IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20120927

Docket: S074302

Registry:
Vancouver

Between:

Mitsubishi Heavy
Industries Ltd.

Plaintiff

And

Canadian National
Railway Company

Defendant

Before:
The Honourable Madam Justice Fitzpatrick

Reasons for Judgment

Introduction

[1]            
On July 5, 2005, a train owned and operated by the defendant Canadian
National Railway Company (“CN”) derailed near Avola, British Columbia. That
train was carrying certain aircraft parts owned by the plaintiff Mitsubishi
Heavy Industries Ltd. (“MHI”) and as a result of the derailment, one of those parts
was severely damaged.

[2]            
MHI claims damages against CN for the value of the damaged part,
estimated to be in excess of $1.6 million. CN says that its liability is
limited to $50,000 pursuant to a certain contract between it and Casco
Forwarding Limited (“Casco”), who arranged for the carriage of the aircraft parts
with CN.

[3]            
On April 21, 2010, Mr. Justice Willcock ordered that the issues of
liability and quantum were to be tried and determined separately. On May 6,
2010, following a later application by CN, Mr. Justice Verhoeven ordered
that the following issue was to be tried and determined before the issue of
liability generally and before any assessment of damages:

Whether [CN] has
the benefit of a limitation of liability provision set out in a contract
between [CN] and Casco.

[4]            
Accordingly, the only issue for determination in this portion of the
trial is whether or not CN’s liability is limited as CN contends.

[5]            
I will begin by reviewing some of the background facts and the statutory
regime which governs the relationship between the parties. I will then address
three issues, as framed by the parties:

(a)        Who is the “shipper”?

(b)        Is
there an agreement between CN and Casco, as “shipper”, and is that agreement
“signed” in accordance with the legislation?

(c)        If there is an agreement
between CN and Casco, is MHI entitled to advance its tort claim against CN in
any event?

Factual Background

[6]            
The parties introduced into evidence a Statement of Agreed Facts and
Joint Book of Documents. The agreed facts and certain provisions of agreed
documents are as follows:

1.     CN owns
and operates a transcontinental railway system, including provision of rail
service from Vancouver, British Columbia to Downsview, Ontario.

2.     MHI, a
Japanese company, manufactured Dash-8 fuselage parts, including central
fuselage barrels, at its manufacturing facility in Japan (the “Nagoya Works”). MHI
sold Dash-8 fuselage parts, including central fuselage barrels, to Bombardier
Aerospace Inc. ("Bombardier").

3.    
On June 15, 1976, MHI entered into a transportation agreement (the
"Master Transportation Agreement") with Fujiki Kaiun Kabushiki
Kaisha, now known as Fujitrans Corporation ("Fujitrans"), for the
transportation of goods of MHI, including central fuselage barrels, from MHI’s
Nagoya Works to customers of MHI worldwide, including Bombardier.

4.    
The Master Transportation Agreement provided in Article 18 (as
translated from Japanese to English):

Article 18         Transport
subcontractor

18.1     [Fujitrans] shall request
[MHI’s] prior written approval when it is to use other transport operators for
all or a part of the transportation work in order to fulfill its obligations
under an Individual Contract [defined in Article 2 as “contracts for
transactions concerning transportation” to be concluded between Fujitrans and
MHI].

18.2     [Fujitrans] shall not be exempted from the
liability defined in the Individual Contract even when it has obtained the
approval of [MHI] as provided in the foregoing paragraph.

5.     Pursuant
to the Master Transportation Agreement, Fujitrans transported Dash-8 fuselage
parts, including central fuselage barrels, from MHI’s Nagoya Works to
Bombardier’s factory in Ontario, except for deep sea carriage of the parts from
the port of Nagoya, Japan to Vancouver, B.C.

6.     By invoice
No. Dash-8-115 dated June 3, 2005, MHI sold to Bombardier three centre
fuselage barrels for Dash-8 Aircraft No. 4115 at a total cost of US
$2,108,675.62 (the "4115 Barrels").

7.     MHI
prepared three Packing Lists for the centre forward barrel, centre mid barrel
and centre aft barrel of the fuselage comprising the 4115 Barrels.

8.     The 4115
Barrels were transported by Fujitrans, pursuant to the Master Transportation
Agreement, from MHI’s Nagoya Works and loaded on board the ship WESTWOOD
COLUMBIA at Nagoya, Japan on or about June 8, 2005, for carriage to Vancouver,
B.C.

9.     The 4115
Barrels were discharged from the ship WESTWOOD COLUMBIA at Vancouver, B.C. on
or about June 26, 2005.

10. On or about June 29 or 30, 2005,
the 4115 Barrels were loaded onto flat cars nos. CN 639972 and CN 639868 as
follows:

CN 639972   centre
fuselage mid barrel
CN 639868   centre fuselage forward and aft barrel

11. The 4115 Barrels loaded on flat
cars nos. CN 639972 and CN 639868 were to be carried by CN from Vancouver, B.C.
to Downsview, Ontario.

12. On or about July 1, 2005, near
Avola, B.C., flat cars nos. CN 639972 and CN 639868, as part of the CN train
E-202-51-01, derailed.

13. As a result of the derailment,
there was physical damage to the centre fuselage mid barrel of the 4115 Barrels
which was being transported by CN on flat car no. CN 639972.

14. At all material times, the train
locomotive, flat cars for train E-202-51-01 and the track on which the train
operated were owned and/or operated by CN.

15. As a result of damage to the
centre fuselage mid barrel of the 4115 Barrels, the centre fuselage mid barrel
could not be repaired or used in construction of Dash-8 Aircraft No. 4115.

[7]            
In addition to the Agreed Statement of Facts and Joint Book of Documents,
CN introduced further evidence and documents through Fiona Murray, an account
manager of CN at the material times. The evidence of Atsuo Utsumi, an employee
of Fujitrans, was also obtained by way of deposition and presented at the
trial.

[8]            
At the conclusion of the trial and during final argument in May 2011,
issues arose between the parties concerning the failure of CN to call two
individuals who were Casco employees, being Chieko Querner and William Weymark.
There were also issues raised by MHI concerning what weight the Court should
place on certain documents admitted into evidence through Ms. Murray, as
they related to Ms. Querner and Mr. Weymark.

[9]            
In August 2011, CN applied to reopen the trial to introduce the evidence
of Ms. Querner and Mr. Weymark. Despite opposition from MHI, I
allowed that application: Mitsubishi Heavy Industries Ltd. v. Canadian
National Railway Company, 2011 BCSC 1536. Following my ruling, by
agreement, that evidence was put in affidavit form in December 2011 and cross-examinations
and re-examinations on the affidavits took place in early April 2012. The Court
has now received revised final arguments from the parties based on this new
evidence.

Position of the Parties

[10]        
Both parties refer to the central statutory provision relevant to this
issue as contained in s. 137(1) of the Canada Transportation Act,
S.C. 1996, c. 10 (the “Act”):

137. (1)  A railway company shall not limit or
restrict its liability to a shipper for the movement of traffic except by means
of a written agreement signed by the shipper or by an association or other body
representing shippers.

(2)  If there is no agreement, the railway company’s
liability is limited or restricted to the extent provided in any terms and
conditions that the Agency may

(a) on the application of the
company, specify for the traffic; or

(b) prescribe by regulation, if none are specified for the
traffic.

[11]        
MHI claims that CN was negligent. MHI denies that it is a party to any
written agreement with CN as contemplated by s. 137(1) of the Act
that would limit CN’s liability for damage to its goods.

[12]        
CN denies that it was negligent, but more importantly for the purposes
of this portion of the trial, it takes the position that it entered into an
agreement with Casco for the transportation of certain goods, which included
the 4115 Barrels and the damaged aircraft part of MHI. CN says that Casco is
the “shipper” in these circumstances and that there is a contract between CN
and Casco which specifically limits CN’s liability to $50,000. Thus, CN says
that it is entitled to the benefit of this limitation as against MHI, in
accordance with s. 137(1) of the Act.

[13]        
In reply, MHI says that it is unclear who the “shipper” is in these
circumstances. Further, if Casco is the “shipper”, MHI denies that there is any
signed written agreement between CN and Casco. In the alternative, MHI takes
the position that even if there is such an agreement, it has no bearing on its
tort claim against CN.

The Statutory Regime

[14]        
A review of the history leading to the enactment
of s. 137 of the Act is of assistance in determining the
legislative intent underlying that provision.

[15]        
At common law, a railway was held to be a common
carrier responsible for the safety of the goods entrusted to it: see Canadian
National Railway Co. v. Harris, [1946] S.C.R. 352 at 369-370:

The common law liability of a common carrier
is, I think, authoritatively stated in 4 Halsbury, at p. 12 and following
pages:

A common carrier is responsible for safety
of the goods intrusted to him in all events, expect where loss and injury
arises solely from act of God or the King’s enemies. He is therefore liable
even where he is overwhelmed and robbed by an irresistible number of persons.
He is an insurer of the safety of the goods against everything extraneous which
may cause loss or injury except the act of God or the King’s enemies.

[16]        
In the face of exposure to liability under the common
law, in the early 1970s, railways, working with the Government of Canada and
the Canadian Transport Committee, developed Special Terms and Conditions for
carriage of cargo which prescribed limits of liability.

[17]        
Later, in April 1980, on application by the
Canadian Freight Association on behalf of rail carriers, Order R-30750 was
issued by the Railway Transport Committee to amend the Special Terms and
Conditions relating to the liability of the railways for loss, damage or delay
to containers (other than that owned by the railways) and their contents. Order
R-30750 provided that the railway was not to be liable except for negligence on
the part of the carrier, but in no event would the liability of the carrier for
a container and its content exceed certain amounts. In respect of 20 foot
containers and their contents, the limits of liability were the lesser of: (a) the
value of the contents; (b) the sum of $10,000; or (c) an amount equal to the
liability of the steamship company pursuant to the Ocean Bill of Lading.

[18]        
In 1989, the Shipping Federation of Canada (who
I am advised acts for shipping companies) applied to the Canadian
Transportation Agency (the “CTA”) to rescind Order R-30750 on the grounds that
the financial limitations set out in R-30750 would not compensate for container
damage. The CTA issued its Decision No. 559-R-1991 on November 8, 1991.
The CTA referred to the philosophy of marketplace regulation expressed in the National
Transportation Act, 1987, R.S.C., 1985, c. 28 (the predecessor
legislation to the Act) and decided that container liability limits for
general freight should be established by negotiations between the parties. The CTA
also decided that:

The new Railway
Traffic Liability Regulations, SOR/91-205-01 will apply on the subject
traffic. In the absence of an agreement between a shipper and a carrier
limiting liability, rail carriers will be liable for the value of the container
and its contents at the place and time of shipment.

[19]        
Accordingly, the previous limits of liability
imposed by regulation were eliminated and the matter was left to be addressed
by the parties directly in their contractual arrangements.

[20]        
The Act is currently the primary
legislation governing the carriage of goods by rail. Relevant portions of the Act,
other than s. 137 (see para. 10 of these reasons), are as follows:

6. "shipper" means a person who sends or
receives goods by means of a carrier or intends to do so;

…

113. (1)  A railway company shall, according to its
powers, in respect of a railway owned or operated by it,

…

(c) without delay, and with due
care and diligence, receive, carry and deliver the traffic;

…

(4)  A shipper and a railway company may, by means of a
confidential contract or other written agreement, agree on the manner in which
the obligations under this section are to be fulfilled by the company.

…

116. (5)  Every person aggrieved by any neglect or refusal
of a company to fulfill its service obligations has, subject to this Act, an
action for the neglect or refusal against the company.

(6) Subject to the terms of a confidential contract
referred to in subsection 113(4) or a tariff setting out a competitive line
rate referred to in subsection 136(4), a company is not relieved from an action
taken under subsection (5) by any notice, condition or declaration if the
damage claimed in the action arises from any negligence or omission of the
company or any of its employees.

……

117. (1)  Subject to section 126, a railway company
shall not charge a rate in respect of the movement of traffic or passengers
unless the rate is set out in a tariff that has been issued and published in
accordance with this Division and is in effect.

(2)  The tariff must include any information that the Agency
may prescribe by regulation.

(3)  The railway company shall publish and either publicly
display the tariff or make it available for public inspection at its offices.

(4)  The railway company shall provide a copy of the tariff,
or any portion of it, to any person who requests it and pays a fee not
exceeding the cost of making the copy.

(5)  The railway company shall keep a record of the tariff
for at least three years after its cancellation.

…..

118. (1) A railway company shall, at the request
of a shipper, issue a tariff in respect of the movement of traffic on its
railway.

…

121. (1)  If traffic is to move over
a continuous route in Canada and portions of it are operated by two or more
railway companies, the companies shall, at the request of a shipper intending
to move the traffic,

(a) agree on a joint
tariff for the continuous route and on the apportionment of the rate in the
joint tariff; or

(b) enter into a confidential
contract for the continuous route.

(2)  If the railway companies fail to agree or to enter
into a confidential contract, the Agency, on the application of the shipper,
may

(a) direct the
companies, within any time that the Agency may specify, to agree on a joint
tariff for the continuous route and an apportionment of the rate that is
satisfactory to the Agency; or

(b) within ninety days
after the application is received by the Agency,

(i) determine the route and
the rate and apportion the rate among the companies, and

(ii) determine the dates, not
earlier than the date of receipt by the Agency of the application, when the
rate comes into effect and when it must be published.

(3)  If the Agency determines a rate under paragraph
(2)(b), the companies that operate the route shall pay a shipper who
moved traffic over the route an amount equal to the difference, if any, between
the rate that was paid by the shipper and the rate determined by the Agency,
applicable to all movements of traffic by the shipper over the route from the
date on which the application was made to the date on which the
determined rate comes into effect.

….

126. (1) A railway company may enter into a contract with
a shipper that the parties agree to keep confidential respecting

(a) the rates to be charged by
the company to the shipper;

(b) reductions or allowances
pertaining to rates in tariffs that have been issued and published in
accordance with this Division;

(c) rebates or allowances
pertaining to rates in tariffs or confidential contracts that have previously
been lawfully charged;

(d) any conditions relating to
the traffic to be moved by the company; and

(e) the manner in which the
company shall fulfill its service obligations under section 113.

(2)  No party to a confidential contract is entitled to
submit a matter governed by the contract to the Agency for final offer
arbitration under section 161, without the consent of all the parties to the
contract.

[Emphasis
added]

[21]        
The Railway Traffic Liability Regulations,
SOR/91-488 (the “Regulations”) are referenced by s. 137(2) of
the Act. The Regulations provide:

4. Subject to sections 8
and 15, for the purposes of subsection 137(2) of the Act, a carrier is liable,
in respect of goods in its possession, for any loss of or damage to the goods
or for any delay in their transportation unless that liability is limited by
these Regulations.

[22]        
Section 5 of the Regulations states that
a carrier will not be liable for any loss or damage for goods or for any delay
in the transportation of goods which result from various matters, such as acts
of God, war, riot, strike and the like. CN does not allege in this case that
any of these circumstances apply.

[23]        
It can be seen from the foregoing that the
matter of limiting a carrier’s liability has now been essentially deregulated
and that the parties are free to negotiate on this issue and contract as to the
basis upon which they will do business:  see Canadian
National Railway Co. v. Neptune Bulk Terminals (Canada) Ltd., 2006 BCSC 1073 at paras. 10-12, 89-93, 60 B.C.L.R. (4th) 96
for a history of this process.

[24]        
Accordingly, a railway will be fully liable for
loss of goods being transported by it unless it can bring itself within one of
two circumstances:  firstly, those set out in s. 5 of the Regulations
(acts of God, etc.); or secondly, where the railway has entered into a
“confidential contract” under s. 126 which contains a contractual
limitation of liability and the contract is a “written agreement signed by the
shipper” pursuant to s. 137(1) of the Act. In this case, the only
issue is whether the latter circumstance has been proven.

[25]        
The parties agree that CN bears the burden of
proving the elements required to be established – a written agreement or
“confidential contract” signed by a “shipper” which contains a limitation of
liability – in accordance with s. 137(1) of the Act.

Discussion and Analysis

(a)      Who is the “shipper”?

[26]        
In accordance with its pleading, CN contends that Casco is the “shipper”.
MHI says that it is uncertain whether MHI, Fujitrans or Casco are the “shipper”
and that in the face of CN not having proved that fact, CN’s argument must
fail.

[27]        
Despite what appears to be a relatively straight forward definition of
“shipper” in s. 6 of the Act – namely, a person who sends or
receives goods by means of a carrier or intends to do so – it is necessary to
review the complexity of the relationships between all parties in this case to
determine who, in fact, bears this role.

[28]        
At this stage it is useful to review the evidence of Mr. Utsumi, Ms. Murray,
Ms. Querner and Mr. Weymark.

[29]        
As is evident from the Statement of Agreed Facts,
MHI’s cargo was being transported from Japan to Ontario pursuant to the Master
Transportation Agreement between MHI and Fujitrans. This Agreement covered all
legs of the transportation, except for the deep sea carriage from Nagoya, Japan
to Vancouver.

[30]        
Mr. Utsumi’s evidence confirmed that he was
the operational coordinator for Fujitrans USA at its Portland, Oregon office.
Fujitrans USA functioned as an agent for MHI through Fujitrans, which is
located in Japan. Fujitrans is Fujitrans USA’s parent company. Fujitrans USA
took instructions from Fujitrans in Japan. For the purpose of these reasons,
there is no distinction between Fujitrans and Fujitrans USA so I will refer to
both collectively in these reasons as “Fujitrans”, except to distinguish
between the respective Fujitrans offices in Japan and the U.S.

[31]        
Fujitrans had a freight forwarding department
and an ocean vessel agency. Mr. Utsumi worked for Fujitrans from 1990 to
April 2009. His job was coordinating freight transport from Japan to North
America and from the United States to Japan. The majority of Fujitrans’
business was export freight forwarding.

[32]        
Fujitrans acted as the agent of MHI in arranging
for the transportation of aircraft parts from Japan to Ontario. MHI contracted
with Fujitrans Japan for the movement of the aircraft parts from Japan to
Ontario, except for the ocean-voyage portion. In Japan, Fujitrans moved the
fuselage parts to alongside the vessel and arranged for the loading onto the
deep sea vessel. Fujitrans would then receive the cargo from the vessel and
then load it onto the railcars for rail transport to Ontario. Casco was
employed by Fujitrans for that purpose.

[33]        
Part of Mr. Utsumi’s job was to communicate
directly with MHI, in person or by phone.

[34]        
From time to time, Mr. Utsumi also had
communications with CN personnel, including Ms. Murray. One communication
in particular from 2002 dealt with CN’s quotation of certain rates. He
confirmed that his communications with personnel at CN related only to the MHI
business. Finally, Mr. Utsumi dealt with various personnel at Casco. He
dealt with Johnny Onodera, the manager of Casco, and his subordinate, Ms. Querner,
an account representative of Casco. Mr. Utsumi understood that Mr. Onodera
was the person at Casco who prepared the shipping contract with CN and
calculated the freight rate. I was advised that Mr. Onodera is now
deceased.

[35]        
Mr. Utsumi had heard about the Master Transportation
Agreement between MHI and Fujitrans Japan, but he had never seen it.

[36]        
One of the documents produced by Mr. Utsumi
was an undated and unsigned “draft” Confidential Transportation Agreement No. 13349
between CN, and Casco and MHI as “Customers”, relating to transportation
services to be provided by CN for the period December 6, 1996 to January 31,
1997 with respect to aircraft parts. Fujitrans was not identified as a party to
this contract although someone added in handwriting a place for Fujitrans to
sign on the signature page of the contract. This draft agreement specifically
refers to CN’s liability being “limited to $50,000 (Cda)” in two separate
places. Mr. Utsumi believes that he received this Confidential
Transportation Agreement somewhere around 2000 to 2002 and he faxed it to an
unidentified person named Philip on July 18, 2005 (just after the derailment).

[37]        
From 1999, Ms. Murray was CN’s account
manager for Casco, along with other CN customers, and she dealt with
dimensional loads requiring special clearance for movement (such as aircraft
parts).

[38]        
Ms. Murray’s job was to get back the
business of transporting aircraft parts which CN had previously lost to
trucking companies. On December 3, 1999, she wrote to Casco proposing rates and
train service transit times to Casco based on MHI’s and Casco’s requirements.

[39]        
Ms. Murray was successful in winning back
this business of transporting MHI’s goods across Canada.

[40]        
The central document in this litigation is a
later version of Confidential Transportation Agreement No. 13349 relating
to transportation services to be provided by CN for the period July 12, 2000 to
March 31, 2006 (“CTA-13349”) again relating to the shipment of aircraft parts. This
time period covers the date of the derailment in 2005. It also follows some
seven months from the date of Ms. Murray’s letter to Casco seeking to win
the MHI business back. Ms. Murray said that CTA-13349 bears the same
number as the earlier draft contract because once a contract number is assigned
by CN to a customer, all subsequent contracts bear the same number.

[41]        
CTA-13349 is in substantially the same form as the
earlier draft confidential agreement. This is understandable since both
documents originated from CN and represent a standard form contract on their
system.

[42]        
CTA-13349 is stated to be between CN, and then Casco
and MHI as “Customers”. The relevant clauses of CTA-13349 are as follows:

1. Effective Date and Term

This Contract
shall be effective as of the 12th day of July 2000 and shall remain in effect
until the 31st day of March 2006 ("Contract Period").

2. Transportation Service and Charges

A.         This
Contract is for the transportation of the commodity or commodities
("Commodity") described in Schedule 1 – "Commodity and
Transportation Particulars".

B.         The
Customer represents to CN that it controls the traffic covered by this Contract
and it agrees to ship the Commodity in accordance with the terms and conditions
set forth herein. CN, acting solely as a Contract carrier, agrees to transport
the Commodity between the Origins and Destinations and at the rates specified
in Schedule 1.

3. Customer to Advise Contract Number

The Customer shall
advise CN of the Contract Number when cars are released for shipment pursuant
to this Contract or cause the shipper to advise CN of the Contract Number. If
the bill of lading or other written or electronically transmitted documentation
is issued. All documentation shall include a statement "Subject to CN’s
Confidential Transportation Contract No. 13349".

5. Liability and Claims

Except as
otherwise provided in any schedule to this Contract, the liability of CN for
any alleged loss, damage or delay to the Commodity shall be identical to the
standards applicable to a Canadian rail common carrier, as specified in Railway
Traffic Liability Regulations, SOR/91- 488.

11. Schedules

A.         In
the event that any Schedule hereto is inconsistent with the terms and
conditions of this head agreement, the Schedule shall prevail.

B.         This Contract includes the
following schedules:

Schedule 1 –    "Commodity
and Transportation Particulars"

Schedule 2 –    "Additional Special
Conditions"

[43]        
The matter of CN’s liability under the
confidential contract was specifically addressed in both Schedule 1 and 2 (in
the same manner as it was addressed under the earlier draft confidential
contact discussed above).

[44]        
Schedule 1 to CTA-13349 sets out a “Description
of Commodity” as "Aircraft Parts”. It also sets out freight rates per car
which were established each year and escalated over the five year period. As referenced
in clause 5 (“except as otherwise provided in any schedule to this Contract”), Note
1 to Schedule 1 provided that:

Liability
coverage while in possession of CN is limited to $50,000 (Cda).

Similarly, Schedule 2 to CTA-13349 is
titled “Additional Special Conditions” and provided that "Liability is
limited to $50,000 (Cda) while in the possession of CN".

[45]        
CTA-13349 was signed by Mr. Utsumi under
the line that said "Mitsubishi Heavy Industries (MHI)". Underneath
his name he wrote “as agents of MHI” and underneath that applied a stamp that
included his name and the words "Attorney-in-fact Fujitrans USA,
Inc.". Mr. Utsumi indicated that he would only use the stamp when he
signed for a customer who had authorized him to sign the contract. When he
received CTA-13349 he sent it on to Fujitrans in Japan. He was authorized to
sign CTA-13349 by the person at Fujitrans Japan who was in charge of the MHI
business, but he does not remember that person’s name.

[46]        
Mr. Utsumi recalled that he was asked to
sign CTA-13349 by either Mr. Onodera or Ms. Querner of Casco. He
never received a copy of it signed by CN (indicated on the document to be the
signature of Jerry Boland) or Casco (indicated on the document to be the
signature of Mr. Onodera).

[47]        
No copy of CTA-13349 was produced which bears
the signature of any person from either CN or Casco. Ms. Murray was unable
to locate any such copy in CN’s files. Other searches for such a document have
not been fruitful.

[48]        
It is not entirely clear when Mr. Utsumi
signed CTA-13349. It could have been anytime between the year 2000 and 2003. He
also indicates that he was asked to sign CTA-13349 because of the change of the
freight rates and that he communicated the change of freight rates to Fujitrans
Japan.

[49]        
Ms. Murray gave evidence that CTA-13349 set
out the agreement regarding the movement of the MHI Dash-8 aircraft parts and
the rates and conditions under which CN moved those parts.

[50]        
Ms. Murray testified that she normally went
through Casco and Fujitrans in discussing the aircraft parts traffic and that she
had met with Mr. Utsumi on several occasions to talk about the business. Nevertheless,
she considered it “MHI business” and also considered that MHI was an indirect
customer. From her perspective, MHI was named in CTA-13349 because it was the
manufacturer, but she considered that Casco, also named in the agreement, was
the party with whom she dealt.

[51]        
She said that she negotiated rates with Ms. Querner
of Casco and Mr. Utsumi of Fujitrans. The freight rates charged by CN were
the rates specifically listed in CTA-13349. According to Ms. Murray, these
rates were preferential rates for aircraft parts based on the limitation of
liability in that she “backed the risk out of the pricing" to provide a
lower rate for the rail movements. She indicated that by limiting CN’s
liability in CTA-13349, she was able to provide more competitive rates to secure
the business.

[52]        
During the period July 2000 through July 2005,
MHI shipped aircraft parts with CN and CN invoiced MHI through Casco and/or
through Fujitrans for the freight rates set out in CTA-13349. Fujitrans USA
received copies of CN’s invoices through Casco’s office and also invoices from
Casco or Casco Terminals (which appears to be a related party operating under
the Casco name). Casco’s invoices were sent by Fujitrans USA to Fujitrans
Japan.

[53]        
Mr. Utsumi indicates that he would discuss
freight rates with Casco and CN separately and that sometimes all three of them
would have discussions on that matter. His discussions with CN went beyond
those relating to the Dash-8 aircraft parts (the ones damaged in the
derailment). In September 2002, Mr. Utsumi was involved in discussions with
Ms. Murray about other matters, including the rates applied in the
shipment of MHI aircraft parts for a regional jet with CN and also the matter
of the return of lashings used on CN shipments.

[54]        
Ms. Querner deposed that she recalls
checking rates from time to time by reference to CTA-13349, when Mr. Onodera
would provide a piece of paper to her from CTA-13349. She indicated that she
was not involved in negotiating any terms of the contract with CN. This is a
slight conflict in relation to the evidence of Ms. Murray who indicated
that she negotiated with both Ms. Querner and Mr. Onodera. I accept
the evidence of Ms. Querner in this respect and find that the contract negotiations
and agreements made between CN and Casco were completed between Ms. Murray
and Mr. Onodera.

[55]        
In addition, Ms. Querner specifically
recalls discussing the calculation of freight rates under CTA-13349 with Ms. Murray
and she recalls calculating those freight rates from CTA-13349 (by reference to
Schedule 1 of CTA-13349 which sets out specific rates over the approximate 5½
year term of the agreement). She identified CTA-13349 as being the agreement in
effect at the relevant time. It bears noting that Schedule 1, which references
the rates, also includes the limitation of liability clause relied upon by CN.

[56]        
That the freight rates specified under CTA-13349
applied to dealings between the parties was confirmed in a certain e-mail
exchange between them in 2002. On April 8, 2002, consistent with her role in
checking the billing rates under the confidential contract, Ms. Querner of
Casco sent an e-mail questioning certain invoices issued by CN. That same day, Ms. Murray
confirmed the correctness of those invoices in an e-mail back to Ms. Querner,
which e-mail was copied to Mr. Utsumi:

…As per our
contract the rate goes up 2% on April 1st, 2002. MHI agreed to this and
Johnny/Atsuo signed on their behalf. I don’t have a copy of the original
contract but I can send you a copy if you need this.

[57]        
Ms. Querner replied “OK. I have check [sic]
the contract. Sorry I should checked before I sent the message”. Mr. Utsumi
did recall in his evidence that there was a rate change for the aircraft parts
in 2000 or 2001 or 2002. The rates and increases discussed in this exchange of
e-mails are the freight rates that were billed and paid, including the increase
for April 2002, and all of which are derived from CTA-13349, as confirmed by Ms. Murray.

[58]        
Ms. Querner has no recollection of seeing –
or not seeing – any signatures on CTA-13349, whether they be from Mr. Utsumi,
Mr. Boland or Mr. Onodera.

[59]        
Another important document is an assignment of CTA-13349
executed on February 25, 2003. The assignment document specifically provides
for an assignment by Casco of:

…all of its interest
in Confidential Transportation Agreement No. 13349 made as of ______ between
Casco Forwarding Limited and Mitsubishi Heavy Industries Ltd. as the “Customer”,
and Canadian National Railway Company (“CN”) effective 07/12/2000 – 03/31/2006
a true copy of which is attached hereto as Schedule “A”.

This assignment was executed by Casco in
favour of P&O Ports Canada Inc. and was acknowledged by P&O Ports
Canada Inc. that same day. A copy of CTA-13349 is attached to the assignment, but
the copy attached is not as signed by Mr. Utsumi.

[60]        
The assignment is executed by Mr. Weymark as
President of Casco and is acknowledged by the President of P&O Ports Canada
Inc. Mr. Weymark executed the assignment, along with many other documents,
as part of the sale of Casco by BCR Marine (the parent company of Casco) to
P&O Ports Canada Inc. He acknowledges his signature, but has no other
specific recollection of the documentation or the surrounding circumstances,
particularly as they relate to CTA-13349.

[61]        
The bottom third of the assignment (relating to
the consent of CN) bears certain handwriting of Ms. Murray. The consent is
signed by Jacques Ruest, a Vice President of CN, as identified by Ms. Murray.
Ms. Murray testified that she would have attached a copy of CTA-13349 to
the assignment when the document was prepared.

[62]        
Mr. Utsumi was never asked to sign an
assignment of CTA-13349 on behalf of MHI.

[63]        
In an e-mail dated January 31, 2003, copied to Mr. Onodera
of Casco, Ms. Murray communicated to the lawyer handling the Casco/P&O
Ports transaction regarding the need for the assignment. At that time, she was
providing clarification regarding the assignment of “our contract with
Mitsubishi Heavy Industries and Casco Forwarding (BCR Marine) to P&O Port
Canada”. She confirmed certain aspects of CTA-13349 and, in particular, stated that
there was no volume commitment in the agreement. She further stated:

[t]he existing
contract is indeed the entire contract, meaning there exists no additional or
supplemental contracts, addendums.

[64]        
In further e-mail exchanges in February 2003
related to the assignment, a Casco representative (Barry Wilson) presses for
CN’s consent to the assignment. Casco (Mr. Onodera) pursues this with Ms. Murray
of CN. In this e-mail exchange, Casco (Mr. Wilson) confirms “[w]e received
the consent from Mitsubishi Heavy Industries on February 5th”. On February 19,
2003, Ms. Murray of CN confirmed that she had CN’s consent in hand and
that she was sending it to Casco (Mr. Onodera).

[65]        
MHI denies that this is evidence that MHI did in
fact consent to the assignment.

[66]        
Ms. Murray also testified as to how
shipments would originate. Customers were required to fill in a blank form
which CN provided to its customers. Those forms were then filled in by the
customers with information known only to the customer.

[67]        
For the specific shipment of the 4115 Barrels, Ms. Querner
of Casco prepared two “Memoranda” dated July 1, 2005 for each of the rail cars.
These were intended to be an acknowledgement that a bill of lading had been
issued for the shipment. This form, when filled out, was then faxed to CN’s
Winnipeg customer service center for billing purposes. The Memoranda filled out
by Ms. Querner included the following information provided by Casco:

a)    the
accounts were to be mailed to Casco;

b)    the
“Shipper” was described at the top of the documents as “Mitsubishi Heavy Industries,
c/o Casco Forwarding Limited”;

c)     there
is a specific reference to “CONTRACT NO.: CN13349”; and

d)    under “Shipper”
at the bottom of the documents, the documents indicated “Casco Forwarding Ltd.
O/B of Mitsubishi Heavy Industries, Chieko Querner-Tsuruta”.

Ms. Querner specifically filled out the
name of the shipper and the reference to CTA-13349 in these Memoranda.

[68]        
The fact that Casco was filling out forms to
transport goods for MHI in 2005, when there was supposedly an assignment from
Casco to P&O Ports earlier in 2003, raises the question as to whether the
assignment was ever effective. The answer to that question was not answered by
the evidence and the validity of the assignment is not an issue in these
proceedings. In any event, it is clear that Casco continued to be involved in
the MHI shipments even past the date of the assignment as evidenced by these
Memoranda.

[69]        
The question of who is a “shipper” under
s. 137(1) of the Act was addressed in Canadian National
Railway Company v. Sumitomo Marine & Fire Insurance Company Ltd., 2007
QCCA 985, leave to appeal to SCC refused, 32282 (February 28, 2008). In that
case, Sanyo Canada Inc. (“Sanyo”) retained TransX-Intermodal
Ltd. (“TransX”) to send goods from British Columbia to Quebec. TransX then sub-contracted
the rail movement to CN for the purpose of transporting the goods by rail.
TransX received the goods from Sanyo and issued a bill of lading denoting Sanyo
as the shipper. A derailment occurred during the rail transportation by CN. Since
Sanyo was insured by Sumitomo, Sumitomo sought recovery of the value of the
goods.

[70]        
A unanimous Quebec Court of Appeal found that
the Act permitted a rail carrier to limit its liability by contracting
with the shipper. The “shipper” was deemed to be the entity that “chose” to use
a railway and had “effective control” in negotiating the terms of carriage: paras. 48-49.
As a result, TransX, who had a long standing contractual relationship with CN, who
had chosen CN and had effective control of the terms of carriage, was found to
be the “shipper” and CN was able to limit its liability. Since Sumitomo was
found not to be a “shipper”, there was no privity of contract that would allow it
to bring a cause of action against CN under the contract.

[71]        
(The Sumitomo decision is in French.
However, an English translation of portions of the decision is found in the
Federal Court of Appeal’s decision in Boutique Jacob Inc. v. Canadian
Pacific Railway Co., 2008 FCA 85, 375 N.R. 160 as discussed below).

[72]        
The issue was also addressed in Boutique
Jacob Inc. v. Pantainer Ltd., 2006 FC 217, 288 F.T.R. 78, rev’d 2008 FCA 85,
375 N.R. 160. Boutique Jacob had retained Pantainer Ltd., through its related
company, Panalpina Inc., to transport certain goods from Hong Kong to Montreal.
Pantainer in turn subcontracted with OOCL to carry the cargo that same distance.
OOCL subsequently retained CPR under a confidential contract to carry the cargo
by rail from Vancouver to Montreal. A derailment occurred while the cargo was
being transported by CPR and the goods were damaged.

[73]        
At the trial level (and before the appeal decision
in Sumitomo), the Court dealt with the ability
of the four defendants (Pantainer, Panalpina, OOCL and CPR) to limit their
liability to Boutique Jacob. The trial judge in Boutique Jacob
(beginning at para. 42) discussed the liability of CPR. de Montigny J. observed
that, based on Regulations 4 and 5, CPR was “clearly liable for the loss
or damage to the Plaintiff’s cargo” (para. 43). CPR argued in part, however,
that it could benefit from the terms and conditions in its confidential
contract with OOCL and limit its liability.

[74]        
The trial judge observed that having regard to
s. 137 of the Act, there was no written agreement limiting
liability between Boutique Jacob and CPR, nor did he consider that there was such
an agreement between OOCL and CPR. He concluded that the “shipper”, for
purposes of the Act, was Boutique Jacob, not OOCL, who he considered simply
a “carrier” (para. 45). He relied on the 2004 trial decision in Sumitomo.
In any event, the trial judge concluded that, even if the confidential contract
was in play, it did not operate to limit CPR’s liability.

[75]        
On appeal, the principal question related to the
liability of CPR, including the question of who was the “shipper” in relation
to CPR. The Federal Court of Appeal overturned the finding by the trial judge
on this point and found that OOCL was the “shipper”. The Court, after reviewing
the statutory provisions under the Act reproduced above, agreed with the
Quebec Court of Appeal’s decision in Sumitomo and applied a “realistic”
approach to a determination of who was the “shipper”:

[46]      Section 6 of the Act defines a "shipper"
as "a person who sends or receives goods by means of a carrier or intends
to do so". This broad definition must, in my view, be read in the context
of the other provisions of the Act. This issue was squarely addressed by the
Quebec Court of Appeal in Canadian National Railway Company Ltd., above,
wherein it concluded that the "shipper" within the meaning of section
137 of the Act was the person who directly contracted with the railway company.
At paragraphs 48 and 49 of his Reasons for the Court, Dussault J.A. wrote the
following:

[TRANSLATION]

[48]      Reviewing these
submissions, I note that the parties are debating the meaning and the scope
that should be given to the notion of "shipper" defined at section 6
of the Act, without actually relying on the other terms of the Act. It is true
that, based on its generality, the definition provided by this section —
"means a person who sends or receives goods by means of a carrier" —
may at first seem vague. However, if we review subsection 117(1), section 118,
and subsections 121(1) and 164(2) of the Act, dealing with establishing tariffs
and rates for the movement of goods, it is quite another matter.

[49]      Therefore, reading
subsection 121(1), I note that rates are determined either by joint tariff for
the various rail carriers, by agreement or a confidential contract. In the
latter case, paragraph 121(1)(b), section 126 and subsection 164(2) all
state that it necessarily involves a relationship between the rail carrier and
the shipper which, in fact, negotiates the terms of the rates with the carrier.
Part IV of the Act, which provides for arbitration when a disagreement arises
between the shipper and the carrier on the rates proposed or applied, indeed
confirms this "realistic" perception of the notion of shipper.
Subsection 164(2) states on this point that "Unless the parties agree
otherwise, in rendering a decision the arbitrator shall have regard to whether
there is available to the shipper an alternative, effective, adequate and competitive
means of transporting the goods to which the matter relates …". The
shipper is therefore the one that, given the possibilities available, made a
concrete decision to call on a rail carrier rather than another carrier. In
other words, the shipper has a direct connection and, especially, effective and
real control over the negotiation of an agreement or contract made with the
carrier.

[Emphasis added]

[47]  Considering the
grammatical and ordinary meaning of the word "shipper", section 6 of
the Act and the scheme of the Act, I cannot but agree with the Quebec Court of
Appeal’s interpretation of the meaning of the word "shipper" found in
section 137 and other provisions of the Act. Consequently, there can be no
doubt that, in the present matter, the "shipper" was OOCL and not
Boutique Jacob. In effect, not only was OOCL the entity which contracted
directly with CPR by way of a confidential rate contract, it was OOCL which
handed over the container to CPR in Vancouver. Thus, there was, as required by
section 137, a written agreement between the railway carrier, CPR, and the
"shipper", OOCL. The fact that OOCL was the carrier retained by
Pantainer to carry the goods from Hong Kong to Montreal does not deter from the
fact that OOCL was the "shipper" insofar as the contract of carriage
by rail is concerned.

[76]        
It is apparent, following Sumitomo and Boutique
Jacob, that for purposes of s. 137(1) of the Act, a “realistic”
approach should be taken in determining who the shipper is, having regard to:
whether the entity has a direct contractual connection with the rail carrier;
whether the entity made a decision or chose to call on the rail carrier for its
services; and, whether the entity has effective and real control over the
negotiation of an agreement made with the carrier.

[77]        
The question here is thus – which of MHI,
Fujitrans or Casco is the “shipper” in relation to CN as it relates to this
shipment of aircraft parts?

[78]        
In my view, MHI could hardly be described as the
“shipper” in these circumstances. In accordance with Article 18 of the Master
Transportation Agreement, MHI clearly intended that others (principally
Fujitrans and possibly other subcontractors) would be responsible for
transporting the aircraft parts, save for the ocean voyage. Again, Fujitrans was
a freight forwarder, but was not a rail carrier.

[79]        
In addition, there is no evidence that any
person at MHI was involved in the specifics of arranging the transportation
with CN. MHI introduced no evidence to suggest that it was involved in the
decision to retain CN or that negotiations took place between MHI and CN to
negotiate the terms of carriage of the aircraft parts. It is well acknowledged
that MHI never had any direct dealings with CN.

[80]        
There is no contractual relationship between MHI
and CN, and MHI does not assert that any such relationship exists, despite MHI
signing CTA-13349 by Mr. Utsumi/Fujitrans as attorney-in-fact. MHI also
was not a party to the assignment – only Casco was. I am unable to conclude
that MHI consented to the assignment despite some suggestion in the evidence to
that effect.

[81]        
MHI is clearly referenced in the Memoranda;
however, CN submits that the use of the word “shipper” in this document should
not be substituted for the interpretation of the term “shipper” under the Act.
I agree. In my view, the proper interpretation of these documents is that Casco
prepared this document and included references to MHI for its own purposes, but
that all communications were to continue directly between Casco and CN. This
recognizes the reality of the situation, consistent with the case law discussed
above.

[82]        
Ms. Murray confirmed in her evidence that
CN’s relationship with MHI was only “indirect” and that she referred to it as
“MHI business” only in the sense of making clear who owned the aircraft parts. In
fact, CTA-13349 specifically provided that MHI was the legal owner of the
freight until delivered to and accepted by the consignee, Bombardier. In this
context, the fact that MHI was asked to sign CTA-13349 was not an intention to
create a direct relationship between CN and MHI.

[83]        
I conclude that MHI is not the “shipper” for the
purposes of the Act.

[84]        
Discerning whether Fujitrans or Casco is the
“shipper” is a closer call.

[85]        
MHI concedes that there was an agreement between
CN and Casco relating to the shipment of the goods.

[86]        
In addition, there is no doubt that Mr. Utsumi
of Fujitrans was involved to a certain extent in the dealings with CN. He met
with Ms. Murray and he was involved in discussions about freight rates
both with CN and Casco separately and when both were involved. He received
copies of e-mails between Casco and CN discussing rate changes.

[87]        
Ms. Murray, however, confirmed in her
evidence that her dealings were mainly with Casco in terms of arranging for the
transportation of the aircraft parts. While Mr. Utsumi may have had some
involvement in the negotiation of the contract and the rates set out in that
contract, Mr. Onodera and Ms. Querner were principally the people at
Casco that she dealt with in terms of making these arrangements and also in relation
to CN’s performance under the contract. The e-mail chain from 2002 discussing
the rate change under the contract is an example of this interaction. Ms. Querner’s
evidence is consistent with Casco having significant dealings with CN regarding
the negotiation and payment of freight rates.

[88]        
Mr. Utsumi confirmed that Mr. Onodera
was the person at Casco who prepared the shipping contract and calculated the
freight rates. This is consistent with Ms. Querner’s evidence that her
role related mainly to checking rates, but not negotiating these agreements
herself. Mr. Utsumi confirmed that Casco was employed for the purpose of
receiving the cargo off the ship and loading the aircraft parts onto the
railcar, which was the responsibility of Fujitrans under the Master Transportation
Agreement.

[89]        
Fujitrans is not named as a party or “Customer” under
either the earlier draft confidential contract or CTA-13349, although it
appears to have been anticipated that Fujitrans would sign the draft contract.

[90]        
As noted above, the Memoranda were filled out by
Ms. Querner at Casco. The Memoranda are consistent with clause 3 of
CTA-13349 which requires that a “Customer” or a “shipper” advise of the
Contract Number when the rail car is released for shipment pursuant to the
Contract and specifically, requires that all documents include a statement
“Subject to CN’s Confidential Transportation Contract No. 13349”. That is
exactly what Casco did in those documents.

[91]        
Further, clause 2.B of CTA-13349 provides that the
“Customer” represents to CN that it controls the traffic covered by the
Contract and agrees to ship in accordance with the terms and conditions set out
in the contract. It was Casco who was controlling the shipment in terms of
arranging for the loading of the railcars for shipment with CN.

[92]        
In support of its argument that it is unclear
who the shipper is, MHI points out that Ms. Murray could find no client
file for Casco – only one entitled “MHI/Bombardier”. In my view, this is hardly
determinative. In fact, it is consistent with Ms. Murray viewing MHI as
the “indirect” customer as noted above. It does not address who she actually
dealt with in terms of arranging for the shipments.

[93]        
The way in which the assignment was drawn up and
signed (by Casco only) is also consistent with Casco being the “shipper” in
terms of representing who has the interest under CTA-13349 and who is the one bound
by and making arrangements under that contract. It was a Casco representative
and lawyer acting for Casco who dealt with CN in terms of obtaining CN’s
consent to that assignment. Fujitrans is not a party to that assignment.

[94]        
MHI argues that the assignment is of little
relevance since CTA-13349 provided in clause 10.C that:

Non-Assignment:
This Contract shall not be assigned by any Party to this Contract.

[95]        
However, I do not see that this restriction detracts
from the fact that Casco was the one who was acting as the shipper with respect
to CTA-13349. Clause 10.C clearly prohibited a unilateral assignment by one
party without the consent of the other, but it would not have prevented a
consensual assignment by the parties to the confidential agreement such as
appears to have been intended, and accomplished, here. The evidence indicates
that CN consented to the assignment.

[96]        
After reviewing the entirety of the evidence of Mr. Utsumi,
Ms. Querner and Ms. Murray and the relevant documentation, it is my
view that, for the purposes of s. 137(1) of the Act, the “shipper”
in respect of the arrangements for the transportation of MHI’s aircraft parts is
Casco, not Fujitrans.

[97]        
The fact that Casco is, as stated by MHI, a
“freight forwarder” or “intermediary” does not detract from this conclusion. Mr. Utsumi
acknowledged that Fujitrans would receive the CN and Casco invoices directly from
Casco and forward them to Japan. This is consistent with Casco providing the
specific services relating to making arrangements for the transportation of MHI’s
aircraft parts on behalf of Fujitrans/MHI with CN, as was contemplated by the
Master Transportation Agreement.

[98]        
Fujitrans was employed by MHI to receive the
cargo off the ship and load it onto rail cars to be transported to Ontario. Fujitrans
then in turn subcontracted with Casco as the “other transport operator” under Article
18.1 of the Master Transportation Agreement with the intention that Casco would
arrange for the rail transport with CN. In this way, Fujitrans simply acted as
an intermediary in respect of these rail transportation arrangements and Mr. Utsumi’s
involvement in both the negotiation of rates and the later forwarding of the specifics
of these rates and documents by CN and Casco relating to the rail transportation
is consistent with this role.

[99]        
I conclude that Casco is the “shipper” in
relation to the CN shipments for the purposes of the Act.

(b)  Is there an
agreement between CN and Casco, as “shipper”, and is that agreement “signed” in
accordance with the Act?

[100]    
There is no doubt that CN has been unable to
produce a written agreement relating to the shipment of MHI’s aircraft parts,
whether CTA-13349 or otherwise, that has been “signed” by Casco in the
traditional sense. In fact, it appears that CN searched for their copy of
CTA-13349 and they were unable to find anything (beyond copies of the e-mails
introduced as part of Ms. Murray’s evidence).

[101]    
MHI says that this fact must lead to the
conclusion that CN is unable to bring itself within the parameters of s. 137(1)
of the Act and as a result, CN’s liability is not limited.

[102]    
CN takes the position that the production of an
agreement “signed” by Casco is not necessary in the circumstances. CN says that
it may prove the existence of the agreement without the necessity of a
signature by Casco and CN and that there is, in any event, no disagreement that
an agreement exists between it and Casco.

[103]    
CN points out that it expressly pled the
existence of such an agreement and that it was not disputed by MHI. MHI does,
however, take the position that no signed agreement exists.

[104]    
CN relies principally on Boutique Jacob
in support of its position. In that case, the trial judge stated that there was
no written agreement limiting liability between OOCL and CPR (see para. 45).
This was an odd statement given para. 24 of the Agreed Statement of Facts (see
para. 1 of the decision) which referenced a Confidential Rate Contract
between OOCL and CPR, however, it appears that the statement was based on the
fact that the agreement produced at trial was not signed.

[105]    
In any event, on appeal, having found that OOCL
was the “shipper” who had made the arrangements for the rail transportation
with CPR, the Federal Court of Appeal considered the alternate argument of
Boutique Jacob that CPR could not limit its liability because no signed
agreement had been produced. The Court rejected that argument:

[48]      Counsel for Boutique Jacob argued, in the
alternative, that even if we found that OOCL was the "shipper", CPR
could not, in any event, limit its liability because the written agreement
adduced in evidence was not signed. That argument is, in my view, without
merit, as neither party to the confidential rate contract disputed the validity
of their agreement.

[Emphasis
added]

[106]    
The application of the above statement from the
Federal Court of Appeal is questionable in these circumstances. There, OOCL and
CPR, the parties to the agreement, were parties to the litigation and neither
was pressing the position that the confidential contract should be ignored by
reason of the fact that it was not signed. Here, Casco is not a party to this
litigation. Nor was there any evidence from Ms. Querner, the only Casco
witness, that this was Casco’s position. I would note, in any event, that Ms. Querner
would have had no authority to do so since she is now retired and no longer in
the employ of Casco.

[107]     CN submits
that the evidence is overwhelming and uncontroverted that the damaged fuselage
was moved by rail pursuant to CTA-13349 with the full knowledge and authority
of MHI, Fujitrans and Casco and that there is clear and convincing evidence
that both MHI and Casco were aware of CTA-13349 and the limitation of liability
in that agreement.

[108]     CN relies
on the following evidence:

a)    although MHI
pleads that it is not a party to any agreement with CN that would limit CN’s
liability, CTA-13349 identifies both MHI and Casco as the “Customers”. Mr. Utsumi
executed that agreement on behalf of MHI;

b)    in 1976, MHI
entered into a Master Transportation Agreement with Fujitrans, which specifically
provided (Article 18) that Fujitrans could subcontract, with MHI’s prior
approval, all or part of the transportation contemplated by the Master
Transportation Agreement;

c)     Mr. Utsumi
of Fujitrans testified that CTA-13349 (for the period 2000-2006) was signed by
him under the line that says "Mitsubishi Heavy Industries (MHI)".
This is confirmed when underneath his name he wrote “as agents of MHI” and then
placed a stamp that included his name and the words "Attorney in-fact
Fujitrans USA, Inc.". Mr. Utsumi testified that he would only use the
stamp when he signed for a customer who had authorized him to sign the contract.
He said that he was authorized to sign CTA-13449 by the person at Fujitrans who
was in charge of the MHI business;

d)    when Mr. Utsumi
received CTA-13349 he sent it on to Fujitrans in Japan;

e)    although Casco
was named in CTA-13349 as a “Customer”, there is no version of the contract
available indicating the signature of Casco. However, in the context of the
transfer of the Casco assets to P&O Ports Canada Inc., Casco, by Mr. Weymark’s
signature, executed an assignment of CTA-13349 in February, 2003. This was a significant
commercial transaction with the benefit of legal advice. This step would only
have been necessary if Casco considered it was a party to CTA-13349 and that
the document represented the agreement between the parties;

f)      Casco’s
representative stated that MHI had consented to the assignment of CTA-13349 to
P&O Ports Canada Inc. in 2003;

g)    CN consented to
the assignment given its clear understanding that CTA-13349 was the operative
agreement between it and its “Customers” (MHI and Casco, but principally Casco
as the “shipper”) in relation the transport of MHI’s aircraft parts by rail;

h)    by clause 2.B of
CTA-13349, Casco represented to CN that it controlled the traffic covered by
the contract and it agreed to ship the aircraft parts in accordance with the
terms and conditions set forth therein. CN, for its part, acting solely as a
contract carrier, agreed to transport the aircraft parts between Vancouver,
B.C. and Downsview, Ontario and at the rates specified in Schedule 1;

i)       in
April, 2002, an exchange of e-mails took place between Casco and CN whereby
Casco questioned the per car freight rates which were being charged by CN for
the shipments. Casco thought the rate should be $10,390 and CN had invoiced
$10,597. CTA-13349, for the period 2000-2006, provided for annual rate increases
on April 1 of each year with the rate increasing on April 1, 2002 from $10,390
to $10,597. Casco (Ms. Querner) acknowledged in an e-mail exchange with Ms. Murray
that, having checked CTA-13349, CN was correct in charging the rate of $10,597
as of April 1, 2002;

j)      Ms. Querner,
on behalf of Casco, completed the Memoranda in relation to the shipment of the
4115 Barrels on July 1, 2005 which specifically refers to the aircraft parts
(including the part which ultimately was damaged in the derailment) and confirms
that those goods were moving under CTA-13349. Casco, on behalf of MHI, was
identified as the shipper by Ms. Querner. On the evidence, there is no dispute
from Ms. Querner that there was an agreement (CTA-13349) pursuant to which
the aircraft parts were moving by rail; and

k)     Ms. Murray
confirmed in her evidence that CTA-13349 was the agreement by which CN was
transporting MHI’s parts and was the operative agreement at the time of the
derailment.

[109]     MHI agrees
that the evidence shows that a contract existed between CN and Casco for the
movement of freight.

[110]     In light
of all of the evidence, I agree with CN’s position and find that CN has proved,
on a balance of probabilities, that there is a written agreement – CTA-13349 – between
it and Casco relating to the shipment of MHI’s aircraft parts.

[111]     In
addition, I find that CTA-13349 clearly included the necessary limitation of
liability clause upon which CN now seeks to rely. It must be kept in mind that
MHI, Casco and CN are all sophisticated parties. Casco, in particular, had
extensive experience in arranging for rail transportation and would have been
fully aware of limitation of liability issues in respect of those arrangements.
As stated earlier, the rates in CTA-13349, which were known to Mr. Utsumi
on behalf of Fujitrans/MHI, and Mr. Onodera and Ms. Querner on behalf
of Casco, were set out in the same schedule which contained the express and
unambiguous limitation of liability in favour of CN.

[112]     The more
difficult issue is whether CN has proven that this written agreement is
“signed”. As stated earlier, there has been no copy of CTA-13349 produced which
bears the signature of a representative of either Casco or CN.

[113]    
On these facts, the issue must be addressed
based on an interpretation of the statutory provisions in s. 137(1) of the
Act.

[114]    
MHI submits, and I agree, that the wording of
the Act must be given its plain and ordinary meaning.

[115]    
Elmer Driedger set out the approach to be taken when interpreting the
words of a statute in Construction of Statutes, 2d ed. (Toronto:
Butterworths & Co. (Canada) Ltd., 1983) at 87:

Today there is only one principle
or approach, namely, the words of an Act are to be read in their entire context
and in their grammatical and ordinary sense harmoniously with the scheme of the
Act, the object of the Act, and the intention of Parliament.

[116]    
Mr. Justice Iacobucci, speaking for the Court, in Bell ExpressVu
Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, cited the
above comments from Mr. Driedger and referred to them as Mr. Driedger’s
“definitive formulation”. Iacobucci J. went on to state that:

[26]      ….. Driedger’s modern
approach has been repeatedly cited by this Court as the preferred approach to
statutory interpretation across a wide range of interpretive settings: see, for
example, Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536, at
p. 578, per Estey J.; Québec (Communauté urbaine) v. Corp.
Notre-Dame de Bon-Secours, [1994] 3 S.C.R. 3, at p. 17; Rizzo &
Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21; R. v.
Gladue, [1999] 1 S.C.R. 688, at para. 25; R. v. Araujo, [2000]
2 S.C.R. 992, 2000 SCC 65, at para. 26; R. v. Sharpe, [2001] 1
S.C.R. 45, 2001 SCC 2, at para. 33, per McLachlin C.J.; Chieu v.
Canada (Minister of Citizenship and Immigration), [2002] 1 S.C.R. 84, 2002
SCC 3, at para. 27.

[117]    
Iacobucci J. also noted that in the context of federal legislation this
approach is buttressed by s. 12 of the Interpretation Act, R.S.C.
1985, c. I-21. Section 12 of the Interpretation Act provides:

12. Every enactment
is deemed remedial, and shall be given such fair, large and liberal
construction and interpretation as best ensures the attainment of its objects.

[118]    
The current case, as in the case of Bell ExpressVu, involves
federal legislation.

[119]    
Iacobucci J. further expanded on the Court’s preferred approach to
statutory interpretation by noting that this approach recognizes the importance
of the context of the provision in question and in particular whether
the provision is a component within a larger statutory scheme. He stated:

[27]      The preferred approach
recognizes the important role that context must inevitably play when a court
construes the written words of a statute:  as Professor John Willis
incisively noted in his seminal article “Statute Interpretation in a Nutshell”
(1938), 16 Can. Bar Rev. 1, at p. 6, “words, like people, take
their colour from their surroundings”. This being the case, where the provision
under consideration is found in an Act that is itself a component of a larger
statutory scheme, the surroundings that colour the words and the scheme of the
Act are more expansive. In such an instance, the application of Driedger’s
principle gives rise to what was described in R. v. Ulybel Enterprises Ltd.,
[2001] 2 S.C.R. 867, 2001 SCC 56, at para. 52, as “the principle of interpretation
that presumes a harmony, coherence, and consistency between statutes dealing
with the same subject matter”. (See also Stoddard v. Watson, [1993] 2
S.C.R. 1069, at p. 1079; Pointe-Claire (City) v. Quebec (Labour Court),
[1997] 1 S.C.R. 1015, at para. 61, per Lamer C.J.)

[120]    
It is clear from Bell ExpressVu that s. 137(1) must be read in the context of the Act
and in its grammatical and ordinary sense in harmony with the statutory scheme
and objects of the Act, and the intention of Parliament.

[121]    
The Act provides that liability may be
limited only by a “written agreement signed by the shipper”. At first blush,
that sounds simple enough. However, I see nothing in the wording in the Act
that requires that a physical copy of the signed agreement be produced before a
party may rely on it.

[122]    
It should also be noted that there is no
evidence that CTA-13349 was not signed by either CN or Casco.

[123]    
During cross-examination by MHI, Ms. Querner
gave evidence that she was not aware of certain other clauses in CTA-13349,
such as a clause in Schedule 2 that required the Customer to indemnify CN for
legal costs incurred in defending against claims by a third party arising from
services provided by CN under the contract. Ms. Querner also stated that
she could not remember the document at all, either with or without signatures.
This evidence does not confirm, as suggested by MHI, that no signatures were
ever obtained on it from CN or Casco. It simply reflects that Ms. Querner
did not pay particular attention to the document given that her clerical role
was more directed at ensuring that CN was using correct billing rates under
CTA-13349.

[124]    
Mr. Weymark’s evidence is similarly
inconclusive on this point, given his lack of recall with respect to CTA-13349.
In addition, I do not view his lack of recall regarding the actual document
attached to the assignment or that that document was unsigned to be relevant.
Given the wording of the assignment, there can be no doubt but that the parties
intended to assign Casco’s interest in CT-13349, as opposed to any other
agreement between Casco and CN.

[125]    
Central to CN’s arguments are what it contends
are the policy reasons behind s. 137(1) of the Act. CN submits:

…the obvious policy of the Act is
to ensure that, if there is to be a binding limitation of liability that could
work against a shipper seeking full recovery of loss or damage suffered at the
hands of a rail carrier, the shipper must have been made aware of the
limitation in writing. The Boutique Jacob decision then assists the rail
carrier to limit its liability in circumstances where the agreement containing
the limitation provision was not “signed by the shipper” but was, without
dispute, in play between the shipper and the carrier. It is submitted that the
policy behind this law is not to allow the shipper the benefits of the
confidential contract without taking the burden when it has been fully informed
and has acknowledged its adherence to the contract.

[126]     It is
clear that the words of s. 137(1) need to be interpreted with regard to
the purpose and object of the Act. Insight into Parliament’s intention
and the policy reasons behind an enactment can come from a variety of different
sources.

[127]    
Section 5 of the Act itself sets out the national transportation
policy and contains the following declaration:

5. It is declared that a competitive, economic
and efficient national transportation system that meets the highest practicable
safety and security standards and contributes to a sustainable environment and
makes the best use of all modes of transportation at the lowest total cost is
essential to serve the needs of its users, advance the well-being of Canadians
and enable competitiveness and economic growth in both urban and rural areas
throughout Canada. Those objectives are most likely to be achieved when

(a) competition and
market forces, both within and among the various modes of transportation, are
the prime agents in providing viable and effective transportation services;

(b) regulation and
strategic public intervention are used to achieve economic, safety, security,
environmental or social outcomes that cannot be achieved satisfactorily by
competition and market forces and do not unduly favour, or reduce the inherent
advantages of, any particular mode of transportation;

(c) rates and
conditions do not constitute an undue obstacle to the movement of traffic
within Canada or to the export of goods from Canada;

(d) the transportation
system is accessible without undue obstacle to the mobility of persons,
including persons with disabilities; and

(e) governments and the private sector work
together for an integrated transportation system.

[128]     The
objectives set out in s. 5 suggest that the purpose of the Act, at
least in part, was to promote competition in the transportation industry while
providing a limited level of regulation. This is consistent with my earlier
review of the legislative history which is set out earlier in these reasons in
paras. 14 -19.

[129]    
In Canadian Pacific Ltd. v. Canada (National Transportation Agency),
[1992] 3 F.C. 145, the Federal Court of Appeal cited parts of s. 3(1) of
the National Transportation Act,
1987, which contained provisions similar to those found in s. 5 of
the Act. Justice Linden then stated:

[10]      It should be noted that
there are novel features in this policy which, inter alia, promote intramodal
railway competition, underscore that competition and market forces are the
prime agents of an effective transportation system and protect shippers without
limiting the opportunity of carriers to compete. Before the enactment of this
Act in 1987, regulation of railway rates was more rigid, more public and rates
were collectively set. With the page of the new Act, rates are no longer
established collectively and publicly in all cases; they may be negotiated
individually and confidentially. Rebates and specific rates are allowed,
whereas they were not before. The system has been rendered more limber.

[130]     Linden J.
then interpreted the statute according to this specific legislative policy and found
that the National Transportation Act, 1987 promoted competition and negotiation of contractual
terms, while still providing some protection to shippers. It should be noted
that s. 153(1) of the National Transportation Act, 1987 was
substantially the same as s. 137(1) of the Act.

[131]    
Comments made by Mr. Young, then Minister of Transportation, during
the second reading of Bill C-101, the bill that enacted the Act, also provide
some insight into some of the policy objectives behind the Act: House
of Commons Debates, 35th Parl., 1st Sess., No. 235 (2 October 1995) at
15078-15079. Mr. Young stated, in part:

Mr. Speaker, the government’s vision for the future of
transportation is clear and attainable. Our commitment is to take Canadian
transportation into the 21st century on a more viable, integrated and
competitive footing.

While we have protected shipper rights we have made
amendments to give more precise direction to the regulatory agency in its
decision making process. The government’s view is that regulated solutions
should only be a last resort.

The new legislation will put in
place a policy that is consistent, transparent and fair and will enhance
competition. Canada’s transportation system must be modern, dynamic and as
unrestricted as possible while maintaining the world class safety record we
have earned over the years.

[132]     These
quotes support the conclusion that Parliament’s intention and the underlying
policy reasons behind the Act was to promote competition in the
transportation (including rail) industry and reduce regulation in that
industry. This is consistent with s. 137(1) which allows parties to contract
on terms that would reduce a railway company’s liability from what it would
otherwise be. However, it also appears that the Act was also intended to
continue to provide some level of protection for shippers.

[133]     I conclude
that the legislative purpose behind s. 137(1) of the Act was to
protect shippers from being subject to a limitation of liability without having
full knowledge and appreciation for the terms of such a limitation. Section
137(1) still allows for the parties to negotiate limitations on liability, but
it must be clear what is being agreed to. This is consistent with the words of Mr. Young
when he stated that the “new legislation will put in place a policy that is
consistent, transparent and fair and will enhance competition”. An
interpretation of s. 137(1) as a means of protecting shippers from being
subject to limitations on liability without having a full appreciation of what
had been agreed too is consistent with the Act creating an environment
that is “transparent and fair”. The fact that s. 137(1) allows parties to
negotiate and agree to a limitation in liability ensures that the legislative
objective to enhance competition is also met.

[134]     Again,
looking at the legislative objectives, I must consider what circumstances will
support a finding that an agreement has been “signed”. Various dictionary
authorities support the argument that the act of “signing” has a meaning well
beyond the simply affixation of a signature to a particular document.

[135]    
Black’s Law Dictionary, 9th ed., sub verbo “sign” defines
“sign” as:

1. To identify (a record)
by means of a signature, mark, or other symbol with the intent to authenticate
it as an act or agreement of the person indentifying it <both parties signed
the contract>. 2. To agree with or join <the commissioner signed
on for a four-year term>.

[136]    
A previous version, Black’s Law Dictionary, 4th ed., sub
verbo “sign”, defines “sign” with reference to a number of American cases. Black’s
Law Dictionary, 4th ed. defines “sign”, in part, as:

To affix one’s name to a writing
or instrument, for the purpose of authenticating it, or to give it effect as
one’s act…To make any mark, as upon a document, in token of knowledge,
approval, acceptance, or obligation.

[137]    
The Canadian Law Dictionary, sub verbo “signature” defines
“signature” as:

The name of a person or something
representing his name written, stamped or inscribed by himself or by someone
properly deputised as a sign of agreement or acknowledgement. The act of
putting down a man’s name at the end of an instrument to attest its validity. A
signature may also be a mark made by the party who is unable to write.

[138]    
The Oxford Canadian Dictionary, 1998, sub verbo “sign” defines
“sign” in part as:

v. 1 tr. &
intr. a write (one’s name or initials etc.) on a document etc. to
authorize or authenticate it. b mark (a document etc.) with one’s name
or autograph etc. to authorize or authenticate it.

[139]     The above
definitions point to the term “sign”, and by extension “signed”, as including a
form of acceptance or agreement with the terms set out in the document in
question. Furthermore, The Canadian Law Dictionary defined “signature”
as “a sign of agreement or acknowledgement”.

[140]     In my
view, these legislative objectives may still be met by allowing CN to prove, on
a balance of probabilities that such a “signed” agreement existed, even though
they are currently unable to produce a fully signed copy at this time.

[141]     The
assignment of CTA-13349 by Casco plays an important role in meeting the
requirements under s. 137(1) of the Act. In the present case, Mr. Weymark
signed the assignment of CTA-13349 to P&O Ports Canada Inc. By doing so, he
accepted and agreed with the terms in the assignment. The assignment clearly
indicated that CTA-13349 had been made between Casco and MHI as the “Customer”
and CN and was considered by Casco to be an extant agreement between it and CN.
While it is somewhat unclear on the evidence, a copy of CTA-13349 was attached
to the assignment. This was the document that clearly set out the basis upon
which Casco and CN arranged for the rail services and upon which those rail
services were provided.

[142]     Mr. Weymark’s
signature on the assignment is an indication or “sign” of both Casco’s agreement
and acknowledgement that the contract, CTA-13349, existed between Casco and CN
and also Casco’s agreement and acknowledgement of the underlying contractual
terms of CTA-13349, which included the limitation of liability clause.

[143]     Section
137(1) of the Act requires a “written agreement signed by the shipper”. Mr. Weymark’s
clear signature on the assignment provides a written, signed document by which Casco
agrees with or acknowledges the underlying terms of CTA-13349. In this way, it
can be said that Mr. Weymark’s signature on the assignment represented the
“signing” of CTA-13349 by Casco as the shipper.

[144]     This
interpretation of the phrase “written agreement signed by the shipper” is
consistent with the purpose of s. 137, which as stated above, is to
protect shippers from being subject to a limitation of liability without having
full knowledge and appreciation for the terms of such a limitation.

[145]     While no
copy of CTA-13349 has been produced bearing Casco’s signature, I am satisfied
that CN has shown that Casco had sufficiently agreed to and acknowledged CTA-13349
– in other words, that Casco has “signed” CTA-13349 which includes the
limitation of liability clause – so as to meet the requirements in the Act.

[146]     MHI
submits, and I agree, that the requirement of a written signed agreement under
s. 137(1) of the Act was intended to avoid the very problems that
have arisen in this case. There is no doubt that CN could be criticized in
respect of their record keeping, or lack thereof, in respect of this
confidential contract.

[147]     MHI
further submits that CN does not need the Court to find a solution to CN’s
difficulties given that they have other options for recovery. It is said that
they could, if CTA-13349 is binding on Casco, enforce the clause that provides
for the recovery of legal costs in defending third party claims. They also
could have negotiated other indemnity provisions with Casco. CTA-13349 also
provides that the Customer was to arrange for a waiver of subrogation in favour
of CN and MHI suggests that CN could pursue Casco for failing to do this.

[148]     Finally,
MHI suggests that CN could have required that Casco ensure that upstream
contracts (such as between Casco/Fujitrans and Fujitrans/MHI) contain clauses
limiting liability upon which CN could rely. These types of clauses are known
as “Himalaya clauses” and apply when there are benefits in certain contracts of
carriage which may protect third parties who are engaged by the carrier to
fulfill that carrier’s obligations under the contracts. These types of clauses
were also in play in Boutique Jacob at paras. 37-38, 50 (FC), paras. 30,
59 (FCA) and a decision discussed in more detail below, Cami Automotive, Inc. v. Westwood Shipping Lines Inc., 2009 FC 664 at paras. 84-87,
351 F.T.R. 236, aff’d 2012 FCA 16, 428 N.R. 382.

[149]     The short
answer to these submissions is that these so called “solutions” do not exist
for CN. There is no indemnity by Casco in relation to this claim, only one
potentially relating to legal costs. There is no waiver of subrogation from MHI
although I would note that MHI does not assert that it claims by way of
subrogation. Finally, there is no “Himalaya clause” in the upstream contractual
arrangements between MHI/Fujitrans/Casco which might benefit CN at this time.

[150]     Accordingly,
CN must bring itself within the provisions of the Act in terms of its
ability to rely on the limitation clause.

[151]     Here, a
failure to produce a copy of CTA-13349 which has been signed by Casco raises
little concern.

[152]     This is a
document which Casco fully accepted as its own. It sought to assign this
document to a third party and by doing so, fully acknowledged that it was a
party to CTA-13349 and all its terms. At no time did Casco raise any issues
concerning the clear and unambiguous limitation provision in favour of CN.

[153]     In my
view, it would be a completely unfair and arbitrary result to hold in this case
that a simple failure to produce the written document with signatures should
deny the benefit of the limitation clause which CN negotiated in good faith
with its contractual partner, Casco. This is nothing more than a “form over
substance” result which does not do justice between the parties.

[154]     I would
also note that this result does no violence to the intent and purpose of the Act.
The requirements under the Act were intended to ensure that contracting
parties had written notice of any limitations sought by the railway company as
part of the negotiation process. It avoids arrangements where the rail carrier
alleges a verbal agreement to limit its liability and the shipper must attempt
to refute that contention without the benefit of documentation. Here, there is
clear written documentation which was known to both parties and which
documentation was the basis upon which they performed their respective
contractual obligations.

[155]     Accordingly,
I find that the requirement in s. 137 of the Act has been met in
that CN has proven a written agreement signed by Casco as the shipper.

(c)      If there is an
agreement between CN and Casco, is MHI entitled to advance its tort claim against
CN in any event?

[156]     This issue involves an analysis as to whether, as contended by CN, MHI
is bound by the limitation in CTA-13349. CN further contends that MHI has
explicitly, or implicitly, agreed to be so bound.

[157]     There could have been no doubt in MHI’s mind, based on the
description of Fujitrans’ business by Mr. Utsumi, that Fujitrans would be
subcontracting the rail movement of MHI’s aircraft parts and specifically, the
4115 Barrels. Fujitrans itself was not a rail carrier.

[158]     Pursuant to Article 18 of the Master Transportation Agreement,
Fujitrans was required to obtain MHI’s consent to the subcontracting of all or
part of the transportation.

[159]     CN says that there is ample evidence that MHI consented to the subcontracting
of the Vancouver vessel offloading, the loading to rail transport and, more
specifically, the rail transportation, by Fujitrans to Casco.

[160]     CN says, in particular, that:

a)    the Master Transportation Agreement specifically contemplated that
Fujitrans could subcontract all or part of the transportation of the aircraft
parts with MHI’s approval;

b)    Mr. Utsumi of Fujitrans USA was authorized and instructed to
sign and did sign CTA-13349 on behalf of MHI, which agreement was between CN,
Casco and MHI;

c)    
Mr. Utsumi forwarded a copy of CTA-13349 to
his Japan office where the Fujitrans representative for MHI was located;

d)    Mr. Utsumi was well aware that CN was acting under the
contractual terms of CTA-13349. He was aware of the specifics of the
contractual arrangements between Casco and CN. He was also aware of discussions
concerning rates being charged under CTA-13349 and he would forward invoices
from both CN and Casco to Fujitrans’ Japan office; and

e)    Casco’s representative indicated that MHI later consented to the
assignment of CTA-13349 by Casco to P&O Ports Canada.

[161]    
CN relies on Boutique Jacob. At the trial
level, the Court addressed the subcontracting issue. Boutique Jacob’s
contractor, Pantainer, was specifically entitled to subcontract “on any terms”
and it did subcontract with OOCL. CPR argued that this meant that Boutique
Jacob was bound by the limitation clauses found in documentation between
Pantainer and OOCL and also, between OOCL and CPR.

[162]    
The Court agreed:

[26]      The issue has been well defined by Lord Denning in Morris
v. Martin, [1966] 1 Q.B. 716, at p. 729-730), a decision that has been
quoted to me both by the Plaintiff and the Defendant OOCL. In that case, the
Plaintiff had sent her mink stole to a furrier to be cleaned; the furrier did
not clean it himself but telephoned to the Plaintiff and offered to send it
away to a reputable cleaner to be cleaned, which she accepted. That cleaner,
known to the Plaintiff, only worked for the trade and not for the private
individuals. While the fur was with the cleaner it was stolen by one of their
servants. The question was whether the limitation clauses in the cleaning
contract could be opposed to the Plaintiff:

Now comes the question: Can the
cleaners rely, as against Mrs. Morris, on the exempting conditions,
although there was no contract directly between them and her? There is much to
be said on each side. On the one hand, it is hard on Mrs. Morris, if her
just claim is defeated by exempting conditions of which she knew nothing and to
which she was not a party. On the other hand, if is hard on the cleaners if
they are held liable to a greater responsibility than they agreed to undertake.
(…) The answer to the problem lies, I think, in this: the owner is bound by
the conditions if he has expressly or impliedly consented to the bailee making
a sub-bailment containing those conditions, but not otherwise. (…) In this
case, Mrs. Morris agreed that Mr. Beder should send the fur to the
cleaners, and by so doing I think she impliedly consented to his making a
contract for cleaning on the terms usually current in the trade.

[27]      In a maritime law context, the Privy Council also
held that the authorization to sub-contract the whole or any part of the
carriage of the goods "on any terms" demonstrated that the owner had
"expressly consented" to the sub-bailment of their goods on any
terms, and that the scope of that express consent was broad enough to include
an exclusive jurisdiction clause (See K.H. Entreprise (The) v. Pioneer
Container (The), [1994] 2 A.C. 324; see also Singer Co (U.K.) Ltd. v.
Tees and Hartlepool Port Authorty, [1988] 2 Lloyd’s Rep. 164).

[28]      These principles have been incorporated into
Canadian law on numerous occasions: see, for example, Punch v. Savoy’s
Jewellers Ltd. et al. (1986), 14 O.C.A. 4 (Ont. C.A.); Bombardier Inc.
v. Canadian Pacific Ltd. (1991), 85 D.L.R. (4th) 558 (Ont. C.A.). In this
last case, Mitsubishi had consigned three containers of its cargo to N.Y.K. for
carriage from Kobe, Japan to Mitsubishi’s agent at Montreal and from thence to
its final destination, Bombardier at La Pocatière, Québec. This was authorized
by an ocean bill of lading which provided that the goods were to be shipped in
the vessel named "and/or other means of transport". The cargo was
carried by ship to Vancouver and discharged into the custody of CPR for
transport by rail to Montreal. The train was derailed without the Appellant’s
negligence. The Court found that Mitsubishi had expressly authorized the
sub-bailment and was as much bound by the terms and conditions of the CPR bill
of lading as if it had executed the document as shipper itself. It is immaterial,
for the purposes of this analysis, that the standard bill of lading that was
used at the time by CPR contained the terms prescribed by the Canadian
Transport Commission instead of the terms mutually agreed by the parties, as is
now the case.

[29] The question that must be answered, therefore,
is whether Jacob and Pantainer have expressly or implicitly consented to OOCL’s
terms and conditions. Neither Jacob nor Pantainer have admitted that they
had actual knowledge of OOCL’s terms and conditions, which are found on its
website. The fact remains that Pantainer, through Panalpina (China) Ltd., and
Panalpina Inc., have a history of prior dealings, particularly with respect to
cargo from the Far East. OOCL’s documentation alerts any reader, such as
Pantainer, to the existence of OOCL terms subject to the applicable tariff,
which can easily be found on its website. Pantainer admits using the OOCL
website for other purposes related to booking and tracking cargoes. Anyone in
Pantainer or in the Panalpina group could have found out by clicking onto the
"B/L Terms" icon on the website (see Agreed Facts, paras. 18-23).

[30]      Given the circumstances, I agree with counsel for
OOCL that Pantainer must be taken to have knowledge of its standard terms
due to previous dealings, the course of dealing and the fact that nothing in
the terms that OOCL relies on is unduly burdensome or unconscionable in the
commercial context. In fact, as we shall see shortly, the limitations found in
OOCL’s terms are very similar in scope and application as those in Pantainer’s
terms.

[31]      Counsel for the Defendant OOCL has quoted to me a
number of cases establishing that the party entering into a contract for the
shipping of goods must be presumed to know that the terms and conditions are to
be found on the bill of lading. The most relevant of those authorities, in
Canadian law, is the decision of the Supreme Court in Anticosti Shipping Co.
v. St. Amand, [1959] S.C.R. 372. In that case, the Plaintiff, through his
agent, had entered into a contract of carriage with the defendant for the transport
by sea of his truck. A bill of lading was filled out at the time but apparently
no original or copy of it was given to the agent. The original of the bill was
not signed and became mislaid. The truck was damaged through the fault of the
defendant and action was brought for loss of its use during the time repairs
were carried out. In the Supreme Court, the main question was whether the
contract for the carriage by water of the truck was or was not covered by a
bill of lading within the meaning of the Rules relating to bills of lading
contained in the schedule to the Water Carriage of Goods Act, R.S.C.
1952, c. 291. Rand. J., on behalf of the court, wrote:

When Riddell requested the shipment
to be made, what terms could he possibly have had in mind other than those on
which invariably goods were carried by the company? His bald request implies,
carry this truck "according to your regular practice". How can we
possibly say that anything else could be intended? It was an ordinary
transaction, and if, as the respondent’s agent, he did not see fit to demand a
bill of lading – as by art. III rule (3) he had the right to do – it cannot
affect what on both sides was contemplated. (pp. 374-375)

[32]      There is no need to belabour this point, since the
case law is replete with illustrations of this principle. This is
particularly apposite when the parties are sophisticated shippers and
businesses, as opposed to private individual as in Punch. The fact
that these terms and conditions could only be accessed through the Internet is
irrelevant; in an age where computerized transactions are ever more pervasive, it
would be disingenuous for a commercial enterprise like Pantainer to claim that
they were unaware of OOCL’s terms and conditions, especially when they admit
having made frequent use of OOCL’s online services (Agreed Facts, para. 23).

[33] As for Jacob, they are bound by Pantainer’s bill
of lading according to which Pantainer can subcontract "on any
terms". The terms and conditions found in OOCL waybill are of the type
that would ordinarily be expected to be found in that sort of contract, and are
certainly not unreasonable or unconscionable. Moreover, these terms are very
similar to those accepted by Jacob in Pantainer’s bill of lading. Consequently,
Jacob cannot argue that they were taken by surprise and that they could not
foresee the OOCL’s limitations.

[Emphasis added.]

[163]     The finding of the trial judge in Boutique Jacob on this
point was upheld by the Federal Court of Appeal:

[52]      It is also important to restate what the Judge
clearly said in his Reasons, i.e. that by reason of the sub-contracting clause
found in Pantainer’s bills of lading (clause 3.1 thereof), Boutique Jacob was
clearly informed of the possibility that the whole or part of the carriage of
its good would be executed by sub-carriers and that they would perform their
obligations subject to terms and conditions applicable to it. Hence, Boutique
Jacob knew or ought to have known that the railway portion of the carriage
might be performed by a sub-carrier whose terms and conditions would apply to
it.

…..

[55] CPR says that by reason of Tariff CPRS 7589,
which was incorporated in the confidential rate contract, it is entitled to
limit its liability to that found in OOCL’s bill of lading. In my view,
CPR’s submission must succeed. As I indicated earlier, Boutique Jacob
knew or ought to have known that the contract of carriage undertaken by
Pantainer might be sub-contracted to others whose terms and conditions would be
applicable to it. The provisions found in Tariff CPRS 7589 are such terms and
conditions.

[Emphasis
added.]

[164]    
The law as stated by the Federal Court of Appeal
in Boutique Jacob was applied in Cami Automotive. Cami
Automotive was the shipper who had engaged Westwood Shipping Lines (“WSL”) to
complete certain shipments from Japan to Ontario. WSL and CN had in turn
entered into a confidential contract relating to the shipment of the goods from
Vancouver to Ontario. The WSL/CN confidential contract included certain limitations.

[165]    
Cami Automotive was not aware of the terms of the confidential contract,
but it was aware that WSL would be subcontracting the carriage of the goods
from Vancouver to Ontario to CN.

[166]    
The Court found that Cami Automotive was bound by the limitation
clauses in the WSL/CN confidential agreement:

[64]      The Plaintiffs are not parties to the Confidential
Contract entered into between WSL and CN. The question is, whether absent
privity of contract between CN and the Plaintiffs, can CN nevertheless rely on
the Confidential Contract with WSL to limit its liability to the Plaintiffs.
The English jurisprudence has addressed the issue of lack of privity of
contract in the context of bailment. In Morris v. Martin, [1966] 1 Q.B.
716, the English Court of Queen’s Bench held that an owner, in suing a
sub-bailee for reward, is bound by the terms of the contract between the bailee
and sub-bailee if the owner had expressly or impliedly consented to the terms
of the subcontract. This approach was adopted in Canada in the context of
contracts for the carriage of goods by sea, and most recently followed in Boutique
Jacob Inc. v. Canadian Pacifique Railway Co., 2008 FCA 85 (Boutique
Jacob (FCA)).

[65]      At first instance, in Boutique Jacob Inc. v.
Canadian Pacifique Railway Co., 2006 FC 217 (Boutique Jacob (FC)), Mr. Justice
de Montigny wrote at para. 27 of his reasons:  [quoted above]

[66]      The above finding is undisturbed on appeal. Here,
as in Boutique Jacob, the owner Cami agreed that, “[t]he OCEAN CARRIER
shall be entitled to subcontract on any terms the whole or any part of
the handling and CARRIAGE of the GOODS” (emphasis added). As in Boutique
Jacob, this indicates that Cami has expressly consented to the terms of the
sub-bailment to CN.

[67]      In Canada, the liability of rail carriers is
governed by the Canadian Transportation Act (1996, c. 10) (the CTA).
Pursuant to section 137 of the CTA, a rail carrier may only limit its liability
by way of a written agreement signed by the shipper. In Boutique Jacob (FCA),
at para. 47, it was found that the shipper, for the purposes of the CTA,
is the entity which directly contracts with the rail carrier. In that case, as
in this case, it is the ocean carrier who is the shipper for the purposes of
the CTA. It follows, therefore, that since the Confidential Contract is signed
by WSL, the ocean carrier, this would satisfy the section 137 requirement of
the CTA. The Confidential Contract is a written contract signed by the shipper.

[68]      Therefore, it appears that a rail carrier may bind
an owner of goods to the terms of a sub-contract in accordance with the
principles of bailment mentioned above. In Boutique Jacob (FCA) the
Court found that Boutique Jacob (the owner) was bound to the tariff found in
the Confidential Contract between OOCL (the ocean carrier) and Pacific Rail, a
common carrier….
……

[80]      … Therefore, the Plaintiffs, having agreed to
allow WSL to subcontract on any terms, are bound by the terms of the
confidential Contract which limits CN’s liability in accordance with the
Regulations.

…….

[82]      In the present case,
the relevant terms of the subcontract are those which limit CN’s liability in
accordance with the Regulations. Since the Regulations are issued pursuant to
the CTA, they should be familiar to all in the industry and are not, in my
view, onerous or unreasonable. Nor can it be said that anyone has been taken by
surprise.

[167]     On the particular facts of Cami, CN was unable to rely
on an exclusion provision in the confidential contract for reasons that are not
relevant here.

[168]     The reasons in Boutique Jacob and Cami illustrate that
there are various ways by which an owner of shipped goods may be bound by a
limitation found in the contractual arrangements of other parties. For the
purposes of this discussion, I will address a simplified set of relationships:
A is the owner of the goods, B is the freight forwarder or “shipper”; C is the
rail carrier. There is a contractual relationship between A and B, and between
B and C. However, there is no contractual relationship between A and C.

[169]     The basis upon which A, the owner of the goods, may be bound by a
limitation of liability agreed between B and C is based upon two concepts:
knowledge and consent. There are a number of ways by which A, the owner, is
taken to have known of and agreed to the limitation of liability.

[170]     Firstly, the owner may have specifically authorized the
subcontracting of further transportation services “on any terms” or in similar
broad language that allowed the contractor to use its discretion to make these
arrangements. As such, an owner will be bound by clauses where knowledge of and
consent to the limitation can be imputed or implied, such as through industry
standards or general knowledge as to the basis upon which subcontractors
contract and where such clauses are not commercially unconscionable (see Boutique
Jacob, paras. 29-33 (FC), paras. 19, 52 (FCA) and Cami, paras. 80,
82). Secondly, it may be shown that the owner has express knowledge as to the
basis upon which the further contractual arrangements have been made and
consents to those arrangements.

[171]     I agree that MHI must be taken to have either impliedly or expressly
consented to the subcontracting by Fujitrans to Casco, and Casco’s further
subcontracting in favour of CN.

[172]     Article 18 of the Master Transportation Agreement, which allowed the
subcontracting to occur, contained no restriction on the terms of any such
subcontracting. However, unlike the contracts in the authorities discussed
above, the Master Transportation Agreement did not state that such
subcontracting could take place “on any terms”. MHI controlled such
subcontracting by requiring their consent on any such subcontract.

[173]     As such, if such consent can be implied, MHI must be taken to have
agreed to such terms as may have been negotiated between Casco and CN, provided
that they were reasonably within industry standards and were commercially
reasonable. MHI does not suggest in any way that the limitation clause under
CTA-13349 is otherwise.

[174]     In addition, the limitation clause in this case was specifically
known to MHI, given Mr. Utsumi’s execution of CTA-13349 on the authority
of MHI, through Fujitrans’ Japan office. Mr. Utsumi later forwarded
CTA-13349 to Japan. MHI does not deny that they ultimately received the
document. In fact, Mr. Utsumi had a previous draft of CTA-13349 from the 1996/97
time frame in his possession well before the derailment, which draft included
the same limitation of liability clause found in the later contract.

[175]     There is therefore no doubt that MHI had express knowledge of
CTA-13349 and its terms. That knowledge would include the limitation of
liability clause found in that document.

[176]     Accordingly, even if MHI had argued that this limitation clause was
not “standard” in the sense of being in CN’s normal confidential contract or
normal in the industry, MHI’s actual knowledge of that term imports to them
indisputable knowledge of the limitation clause. In the face of that knowledge,
MHI continued to ship its aircraft parts under CTA-13349, knowing that such a
limitation would apply. Consent was therefore given by MHI as to the terms by
which the CN shipments would occur.

[177]     In accordance with the reasoning of Boutique Jacob and Cami,
and given the undisputed facts concerning MHI’s knowledge of and consent to the
terms of CTA-13349, including the limitation in favour of CN, MHI is bound by
that limitation even without any privity of contract between it and CN.

Conclusion

[178]     Accordingly, I find that the question posed in the order of Mr. Justice
Verhoeven – whether CN has the benefit of a limitation of liability provision
set out in a contract between CN and Casco – is to be answered in the
affirmative.

[179]    
Costs of this portion of the trial are awarded to CN in any event
of the cause.

“Fitzpatrick J.”