Goods, namely 'one dismantled Kroll Climber shipped in four cases and 64 unpacked construction parts', were received from the crane factory of the shipper (FB Kroll A/S) in Copenhagen by Care Line Canada Ro/Ro Express (Care Line) at Copenhagen in apparent good order and condition. The plaintiff/consignee, BG Equipment Co Inc, owned the goods. The goods were then carried by feeder ship to Gothenburg, Sweden, for loading onto the ocean vessel MV Mont Laurier for carriage to Montreal, Canada. The goods were loaded at Gothenburg in apparent good order and condition. The Care Line Combined Transport Bill of Lading (the B/L) was dated 21 November 1972 at Copenhagen, Denmark. The value of the goods was not declared to the defendants, and was not indicated on the B/L. The defendants were: (1) Care Line; (2) Cie Atlantique Maritime (who owned the vessel); and (3) Cie Générale Transatlantique (the carrier), who was the 'carrier' of the goods under the B/L.

While crossing the North Atlantic, the vessel encountered heavy weather. Some of the plaintiff's goods shifted and were damaged. The plaintiff's goods were discharged at Montreal around 21 December 1972. There is no dispute that the damage occurred during the port-to-port shipment between Gothenburg and Montreal.

For the purposes of the present case: (1) the plaintiff admitted that the defendants exercised due diligence to make the vessel seaworthy and to secure that the vessel was properly manned, equipped and supplied, and to make the holds and other parts of the vessel in which the plaintiff's goods were carried fit and safe for their reception, carriage, and preservation; (2) the defendants waived any defence based upon perils, danger and accidents of the sea or other navigable waters; and (3) the plaintiff fixed the cost of repairs to its goods at CAD 17,000 (despite post-discharge surveys ascertaining total costs of approximately CAD 20,000).

The contract of carriage was governed by the Hague Rules, which were compulsorily applicable according to Swedish Law No 277 of 5 June 1936 (Law No 277). Article 4.5 of the Hague Rules provides:

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding 100 pounds sterling per package or unit, or the equivalent of that sum in other currency unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.

This declaration if embodied in the bill of lading shall be prima facie evidence, but shall not be binding or conclusive on the carrier.

By agreement between the carrier, master or agent of the carrier and the shipper another maximum amount than that mentioned in this paragraph may be fixed, provided that such maximum shall not be less than the figure above named.

Neither the carrier nor the ship shall be responsible in any event for loss or damage to, or in connection with, goods if the nature or value thereof has been knowingly misstated by the shipper in the bill of lading.

The parties agreed that damage was sustained to 16 packages or units, and that, under Law No 277, the limitation per package or unit was SEK 1,800, which was equivalent to CAD 377.82 in December 1972. However, the parties disputed quantum of liability.

The defendants argued that under Swedish law and under cl 13 of Pt III of the B/L (entitled 'Carrier's Liability') their total liability to the plaintiff was limited to CAD 6,045.12. On 27 July 1976, the defendants paid that sum into Court, together with an additional sum representing interest and costs.

The plaintiff argued that, by virtue of the terms and conditions of the B/L, the defendants waived the benefit of limitation of liability based upon the packages or units and thus were liable to the plaintiff in the amount of CAD 17,000. Alternatively, if the defendants were entitled to limit liability based on the packages or units, such liability through the combined effect of cll 5, 12 and 13 of the B/L should be that prevailing under the Canadian Carriage of Goods by Water Act, RSC 1970 c C-15 (the COGWA), namely, CAD 500 per package or unit, in which event their liability to the plaintiff would be in the amount of CAD 8,000.

The issues before the Court were: (1) under the terms of the B/L, have the defendants waived their right to limit liability for loss or damage to goods on a per package or unit basis; and (2) if the right to limitation was not waived, should such limitation be based on the per package or unit rate of either CAD 377.82 or CAD 500.00 (being the Swedish law rate and Canadian law rate respectively)?

Clause 5 of the B/L stated as follows:

5. Law and Jurisdiction.

Disputes arising under this B/L shall be determined at the option of the Claimant by the courts, and subject to Clause 13 of the B/L in accordance with the law at

(a) the place where the Carrier has his habitual residence or his principal place of business or the branch or agency through which the contract or combined transport was made, or

(b) the place where the goods were taken in charge by the Carrier or the place designated for delivery.

No proceedings may be brought before other courts unless the Parties expressly agree on both the choice of another court or arbitration tribunal and the law to be then applicable.

Clause 12 of the B/L stated as follows:

12. The Amount of Compensation.

(1) When the Carrier is liable for compensation in respect of loss of or damage to the goods, such compensation shall be calculated by reference to the value of such goods at the place and time they are delivered to the Merchant in accordance with the contract or should have been so delivered.

(2) The value of the goods shall be fixed according to the commodity exchange price or, if there be no such price, according to the current market price or, if there be no commodity exchange price or current market price, by reference to the normal value of goods of the same kind and quality.

(3) Compensation shall not, however, exceed Can. $2 per kilo of gross weight of the goods lost or damaged.

(4) Higher compensation may be claimed only when, with the consent of the Carrier, the value for the goods declared by the Consignor which exceeds the limits laid down in this clause has been stated in this B/L. In that case the amount of the declared value shall be substituted for that limit.

Clause 13 of the B/L stated as follows:

13. Special Provisions including Port to Port Shipments.

(1) Notwithstanding anything provided for in clauses 11-12 of this B/L, if it can be proved where the loss or damage occurred the Carrier and/or the Merchant shall, as to the liability of the Carrier, be entitled to require such liability to be determined by the provisions contained in any international convention or national law, which provisions

a) cannot be departed from by private contract to the detriment of the Claimant, and

b) would have applied if the Merchant had made a separate and direct contract with the Carrier in respect of the particular stage of transport where the loss or damage occurred and received as evidence thereof any particular document which must be issued if such international convention or national law shall apply.

(2) Insofar as the Hague Rules contained in the International Convention for the Unification of Certain Rules relating to Bills of Lading dated 25th August, 1924, do not apply to carriage by sea by virtue of the foregoing provisions of the clause, the liability of the Carrier in respect of any carriage by sea shall be determined by that Convention. The Hague Rules shall also determine the liability of the Carrier in respect of coastwise carriage and of carriage by inland waterways as if such carriage were carriage by sea. Furthermore, they shall apply to all goods carried on deck subject to clause 8.

(3) Wherever reference is made to the Hague Rules in the present clause such reference shall in Canada be construed as a reference to the Canadian Water Carriage of Goods Act 1936.

Held: Judgment for the plaintiff in the sum of CAD 6,045.12.

The Hague Rules adopted in Sweden by Law No 277 on 5 June 1936 are applicable by cl 13(1)(b) of the B/L as an 'international convention or national law' of Sweden. Although the proceedings are brought in Canada, the limitation of liability in the Hague Rules adopted in Canada by the COGWA does not apply to this inbound shipment.

Clause 13 of the B/L must be given full effect as overriding cl 12 and incorporating the Hague Rules. The plaintiff's contention that the defendants have waived their right to limitation of liability on a per package or unit basis cannot be sustained. The fact that cl 13(3) of the B/L states wherever reference is made to the Hague Rules such reference shall 'in Canada' be construed as a reference to The Water Carriage of Goods Act, 1936 of Canada does not make the COGWA limitation in art 4.5 of the Hague Rules applicable, since the legislation itself makes it clear that this only applies to outbound shipments.

The Hague Rules are embodied in the COGWA as a Schedule thereto but by s 2 of the COGWA the Hague Rules have effect in connection with carriage of goods by water only from any port in Canada to any other port whether in or outside Canada. By section 4 of the COGWA every bill of lading issued in Canada that is evidence of any contract to which the Hague Rules apply must contain an express statement that it is to have effect subject to the Hague Rules. The present shipment was by virtue of the B/L made in Copenhagen, calling for shipment by a feeder ship to Gothenburg, and then to Montreal on the vessel owned by the defendant Cie Atlantique Maritime, from whence the merchandise would be sent by truck to the consignees in Rochester, New York. The B/L was therefore a through bill of lading.

The plaintiff's argument that cl 12 of the B/L applies and provides for an increased maximum limitation of liability permitted by the Hague Rules is rejected. First, while the nature of the goods was declared by the shipper and inserted in the B/L, the value of the goods is missing. The B/L contains the words 'In transit to U.S.A. for consignees' account and risk', and while no value of the goods was declared, freight charges would be based on the through carriage. If cl 12 stands alone it would appear that the CAD 2 per kg limitation in cl 12(3) would prevail in the absence of a declaration of value to bring a still higher limitation into play by virtue of cl 12(4). However, the CAD 2 per kg limitation, even though agreed to, would itself appear to be a derogation from art 4.5 of the Hague Rules which do not permit any derogation from the limitation unless the nature and value of the goods have been declared. Second, cl 13 of the B/L clearly excludes the application of cl 12 when it can be proven where the loss or damage occurred, in which event either the merchant or the carrier can require that the liability be determined by the provisions of the Hague Rules. Clause 13(1)(b) of the B/L applies. The B/L was one made with the carrier in respect of the particular stage of transport where the loss or damage occurred. While the B/L also covered other stages of carriage and in this sense was not a separate direct contract with the carrier, it does specify 'Pier to Pier Basis', and it is not disputed that it was during this portion of the carriage that the damage occurred.

The plaintiff's argument that cl 13 of the B/L does not apply because of the words 'as to the liability of the Carrier' was rejected as well. The plaintiff contended that liability merely means legal responsibility for the damages and does not include the quantum thereof, which is dealt with in cl 12 of the B/L, titled 'The Amount of Compensation'. The plaintiff's contention is that the Hague Rules not only limit the amount which can be claimed per package, but also set out the obligations of a carrier. In rejecting the plaintiff's argument, the Court referred to arts 2 and 4 of the Hague Rules. Article 2 of the Hague Rules states that the carrier 'shall be subject to the responsibilities and liabilities and entitled to the rights and immunities hereinafter set forth'. Moreover, art 4, in addition to setting out various conditions in which the carrier shall not be liable, includes art 4.5 stating that it shall not in any event be liable for loss or damage exceeding 100 pounds sterling per package or unit.