Judgments

Decision Information

Decision Content

A-743-81
Air Canada (Appellant) v.
Swiss Bank Corporation, Swissair and Swiss Air Transport Co. Ltd. (Respondents)
INDEXED AS: SWISS BANK CORP. V. AIR CANADA
Court of Appeal, Pratte, Marceau and Lacombe JJ. *—Montréal, February 17; Ottawa, July 9, 1987.
Air law Appeal from Trial judgment awarding damages to respondent, and cross-appeal claiming interest from date of loss at higher than legal rate Parcel carried by appellant lost in transit Last person handling parcel appellant's employee in charge of valuable objects Trial Judge finding loss due to theft by appellant's employees Appeal dis missed; cross-appeal allowed Warsaw Convention, Art. 22 limit on liability not applicable pursuant to Art. 25 Intent to cause damage where theft Scope of employment Identity of thieves In view of generality of Art. 18, in few cases where liability not limited, intending to fully compensate victim for loss, including interest from date of loss No error by Trial Judge in declining to award interest at higher than legal rate Art. 18 authorizing interest where Art. 22 not applicable.
This is an appeal from the Trial judgment ordering Air Canada to pay to the Swiss Bank Corporation the value of a parcel lost in transit. The respondent cross-appealed, arguing that interest should have been awarded from the date of the loss, rather than from the date of judgment, at a rate higher than the legal rate. The pilot had given the parcel to a ramp supervisor, who gave it to another Air Canada employee who was responsible for receiving and storing valuable objects. The parcel had not been seen since. Although the Trial Judge could not find that the parcel had been stolen by the second employee, he concluded that it had been stolen by one or more Air Canada employees.
Under the Carriage by Air Act, the carriage of the lost parcel was subject to the provisions of the Warsaw Convention, which in Article 22 imposes a limit on the carrier's liability. Article 25 provides that the Article 22 limits on liability do not apply if the damage resulted from an act or omission of the carrier or his servants done with intent to cause damage, and provided that the servant was acting within the scope of his employment. The Trial Judge applied an objective test to determine whether the fault of the carrier or its employees was
* Due to ill health, Lacombe J. was unable to participate in this judgment.
intentional or reckless. He found that, as the respondent's loss resulted from a theft by the appellant's employees, the thieves must have had an "intent to cause damage", and that the theft occurred within the scope of their employment as the opportu nity arose while they were working. The Trial Judge held that the limit on liability did not apply.
Held, the appeal should be dismissed, and the cross-appeal should be allowed.
The Trial Judge correctly held that the parcel was stolen by one or more of the appellant's employees. However, he erred in not identifying the thieves as he could not otherwise say that the theft was committed within the scope of their employment. Although the evidence was not sufficient to identify the thieves with absolute certainty, it was sufficient to support a conclusion that in all probability, the theft was committed by certain employees while the parcel was in their custody, as employees of the appellant.
The Court of Appeal was entitled to contradict the Trial Judge on a question of fact because 1) it was an inference that could be drawn from the evidence rather than having to weigh the evidence 2) the Court of Appeal was in as good a position as the Trial Judge to identify the thieves since the evidence consisted of the testimony of the employee who investigated the matter, and 3) the Trial Judge, out of a sense of fairness, did not want to identify the thieves because there was still a reasonable doubt as to their guilt. The Trial Judge having correctly held that the limit on liability did not apply, Air Canada's appeal should be dismissed.
The Trial Judge properly exercised his discretion in not ordering interest at higher than the legal rate. However, the respondent is entitled to interest prior to judgment. As the Article 22 limits on liability do not apply, only paragraphs 18(1) and 23(1) are applicable. Article 18 provides that the carrier is liable for damage sustained in the event of loss of cargo. Apart from exceptional cases, the Convention limits the carrier's liability significantly. In view of the generality of the language of Article 18, in the rare cases in which such liability is not limited, the authors of the Convention intended that the victim be compensated in full for the loss sustained. Thus he should receive compensation which would place him in the situation he would have been in if the loss had not occurred. In this case, that means interest that he would have earned from the date of the loss. The contract of carriage could not divest him of this right pursuant to Article 23, which declares such provisions to be null and void.
The foreign cases cited, in support of the argument that the Convention does not allow interest to be awarded for a period prior to the judgment, actually held that where the limits on liability stated in Article 22 apply, the courts cannot award interest for a period prior to the judgment in addition to the amount of the limit. The limits imposed in Article 22 are limits imposed on the liability created by Article 18. If Article 22
prohibits awarding interest prior to the judgment it must be because Article 18 authorizes such interest to be awarded where Article 22 does not apply.
Per Marceau J.: In order to apply Article 25, the Trial Judge had only to find that the parcel had been stolen, and that the theft was committed by one or more of the appellant's employees. With respect to the requirement that the act be done "with intent to cause damage" or "with knowledge that damage would probably result", it does not matter whether a subjective or objective test is applied when it is a case of theft. A theft is necessarily committed with the intent of causing damage as the thief is attempting to permanently deprive the owner of his thing by converting it to his own use.
The test to be applied to determine, in a case of theft, whether an employee was acting within the scope of his employment is whether, because of his duties, the employee had free access to the thing stolen. As no breaking was established where the parcel was located, no entry was made in the register of valuable objects and no trace of documentation could be found, the Trial Judge was justified in concluding that there was sufficiently persuasive evidence that an employee with free access to the parcel had committed or participated in the theft.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Carriage by Air Act, R.S.C. 1970, c. C-14, Schedule I, Arts. 18, 22 (as am. by Schedule I11, Art. XI), 23 (as am. idem, Art. X 11), 25 (as am. idem, Art. XIV).
CASES JUDICIALLY CONSIDERED
CONSIDERED:
Swiss Bank Corporation and Others v. Brink's-Mat Ltd. and Others, [1986] 2 Lloyd's Rep. 99 (Q.B.D.); O'Rourke v. Eastern Air Lines, Inc., 18 Avi 17,763 (2d Cir. 1984); Rustenburg Platinum Mines Ltd., Johnson Matthey (Pty.) Ltd. and Matthey Bishop Inc. v. South African Airways and Pan American World Airways Inc., [1979] 1 Lloyd's Rep. 19 (C.A.); C'e Saint Paul Fire and Marine c. Ck Air-France, [1986] Rev. Franc. de Droit Aer. 428.
REFERRED TO:
Domangue v. Eastern Air Lines, Inc., 18 Avi 17,533 (5th Cir. 1984); Société Financière Mirelis v. Koninklyke Luchtvaart Maatscheppi N.V., 1968 (Hague District Court).
AUTHORS CITED:
Cheng, Bin "Wilful Misconduct: From Warsaw to The Hague and from Brussels to Paris" (1977) II Ann. Air & Sp. L. 55.
COUNSEL:
J. Vincent O'Donnell, Q.C. for appellant. Vincent M. Prager and Laurent Fortier for respondent Swiss Bank Corporation.
Peter Richardson for respondents Swissair and Swiss Air Transport Co. Ltd.
SOLICITORS:
Lavery, O'Brien, Montréal, for appellant. Stikeman, Elliott, Montréal, for respondent Swiss Bank Corporation.
Mackenzie, Gervais, Montréal, for respon dents Swissair and Swiss Air Transport Co. Ltd.
The following is the English version of the reasons for judgment rendered by
PRATTE J.: Air Canada is appealing from a judgment of the Trial Division [[1982] 1 F.C. 756] ordering it to pay the Swiss Bank Corporation ("the respondent") the sum of $60,400, represent ing the value of a parcel which Air Canada carried from Zurich to Montréal and which was lost before being delivered to its intended recipient. The respondent also filed a cross-appeal from this judgment, alleging that the Judge should have awarded it interest on the sum of $60,400 from the date of the loss (rather than that of the judgment) at a rate higher than the legal rate.
The lost parcel contained bank notes. It was delivered to Air Canada on November 5, 1970 to be sent on flight AC 879 to Montréal. It was in fact given to the pilot of the aircraft personally. Shortly before landing in Montréal, he sent a radio message asking for whoever was responsible to meet him and take delivery of the parcel. On arrival, the person who responded was a ramp supervisor, identified by the Trial Judge with the letter "X": the pilot gave him the parcel and obtained a receipt for it. X then apparently went to an area specially equipped to store valuable objects and gave the parcel to another Air Canada employee, identified by the Trial Judge with the letter "Y", who was responsible for receiving and storing such objects. The orders were that this employee was to place the parcel in a vault and enter receipt of it in a special register. He did nothing of the sort and since that day the parcel
has not been seen. However, the loss was not discovered until a month later because all the documents relating to the shipment, which were in the possession of Air Canada, also disappeared.
None of these facts is in dispute. They were established at the hearing by the testimony of the Air Canada employee responsible for investigating the circumstances of the loss. Neither employee X nor employee Y were heard as witnesses. Employee X was in fact served by the respondent, but it did not call him. Employee Y could not be located. He was suspected in 1970 of taking part in the rash of thefts that occurred at the Dorval airport, and in 1976, six years after the incident under consideration, he was sentenced to imprison ment for participating in another theft at Dorval with other Air Canada employees.
Considering the cause of the loss of the parcel, the Trial Judge said [at page 768] he could not say it had been stolen by employee Y:
It would be pure speculation to conclude that he stole it, however. He could have been ... careless in his handling of it ... 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.
Nevertheless, he concluded [at pages 768-769] that the parcel had been stolen by one or more Air Canada employees:
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 previous and subsequent thefts of cargo by Air Canada employees from the cargo sheds at Dorval Airport, and the unexplained disappearance of cover ing 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.
Under the Carriage by Air Act,' the carriage of the lost parcel was subject to the provisions of the Warsaw Convention, which in Article 22 [as am. by Schedule III, Art. XI] imposes a limit on the carrier's liability. The only problem raised by Air Canada's appeal is as to whether, in the circum stances, it can take advantage of this limit on liability. In particular, the question is whether the damage which the respondent claims compensation for was caused in the circumstances described in Article 25 of the Convention, under which
Article 25
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 answer to this question, the Trial Judge first expressed the view that the question of whether the fault of the air carrier or of its employees was intentional or reckless must, as the French Court of Cassation has held, be decided objectively rather than subjectively. He went on to say that, in any case, as the damage suffered by the respon dent resulted from a theft committed by the appel lant's employees, the perpetrators of the theft must of necessity have had an "intent to cause damage". Finally, on the question of whether the employees of the appellant who stole the parcel acted within the scope of their employment, the Judge conclud ed as follows [at page 785]:
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 oppor tunity having occurred while they were working in the cargo shed handling cargo of which the valuable parcel in question would be a part.
The Judge accordingly held that, in the circum stances, the appellant could not benefit from the limit on liability.
The appellant made two objections to this judg ment: that it adopted the argument of the French Court of Cassation as to how the Court should
1 R.S.C. 1970, c. C-14.
assess whether the carrier's fault was intentional or reckless, and secondly, that it concluded that the perpetrators of the theft were the appellant's employees acting within the scope of their employment.
In my opinion, it is not necessary to discuss the appellant's first point as if, as the Judge held, the parcel was stolen by the appellant's employees, the latter as thieves must of necessity have had the intent described in Article 25 of the Convention. The only problem is thus the one presented by the appellant's second point: was the Trial Judge cor rect in finding, first, that the parcel was stolen by the appellant's employees, and second, that those employees were acting within the scope of their employment at the time?
I think it is beyond question that the Trial Judge was right in saying that the parcel was stolen by one or more of the appellant's employees. The difficulty however is with the Judge's finding that the perpetrators of the theft were acting within the scope of their employment at the time. If the Judge did not know the identity of the employees who took part in the theft, how could he say that the theft was committed within the scope of their employment rather than as an incidental part of their employment?
This difficulty results from the fact that the Trial Judge considered that on the evidence he was unable to identify the perpetrator of the theft. In my view he was in error on this point. Though the evidence did not suffice to identify the perpetrator of the theft with absolute certainty it was more than sufficient to support a conclusion that, in all probability, the theft was committed by employees X or Y, while the parcel was in their custody as employees of the appellant. I know that in saying this I am contradicting the Trial Judge on a question of fact. However, I feel I am entitled to do so for several reasons: first, because it is an inference that can be drawn from the evidence rather than weighing the evidence itself; second, because the gist of the evidence was in fact the testimony by the appellant's employee who investi gated the circumstances in which the parcel disap peared, testimony in which he told the Court the results of his investigations, so that this Court is in as good a position as was the Trial Judge to identify the perpetrators of the theft; finally,
because 1 suspect that the Trial Judge, with his well-known sense of fairness, did not wish to iden tify the perpetrators of the theft because there was still a reasonable doubt as to their guilt.
That being so, the Trial Judge in my opinion was right to conclude that in the circumstances the appellant could not benefit from the limit on liabil ity contained in Article 22 of the Warsaw Conven tion. I would therefore dismiss Air Canada's appeal.
There remains the cross-appeal of the respon dent, which argues that, instead of ordering the appellant to pay it the sum of $60,400 with inter est at the legal rate from the date of the judgment, the Trial Judge should have ordered the appellant to pay this sum with interest from the date of the loss to the date of the payment, calculated at the average preferential bank rate for that period.
A distinction has to be made, as it was made by the Trial Judge, between interest claimed for the period preceding the judgment and that claimed for the following period. Section 40 of the Federal Court Act [R.S.C. 1970 (2nd Supp.), c. 10] pro vides that, unless the Court orders otherwise, a judgment will bear interest at the legal rate from the date on which it was rendered. The Trial Judge did not see fit to order that his judgment bear interest at a rate higher than the legal rate. There is nothing in the record to indicate that this was not a proper exercise of the discretion conferred on him by law. I would therefore affirm his decision on this point.
The Trial Judge's refusal to award interest on the amount of the compensation for the period prior to the judgment presents a problem that is more difficult to solve.
The respondent's action is based on the Warsaw Convention, or more precisely, the Carriage by Air Act, under which the Convention is applicable in Canada. That is why the Federal Court has juris diction over this case. Accordingly, reference must be made to the Convention to determine the com pensation to which the respondent is entitled.
As in a case such as this the limits on liability mentioned in Article 22 do not apply, the only
provisions of the Convention which are applicable are paragraphs 18(1) and 23(1):
Article 18
(1) The carrier is liable for damage sustained in the event of the destruction or loss of, or of damage to, any registered baggage or any cargo, if the occurrence which caused the damage so sustained took place during the carriage by air.
Article 23
(1) Any provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down in this Convention shall be null and void, but the nullity of any such provision does not involve the nullity of the whole contract, which shall remain subject to the provisions of this Convention.
Under paragraph 18(1), therefore, the carrier is "liable for damage sustained in the event of .. . loss of ... cargo". The question here is as to the consequences of this liability. The answer to this question has to be found in the Convention, since the rules we usually apply in other areas are not applicable here.
Apart from exceptional cases, the Convention limits the carrier's liability significantly. In view of the generality of the language of paragraph 18(1), I think one has to conclude that in the rare cases in which such liability is not limited, the authors of the Convention intended the victim to be compen sated in full for the damage sustained. That means that he is to receive compensation which will place him in the situation he would have been in if the loss had not occurred: that is, in a case like the one at bar in which the goods lost consisted of a sum of money, the victim must receive in addition to the amount lost the interest he would undoubtedly have earned if the loss had not taken place. I therefore consider that the Convention gave the respondent the right to claim interest on the sum of money lost from the date on which delivery would ordinarily have been made to the date of the judgment. That being so, contrary to what the Trial Judge held, the provisions of the contract of carriage could not divest him of this right. Under paragraph 23 (1) of the Convention, such provi sions are null and void.
In support of its argument that the Convention does not allow interest to be awarded for a period
prior to the judgment, the appellant cited twc judgments, one British and the other American) In these two cases it was held that, where the limits on liability stated in Article 22 of the Con vention apply, this Article prohibits the courts from awarding interest for a period prior to the judgment in addition to the amount of the limit. In my opinion these judgments do not support the appellant's argument. The limits imposed in Article 22 are limits imposed on the liability creat ed by Article 18. If, therefore, Article 22 prohibits the awarding of interest for a period prior to the judgment, this must of necessity be because Article 18 authorizes such interest to be awarded in cases where Article 22 does not apply.
The respondent will accordingly be entitled to interest to compensate it for the loss of income sustained by it prior to the judgment as a result of loss of the parcel. At what rate should such inter est be calculated? As there is no evidence to establish the true quantum of the income lost by the respondent, I would calculate this interest at the legal rate.
I would accordingly dismiss the appeal with costs, allow the cross-appeal with costs and vary the judgment a quo by inserting, immediately after the words "with interest" in line 2, the following parenthesis:
[at the legal rate from November 6, 1970].
* * *
The following is the English version of the reasons for judgment rendered by
MARCEAU J.: I share the view expressed by Pratte J. on both the principal appeal and the cross-appeal. As regards the latter and the refusal of the Trial Judge to award interest on the amount of the compensation, I have nothing to add; but on the principal appeal and the application to the facts of the case at bar of the provisions of Article 25 of the Warsaw Convention, as contained in the Carriage by Air Act, R.S.C. 1970, c. C-14, I
2 Swiss Bank Corporation and Others v. Brink's-Mat Ltd. and Others, [I986] 2 Lloyd's Rep. 99 (Q.B.D.); O'Rourke v. Eastern Air Lines, Inc., 18 Avi 17,763 (2d Cir. 1984).
See, contra, Domangue v. Eastern Air Lines, Inc., 18 Avi 17,533 (5th Cir. 1984).
should briefly like to set forth a more personal opinion.
I have no hesitation in saying with my brother Judge that the Trial Judge had before him what he needed to conclude that, in all probability, the theft was committed by employees X or Y, or at least with their connivance and at a time when they had custody of the parcel. However, I persist in thinking nevertheless that, in order to apply Article 25 of the Warsaw Convention as amended by the Hague Protocol (hereinafter "the Conven tion") and conclude that the appellant had lost the benefit of the limit on liability it was attempting to assert under Article 23 of the said Convention, the Judge did not need to say any more than he did, namely that the parcel had been stolen and the theft committed by an employee or group of employees of the appellant. It seems to me that once these two findings of fact were made, it became apparent that the two conditions for application of Article 25 of the Convention had been met.'
I do not think this can be seriously disputed as to the first condition, namely the requirement of evidence that the act was done "with intent to cause damage" or "with knowledge that damage would probably result". The Trial Judge did refer in the course of his analysis to the controversy which has arisen about whether the question of
3 For ease of reference I will again reproduce Article 25 of the Convention, in both its French and English versions:
Les limites de responsabilité prévues à l'article 22 ne s'appliquent pas s'il est prouvé que le dommage résulte d'un acte ou d'une omission du transporteur ou de ses préposés fait, soit avec l'intention de provoquer un dommage, soit témérairement et avec conscience qu'un dommage en résul- tera probablement, pour autant que, dans le cas d'un acte ou d'une omission de préposés, la preuve soit également appor- tée que ceux-ci ont agi dans l'exercice de leurs fonctions.
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.
intent mentioned in the provision is to be assessed "subjectively", that is attested and proven as exist ing in the mind of the perpetrator of the wrongful act himself, which is the opinion of nearly all commentators and most bodies of national case law, or "objectively", that is by inference, refer ring to the standard of a prudent and reasonable man, as the French Court of Cassation held (see on the controversy the excellent article by Bin Cheng, "Wilful Misconduct: From Warsaw to The Hague and from Brussels to Paris", in the Annals of Air and Space Law, vol. II, p. 55, Montréal, McGill University, 1977). In actual fact, however, this controversy can have no bearing on a case of theft, as the thief's state of mind presents no difficulty. A theft is necessarily committed with the intent of causing damage, as by definition the thief is attempting to permanently deprive the owner of his thing by converting it to his own use.
I think that, in the circumstances of the case at bar, taking into account certain facts already established, the same will ultimately have to be said for the second condition, requiring proof that the employee who committed the theft, or at least one of the employees who participated in commis sion of the theft, must have been acting within the scope of his employment. Here, of course, the conclusion does not necessarily follow. It all depends, first, on the meaning given to the phrase "dans l'exercice de leurs fonctions" ("within the scope of his employment" in the English version). The conclusion is clearly not valid if the condition can only be met when the dishonest employee is the person to whom custody of the thing was given, as Lord Denning, M.R. held in his reasons in the decision of the British Court of Appeal in Rusten- burg Platinum Mines Ltd., Johnson Matthey (Pty.) Ltd. and Matthey Bishop Inc. v. South African Airways and Pan American World Air ways Inc., [ 1979] 1 Lloyd's Rep. 19, at page 24, and even less so if the requirement is for evidence that the dishonest employee committed his crime during his working hours, as the French Court of Cassation held in Cfe Saint Paul Fire and Marine c. C'e Air-France, [1986] R.F.D.A. 428. With respect, however, I would say that such a narrow, strict meaning cannot be given to the phrase with-
out running the risk of removing all practical significance from the exception to the limit on liability which is the purpose of Article 25 of the Convention, an exception which I regard as funda mental in that it determines the extent to which, in order to encourage the development of the trans portation industry, the user public is made to assume the risk of recklessness, error, negligence or malfeasance by the carrier. In my view, the test to be applied to determine in a case of theft whether an employee was within the scope of his employment is the one which some courts have adopted and which consists in seeing whether because of his duties the employee had free access to the thing stolen (see inter alia the decision of the Hague District Court in Société Financière Mirelis v. Koninklyke Luchtvaart Maatscheppi N.V., 1968). I admit that everything also hinges on the possibility of showing that the employee was within the scope of his employment even when the precise identity of that employee is unknown but I think it is hard to dispute that such a possibility exists. The evidence of a fact may be presented indirectly and by inference, from an analysis of the circumstances and a study of the possibilities, pro vided that a sufficient degree of probability can be established as a result. In my view, taking into consideration that no breaking was established in the area where the parcel was located, that no entry was made in the register of valuable objects and that no trace of documentation could be found, the Trial Judge was justified in thinking that there was sufficiently persuasive evidence that an employee with free access to the parcel and the documentation establishing its movements had committed the theft or at least participated in it.
I am accordingly entirely of the opinion of Pratte J. that the principal appeal should be dis missed and I would dispose of the cross-appeal as he suggests.
 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.