipped — Defend
ant Air Canada admits liability but alleges it is limited to
$1,000 pursuant to the provisions of the Warsaw Convention as
incorporated in the Carriage by Air Act — Plaintiff invokes
Art. 25 of the Warsaw Convention, as amended, which
excludes the limits of liability provided in Art. 22 of the
Convention — Whether defendant Air Canada is able to limit
its liability — Whether interest at the commercial rate from
the date of loss to the date of judgment should be allowed -
Carriage by Air Act, R.S.C. 1970, c. C-14, Schedule I, Arts.
22, 25 and Schedule III, Arts. XI, XIII — Federal Court Act,
R.S.C. 1970 (2nd Supp.), c. 10, s. 40 — Federal Court Rules 5,
406, 456, 1212 — Quebec Civil Code, art. 1054 — Quebec
Code of Civil Procedure, art. 476.
This is a claim for the loss of a parcel of Canadian dollar
bank notes totalling $60,400 received by defendant Swissair
from plaintiff for carriage by Swissair and Air Canada to
Montreal, the consignee being The Royal Bank of Canada. The
facts show that the parcel was picked up by a ramp supervisor
in Montreal who allegedly delivered it to the employee in
charge of the valuable cargo locker. They also show that
documents pertaining to the shipment disappeared. Air Canada
admits liability, but alleges it is limited to $1,000, i.e. the limit
of liability under the Warsaw Convention for International
Carriage by Air adopted by and incorporated in the Carriage
by Air Act. Plaintiff invokes Article 25 of the said Convention,
as amended by The Hague Convention, which excludes the
limits of liability specified in Article 22 of the Convention,
where damage results from an act or omission of the carrier or
his servants, done with intent to cause damage or recklessly and
with knowledge that damage would probably result, provided
that in the latter case, the servant was acting within the scope
of his employment. The question is whether defendant Air
Canada is able to limit its liability or whether this is excluded
by Article 25 of the Warsaw Convention, as amended. Plaintiff
also seeks interest at the commercial rate from the date of loss
to the date of the judgment.
Held, plaintiff's action is maintained. As far as the direct
responsibility of Air Canada is concerned, the Court cannot
conclude the loss resulted from an act or omission "done with
intent to cause damage or recklessly and with knowledge that
damage would probably result". Although Air Canada's secu
rity procedures at the time for the protection of valuable cargo
were far from perfect, it cannot be concluded from the evidence
that it was the deficiency in these procedures or the failure to
comply with them literally in every respect which resulted in
the loss. Air Canada's errors resulted in delays in determining
that the package was missing and in commencing investigation
to locate it. This was not the cause of the loss of the parcel. It
was also an act of negligence to have a person under suspicion
in charge of the valuable cargo locker, but at that time
justification for suspecting him was not very great. With
respect to the liability of the carrier's servants, the Court relies
on the objective approach adopted by the French Cour de
cassation in its interpretation of Article 25 of the Convention.
If it were necessary to specifically identify the thief in the case
of goods which it has been concluded have been stolen in transit
by a servant or agent acting within the scope of his employ
ment, in order to examine his intentions before concluding that
in so doing he had stolen them with intent to cause damage or
recklessly and with knowledge that damage would probably
result, the exclusion of limitation of liability would seldom have
any application. From then on, it becomes specious to argue
that when the theft has taken place as a result of participation
by one or several persons unknown acting within the scope of
their employment the intention to cause damage or knowledge
that damage would probably result cannot be proved because it
is impossible to determine whose intentions must be examined.
Any thief or thieves must be aware that damage would prob
ably result even though that was not their specific intent when
they stole the package in question. To interpret Article 25
otherwise would have the effect of rendering it virtually mean
ingless. Furthermore, the presumed theft of the parcel by an
employee or employees of Air Canada can be brought within
the provisions of Article 25 as having occurred within the scope
of their employment, the opportunity having occurred while
they were working in the cargo shed handling cargo of which
the valuable parcel would be part. There is no authority for
allowing plaintiff's claim for interest before judgment on an
equitable basis. It is the provisions of the Warsaw Convention
as amended by The Hague Convention which must be applied
here and not the provisions of federal or provincial law whether
or not such interest would have been allowed under the laws of
the Province of Quebec where the action was tried. The Court
should not depart from the general practice and allow interest
at the commercial rate rather than the legal rate following
judgment.
Bensol Customs Brokers Ltd. v. Air Canada [1979] 2 F.C.
575, applied. Lacroix Baartmans, Callen, Und, Van
Tichelen S.A. v. Swiss Air 1974 R.F.D.A. 75, agreed with.
Ce Air-France v. Moinot 1976 R.F.D.A. 105, agreed with.
Ce Le Languedoc v. Société Hernu-Peron 1976 R.F.D.A.
109, agreed with. Rustenburg Platinum Mines Ltd. v.
South African Airways [1977] 1 Lloyd's Rep. 564;
[1979] 1 Lloyd's Rep. 19 (C.A.), agreed with. Tondriau v.
Cie Air India 1977 R.F.D.A. 193, considered. Rashap v.
American Airlines Inc. 1955 US& Civ. AvR 593, con
sidered. The Governor and Company of Gentlemen
Adventurers of England v. Vaillancourt [1923] S.C.R.
414, considered. Velan-Hattersley Valve Co. Ltd. v. John-
son [1971] C.A. 190, considered, Syndicat d'assurances
des Lloyds v. Sté Aérofret 1969 R.F.D.A. 397, disagreed
with. Curley v. Latreille (1920) 60 S.C.R. 131, referred to.
ACTION.
COUNSEL:
V. Prager and P. Cullen for plaintiff.
Jean Clerk for defendant Air Canada.
Peter Richardson for defendants Swissair and
Swiss Air Transport Co. Ltd.
SOLICITORS:
Stikeman, Elliott, Tamaki, Mercier & Robb,
Montreal, for plaintiff.
Boudreau, Giard, Gagnon & Clerk, Montreal,
for defendant Air Canada.
Doheny, Mackenzie, Grivakes, Gervais &
LeMoyne, Montreal, for defendants Swissair
and Swiss Air Transport Co. Ltd.
The following are the reasons for judgment
rendered in English by
WALSH J.:
OUTLINE OF FACTS AND FINDINGS OF FACT
This is a claim for a loss, apparently by theft at
Dorval Airport in Montreal of a parcel of Canadi-
an dollar bank notes totalling $60,400 received by
defendant Swissair from plaintiff at Basle, Switz-
erland, for carriage by defendant Swissair from
there via Zurich, Switzerland, to Montreal, the
consignee being The Royal Bank of Canada.
Swissair issued a valuable cargo air waybill No.
085-626-4641-5 providing for carriage by defend
ant Swissair from Basle to Zurich on Swissair
Flight SR 749 on November 4, 1970, and from
Zurich to Montreal on Swissair Flight SR 160 on
November 5, 1970. The arrangements for the
transport were made by MAT Transport Limited
as agents for plaintiff in accordance with their
usual practice. In due course it was found that
Flight SR 160 from Zurich to Montreal was a
chartered flight and not permitted to carry cargo
so the agent arranged for the shipment on Air
Canada Flight 879 on November 6, 1970. Plaintiff
Swiss Bank Corporation was not advised of the
change, but plaintiff does not suggest that using
Air Canada in place of Swissair for the transatlan
tic flight was negligence.
The shipment was delivered by Swissair Secu
rity to Captain Proctor, the Captain of the Air
Canada flight shortly before departure and he
accepted it and signed the valuable cargo receipt
No. 95042. He was not obliged to do so but
accepted it voluntarily. Edward Johnson, an inves
tigator for Air Canada at Dorval at the time and
now Chief of Security for Air Canada testified
that while attempts had been made to have the
Canadian Air Line Pilots Association accept the
responsibility for valuable cargo this had not been
agreed to, but it was not unusual for the pilots to
voluntarily accept small parcels of valuable cargo
which they could take in the cockpit with them. In
the present case Captain Proctor carried it under
his seat, the parties agreeing that the parcel would
have been approximately 12 inches square and
perhaps 4 inches in depth.
In accordance with its practice Swissair did not
declare the value for carriage which would have
resulted in a substantial surcharge, as frequent
shipments of money and securities are made by it
and it carries its own insurance to cover any losses.
It was explained that by declaring the value of a
parcel this does not assure special handling or even
that it is especially valuable cargo as it will be
placed in the hold of the plane with other general
cargo. Any passenger, for example, may place a
value on a piece of his luggage which insures that
in the event of loss his claim will not be limited to
the amount in the Regulations. It is equivalent to a
form of insurance. The fact that this was not done
in the present case is irrelevant. As valuable cargo
however the shipment was subject to the provisions
of the Air Cargo Tariff Worldwide in effect at the
time which required payment of a surcharge and
this was done, the correct minimum charge being
paid. The waybill, a Swissair form, indicates that
it was valuable cargo with no value declared.
The Air Canada flight in question, after it
stopped in Montreal, was continuing on to Toronto
and Captain Proctor was also given a similar
parcel destined for Toronto, which was delivered in
due course so is not in issue. The receipt of the
package which Captain Proctor signed for was
known as a valuable cargo receipt several copies of
which accompanied the cargo. In approaching
Montreal he radioed ahead to Air Canada's radio
operator to have a responsible person come aboard
to receive the shipment. This message was some 15
minutes before touch-down. On arrival he handed
the parcels over to a ramp supervisor who will
henceforth be designated as employee X, since
although he was one of the persons under suspicion
in connection with the loss of the parcel there was
insufficient evidence to lay any charges against
him. Employee X signed copies of the valuable
cargo receipt forms for the parcels and fortunately
Captain Proctor kept these in his personal posses
sion, thereby being clear of any responsibility for
the loss.
It should be mentioned that these parcels are
also flagged for identification as being valuable
cargo so that, even if they are put in the hold, they
can be readily identified. While there was some
discussion as to the desirability of so identifying
such cargo so that any of the cargo handlers or
anyone on the tarmac or in the cargo shed having
knowledge of the system can readily see which
parcels are of a special value, and also of the
propriety of the Captain radioing ahead that he is
carrying valuable cargo so that anyone having
access to this communication and having criminal
intent will be on the look-out for it, I do not
consider either action to constitute negligence. As
Mr. Johnson testified it is a lesser of two evils and
prepares authorized receiving personnel at the Air
port to be on the look-out for such cargo and take
appropriate measures to quickly locate and protect
it.
In accordance with practice Swissair security
sent an urgent message to Air Canada Freight in
Zurich and Dorval advising that the Captain had
the shipments, giving the air waybill number and
weight. Air Canada denies having received this. A
witness, Jean Bergeron, supervisor of C.N.C.P.
Telecommunications explained that this is what is
known as a routing message which may have gone
via Zurich, Frankfurt, New York, Toronto to
Montreal and it is possible that it did not arrive as
a copy of the transmission of the message is not a
proof of reception. In the absence of any indication
of any break-down of Air Canada's receiving
equipment for such a message however on the date
in question, or of any difficulties in transmission
en route, it appears to me that the better view is
that it was received and mishandled, or mislaid
along with other documentation to which reference
will be made later. The witness Johnson testified
that if the message had been received the ramp
agent in Montreal would be given it in order to
notify the off-load crew. In any event as a result of
Captain Proctor's radio message on approach to
Montreal it was made known that there was valu
able cargo aboard the flight, although this resulted
in considerably less notice being given to the cargo
handlers than would have been the case had the
earlier message been received and acted upon.
Swissair also prepared the manifest for the
Montreal cargo and put it into the Air Canada
Corporation pouch which travels with it on the
plane. Air Canada prepared the Air Canada Valu
able Cargo Register ZRH FF 4641 but the name
of the loading person does not appear on it, nor
does the cargo dispatch message refer to the ship
ment which was lost. This was explained as per
haps being due to the fact that the package in
question was only delivered personally to Captain
Proctor shortly before take-off. The Toronto
parcel had originated in Zurich and may have
been in Air Canada's possession earlier which
accounts for it having been on the dispatch. Mr.
Johnson testified that the missing parcel would not
have been on the cargo dispatch message in any
event as it was not put in the hold.
The ramp supervisor X on receipt of the parcel
from Captain Proctor did not verify it with the air
waybill or valuable cargo register both of which
would have been in the pouch of documents. This
was contrary to Air Canada Regulation 170.18-4.
Mr. Johnson testified that this was not necessary
as the parcels were handed to him directly by the
Captain and were not in the hold.
While Regulations require that when valuable
shipments are to be transferred from one location
to another at an airport one responsible employee
in addition to the operator of the motor vehicle or
tractor train will be assigned to maintain surveil
lance over the valuable cargo during the transfer,
the ramp supervisor X handled the parcels alone,
transporting them in the station wagon with which
he is provided for use in supervising the loading
and unloading of planes, transfer of crews and so
forth. The witness Johnson explained that the pur
pose of the Regulation is that if the valuable cargo
is being transported in an ordinary cargo transport
vehicle pulled by a tractor along with other cargo
it could bounce out or be taken off en route, which
is the reason for having an agent keep it under
personal observation during transport, but that
was unnecessary as the ramp supervisor X was
taking the two small packages himself in his own
vehicle, since the purpose of involving two
employees in the transport is not so that one will
be able to keep watch over the other. The said
ramp supervisor appears to have been extremely
casual however in his handling of the two valuable
packages, leaving the one which was to be returned
on board the plane for carriage to Toronto lying on
the seat of his station wagon while he went off to
deliver the other. Since the Toronto package was
not lost but was returned by him to Captain
Proctor and eventually delivered in Toronto this
has no bearing on the loss of the Montreal
package.
Air Canada was aware of the shipment of this
parcel since Exhibit P-31 is an unsigned valuable
cargo register covering the shipment from Zurich
to Montreal. This form bears the words "Immedi-
ate teletype must be sent to origin station advising
arrival of goods". No such teletype was ever sent
and this document along with the Montreal copy
of the waybill, the cargo manifest and the valuable
cargo notice which were supposed to be in the
pouch disappeared and could never be located in
Montreal. Oddly enough according to the witness
Johnson the only documents missing from the
pouch were those relating to this cargo plus the
manifest which covered all the cargo on the plane.
These documents go to an entirely different area
of the Airport from where the cargo is stored and
had they not been missing the loss of the valuable
shipment would have been ascertained at a much
earlier date and investigation started sooner. As it
was the investigation department first became
aware of the loss on December 5, nearly a month
after the shipment when a secretary from Hayes,
Stuart called on behalf of the consignees reporting
that the shipment was missing and that she had
spoken to the cargo people at Air Canada a day or
two before. Mr. Johnson then ordered a warehouse
inventory to be taken both in Dorval and Toronto,
no documentation being available to determine
where the package was lost although the customs
manifest, air waybill of lading, valuable cargo
receipt and entries in the valuable cargo register
should have been available at Dorval. This caused
considerable concern because of the inference that
someone had deliberately interfered with the docu
mentation since, if the documents were available
without the cargo an investigation would immedi
ately have been triggered, whereas in the converse
case where an item of cargo can be found without
documentation it poses no great problem as a
sub-waybill can be issued. If there had been a
manifest this could have been matched up with the
cargo which is normally done the same day. Docu
mentation had to be obtained in Switzerland and it
was only after interviewing Captain Proctor to
ascertain to whom he had delivered the cargo that
the ramp supervisor X was interviewed. Regula
tions call for a specially designated cargo agent to
take delivery of the valuable cargo and ramp
supervisor X was not such an agent but the witness
Johnson insisted that this was even better as he
occupied a senior position, considered part of man
agement. Nevertheless he was in charge of loading
or unloading four or five planes at the time and
was not sent out from the cargo sheds specifically
to take delivery of this parcel and deliver it to the
security locker.
When first interviewed, which was of course a
month after the event, said employee X could not
remember the shipment at all until a few days
later when his memory was refreshed. On the
plane in question certain pallets of cargo destined
for Toronto had by error been loaded outside those
destined for Montreal which would have neces
sitated unloading the Toronto pallets to get at
those destined for Montreal and then loading the
Toronto pallets on again. As a result of this said
ramp supervisor X went into the cargo shed to
inquire whether it would not be preferable to leave
the Montreal pallets on the plane when it con
tinued on to Toronto and then have them returned
to Montreal to avoid double handling. He then
recalled that when he was passing through the
cargo terminal to see about this he continued on to
the valuable cargo locker with the Montreal parcel
delivering it to the employee in charge of the
locker on the day in question, whom I will identify
as employee Y. He believed he obtained a receipt
which should then have gone to the ramp cargo
office. This receipt would have been kept there for
a month, but if it in fact existed it had been lost or
thrown away after a month, at which time the
investigation had not yet started. He could not
recall the name of the party to whom he allegedly
gave the parcel.
In any event no notation as to this cargo was
entered in the valuable cargo register which should
have been filled in both when such cargo was
entered into and delivered out of the valuable
cargo locker.
The Air Canada employee in charge of the
valuable cargo locker and the valuable cargo regis
ter at the relevant time, employee Y, had been
under some suspicion both by Air Canada security
personnel and the Dorval police in connection with
previous losses at Dorval Airport. Subsequently
some six years later he was convicted together with
some other employees in connection with the
importation of drugs and theft of Olympic coins.
This conviction, many years later, can have no
bearing on the negligence of Air Canada at the
time in question. However as Mr. Johnson, cor
roborated by a witness who occupied a senior
position with the Dorval Police Department at the
time, testified this employee Y's name appeared on
a list of names of persons working in the cargo
area on the occasion of two or three previous
disappearances of valuable cargo from the shed
which gave some reason for suspecting him of
being involved with these thefts. Witness Johnson
testified that when an employee is first hired to
work in the cargo sheds of Air Canada a security
check takes place but there are no follow-up secu
rity checks nor any further checks each time he is
promoted so that agent X having risen to be a
ramp supervisor would not have undergone any
further security check since the time he was first
employed and the same would apply to employee
Y. It appears odd however that an employee who
was under some suspicion, however slight, at the
time would be given the responsible job of being in
charge of the security locker where valuable cargo
is kept. Mr. Johnson testified that in the late
1960's and early 1970's the Dorval Airport was
receiving special attention of the Air Canada secu
rity investigators together with a half dozen other
stations. The worst problems were at Dorval,
Toronto and Vancouver. The company security
Regulations are constantly being updated when
conditions warrant it. The Air Canada investiga
tors however, unlike the railroad investigators,
were not sworn in as peace officers. The Airport at
Dorval was patrolled by the Royal Canadian
Mounted Police, but on some occasions private
security guards were hired who would ride to the
plane with an Air Canada driver to deliver or
receive especially valuable cargo. The consignor or
consignee would be billed for this special service
which would have to be arranged in advance.
Air Canada at Dorval did not telex Air Canada
at Zurich to confirm receipt of the shipment as the
valuable cargo handling Regulations and provi
sions of the valuable cargo register require within
twelve hours. Most probably this was due to the
disappearance of the covering papers although it
cannot be said that Air Canada did not know that
the shipment had arrived. Moreover Air Canada in
Zurich did not communicate with Air Canada at
Dorval within twelve hours asking for confirmation
of the safe receipt of the shipment which is also a
requirement of the valuable cargo handling Regu
lations. These follow-up steps are required by the
Regulations in order to enable the disappearance
of an item of valuable cargo to be determined and
the search for it and investigation commenced as
soon as possible and the disappearance of it, result-
ing in a delay of nearly a month before Air
Canada was even aware that the parcel was miss
ing was undoubtedly prejudicial to any hope of its
recovery. However I cannot conclude that the fail
ure to take these steps contributed to its disappear
ance. The evidence leads to an overwhelming pre
sumption that the parcel was not simply lost but
was stolen by an employee, or more likely a group
of employees of Air Canada acting in concert who,
being familiar with the procedure for handling and
subsequently verifying the safe handling of such
cargo are also in a position to take steps to remove,
from another area of the Airport the documenta
tion relating to it which would enable the theft to
be quickly ascertained. It is unlikely that this
parcel however because of its nature would ever
have been recovered even if the investigation had
started the next day. The parcel was of a size and
weight that could easily be carried under one arm
with an overcoat thrown over it, for example, to
conceal it. While the time-clock which workers
punch on leaving work is adjacent to the supervi
sor's office and the departing employees have to
walk by it in full view of one or more persons in
the office, they are not searched; moreover it is
unlikely that the union would permit it. Further
more it would be easy to place such a small parcel
in any vehicle leaving the premises at any time, the
driver of which might be' part of the conspiracy to
steal. It could easily be thrown over the perimeter
fence or easily removed from the Airport in any
number of other ways. The contents, being
unmarked bills in assorted denominations, with no
record of the numbers of them would soon
disappear.
The passage of time before the theft was dis
covered and the disappearance of some of the
important documentation made it impossible to
attribute the theft to any given individual or
individuals. The ramp supervisor X, a well-respect
ed employee who was not under any suspicion at
the time, could not unfortunately produce the
receipt from the employee to whom he allegedly
handed the parcel, which would have cleared him.
Undoubtedly if the investigation had started
immediately after the theft he could not have
claimed, as he did at first, that he had forgotten
what he had done with the parcel or that he had in
fact received the receipt for it but that it had been
destroyed after 30 days in the ramp supervisor's
office. Certainly he was the last person known to
have had the package in his possession and it is
difficult to understand how even 30 days later he
would at first have had no recollection of what had
been done with it until his memory was subse
quently refreshed. When eventually Johnson called
in the Dorval police on December 11 he did not
even then designate the loss as a theft so it was
entered in the police records as an incident. Cap
tain Detective Boyer testified that the airline usu
ally waits 30 days before making a complaint of
theft in any event. Far more parcels are merely
misplaced, misdirected, sent to a wrong destination
or otherwise temporarily lost than are ever stolen,
of course, so that it is not unreasonable to allow
some time to elapse before the disappearance is
considered as a theft. Captain Detective Boyer
suggested that a lie detector test be given to the
ramp supervisor X since he was the last person
known to have handled the parcel. Unfortunately
soon after the incident in question, and whether
the incident attributed to it or not is not known,
said ramp supervisor X had a nervous breakdown.
One of his ramp employees had been injured and
he was driving him to the First Aid Station when
in his excitement he inadvertently backed up his
car and ran over another employee. It was then
that he had his breakdown. On medical advice the
company refused to have him given the lie detector
test, which was understandable under the circum
stances. However Mr. Johnson stated very
emphatically that when a lie detector was suggest
ed he refused absolutely to allow it to take place
on company property and time. In view of X's
mental condition his position would appear to be
justifiable, but if it were not for this it would be
entirely unacceptable as one would expect com
plete cooperation between the airline investigators
and the local police in an attempt to prove the
theft. The various employees working in the shed
at the time were interviewed, especially those who
were under some suspicion as a result of having
been present on the occasion of previous thefts.
Employee Y was in charge of the security locker
on the day in question. His statement had been
declared to be a privileged document by judgment
rendered at an early stage in the proceedings on a
motion for production of documents. Employee Y,
since his release from prison following his convic
tion for the 1976 theft could not be located by
plaintiff in order to subpoena him to testify. Ramp
supervisor X was subpoenaed but not called by
plaintiff as its counsel was under the impression
that he was going to be called by defendant Air
Canada. He was not called however. This is not a
criminal proceeding nor has any charge ever been
laid against him. The Court can draw conclusions
from his failure to testify. Although there was no
evidence as to his present state of health it may
well be that defendant Air Canada did not choose
to submit him to the rigours of cross-examination.
It is most probable however that had he been
called he would merely have repeated the informa
tion given to investigator Johnson, which defend
ant Air Canada did not object to as being hearsay,
to the effect that he had delivered the parcel to the
person responsible for putting it in the security
locker and had obtained a receipt, which he gave
to the ramp supervisor's office where it was subse
quently destroyed after 30 days. One thing is
clear—the parcel was never checked into or out of
the security locker and as employee Y who was
already under some suspicion would have been
responsible for this, it is highly likely that had he
testified he would merely have denied any knowl
edge of the parcel or of having received it from
ramp supervisor X and given a receipt for it. It
would be pure speculation to conclude that he stole
it, however. He could have been equally careless in
his handling of it as employee X was in connection
with the Toronto package, and merely put it down
somewhere, intending to enter it on the register
and put it in the locker later. Any employee or
anyone with access to the shed could then have
taken it and employee Y would attempt to cover
his negligence by denying ever having received it.
He could have put it in the locker without entering
it as required and taken it out at his leisure.
Counsel for defendant Air Canada suggested that
anyone having access to the sheds, such as
employees of other airlines or even strangers who
might be in the Airport, although they had no
right to be, could have taken it but this is an
unlikely possibility in view of the evidence of previ
ous and subsequent thefts of cargo by Air Canada
employees from the cargo sheds at Dorval Airport,
and the unexplained disappearance of covering
documents.
Since the investigation at the time did not
uncover any evidence enabling the blame to be
attributed to any specific individual this certainly
cannot be done now, but I have no doubt, as I have
already indicated, that the parcel was stolen by
one or more employees of Air Canada having
access to it and to the covering documents which
delayed the investigation of the theft.
Air Canada has admitted responsibility and has
offered payment of $1,000 which amount is the
limit of liability under the Warsaw Convention for
International Carriage by Air to which effect has
been given in Canada by chapter C-14 of the
Revised Statutes of Canada 1970 [Carriage by Air
Act]. The question which has given rise to the
present litigation is whether the carrier Air
Canada shall be able to limit its liability or wheth
er this is excluded by provisions of Article 25 of
the said Warsaw Convention as amended by The
Hague Convention.
PROCEDURAL QUESTIONS AND ADMISSIONS
A serious procedural question arose which,
although resolved so as to enable the action to
proceed to a hearing on the merits should be
referred to since an apparently fatal defect,
although overcome prior to the opening of the
trial, will appear from the record. In the early
stages of the proceedings the defendant Air
Canada moved for a declinatory exception contest
ing the jurisdiction of the Court and by judgment
dated December 18, 1974, based on the jurispru
dence at the time, it was found that this Court did
not have jurisdiction and plaintiff's action was
dismissed with costs. An appeal was brought from
this judgment. Several years passed and in the
interval a judgment had been rendered by the
Court of Appeal in the case of Bensol Customs
Brokers Limited v. Air Canada' finding that this
Court did have jurisdiction over claims for the
international carriage of goods by air. All parties
being convinced that this represented the existing
state of the law now wished to proceed on the
merits before this Court. This could have been
simply accomplished by a consent to the granting
1 [I979] 2 F.C. 575.
of the appeal, on which the Appeal Court would no
doubt have acted following the Bensol Customs
Brokers case. However, inadvertently, the parties
entered in the appeal file, Court No. A-339-75
documents having the opposite effect. On
December 4, 1980, two documents were filed, the
first being a consent to the jurisdiction of this
Court, secondly a discontinuance of the appeal.
Quite aside from the fact that parties cannot
confer jurisdiction on a court by consent, as this is
a matter of law for the court to determine, the
discontinuance of the appeal had the effect of
confirming the judgment of Mr. Justice Addy,
effectively closing the trial file. As the appeal file
had also been closed by the discontinuance it was
now not possible to withdraw same and replace it
by a consent to granting of the appeal which is
what the parties had intended. While Federal
Court Rules provide for discontinuance proceed
ings (Rule 406) and for a consent in an appeal to
reversal of a judgment (Rule 1212), neither Rule
was applicable under the circumstances. Moreover,
proceedings which had been started in the Supe
rior Court in Montreal as a result of Justice
Addy's judgment finding that this Court did not
have jurisdiction were themselves discontinued
when it was decided to proceed in this Court and
that this could be done as a result of the Bensol
Customs Brokers judgment. It would be manifest
ly inequitable to deprive plaintiff of its day in
Court in which the matter could be dealt with on
the merits, as a result of a procedural error con
tributed to by counsel for all parties signing the
documents in the appeal record.
Fortunately what appeared to be an acceptable
way out of the impasse was discovered by invoking
article 476 of the Quebec Code of Civil Procedure
which reads as follows:
476. A party may renounce rights arising from a judgment
rendered in his favour, by filing in the office of the court a total
or partial renunciation signed by him or by his special attorney.
A total renunciation accepted by the opposite party places the
case in the position it was in immediately before the judgment.
There is no such Rule in the Federal Court Rules
and by invoking Rule 5 (the gap Rule) it was
possible to apply article 476. With the full written
approval of all parties defendants Air Canada and
Swissair and Swiss Air Transport Co. Ltd.
renounced their rights arising from the judgment
rendered by Justice Addy on May 20, 1975.
Article 476 provides no time limit within which
such renunciation may be made. The effect was to
place the parties in the position in which they were
immediately before the said judgment so that the
action could therefore be proceeded with.
At the opening of the hearing the parties filed
various admissions, to the effect that the amount
representing the air carriers' limitation of liability
with respect to the shipment was $1,000 which was
deemed to have been legally and validly tendered
into Court on the date of the admission of October
6, 1981, that the parties agreed that the shipment
consisted of Canadian dollars totalling $60,400,
that the carriage was an international carriage
covered by Swissair Waybill No. 085-626-4641-5,
that plaintiff is the right party to sue the defend
ants, that the method of carriage utilized was the
method normally used by The Royal Bank of
Canada and by the plaintiff, and that neither
Swissair nor Air Canada notified either MAT
Transport, the plaintiff, or The Royal Bank of
Canada of the fact that Air Canada was the
carrier of the cargo from Zurich to Montreal until
after the loss was discovered. A further admission
was made to the effect that plaintiff paid Swissair
143.95 Swiss francs being the correct minimum
charge provided in accordance with the tariff and
that no additional valuation charge was made, no
value for carriage having been declared.
Demands for the production of documents at
trial made by Air Canada were complied with.
Some discussion took place as to whether Air
Canada should be required to produce the docu
ments on its list of documents which had not been
declared privileged in the judgment of June 7,
1974, or if these could only be introduced by
plaintiff through witnesses which would have
involved the calling of a great many witnesses,
many no longer available to identify signatures. A
secondary discussion arose with respect to the
production of photostated copies of some of these
documents rather than originals. The Court
invoked the Rule 456 which reads as follows:
Rule 456. At any stage of an action, the Court may order any
party to produce to the Court any document in his possession,
custody or power relating to any matter in question in the cause
or matter and the Court may deal with the document when
produced in such manner as it thinks fit.
Defendant Air Canada was ordered to produce
any document on its list of documents which plain
tiff desired to have entered as an exhibit and which
had not been declared privileged and that a photo-
stat of any such document would be acceptable if
the original was not available unless defendant Air
Canada was in a position to deny that the photo-
stat represented a true copy of the original
document.
Plaintiff in its statement of claim dated October
20, 1972, asked for interest at the current commer
cial rate as of the date of the loss. This was
amended at the trial with the consent of all parties
so as to claim interest at the average prime rate
from the date of the loss to the date of judgment
and one of the agreements filed was that the
average prime rate from November 6, 1970, to
October 6, 1981, was 10.1%, without prejudice to
the right of defendant Air Canada to argue that
only the legal rate of interest should apply. Said
admission also contained an admission to the effect
that no notice of arrival was given either by Air
Canada or by Swissair to either MAT Transport,
The Royal Bank or Swiss Bank Corporation of the
arrival at Dorval of the shipment.
The discovery of Captain Proctor was taken into
the record as if read in full. The statements made
by P. V. Hohl of the Swiss Bank Corporation,
Charles Redman of MAT Transport and B. Met-
tini, Swissair service head of the valuable cargoes
in Zurich, taken by consent in Switzerland and
examined by counsel for the parties as if taken by
virtue of a rogatory commission were also entered
into the record, it being agreed that if these wit
nesses were present in Court the statements repre
sented what they would say.
LAW AND JURISPRUDENCE
Article 25 of the Warsaw Convention formerly
read as follows:
Article 25
(1) The carrier shall not be entitled to avail himself of the
provisions of this Convention which exclude or limit his liabili
ty, if the damage is caused by his wilful misconduct or by sucl
default on his part as, in accordance with the law of the Cour
seized of the case, is considered to be equivalent to wilfu
misconduct.
(2) Similarly the carrier shall not be entitled to avail himsel
of the said provisions, if the damage is caused as aforesaid b3
any agent of the carrier acting within the scope of hic
employment.
By The Hague Convention of September 28, 195f
it was amended as follows:
Article XIII
In Article 25 of the Convention—
paragraphs (1) and (2) shall be deleted and replaced by the
following:
"The limits of liability specified in Article 22 shall not apply
if it is proved that the damage resulted from an act or
omission of the carrier, his servants or agents, done with
intent to cause damage or recklessly and with knowledge that
damage would probably result; provided that, in the case of
such act or omission of a servant or agent, it is also proved
that he was acting within the scope of his employment."
In order to avoid the limitations of liability
imposed by Article 22 as amended, plaintiff seeks
to invoke Article 25 and it is the provisions of the
amended Article which are applicable in the
present proceedings.
Reference to the former wording has been made
however as the United States has not adopted The
Hague Convention modifying the wording which
makes American jurisprudence of little value in
the present case. British jurisprudence also relies
for the most part on the former wording interpret
ing the words "wilful misconduct". Serious dif
ficulty was encountered in obtaining a uniform
international interpretation as the civil law coun
tries gave their interpretation of the words "dol ou
d'une faute qui, d'après la loi du tribunal saisi,
est considérée comme équivalente au dol" in the
French version.
Shawcross and Beaumont, Air Law, page 345
(2d ed., 1951) concluded that English courts as of
that time interpret "wilful misconduct" under the
Warsaw Convention as an intentional act or fail
ure to act (1) where the person knows it is a
breach of his duty under the circumstances, or (2)
"knows [he] is likely to cause [injury] to third
parties", or (3) with reckless indifference does not
know or care whether it is or is not a breach of his
duty or is likely to cause damage.
In an article by William C. Strock, Volume 32,
Journal of Air Law and Commerce (1966) at page
294, the amended wording is discussed. He states:
This amendment by a change in wording indicates a dissatisfac
tion with the language in the Warsaw Convention among the
nations which drafted and signed The Hague Protocol. Appar
ently, this was due to a change in times and circumstances plus
a desire to decrease the situations where a carrier may have
unlimited liability. As a compromise, the maximum limited
liability was doubled. The Protocol restricts unlimited liability
by replacing "wilful misconduct" with the requirement of
knowledge as to both intentional damage and recklessness.
In England the Carriage by Air Act, 1961, 9 &
10 Eliz. 2, c. 27, adopted the provisions of the
Warsaw Convention as amended by The Hague
Convention in 1955 but the Carriage by Air Acts
(Application of Provisions) Order 1967 [S.I. 1967,
No. 480] substituted for the then Article 25 (i.e.
the amended Article), the original Article 25 so
that British jurisprudence subsequent to 1967 still
interprets "wilful misconduct" and must be read
with care. Shawcross and Beaumont say at page
449:
There is a strong tradition in civil law countries of treating
gross negligence as equivalent to dol, but this tradition was
particularly controversial in France and in 1957 the French
legislation, following the example of the amended convention
agreed at The Hague, provided that the fault equivalent to dol
was `faute inexcusable ... la faute délibérée, qui implique la
conscience de la probabilité du dommage, et son acceptation
téméraire sans raison valable".
In the English courts, the English text prevails, and the
question is as to the meaning of "wilful misconduct" or its
equivalent.
In dealing with the amended Article 25
Giuseppe Guerreri in an article entitled "Wilful
Misconduct in the Warsaw Convention: A Stum
bling Block" 2 states at page 275:
The comparison of the two texts of art. 25 shows that in the
Protocol neither the word "dol" nor the phrase "faute ...
équivalente au dol" have been used, thus avoiding any further
discussion on the subject among delegates of different
countries. -
2 The McGill Law Journal, Vol. 6.
The words disappeared but, instead, the concepts have been
incorporated in the text as clearly as possible in order to avoid
further differences of interpretations under different legal
systems.
The fault depriving the carrier of the benefit of a limited
liability must now be reckless and accompanied with the knowl
edge of the probable consequences. Moreover, the case of an
act intentionally performed to cause damage fits the universally
accepted concept of "dol".
Thus the new article 25, in defining and limiting the
extent, conveys the notion of wilful misconduct as applied by
the anglo-saxon judges, without significantly departing from
the French jurisprudence handed down in recent years on the
matter of responsibility arising from air catastrophes which
have plagued national aviation.
Garnault: Le Protocole de la Haye, [1956] Revue Fran-
çaise de Droit Aérien, 6.
In the most recent French cases, mainly in the Paris Court of
Appeals judgment February 3, 1954 (Hennessy v. Air France)
a tendency can be found directed to confine "faute lourde"
within well determined limits and boundaries; in general, a
limited interpretation is given which causes the concepts of
"faute lourde" and "wilful misconduct" to meet in the end. A
clear equivalence of ideas has been at last accomplished
through different legal systems.
In view of the differences in jurisprudence encoun
tered subsequently it appears this opinion may
prove to have been overly optimistic.
In reviewing the numerous cases to which the
Court was referred by counsel for both parties, it
appears desirable not only to exercise caution in
relying on British and American jurisprudence
based on the former wording of Article 25 of the
Convention, but also to eliminate the frequent
cases involving airplane crashes since the facts are
quite different from those of the subject case. It is
evident that a pilot whose own life is at stake when
he flies at altitudes lower than those permitted,
ignores directions from a controller or otherwise
by act or omission behaves recklessly cannot be
found to have done so with intent to cause damage
or knowledge that damage would probably result.
One significant change brought about by the
amendment of Article 25 is that the words in the
old Article "in accordance with the law of the
Court seized of the case" have been omitted. It is
therefore no longer the lex fori which should be
applied, and as counsel for defendant Air Canada
points out it is desirable that international inter
pretation be given to the Convention so that the
decisions will be consistent. While this is a desir
able end, the jurisprudence of various countries
interpreting it has been by no means consistent any
more than the decisions in the various countries
interpreting The Hague Rules for Carriage by Sea
or the American Carriage of Goods by Sea Act
always reach the same results. Defendant Air
Canada refers to extensive jurisprudence mostly
reported in the Revue Française de Droit Aérien.
In the case of Lacroix Baartmans, Caliens, Und,
Van Tichelen S.A. v. Swiss Air 3 a judgment of the
Swiss Federal Tribunal dealing with theft of bank
notes consigned as valuable cargo the Court held
at pages 77-78 (my translation):
.. There is no doubt that in accordance with the new
provisions of Article 25 of the Convention and Article 10 of the
rules of air transport the gross negligence of the carrier or of
his employees is not sufficient to open the way to unlimited
responsibility. According to these provisions even gross negli
gence committed knowingly is not sufficient. The responsibility
is only unlimited when the carrier or his employees have
intentionally caused the damage or when the act or omission
has been reckless or inconsiderate ... and on condition more
over that he was aware that damage would probably result
from the conduct...."
At page 78 the judgment goes on to say (my
translation):
Applying this interpretation to the present case the Federal
Tribunal declares it is not possible to state that the persons
eventually responsible for the loss of the five parcels actually
had this knowledge. In effect although the trial judge was
convinced that one of several employees of Eastern Airlines
who were involved in the re-shipment of the parcels from New
York to Mexico and whose names are known was responsible
for this loss the circumstances of the re-shipment are so con
fused that it is not possible to designate which employee.
Therefore "since the Court of Commerce concludes that it is
impossible to know with certainty where and why these parcels
were lost" it is equally impossible to identify the person whose
fault caused the loss, and as a result to "establish that he in
effect was aware of the probability of damage as the provisions
relating to the unlimited responsibility of the carrier require".
and later on the same page it is stated (my
translation):
The Federal Tribunal subsequently examined various hypo
theses put forward by plaintiff to explain the loss of the parcels.
It concludes that in supposing that these are correct they do not
permit it "to determine the existence of subjective criteria of
intention and knowledge of the probability of damage".
The case of Tondriau v. Cie Air India,' Cour de
cassation of Belgium, concerns an air crash and
3 1974 R.F.D.A. 75.
4 1977 R.F.D.A. 193.
the facts are therefore not pertinent but it is useful
in confirming that the Convention should be inter
preted by provisions of international law, as I have
already indicated. At page 202 the judgment
states:
[TRANSLATION] But considering that responsibility in mat
ters of international air transport which is a question which the
Court of Appeal was called upon to decide is regulated by the
Warsaw International Convention having for its objective the
unification of the rules applicable in this domain; that the
recourse to national law can therefore not be considered save to
the extent that the Convention refers to or permits it;
Whereas the interpretation of an international convention the
purpose of which is the unification of law cannot be done by
reference to the domestic law of one of the contracting States;
that if the treaty text calls for interpretation, this ought to be
done on the basis of elements that actually pertain to the treaty,
notably, its object, its purpose and its context, as well as its
preparatory work and genesis; that the purpose of drawing up a
convention designed to become a species of international legis
lation would be wholly frustrated, if the courts of each State
were to interpret it in accordance with concepts that are
specific to their own legal system;
and again on the same page:
[TRANSLATION] Whereas The Hague Protocol has for objec
tive in this connection the elimination of difficulties resulting
from the former text by establishing by a compromise solution
a common rule suitable for international air transport;
However, in a decision which is difficult to
understand the Cour de cassation (Ch. com.) of
France in the case of Syndicat d'assurances des
Lloyds v. Sté Aérofret 5 it was decided (my
translation):
The leaving of a parcel containing diamonds in a shed in the
airport open to anyone by an employee of the representative of
the carrier who knew the nature of the contents does not
constitute inexcusable fault sufficient to bring into play the
unlimited responsibility of the carrier provided by Article 25 of
the Warsaw Convention.
The history of Article 25 and the interpretation
given to it by the courts of various countries is very
thoroughly dealt with in an article by Bin Cheng
appearing in the Annals of Air and Space Law
1977, Volume II. He refers to the case of Ton-
driau v. Cie Air India (supra) in which the Brus-
sels Court of Appeal repudiated the approach of
the French Cour de cassation (1st Ch. Civ.) in the
case of Emery v. Sté Sabena 6 and adopted the
subjective approach rather than the objective
approach which had been applied to the pilot at
fault in that case.
5 1969 R.F.D.A. 397.
6 1968 R.F.D.A. 184.
The author refers to the case of Rashap v.
American Airlines Inc.' in which Dawson DJ.
said at page 605:
Wilful misconduct ... means a deliberate act or omission which
the person doing it: (1) knows is a breach of his duty in the
premises; or (2) knows is likely to cause damage to third
parties; or (3) with reckless indifference does not know or care
whether it is or is not a breach of his duty or likely to cause
damage.
While this case dealt with the old wording still
applicable in the United States of Article 25 in
interpreting "wilful misconduct" the close
approach to the present wording "recklessly and
with knowledge that damage would probably
result" is apparent.
After reviewing American and British jurispru
dence Bin Cheng concludes at page 75:
The true position appears to be that in the third type of wilful
misconduct, the doer's knowledge is required, but greater free
dom is implicitly allowed in inferring such knowledge — which
must exist — from the circumstances. It differs from the
objective test, where the doer's knowledge is not required. In
the latter case, it suffices that a reasonable person, a bonus
pater familias, or a "good pilot" (whatever may be the stand
ard applied) would have had such knowledge.
The Hague Protocol was adopted in 1955 and
did not come into force in France until August 1,
1963. Meanwhile on March 2, 1957, Law 57-259
on the liability of carriers by air was adopted in
France amending Article 42(1) of the law of May
31, 1924 on the same matter as follows:
[TRANSLATION] Art. 42. For the application of Art. 25 of
the said Convention [the Warsaw Convention or any conven
tion amending it; see Art. 41], the default considered as being
equivalent to dol is inexcusable default (la faute inexcusable).
A default is inexcusable if it is a deliberate default which
involves knowledge of the probability of damage and its reck
less acceptance without valid reason.
The Cour de cassation persists in its objective
approach to the interpretation of Article 25 of the
Warsaw Convention as amended by The Hague
Convention although Bin Cheng in the article to
which I have already referred outlining the history
and negotiations leading to the Conventions and
the intentions of the contracting parties suggests it
7 1955 US& Civ. AvR 593.
was the subjective approach which was intended in
the wording finally adopted at The Hague Conven
tion. In the case of Ce Air-France v. Moinot 8 at
page 107 the Cour de cassation (1st Ch. civ.)
stated:
[TRANSLATION] ... the Court of Appeal rightly considered
that under Article 25 of the Warsaw Convention as amended
by The Hague Protocol, in order to assess whether the author
of the reckless act or omission, which was the cause of the
accident, did have knowledge that damage would probably
result, it was the objective test that should be applied, that is to
say by reference to a normally careful and prudent person;
This again was in an airplane crash case. However
the same holding is made in cases of carriage of
goods. In the case of Cie Le Languedoc v. Société
Hernu-Peron 9 it stated:
[TRANSLATION] ... the inexcusable default of the carrier or of
his servants or agents referred to by Article 25 of The Hague
Convention should be assessed objectively: consequently, what
one has to do, in the present case, is to find out if the conduct of
the Société H.P. discloses, on its part, the knowledge that it
should have had of its own recklessness and of the possibility of
damage;
If I have reviewed the authorities and jurispru
dence at some length it is with a view to showing
that there is no consistent line of international
jurisprudence requiring a subjective interpretation
of the words "done with intent to cause damage or
recklessly and with knowledge that damage would
probably result" in Article 25 as amended by The
Hague Convention as defendant Air Canada con
tends, whatever may have been the intention of the
subscribing countries at the time the wording in
the amendment was adopted. I find it difficult to
accept the interpretation given by the Belgian
Cour de cassation in the Tondriau case (supra)
and other cases adopting the subjective approach
because this of necessity leads to a somewhat
preposterous conclusion. If it were necessary to
specifically identify the thief in the case of goods
which it has been concluded have been stolen in
transit by a servant or agent acting within the
scope of his employment, in order to examine his
intentions before concluding that in so doing he
had stolen them with intent to cause damage or
recklessly and with knowledge that damage would
probably result, the exclusion of limitation of lia
bility would seldom have any application. While it
might be argued that a thief steals goods for his
8 1976 R.F.D.A. 105.
9 1976 R.F.D.A. 109, at pages 115-116.
own personal profit and benefit and not with intent
to cause damage to his employer or recklessly and
with knowledge that damage would probably
result, he must be deemed to have knowledge that
the theft is damaging to the owner.
If we accept this, and none of the jurisprudence
appears to dispute it when the loss can be attribut
ed to a specific individual, surely it is somewhat
specious to argue that when the theft has taken
place as a result of participation by one or several
persons unknown acting within -the scope of their
employment the intention to cause damage or
knowledge that damage would probably result
cannot be proved because it is impossible to deter
mine whose intentions must be examined. Any
thief or thieves must be aware that damage would
probably result even though that was not their
specific intent when they stole the package in
question. To interpret the Article otherwise would
have the effect of rendering it virtually meaning
less, and in my view the French Cour de cassation
has therefore quite properly adopted the objective
approach for forming conclusions.
Although Air Canada's security procedures at
the time for the protection of valuable cargo were
far from perfect and certainly inferior to those of
Swissair which used armoured cars at the Airport
and security guards to transport such packages I
cannot conclude from the evidence that it was the
deficiency in these procedures or the failure to
comply with them literally in every respect which
resulted in the loss. The principal fault seems to
have been the failure ta act on the message advis
ing that the valuable cargo was en route (although
the receipt of this message is denied, it was more
probably mislaid or not properly acted on), the
failure to acknowledge to Zurich receipt of the
package, and the failure of Air Canada in Zurich,
when such acknowledgement had not been
received within twelve hours as required by the
Regulations, to make enquiries. These errors
resulted in delays in determining that the package
was missing and in commencing an investigation to
locate it. This was not the cause of the loss of the
parcel. It was also an act of negligence to have a
person under suspicion, employee Y, in charge of
the valuable cargo locker, but it must be remem
bered that at that time justification for suspecting
him was not very great, and although he was
convicted of theft of air cargo several years later
this was not foreseeable at the time of his employ
ment nor at the time that he was put in such a
position of trust.
As far as the direct responsibility of Air Canada
is concerned therefore I cannot conclude the loss
resulted from an act or omission "done with intent
to cause damage or recklessly and with knowledge
that damage would probably result". This by no
means exonerates said defendant however for
Article 25 provides the same exclusion of limited
liability if the damage resulted from an act or
omission of servants or agents of the carrier "done
with intent to cause damage or recklessly and with
knowledge that damage would probably result"
provided that in the case of such act or omission of
a servant or agent it is also proved that he was
acting within the scope of his employment.
Having already found that it can properly be
concluded that the parcel in question was not lost
or mislaid but was in fact stolen and that such
theft was as the result of concerted action by one
or more employees of Air Canada (who also most
probably stole the documents which would have
resulted in an earlier investigation of the theft
taking place), and having concluded that they
must have committed this theft with knowledge
that damage would probably result, it only
remains to decide whether they were acting within
the scope of their employment at the time. This in
itself is a controversial question. Certainly no
employee is employed to steal but since it can be
concluded that the employee or employees who
participated in the theft were working in the cargo
shed or vicinity thereof at the time of the theft it
can be argued that it took place in the course of
their employment. The jurisprudence has made a
clear distinction that the mere fact of being an
employee does not mean that the incident has
occurred in the course of employment, as for
instance if a ticket agent or member of the air
crew stole from the cargo shed where they were
not employed, but the presumption is that this is
not what took place and that it was one or more of
the employees working in the shed, who handled
cargo or had access to it in the course of their
employment who stole it. In this connection it is
instructive to look at the British case of Rusten-
burg Platinum Mines Ltd. v. South African Air
ways and Pan American World Airways Inc. 10 on
which plaintiff places considerable reliance. In this
case a box of platinum was stolen while in transit.
Unlike the present case it was decided on the basis
of "wilful misconduct" under the former wording
of Article 25 adopted in Britain by the Carriage by
Air Acts (Application of Provisions) Order 1967,
and it also found that Pan Am Airways was
responsible for such misconduct whereas in the
present case I do not find Air Canada directly
responsible for the loss of the cargo. The case
therefore is not cited as authority on these points.
The decision as in the present case is based on a
presumption as to the theft having taken place by
one or more loaders during the transfer of the
parcel from one plane to another. Reference was
made at page 574 of the Trial Division Report to
the case of Morris v. C. W. Martin & Sons Ltd."
in which Lord Denning M.R. stated at page 69:
... The case raises the important question of how far a
master is liable for theft or dishonesty by one of his servants.
If the master has himself been at fault in not employing a
trustworthy man of course he is liable. But what is the
position when a master is not himself at fault?
The law on this subject has developed greatly over the
years. During the 19th century it was accepted law that a
master was liable for the dishonesty or fraud of his servant if
it was done in the course of his employment and for his
master's benefit. Dishonesty or fraud by the servant for his
own benefit took the case out of the course of his employ
ment. The Judges took this simple view; no servant who turns
thief and steals is acting in the course of his employment. He
is acting outside it altogether. But in 1912 the law was
revolutionised by Lloyd v. Grace Smith & Co., [1912] A.C.
716, where it was held that the master was liable for the
dishonesty or fraud of his servant if it was done within the
course of his employment, no matter whether it was done for
the benefit of the master or the benefit of the servant ..
10 [1977] 1 Lloyd's Rep. 564. Court of Appeal [1979] 1
Lloyd's Rep. 19.
11 [1965] 2 Lloyd's Rep. 63.
At page 575 Ackner J. stated:
Lord Denning, M.R., went on to state that of course the
question remained what is meant by the phrase "in the course
of his employment". Having stated that the cases were baffling,
he concluded that in the ultimate analysis they depend on the
nature of the duty owed by the master towards the person
whose goods have been lost or damaged. At p. 70 he stated:
The master is under a duty to use due care to keep goods
safely and protect them from theft and depredation. He
cannot get rid of his responsibility by delegating his duty to
another. If he entrusts that duty to his servant, he is answer
able for the way in which the servant conducts himself
therein. No matter whether the servant be negligent, fraudu
lent, or dishonest, the master is liable. But not when he is
under no such duty.
At page 576 Justice Ackner states:
Accordingly, in English law the theft by Loader A was
within the scope of his employment. It was clearly part of his
duty to take reasonable care of the package during the opera
tion of loading and stowing it on the aircraft.
and again at page 577:
In all the circumstances I am satisfied on the material that
has been placed before me that the construction I have placed
on the words "acting in the scope of his employment" is
generally, even though not universally, acceptable.
In the appeal decision Lord Denning stated at
page 23:
If this loss was caused by the wilful misconduct of a servant or
agent of the carrier acting within the scope of his employment,
then the carrier can no longer rely on that limit of liability. He
is liable for the full value of the cargo.
and again [at pages 23-24] after reviewing previ
ous jurisprudence:
If this box of platinum was stolen by one of the loaders who
was entrusted with the task of loading it carefully and securely
into the aircraft; if it were stolen by himself or in combined
operation with others outside the aircraft; such a person is
guilty of wilful misconduct acting within the scope of his
employment. It would be different if it had been stolen by a
person who had nothing to do with the loading at all — as if it
had been stolen by a passenger or one of the cabin staff. Then it
would not have been within the scope of the employment of a
servant or agent at all — unless it appeared that someone (who
was entrusted with the care of the box) was negligent in
allowing the passenger or the cabin staff to have access to it.
Then of course it would be due to the negligence of that person
and it would be within the scope of his employment.
and again at page 24:
To which I may add if that servant is guilty of wilful miscon
duct in the way he carries out his duty, in so far as he steals the
goods himself or combines with others to steal them or allows
them to steal the goods, then in those circumstances that
servant or agent is guilty of wilful misconduct within the scope
of his employment.
and again at page 24:
So it seems to me, in agreement with the Judge below, that
this box of platinum was stolen by a combined operation, one of
the loaders entrusted with the very task of loading it carefully
combined with someone in the vehicles outside, whereby he put
it in such a position that he was able to pull it out at the crucial
moment and steal it from the aircraft. That was certainly wilful
misconduct within the scope of his employment.
This question has also aroused considerable con
troversy in Canada. In the leading Canadian case
of The Governor and Company of Gentlemen
Adventurers of England v. Vaillancourt 12 inter
preting article 1054 of the Quebec Civil Code in
which the words "in the performance of the work
for which they are employed" closely resemble the
words "acting within the scope of his employment"
in Article 25 of the Convention it was held that a
Hudson Bay factor who had shot an employee who
was drunk and disobedient nevertheless engaged
the responsibility of his employer. At page 429
Mignault J. stated:
[TRANSLATION] There appears to me to be no doubt that a
master cannot avoid responsibility for the acts of his servant on
the pretext that the servant committed a crime for which no
mandate had been given him, if it is determined that this crime
was committed in the exercise of the functions of the servant.
but he adds:
[TRANSLATION] But it is equally certain that the master is not
responsible for the fault or crime which his servant committed
outside his functions.
In the case of Velan-Hattersley Valve Co. Ltd. v.
Johnson 13 the Quebec Court of Appeal discussed
this judgment and the earlier Supreme Court judg
ment of Curley v. Latreille 14 . Taschereau J. found
that the fact that thefts had been committed by an
employee of defendant while he was in charge of
merchandise did not justify condemnation of the
employer as the proof was based only on suspicion
and moreover the thefts were not committed while
the employee was in the exercise of his functions
but on the occasion of them, despite the fact that
the defendant who had the obligation of providing
the service of a security guard employed one who
12 [1923] S.C.R. 414.
13 [1971] C.A. 190.
14 (1 920) 60 S.C.R. 131.
had been condemned for theft on four different
occasions. The learned Judge distinguished the
Hudson Bay case on the basis that even if the
employee had stolen the merchandise it could not
be established that he was in the exercise of his
functions since what he did was contrary to the
obligations assumed toward his employer. The
other two Judges of Appeal in their decision seem
to have based their findings primarily on the fact it
was merely a presumption that the theft would
have had to be committed by the employee in
question, rather than on the more difficult ques
tion of whether if he had committed the theft in
question he could have been considered as being in
the execution of his functions in doing so. If one
looks at the French versions of article 1054 of the
Quebec Civil Code and Article 25 of the Conven
tion it may be that the Quebec Civil Code which
uses the words "dans l'exécution des fonctions
auxquelles ces derniers sont employés" whereas
Article 25 merely says "dans l'exercice de leurs
fonctions" is more restrictive. The English versions
use the words "in the performance of the work for
which they are employed" and "within the scope
of his employment". Either version of Article 25
appears to allow somewhat more latitude.
I therefore conclude that the presumed theft of
the parcel in question by an employee or
employees of defendant Air Canada can be
brought within the provisions of Article 25 of the
Convention as having occurred within the scope of
their employment or "dans l'exercice de leurs
fonctions", the opportunity having occurred while
they were working in the cargo shed handling
cargo of which the valuable parcel in question
would be a part.
Judgment will therefore be rendered for the full
amount of the loss fixed by agreement at $60,400.
INTEREST
The question of interest remains to be con
sidered and is a very important one in view of the
lengthy delay in bringing the matter to trial and
the rapid escalation in the commercial rate of
interest during the period in question. In plaintiff's
statement of claim, paragraph 21, as amended,
reads:
Plaintiff is entitled to claim interest on the said banknotes at
the average prime rate at and from the date of the loss to the
date of the judgment.
While one of the admissions produced is to the fact
that the prime rate from November 6, 1970 to
October 6, 1981, amounted to 10.1% this admis
sion was made without prejudice to the right of
defendant to argue that only the legal rate of
interest should apply.
Section 40 of the Federal Court Act, R.S.C.
1970 (2nd Supp.), c. 10, provides:
40. Unless otherwise ordered by the Court, a judgment,
including a judgment against the Crown, bears interest from
the time of giving the judgment at the rate prescribed by
section 3 of the Interest Act.
This only applies to interest on judgments
however.
It is well established that in admiralty law the
Court can award interest at its discretion whether
the claim arose ex contractu or ex delicto as an
integral part of the damage from the time that the
expenditure giving rise to the damage award
occurred (see Canadian Brine Limited v. The
`Scott Misener" 15 and The Bell Telephone Com
pany of Canada—Bell Canada v. The ` Mar-
Tirenno" 16 confirmed in appeal [1976] 1 F.C. 539.
This follows the English practice in the exercise of
an equitable jurisdiction. I have been referred to
no jurisprudence however, nor have I been able to
locate any which has awarded interest from the
date of damage except by application of provincial
rules of law or procedure or by statute save for the
aforementioned exception in an admiralty matter.
The present case deals with air transport and not
with admiralty.
I can find no authority for allowing plaintiff's
claim for interest before judgment on an equitable
basis. It is the provisions of the Warsaw Conven
tion as amended by The Hague Convention which
must be applied here and not the provisions of
federal or provincial law whether or not such
interest would have been allowed under the laws of
the Province of Quebec where the action was tried.
From the equitable point of view certainly plaintiff
has suffered loss of interest on this money from
November 6, 1970, although it can also be said
that defendant Air Canada has not benefited from
such interest since the money was not in its posses
15 [1962] Ex.C.R. 441.
16 [1974] 1 F.C. 294.
sion either. Article 14 of the Warsaw Convention
allows action to be taken either by the consignor or
the consignee in their own names whether acting in
their own interest or in the interest of another and
the parties admit that the Swiss Bank Corporation
is the proper plaintiff although it was reimbursed
for the loss by its insurer Baloise Insurance Com
pany on November 5, 1971. In practice Swiss
Bank Corporation lost interest for a year and the
Baloise Insurance Company ever since November
5, 1971.
Article 14(3) of the General Conditions of Car
riage of Cargo of Swissair (Exhibit DAC-1) the
terms and conditions of which were accepted by
plaintiff in delivering the cargo to Swissair for
carriage states that "a carrier is not liable for
indirect or consequential damage. A carrier shall
not be liable for loss of income." Interest is income
which would have been derived from the retention
of the money. With regret therefore I do not
believe that interest prior to judgment can be
allowed, nor that the Court should depart from the
general practice and allow interest at the commer
cial rate rather than the legal rate following
judgment.
Plaintiff quite properly brought action against
both Air Canada and Swissair, Swiss Air Trans
port Co. Ltd. to whom the cargo was initially
delivered for carriage, so that Swissair was obliged
to file a defence. Swissair brought a notice of
indemnity pursuant to Rule 1730 against Air
Canada calling on it to indemnify it against any
judgment plaintiff might recover against Swissair
as well as all expenses, judicial costs, and legal fees
incurred in defending itself against the action.
Plaintiff's action will be maintained with costs
against Air Canada only no fault being attribut
able to Swissair. Swissair's third party proceedings
against Air Canada will be maintained with costs
including costs incurred by Swissair in contesting
plaintiff's action.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.