A-584-76
Owners and charterers of the vessel City of
Colombo, and Ellerman Lines Ltd., and The
Canadian City Line (Appellants)
v.
Variety Textile Manufacturers Ltd. (Respondent)
Court of Appeal, Jackett C.J., Le Damn J. and
Hyde D.J.—Montreal, January 11; Ottawa, Janu-
ary 17, 1978.
Maritime law — Customs and excise — Expedient customs
procedure requested by shipper — Duty paid on goods listed in
manifest, but later discovered not to be delivered — No notice
by carrier that goods in manifest not delivered — No action by
respondent-importer to seek refund of duty — Liability of
carrier for duty paid — Customs Act, R.S.C. 1970, c. C-40, ss.
11, 19(1), 20, 24(1),(3), 25, 112(1), 114.
Appellants, carriers of goods by vessel under a bill of lading,
failed to deliver to respondent a large quantity of its merchan
dise and paid respondent the value of the goods not delivered.
Respondent, however, pursuant to a notice from the carrier that
the goods would be ready for unloading and asking that cus
toms entry be passed and delivery be taken without delay, paid
customs duties on all merchandise listed in the manifest.
Respondent did not seek a refund of duty but rather brought
action in Trial Division, and recovered an amount equal to the
customs duty on the undelivered goods. Appellants appeal that
decision.
Held, the appeal is dismissed. It cannot be said, as between
appellants and respondent, that respondent should have prose
cuted a refund claim for the customs duty in question. It has
been established that the consignee is entitled to compensation
for loss directly attributable to non-delivery, and that in appro
priate cases, compensation may include loss directly attribut
able to non-delivery. At the time the action was launched in the
Trial Division, the respondent was entitled to be indemnified by
appellants for the loss arising from having paid duties on
undelivered goods; its position, that responsibility to obtain a
refund lay with the carrier, did not adversely affect the ulti
mate result. The loss suffered by respondent through payment
of duties is directly attributable to appellants' including the
undelivered goods in their manifest and their serving the usual
notice on the respondent, whether or not the goods actually
were imported into Canada. Circumstances never arose that
should have caused respondent to minimize its loss by obtaining
a refund of duties.
APPEAL.
COUNSEL:
Michael Davis for appellants.
Marc de Man for respondent.
SOLICITORS:
Brisset, Bishop, Davidson & Davis, Montreal,
for appellants.
Stikeman, Elliott, Tamaki, Mercier & Robb,
Montreal, for respondent.
The following are the reasons for judgment
rendered in English by
JACKETT C.J.: This is an appeal from a judg
ment of the Trial Division [[1977] 2 F.C. 127]
awarding the respondent $1,426.59 with interest
and costs.
The matter was tried on the basis that the
appellants as carriers of goods by vessel under a
bill of lading from Pakistan to Montreal, had
failed to deliver to the respondent as importer
thirty-four bales of merchandise, out of a total
shipment of fifty 300 lb. bales, and that the appel
lants had paid to the respondent, before com
mencement of the proceedings in the Trial Divi
sion, the c.i.f. invoice value of the goods not
delivered. However, pursuant to a notice from the
carrier that the goods would be ready for unload
ing from the vessel and asking that customs entry
be passed and delivery be taken without delay, the
respondent had paid customs duty on the goods in
question and the action in the Trial Division was
launched to recover from the carrier an amount
equal to the customs duty so paid on such undeliv
ered goods.
The matter was further tried on the basis that
the respondent was a party to the contract of
shipment represented by the bill of lading and that
the appellants, as carrier, were the other party
thereto.
To enable the goods to be landed, the respond
ent, as importer, effected an entry "by bill of
sight" and made the payment necessary for such
an entry. (See section 24(1) of the Customs Act',
R.S.C. 1970, c. C-40.) Subsequently, before it
' Section 24(1) and (3) and section 25 read:
24. (1) If the importer of any goods, or the person author
ized to make the declaration required with regard to such
became apparent that the goods were not going to
be delivered but after it received the necessary
documentation, the respondent perfected the entry
in respect of the sixteen bales that were delivered,
if not of the whole shipment, as required by sec
tions 19 et seq. of the Customs Act. 2 The judg
ment appealed against is for an amount equal to
the customs duty paid in respect of the goods that
were not delivered.
goods, makes and subscribes a declaration before the collec
tor or other proper officer, that he cannot, for want of full
information, make perfect entry thereof, and takes the oath
provided in such cases, then the collector or officer may
cause such goods to be landed on a bill of sight for the
packages and parcels thereof, by the best description that can
be given, and to be seen and examined by such person and at
his expense, in the presence of the collector or other proper
officer, or of such other officer as is appointed by the
collector or other proper officer, and to be delivered to such
person, on his depositing in the hands of the collector or
officer a sum of money sufficient in the judgment of the
collector or officer to pay the duties thereon.
(3) In all cases where such goods are purchased or con
signed a sufficient invoice therefor as provided in section 26
shall be produced within the time appointed by the collector,
and in default thereof the importer is liable to a penalty
equal to the amount so deposited with the collector recover
able in any court of competent jurisdiction.
25. Such sight entry may be made as aforesaid and the
goods may be delivered, if the importer or person as afore
said makes oath or affirms that the invoice has not been and
cannot be produced, and pays to the collector or proper
officer aforesaid a sum of money sufficient in the judgment
of such collector or officer to pay the duties on the goods;
and such sum shall then be held as duties.
2 The relevant provisions are:
19. (1) Every importer of goods by sea from any place out
of Canada shall, within three days after the arrival of the
importing vessel, make due entry inwards of such goods and
land them.
20. The person entering any goods inwards shall deliver to
the collector or other proper officer
(a) an invoice of such goods showing the place and date of
purchase and the name or the style of the firm or person
from whom the goods were purchased, and a full descrip
tion thereof in detail, giving the quantity and value of each
kind of goods so imported; and
(b) a bill of entry of such goods, in such form as is
appointed by a competent authority, fairly written or
printed, or partly written and partly printed, and in dupli
cate, containing the name of the importer, and if imported
(Continued on next page)
It appears that the respondent made no claim
for refund of such customs duties but proceeded
throughout on the basis that it was the responsibil
ity of the appellants, as carrier, to take the neces
sary steps to recover the duty so paid by making
the report contemplated by section 112(1), which
reads:
112. (1) No refund of duty paid shall be allowed because of
any alleged inferiority, or deficiency in quantity of goods
imported and entered, and that have passed into the custody of
the importer under permit of the collector, that might have the
effect of reducing the quantity or value of such goods for duty,
unless the same has been reported to the collector within ninety
days of the date of entry or delivery or landing, and the goods
have been examined by the collector or by an appraiser or other
proper officer, and the proper rate or amount of reduction
certified by him after such examination; and if the collector or
proper officer reports that the goods in question cannot be
identified as those named in the invoice and entry in question,
no refund of the duty or any part thereof shall be allowed.
(When it accepted payment from the appellants of
the invoice value, the respondent indicated that it
did not accept it in settlement of the claim in
respect of duty.) On the other hand, the appel
lants' position was that they had no responsibility
with reference to the duty so paid.
As it seems to me, section 112 should be read
with section 114(1), which reads:
114. (1) Subject to sections 112 and 115, no refund of a
payment or overpayment of duty or taxes, arising otherwise
than by reason of an erroneous tariff classification or an
erroneous appraisal of value, shall be made unless an applica
tion therefor is made within two years of the date of payment
or overpayment.
The provisions to which I have referred relate
primarily to the customs duty paid by the import
er. The principal burdens placed on the Master of
an incoming vessel by the Customs Act are set out
in section 11 of the Customs Act, which reads in
part:
11. (1) The master of every vessel coming from any port or
place out of Canada, or coastwise, and entering any port in
Canada, whether laden or in ballast, shall go without delay,
(Ccntinued from previous page)
by water, the name of the vessel and of the master, and of
the place to which bound, and of the place, within the port,
where the goods are to be unladen, and the description of
the goods, and the marks and numbers and contents of the
packages, and the place from which the goods are import
ed, and of what country or place such goods are the
growth, produce or manufacture.
when such vessel is anchored or moored, to the custom-house
for the port or place of entry where he arrives, and there make
a report in writing to the collector or other proper officer, of the
arrival and voyage of such vessel.
(2) The report shall state, so far as any of the following
particulars are or can be known to the master, the name,
country, tonnage and port of registry of the vessel, the name of
the master, the country of the owners, the number and names
of the passengers, if any, the number of the crew, and whether
the vessel is laden or in ballast, the marks and numbers of every
package and parcel of goods on board, if any, the best descrip
tion possible of all unmarked or unparcelled goods, whether the
property of the importer, consumer, passengers, officers or
members of the crew, and where the same were laden, and the
particulars of any goods stowed loose, and, if consigned, where
and to whom consigned, and where any and what goods, if any,
have been laden or unladen, or bulk has been broken, during
the voyage, also the part of the cargo and the number and
names of the passengers intended to be landed at that port, and
at any other port in Canada, what part of the cargo, if any, is
intended to be exported in the same vessel, and what surplus
stores remain on board; but this section shall not be construed
to require a report of the wearing apparel or personal effects in
actual use by passengers, officers and members of the crew of
vessels.
(4) Where pursuant to this section the master of a vessel
reports goods for entry inwards to the collector or other proper
officer, the master is liable for the duties on the goods so
reported but the master is not liable for such duties in respect
of any part of the goods on which duties have been paid or in
respect of any part of the goods that were
(a) destroyed or lost at sea due to stress of weather or
casualty on board the vessel,
(b) not laden on board the vessel at the foreign port of
exportation,
(c) destroyed after landing but before being formally entered
into a customs warehouse or delivered to a bonded carrier,
(d) formally entered into a customs warehouse,
(e) delivered to a bonded carrier for furtherance to
destination,
(J) carried over to another port and there accounted for to
customs, or
(g) exported from Canada
if he proves, in accordance with such regulations as the Gover
nor in Council may prescribe in that behalf, that such duties
have been paid or any of the events set out in paragraphs (a) to
(g) have occurred.
It is also of interest to refer to section 11(3), as
enacted by chapter 39 of S.C. 1973-74, which
reads:
11....
(3) The report is proof of the goods aboard the vessel in the
absence of evidence to the contrary and all goods reported for
entry inwards in such report are deemed to have landed in
Canada.
At the relevant time, there was a circular issued
by the Department of National Revenue which
dealt with "Short-Landed Certificates" in part as
follows:
1. Checking of cargo is the responsibility of the steamship
company and any discrepancies between the inward report or
manifest and the actual check of cargo are to be reported to
Customs on form A 6 1 / 2 within thirty days of the date of the
original inward report. Where a shortage of one or more
packages or units is revealed, and refund of duty and taxes is
involved, a short-landed certificate to cover each shipment is to
be presented with the form A 6 1 / 2 amending the inward report.
2. Where one or more packages or units are checked short but
are shown on the ship's manifest and relative bills of lading,
these documents will be regarded as prima facie evidence that
the missing packages were laden on board in the country of
export. Short-landed certificates will be approved only for
legitimate shortages of whole packages on presentation of
suitable documentation, authenticated or signed by responsible
persons overseas, as supporting evidence of shortage at point of
lading, of Customs documentation confirming that the goods
were landed at a foreign port, or extracts from the ship's log
confirming loss at sea.
3. If the goods are landed at another Canadian port, it is the
responsibility of the steamship company to produce supporting
Customs documentation at the port where the goods were
reported short. 3
The appellants, as carriers, never made the report
concerning the undelivered goods here in question
that is contemplated by this departmental memo
randum although they were shown in the "inward
report or manifest".
While the Customs Act has been framed on the
assumption that an importer ordinarily pays the
duty on goods within the three-day period after the
vessel arrives (section 19(1)) and then receives his
goods directly from the vessel at a time when a
3 The memorandum seems to have been written before the
reporting time in section 112(1) was changed from 30 days to
90 days.
customs officer is in attendance (section 8(2)), 4 in
fact, and apparently in accordance with modern
business usage, the part of the cargo of the vessel
in question that was destined for Montreal was
unloaded unchecked into the custody of the carri
ers' agents by whom it had to be sorted before
delivery could be made to the consignees of their
respective consignments. (It was not unusual for
this to involve a delay of more than 30 days.) As a
result, there was a substantial interval between the
time of unloading and the time when it was ulti
mately determined that the goods in question were
not available for delivery under the contract of
carriage to the respondent. In the meantime, as
already indicated, the respondent, as importer, had
had to pay duty, as a matter of business expedien
cy, on the assumption that the goods would be
available for delivery to him in accordance with
the appellants' representations.
When it was ascertained, after the entry had
been perfected and the customs duty had been
paid, that the goods were not available for delivery
pursuant to the bill of lading, it would appear that
neither the respondent nor the carriers' agents had
any knowledge as to whether the goods had in fact
been imported into Canada and subsequently dis
appeared or whether they had either not been on
the vessel when it left Pakistan or had subsequent
ly been unloaded from the vessel before it came
into Canada.
4 Section 8(2) reads:
8....
(2) No goods shall be so unladen, unless for the purpose of
lightening the vessel in crossing over or getting free from a
shoal, rock, bar or sand bank, except between sunrise and
sunset, and on some day not being a Sunday or statutory
holiday, and at some hour and place at which an officer is
appointed to attend the unlading of goods, or at some place
for which a sufferance has been granted by the collector or
other proper officer, for the unlading of such goods, except
that the collector or other proper officer at the port at which
entry of the goods is to be made may give permission in
writing for the lightening of a vessel and unlading of goods
(a) on a statutory holiday other than a Sunday;
(b) after sunset and before sunrise; and
(c) at a place other than a port;
but such unlading shall be done only in the presence of an
officer detailed for such service and under such conditions
and upon such terms as the Minister may authorize or
prescribe.
The vessel arrived in Montreal in July, 1974
but, according to the evidence, it was not until the
time of the trial in May, 1976, that the respondent
learned of an incident that occurred in Pakistan at
the time that the vessel was being loaded, which
incident pointed to the possibility that the goods in
question might, after being loaded on the vessel in
Pakistan, have been removed from the vessel by
Pakistanian police authorities looking for contra
band. Largely on the basis of that evidence, the
learned Trial Judge concluded that the balance of
probability was that the goods had never been
imported into Canada. He indicated, however, that
it was a "matter of speculation" as to whether the
customs authorities "would have accepted such a
conclusion when the documents indicated other
wise". The significance of this is that, if the goods
were in fact imported into Canada, the customs
duties paid to the Canadian authorities were not
repayable even if the goods were never delivered to
the respondent but, if they had not been so import
ed, a claim for return of the customs duties would
probably have succeeded assuming that it had
been prosecuted in accordance with the require
ments of the Act and applicable regulations.
Leaving aside for the moment particular
defences put forward by the appellants, I adopt the
position developed by Thurlow J. (as he then was)
in Club Coffee Company Limited v. Moore-
McCormack Lines, Inc.' (on which, as I under
stand him, the learned Trial Judge based his judg
ment) that, in a case where a carrier fails to
deliver goods in accordance with a contract of
carriage, the consignee is entitled to be compensat
ed for the loss directly attributable to non-delivery
and that, in an appropriate case, the compensation
may include not only the value of the goods not
delivered but also other loss directly attributable to
non-delivery.
As I read the pleadings on which this action
went to trial, the parties were both proceeding on
the basis that, when the appellants paid to the
respondent the invoice value of the goods, that
5 [1968] 2 Ex.C.R. 365.
amount was paid and accepted as being the value
of the goods, 6 not including customs duty, at the
time that they should have been delivered. The
only question that was dealt with at trial was
whether failure to deliver resulted in a direct loss
to the respondent, in addition to the invoice value,
equal to the customs duty that it had paid on the
goods that were not delivered.
If the goods had been delivered in accordance
with the contract, in my view, the respondent
would have had in Canada duty paid goods, which
would have had a prima facie value of
(a) invoice value, plus
(b) the duty on such goods.
If, therefore, duty had become payable by the
respondent as importer on the goods that were not
delivered, in my view, it was entitled to recover for
breach of contract not only the invoice value,
which it had received, but the duty that it had paid
on the goods that the appellants had failed to
deliver to it. In reaching that conclusion, I base
myself on the customs and shipping business situa
tion in Canada, which was obviously known to the
appellants as well as to the respondent, that, in
such a case, duty had to be paid, on the basis of
information supplied by the carrier to the importer
that the goods were on the incoming vessel, to
enable the expected goods to be removed from the
vessel and delivered to the importer and that, as a
matter of commercial reality, such a payment of
duty had to be made by the importer, before the
goods were available for delivery, on the basis only
of the carrier's information that they were on the
incoming vessel.
On the other hand, the loss to the respondent
arising from having paid customs duties in respect
of goods that it never received can only be regard
ed, on the facts of this case, as being a direct result
6 I think that there is a rebuttable presumption that goods
have a value to the business man equal to what he has arranged
to pay to get them into his inventory.
of the appellants' breach of contract in not deliver
ing such goods if
(a) the goods were in fact imported into
Canada, or
(b) if the goods were not imported into Canada,
if the respondent, as between itself and the
appellants, should not have obtained a refund of
the customs duties from the customs authorities.
With reference to the first of these two ques
tions, it is not clear to me, reading the judgment as
a whole, whether the learned Trial Judge has
found as a fact that the goods were not imported
into Canada. If he did, I am inclined to the view
that there was no basis for such a finding. I am
satisfied that there was evidence that it was one
possible reason why the goods were not available
for delivery. I have not, however, been able to find
persuading evidence that it was a more probable
explanation than the possibility that the goods
were misappropriated after they were landed. In
any event, in view of my conclusion on the second
question, I do not find it necessary to reach any
conclusion on that question.
It does seem to be clear that
(a) the undelivered goods were included by the
appellants in the manifest delivered to customs,
with the result that, in the absence of proof to
the contrary, by virtue of section 11(3) of the
Customs Act they were deemed to have been
landed in Canada,
(b) the appellants, in effect, advised the
respondent that the goods were on the vessel
which was approaching Canada and which
subsequently discharged cargo in Montreal, and
(c) the appellants, at no time, advised the
respondent that the goods were not imported
into Canada, nor did they supply it with proof
that they were not imported into Canada.
In these circumstances, I am of opinion that it
cannot be said, as between the appellants and the
respondent, that the respondent should have prose
cuted a refund claim for the customs duty in
question and I am further of opinion that, as of the
time that the action was launched in the Trial
Division, the respondent was entitled to be indem-
nified by the appellants for the loss arising from
having paid duties on the undelivered goods.
In reaching this conclusion I have had some
hesitation because, as it seems to me, both parties
took an unsupportable position, viz,
(a) the respondent took the position that the
responsibility to obtain a refund of any duties
paid on undelivered goods was that of the carri
er, and
(b) the appellants took the position that they
had no responsibility in respect of the duties
paid on the undelivered goods.
Upon considering the matter I have concluded
(a) that, while it was the responsibility of the
importer to reclaim duties paid by it that could
be lawfully reclaimed, in this case, there was
never any proof available to it on which it could
base such a refund claim and the appellants
never put the respondent on notice that there
was any such proof available nor was there any
other indication that the respondent should
have, as a reasonably prudent business matter,
been conscious of any possibility of its having a
reasonably sound basis for a refund claim; and
(b) that the appellants had created the prima
facie liability for payment of the duties and
either had, at no relevant time, "proof to the
contrary" at its disposal, or, if it had such proof,
never gave notice thereof to the respondent.
In these circumstances, I am of opinion that the
position so taken by the respondent cannot be
regarded as having adversely affected the ultimate
result. As it seems to me, the loss suffered by the
respondent through payment of the duties is
directly attributable to the fact that the appellants
included the undelivered goods in their manifest,
and served the usual notice on the respondent,
whether or not the goods were actually imported
into Canada, and that circumstances never arose
that should have caused the respondent to mini
mize its loss by obtaining a refund of duties.
Leaving aside any question of the failure of the
appellants to have "reported" the shortage under
section 112(1) (which as I read it only applies in
respect of "deficiency of quantity" of goods
"imported and entered, and that have passed into
the custody of the importer ..."), as it seems to
me, there was a prima facie basis for the respond
ent's claim for customs duty paid by it on goods
that the appellants failed to deliver under the
contract of carriage.'
I turn to the special defences relied on by the
appellants.
With reference to the reliance by the appellants
on the clause in the bill of lading concerning
"Responsibility ... after discharge .. .", this in my
view is a defence available to the appellants only if
it establishes that its failure to deliver was caused
by "loss ... of ... the goods ... after they are
discharged" and, in the absence of proof of "loss
... after discharge", it does not serve as a defence.
On the basis of the evidence there was no proof of
any such loss. It is just as likely that they were
discharged either in Pakistan or Durban.
Similarly with reference to article 24 of the bill
of lading, it was a limitation on the ordinary rule
concerning quantum of compensation on which the
appellants rely, although it does not seem to have
been pleaded. The onus was on the appellants to
show that it would operate to eliminate the
respondent's claim for duties paid uselessly. Not
only were the facts giving rise to the application of
this article as a defence not pleaded by the defence
but, in my view, it does not apply in a case such as
this where there is no proof of what happened to
the goods. That article can only operate as a
defence or partial defence where there was "loss
of, or damage to, or detention of, the goods". In
this case all that was established was that the
goods were not, in fact, delivered. I express no
opinion as to whether the words in the article
"shipper's net invoice cost and disbursements"
apply to the importer's cost and disbursements or,
if it does, whether the word "disbursements"
would include payment by the importer of customs
duty.
' There are various passages in the learned Trial Judge's
reasons which indicate that there was an "apparent impossibili
ty of showing that the goods were never landed in Canada"
although he recognizes "the likelihood of this being so".
The appellants also raised the question of the
jurisdiction of the Trial Division in this matter but,
in view of this Court's recent judgment in
Associated Metals and Minerals Corporation v.
The "Evie W." [A-175-73], did not argue that
question in this Court. The point was not, however,
abandoned.
For the above reasons, I am of opinion that the
appeal should be dismissed with costs.
* * *
LE RAIN J.: I agree.
* * *
HYDE D.J.: I agree.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.