Paying Attention

Author: Allan Foran

This post was written prior to our January 2017 merger, under our previous firm name, Aikins, MacAulay & Thorvaldson LLP.

Bills of Lading between shippers and trucking companies incorporate statutory rules of carriage which are prescribed by provincial legislation and regulations. One of these conditions limits a carrier’s liability for damage or loss to goods during transportation to $4.41 per kilogram ($2.00 per pound) as computed on the total weight of the shipment. The exception is if a higher value is declared on the face of the Bill of Lading by the consignor (or if an agreement is made under a separate master contract between the carrier and the shipper).

Typically, a carrier is able to rely on the standard form of conditions and limit its maximum liability. There has been (and continues to be) litigation with shippers seeking to set aside the cap on damages.

In one case in Manitoba, a shipper asked the court to throw out the limitation on liability on the basis that the clause was not specifically brought to the shipper’s attention. The court was asked whether simply relying on the limitation as set out in the Bill of Lading without any discussion was sufficient to bring it to the attention of the shipper. In both a trial and an appeal, the Manitoba courts held that even though the carrier had not specifically brought the limit on damages to the attention of the shipper, the shipper could not make a claim for increased damages. As part of its reasoning, the court commented that if a shipper had little or no experience in shipping goods (as opposed to the facts of that case where the claim was being advanced by an experienced shipper), the limitation likely would have been found to be insufficient to limit the carrier’s liability. As the shipper in this case was experienced, the court concluded that it was undoubtedly familiar with the language used in the Bill of Lading and accordingly, the limitation of damages applied.

Similar litigation has also taken place in New Brunswick. Like the Manitoba Decision, the court found that the limitation clause applying to the Bill of Lading was enforceable and was clear and unambiguous. Essentially the courts focused on and made a determination based on the experience of the shipper. Accordingly, the experience of a shipper seems to play a key role in determining the extent to which a carrier had to bring the limitation of liability to the shipper’s attention.

In circumstances where carriers are dealing with experienced (established) customers, the court decisions suggest that the incorporation of limitations on liability in the Bill of Lading without specifically bringing them to a shipper’s attention is sufficient to protect the carrier. If, however, a new account is being serviced by the carrier, it would be advisable to have an initial discussion that specifically references the limitation to pay for damages.

On a separate issue, carriers also need to be aware of the possibility of increased liability in circumstances where a shipper has declared a higher value on the face of the Bill of Lading. The Bill of Lading form approved by Regulation includes a declared valuation section. If filled in by the consignor, the shipper will be responsible for a higher value. It would be prudent for carriers to have a clear protocol that ensures that their agents (drivers) are accepting possible higher values when picking up the freight. This would include verifying that the carrier is prepared to move the goods at the higher value at the rate agreed upon in advance. If not, further discussion with the shipper should take place.

Accepting the freight with a higher declaration will entitle the shipper to recover over the $2.00 per pound in the event of loss or damage. In one court case, a shipper had, in fact, filled in a higher valuation but had not included it in the appropriate box on the Bill of Lading. The carrier resisted paying the claim. A court found that even though the shipper had not filled in the appropriate box, the valuation was valid as it was placed on the face of the Bill of Lading and awarded damages in favour of the shipper.

The decisions of the court suggest that when dealing with limitation on damage issue, it is the experience and understanding of the shipper that will usually prevail. It would be prudent for carriers to never assume that a shipper is sophisticated at first instance and always explain the limitation of liability provisions for new accounts. Simple reliance on the Bill of Lading alone may cause carriers to “pay” for their inattention.

This article was originally published in Western Canada Highway News, Winter 2010 issue.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.

Allan Foran practises transportation law at Aikins.