T-2353-86
Ontario Bus Industries Inc. (Plaintiff)
v.
The Vessel Federal Calumet, Federal Pacific
(Liberia) Ltd., Fednav Limited (Defendants)
INDEXED AS: ONTARIO BUS INDUSTRIES INC. V. FEDERAL
CALUMET (THE) (TD.)
Trial Division, Strayer J.—Montréal, April 30;
Ottawa, June 17, 1991.
Conflict of laws — Goods damaged during carriage by sea
— Bill of lading issued in Germany; goods loaded in Belgium
— Under German law Hague Rules applied; under Belgian
law, Hague-Visby Rules applied — Different limitations on lia
bility under different Rules — Bill of lading ambiguous as to
which Rules applied — Hague-Visby Rules applied based on
contra proferentem construction of bill of lading and because
in all circumstances transaction most closely associated with
Belgium — Preference given to law of place of performance,
particularly where contract made elsewhere — Performance
started in Belgium.
Maritime law — Carriage of goods — Hague-Visby Rules
found to govern limitation of liability — Bill of lading purport
ing to vary limitation on liability imposed by Rules — Under
law of contract (Belgian law), Rules applied compulsorily —
Rules providing any clause limiting liability arising from negli
gence null and void — Bill of lading inconsistent as purporting
to accept application of Rules and then modifying them — As
defendants drafting bill of lading, construed contra proferen-
tem.
This was an action for damages for loss suffered by the
owner of an articulated "bus frame" during shipment on the
defendant vessel. The bill of lading was issued in Germany.
The goods were loaded in Belgium. The defendants admitted
responsibility for the damage. The bill of lading was ambigu
ous as to which Rules limiting the liability of carriers applied.
Under Belgian law, the Hague-Visby Rules applied to ship
ments loaded in Belgium. Under German law, the Hague Rules
applied to shipments covered by a bill of lading issued in Ger-
many. The Hague Rules limited the carrier's liability to £100
per package, unless the nature and higher value of the goods
had been declared by the shipper before shipment and inserted
in the bill of lading. The Hague-Visby Rules limited liability
per package or per weight of the damaged goods. If the Hague-
Visby Rules applied, the bill of lading purported to modify the
limit imposed thereby by eliminating the limitation based on
weight. The Hague-Visby Rules also provided that the limita
tion on liability did not apply where damage was caused inten-
tionally or recklessly and with knowledge that damage would
probably result. There was no counterpart in the Hague Rules.
The plaintiff alleged that the carriers acted recklessly and with
knowledge that damage would probably result. The issue was
which Rules applied.
Held, the Hague-Visby Rules should be applied.
The Court had the right and the duty to apply Canadian con
flict of law rules as part of the lex fort to choose the law to
govern the contract contained in the bill of lading. Since there
is no Canadian statute governing validity and interpretation of
a bill of lading issued in a foreign country in respect of goods
loaded in another country, it was necessary to apply common
law rules for the choice of the proper law of the contract.
Where the parties have not expressly or by implication chosen
the proper law, the Court must choose the system of law with
which the transaction has the closest connection. An intention
to choose the lex fort as the proper law is sometimes inferred
from an express choice of forum for resolution of disputes.
Although the bill of lading expressly chose Canadian courts for
actions arising thereunder, an inference that the lex fori is the
proper law can be supplanted by other indications that the par
ties intended some other system of law to govern validity and
interpretation. Although the bill of lading indicated that some
other system was to apply, which system was unclear. Apply
ing the rule of construction that where there is an ambiguity
the contract should be construed contra proferentem (against
the party drafting it, in this case the defendants), the Hague-
Visby Rules applied. The bill of lading was adequately clear
that the parties intended the Hague-Visby Rules to apply. The
choice of Belgian law favours the plaintiff.
It was also necessary to look to the surrounding circum
stances to determine with which country the transaction was
most closely associated. A preference should be given to the
law of the place of performance as the proper law, especially
where the contract is made in one country for performance in
another. Performance started in Belgium where the cargo was
loaded and the voyage commenced. Therefore Belgian law was
the proper law of the contract.
The parties could not vary the Rules except as the Rules
themselves contemplated. The plaintiff did not establish that
the defendants acted recklessly and with knowledge that dam
age would probably result. Although there was negligence in
the way the bus frame was loaded or carried, it was not so
apparent that damage to the bus frame would result that it
could be said that the defendants acted "recklessly" or "with
knowledge that damage would probably result". As the limita
tion by weight would be higher, it should apply by strict appli-
cation of the Hague-Visby Rules. The defendants contended
that according to the bill of lading the Rules should be modi
fied so as to impose the per unit limitation alone. The proper
law of the contract (Belgian law) governs the validity of con
tractual clauses limiting liability. Belgian law compulsorily
applies the Hague-Visby Rules which provide that any clause
limiting liability arising from negligence shall be null and
void. Even if the Rules did not render the clause void, the bill
of lading was ambiguous in that it provided that the Rules
would apply and then purported to modify those Rules. As the
defendants drafted the bill of lading, applying the construction
principle of contra proferentein, any inconsistency must be
interpreted against the defendants and in favour of the plaintiff.
The limitation purportedly imposed could not stand against the
acceptance by the parties of the application of the Rules which
preclude such limitations.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Carriage of Goods by Water Act, R.S.C., 1985, e. C-27.
Federal Court Rules, C.R.C., c. 663, RR. 324, 482 (as am.
by SOR/90-846, ss. 18, 19).
International Convention for the Unification of Certain
Rules of Law Relating to Bills of Lading and Protocol
of Signature, Brussels, August 25, 1924 ("Hague
Rules"), Art. 3, ss. 2, 8; Art. 4, s. 5.
Protocol to Amend the International Convention for the
Unification of Certain Rules of Law Relating to Bills
of Lading, Brussels, 25 August 1924 (Brussels, 23 Feb-
ruary 1968) ("Visby Rules").
Protocol to Amend the International Convention for the
Unification of Certain Rules of Law Relating to Bills
of Lading, Brussels, 25 August 1924, as amended on 23
February 1968 (Brussels, 21 December 1979).
CASES JUDICIALLY CONSIDERED
DISTINGUISHED:
Vita Food Products, Incorporated v. Unus Shipping Co.,
Ld., [1939] A.C. 277 (P.C.).
REFERRED TO:
Atlantic Consolidated Foods Ltd. v. The Doroty, [ 1979] 1
F.C. 283 (T.D.); affd [1981] 1 F.C. 783; (1980), 35 N.R.
160 (C.A.); Bonython, John Lavington v. Commonwealth
of Australia, [1951] A.C. 201 (P.C.); TropwoodA.G. et al.
v. Sivaco Wire & Nail Co. et al., [1979] 2 S.C.R. 157;
(1979), 99 D.L.R. (3d) 235; 10 C.P.C. 9; 26 N.R. 313.
AUTHORS CITED
Carver's Carriage by Sea, Vol. 2, 13th ed., London: Ste-
vens & Sons, 1982.
Castel, J.-G., Canadian Conflict of Laws, 2nd ed.,
Toronto: Butterworths, 1986.
Dicey and Morris on the Conflict of Laws, Vol. 2, 10th
ed., London: Stevens & Sons Ltd., 1980.
Scrutton on Charterparties and Bills of Lading, 19th ed.
by Mocatta et al., London: Sweet & Maxwell, 1984.
Tetley, William, Marine Cargo Claims, 3rd ed., Toronto:
Butterworths, 1988.
COUNSEL:
Vincent M. Prager and Mireille A. Tabib for
plaintiff.
Peter W. Davidson for defendants.
SOLICITORS:
Stikeman, Elliott, Montréal, for plaintiff.
Brisset Bishop, Montréal, for defendants.
The following are the reasons for judgment ren
dered in English by
STRAYER J.:
Relief Sought
This is an action for damages for loss suffered by
the plaintiff as owner of an articulated "bus frame"
arising out of its shipment on the vessel Federal
Calumet from Antwerp, Belgium to Toronto. The
defendants are the vessel, its owners, operators, man
agers and charterers who were the joint carriers of the
bus frame. This appears, from photographs put in evi
dence, to have been the chassis of an articulated bus
together with an attached body in an unfinished con
dition.
The parties filed a statement of agreed facts at the
beginning of the trial with the result that the issues
were very considerably narrowed. It is agreed that the
plaintiff was owner of the bus frame and that it was
damaged while being transported on board the vessel
Federal Calumet. The loss is agreed to be $86,455.
The bill of lading for the carriage of the bus frame
was issued at Hamburg, Germany, on October 5,
1985 and was filed as an exhibit by agreement. The
bus frame, of Hungarian manufacture, was loaded on
the Federal Calumet at Antwerp, Belgium and was
unloaded at Toronto on October 25, 1985.
The defendants do not dispute that they failed to
load, handle, stow, carry, etc. the bus frame properly
and carefully.
Issues
The matters in dispute relate to the regime of law
limiting the liability of the carriers and their responsi
bility under the relevant limitation, together with the
amount of interest to which the plaintiff is entitled.
With respect to the relevant system of law, the
main options appear to be the Hague Rules, 1924 1 or
the Hague-Visby Rules.'- In their agreed statement of
facts the parties agree as follows:
11. Under the Laws of Belgium, The Hague Rules, as amended
by the Visby Rules (the "Hague/Visby Rules"), as attached,
were compulsorily applicable to shipments from Belgium, or
loaded at a Belgian Port in October 1985;
12. Under the Laws of Germany, the Hague Rules were com
pulsorily applicable inter (din to shipments covered by a Bill of
Lading issued in Germany in October of 1985; the equivalent
of £ 100 in article 4 Rule 5 was, under the Laws of Germany,
1250 Deutsche Mark without reference to gold value.
It will be noted that because the bill of lading was
issued in Hamburg it is arguable that the Hague Rules
apply, but because the bus was shipped from Ant-
werp the Hague-Visby Rules arguably apply. Further,
as will be seen below, paragraph 3 of the bill of lad
ing is somewhat ambiguous on a purported choice of
law as between these two sets of rules and paragraph
18 thereof purports to alter the Hague-Visby Rules if
I International Convention for the Unification of Certain
Rules of Law Relating to Bills of Lading, Brussels, August 25,
1924.
2 The Hague Rules, ibid, as amended by the Protocol to
Amend the International Convention for the Unification of
Certain Rules of Law Relating to Bills of Lading, Brussels,
February 23, 1968, which has been in turn amended by the
Protocol Amending the International Convention for the Unifi
cation of Certain Rules of Law Relating to Bills of Lading
(August 25, 1924 as amended by the Protocol of February 23,
1968), Brussels, December 21, 1979.
they apply. Which set of rules applies—Hague,
Hague-Visby, or either one as modified by paragraph
18 of the bill of lading—will effect the outcome
because of the respective limits of liability in each of
these instruments. By Article 4, section 5 of the
Hague Rules, liability of the carrier was limited to
£100 per package or unit or the equivalent of that
sum in other currency, unless the nature and (higher)
value of the goods had been declared by the shipper
before shipment and inserted in the bill of lading. By
Article 4, subparagraph 5(a) of the Hague Rules as
amended by the Hague-Visby Rules [Article 2] and
further amended by the Brussels Protocol of 1979
[Article II], 3 the provision which would be applicable
if the Hague-Visby Rules govern a situation, it is pro
vided:
Article 4
5....
a) Unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in the bill
of lading, neither the carrier nor the ship shall in any event be
or become liable for any loss or damage to or in connection
with the goods in an amount exceeding 666,67 units of account
per package or unit or 2 units of account per kilogramme of
gross weight of the goods lost or damaged, whichever is the
higher.
As I understand it, the parties have agreed that the
value of a unit of account in Canadian currency on
October 25, 1985, was $1.455671.
However, paragraph 18 of the bill of lading seem
ingly purports to modify the limits on liability
imposed by the Hague-Visby Rules by providing as
follows:
18. In case of any loss to or in connection with goods exceed
ing in actual value $500 per package lawful money of the
United States or in case of goods not shipped in packages per
customary freight unit, the value of the goods shall be deemed
to be $500 per package or per freight unit, on which basis the
freight is adjusted and the Carrier's liability, if any, shall be
determined on the basis of a value of $500 per package or per
3 Ibid.
customary freight unit, unless the nature of the goods and a
valuation higher than $500 shall have been declared in writing
by the shipper upon delivery to the carrier and inserted on this
Bill of Lading and extra freight paid as required and in such
case if the actual value of the goods per package or per cus
tomary freight unit shall exceed such declared value, the value
shall nevertheless be deemed to be the declared value and the
Carrier's liability, if any, shall not exceed such declared value.
Whenever this Bill of Lading is not subject to the United
States Carriage of Goods by Sea Act, the amount of any like
limitation per package or, if the goods are not shipped in pack
ages, per customary freight unit, as stated in the Hague or
Hague Visby Rules, whichever applies to this contract of car
riage pursuant to clause 3 hereof, shall be substituted in the
place and stead of the aforementioned $500 amount or limita
tion but the foregoing in all other respects to remain identical.
What I understand this to mean is that if the Hague-
Visby Rules apply the monetary limit would only be
the per package or unit limitation, namely 666.67
units of account (which I calculate to have had a
value of (Canadian) $970.45 on the date of discharge
of the cargo); that is, paragraph 18 purports to elimi
nate the limitation based on weight of two units per
kilogramme, which counsel for the plaintiff says
would raise the limit of liability to some $30,860.
Another potential difference in the amount of lia
bility, depending on the Rules to be applied, arises
from the provisions of Article 4, subparagraph 5(e) of
the Hague-Visby Rules which has no counterpart in
the Hague Rules and which reads as follows:
Article 4
5....
e) Neither the carrier nor the ship shall be entitled to the
benefit of the limitation provided for in this paragraph if it is
proved that the damage resulted from an act or omission of the
carrier done with intent to cause damage, or recklessly and
with knowledge that damage would probably result.
While the plaintiff does not suggest that the carriers
acted with intent to cause damage, it does allege that
the carriers acted recklessly and with knowledge that
damage would probably result. If the plaintiff can
establish this, then the defendants cannot rely on the
monetary limitations to liability as set out in Article
4, subparagraph 5e).
With respect to interest, the plaintiff now seeks
pre-judgment interest at the rate of 11.58% per
annum compounded semi-annually from the date of
discharge (the parties having agreed that the weighted
average prime commercial rate of interest from Octo-
ber 25, 1985 to April 23, 1991 was 11.58%). The
plaintiff also seeks post-judgment interest com
pounded semi-annually, the rate to be the prime com
mercial rate of interest. The defendants object to
compound interest being ordered and they suggest
that the rate of interest should be that paid on money
paid into Court.
Conclusions
Choice of Law
It is clear that this Court has the right and the duty
to apply Canadian conflict of law rules as part of the
lex fori to choose the law to govern the contract con
tained in the bill of lading. 4 What is in issue here is
the legality, and interpretation, of certain terms in the
bill of lading. The defendants suggested that these
issues should also be governed by Canadian law as
part of the lex fori. It is true that a Canadian court
could be required, by valid Canadian statutory enact
ment, to apply Canadian law to the validity and inter
pretation of such a bill of lading, hut there is no such
Canadian statute. The only statute in the field, Car
riage of Goods by Water Act 5 specifically provides
for the application of rules akin to the Hague Rules,
but only in respect of goods carried in ships "from
any port in Canada to any other port, whether in or
outside Canada". That clearly has no application in
this case. But counsel for the defendants also relied
on the Vita Food case 6 for the proposition that the lex
fori should apply to interpret the contract whether or
not there was Canadian statutory law governing the
matter, and even though the statutory laws of the
state where the goods were loaded and the state
J'ropwood A.G. et al. v. Sivaco Wire & Nail Co. et al.,
[1979] 2 S.C.R. 157, at pp. 166-167.
5 R.S.C., 1985, c. C-27.
6 Vita Food Products, Incorporated v. Unus Shipping Co.,
td., [ 1939] A.C. 277 (P.C.).
where the bill of lading was issued make other rules
applicable to its interpretation. Thus it was argued
that Canadian common law should apply to the situa
tion, and Canadian common law recognizes complete
freedom of contract in these circumstances. As a
result, on this reasoning, any limitations in liability
agreed to by the parties in the bill of lading should be
respected. Vita Food can, however, be distinguished
by the fact that there the Judicial Committee of the
Privy Council was able to conclude that the parties
intended English law, and not the law of Newfound-
land where the bill of lading was issued and the
goods loaded, to be the proper law of the contract.
I must then apply common law rules for the choice
of the proper law of the contract. It is well settled that
where the parties have expressly or by implication
chosen the proper law, this law will normally be
applied to issues such as the validity of the contract.
Where they have not made such a choice, the Court
must choose the system of law with which the trans
action has the closest connection.? An intention to
choose the lex fori as the proper law is sometimes
inferred 8 from an express choice of forum for resolu
tion of disputes. Here the parties did by paragraph 4
of the bill of lading choose Canadian courts for any
actions arising under it. But such an inference that the
lex Pori is the proper law can be readily supplanted by
other indications of the parties that they intended
some other system of law to govern validity and
interpretation. The parties in this case clearly indi
cated that some other system was to apply by the lan
guage of paragraph 3 of the bill of lading although
their precise choice is far from clear. Paragraph 3
provides as follows:
7 See e.g. J.-G. Castel, Canadian Conflict of Laws (2nd ed.
1986), at pp. 529-540.
8 Id., at p. 532.
3. This Bill of Lading shall have effect subject to the provi
sions of any legislation incorporating the Rules contained in
the International Convention for the Unification of certain
rules relating to Bills of Lading dated Brussels, August 25th
1924 (the Hague Rules) or those Rules as amended by the Pro
tocol signed at Brussels, February 23rd 1968 (The Hague
Visby Rules) and which is compulsorily applicable to the con
tract of carriage contained herein. If no such legislation is com
pulsorily applicable, the Hague Rules or, if applicable, the
Hague Visby Rules as enacted in the country of the port of
loading shall apply. When no such enactment is in force in the
country of the port of loading, the corresponding legislation of
the country of the port of discharge shall apply and in the
absence of any such legislation, the terms of the 1924 Conven
tion as amended by the 1968 Protocol shall apply.
If I understand this paragraph correctly, the first
sentence states that the bill of lading is to be gov
erned by either the Hague Rules or the Hague-Visby
Rules if such rules apply "compulsorily" to this con
tract of carriage. The difficulty of applying this is that
both set of rules apply compulsorily to this contract
of carriage as the parties themselves agreed in the
statement of agreed facts: German law applies the
Hague Rules compulsorily because the bill of lading
was issued in Germany; and Belgian law applies the
Hague-Visby Rules compulsorily because the cargo
was loaded in Belgium. Therefore there is no mean
ingful choice of law as between German and Belgian
law to be found in the first sentence. The second
sentence of the paragraph is literally applicable only
where there is no legislation compulsorily applying
the Hague Rules or the Hague-Visby Rules. That is
not the present situation: instead there exists "such
legislation" in two relevant jurisdictions. Similarly,
the third sentence is not strictly speaking determina-
tive because it only applies where there is no "such
enactment" in force in the country in the port of load
ing, whereas in fact as the parties have agreed there
was legislation in Belgium, the country of the port of
loading, making the Hague-Visby Rules applicable.
Although the precise language of paragraph 3 does
not yield a clear choice of law, I am satisfied that the
parties intended the legislation incorporating the
Hague-Visby Rules to apply, that is the legislation of
Belgium as the law of the port of loading. While the
first sentence points to both German and Belgian law,
the second sentence provides in effect that if the
choice is not made pursuant to the first sentence then
the law chosen in the second sentence should apply if
possible: namely, the law of the port of loading
which would be Belgian law. In reaching this conclu
sion I am applying the rule of interpretation of con
tracts that where there is an ambiguity the contract
should be construed contra proferentem. 9 The
defendants prepared this bill of lading. The choice of
Belgian law favours the plaintiff and not the defend
ants in this case, as will be seen. It should also be
noted that the choice which I attribute to the parties
as described in the third sentence of paragraph 3, is
that of the "Hague-Visby Rules as enacted in the
country of the port of loading ..." [Underlining
added.]
Even if the choice of law were not adequately clear
in paragraph 3 I would be obliged to look to the sur
rounding circumstances to determine with which
country the transaction was most closely associated.
It is generally accepted in conflict of laws rules
applied by Canadian courts that a preference should
be given to the law of the place of performance as the
proper law, especially where the contract is made in
one country for performance in another. 10 Perform
ance of the contract in this case started in Belgium
where the cargo was loaded and the voyage com
menced. I conclude that by applying this principle
Belgian law is the proper law of the contract rather
than German law. I have had no evidence on the laws
of Belgium but as quoted earlier, the parties in their
statement of agreed facts have stipulated that under
the laws of Belgium the Hague-Visby Rules were
9 See e.g. Atlantic Consolidated Foods Ltd. v. The Doroty,
[1979] I F.C. 283 (T.D.), at pp. 293-294, affd [1981] I F.C.
783 (C.A.); Tetley, Marine Cargo Claims (3rd ed., 1988) at p.
84. Although it is the rules of interpretation of the proper law
of the contract which should be applied, I have no evidence as
to the relevant rules of Belgian law. I must therefore presume
that they are the same as in Canadian law: Castel, supra, note
7, at p. 145.
10 See e.g. Castel, ibid, at p. 539; Carver's Carriage by Sea
(1982) vol. 2, at p. 719; Bonython, John Lavington v. Common
wealth of Australia, [1951] A.C. 201 (P.C.); Dicey and Morris
on the Conflict of Laws (10th ed., 1980), at p. 771.
"compulsorily applicable to shipments from Belgium,
or loaded at a Belgian port in October, 1985 ...."
I therefore conclude that the Hague-Visby Rules
apply to this bill of lading. They apply either because
the parties by paragraph 3 of the bill of lading chose
these Rules as enacted in Belgium, or because in all
the circumstances the proper law of the contract must
be seen to be Belgian law. In either case the Hague-
Visby Rules are compulsorily applicable as that is the
law of Belgium. This means, among other things, that
the parties are not at liberty to vary those Rules
except as the Rules themselves contemplate.
Effect on Liability of the Defendants
One consequence of the Hague-Visby Rules gov
erning the validity and effect of the bill of lading is
that there is a potential, under Article 4, subparagraph
5e), as quoted above, for liability of the carriers to be
unlimited if, as the plaintiff alleges, they acted "reck-
lessly and with knowledge that damage would proba
bly result." To establish this the plaintiff must meet a
high standard of proof.I" I am not satisfied that the
evidence demonstrates that the defendants acted
"recklessly and with knowledge that damage would
probably result." Each party called a marine surveyor
as sole witness. Each of them had inspected the dam
aged bus frame in the vessel upon its arrival in
Toronto. There was conflicting evidence as to
whether vehicles would commonly he damaged if
loaded, as this bus frame was loaded, athwartships
and on top of a shipment of steel prone to settling.
While the evidence of the witness for the plaintiff
was more persuasive in this respect, neither witness
was produced as an expert. No expert affidavit had
been submitted by either of them as required by Rule
482 [Federal Court Rules, C.R.C., c. 663 (as am. by
SOR/90-846, s. 18] and they were not presented for
acceptance by the Court as experts. While counsel for
the plaintiff contended that he was entitled to use his
See e.g. Mocatta et al., Scrotum on Charterparties and
Bills of Lading (I 9th ed., 1984), at p. 456.
witness as an expert to rebut the evidence of the wit
ness for the defendants, pursuant to paragraph 482(5)
[as am. idem, s. 19] of the Federal Court Rules
allowing expert evidence in rebuttal without a previ
ous affidavit, I cannot accept the evidence on that
basis. At no time was the Court asked to qualify this
witness as an expert and counsel for the defendants
was not heard on that subject. All I can conclude is
that there was negligence in the way the bus frame
was loaded or carried. I am not in a position to con
clude that it was so apparent that damage to the bus
frame would result that the defendants can be said to
have acted "recklessly" or "with knowledge that
damage would probably result."
Without further complications, then, the relevant
limits on the defendants' liability would be those set
out in Article 4, subparagraph 5e) of the Hague-Visby
Rules as amended by the Brussels Protocol of 1979
as quoted above. Those limits would be either 666.67
units of account per package or unit (there being one
unit here) or two units of account per kilogramme of
gross weight of the goods lost, whichever is the
higher. The first basis for calculation would yield a
limitation, by my calculation, of $970.45 represent
ing 666.67 units of account whose value on October
25, 1985 was $1.455671. Calculated on the second
basis, by weight, I am advised by counsel for the
plaintiff (I do not know the weight of the bus) that the
limitation would be some $30,860.20. Obviously the
calculation by weight produces the higher limitation
and that is the one which would apply by the strict
application of the Hague-Visby Rules.
The defendants, however, contend that paragraph
18 of the bill of lading, as quoted above, represents
an agreement that the Hague-Visby Rules if other
wise applicable should he modified so as to impose
the per package or per unit limitation alone, without
the option of the calculation of value per kilogramme.
I have concluded that paragraph 18 cannot validly be
given this effect. It is the proper law of the contract
which governs the validity of contractual clauses lim
iting Iiability. 12 The proper law of the contract is Bel-
gian law and Belgian law compulsorily applies the
Hague-Visby Rules to this bill of lading. Article 3,
paragraph 8 of those Rules provides:
Article 3
8. Any clause, covenant, or agreement in a contract of car
riage relieving the carrier or the ship from liability for loss or
damage to, or in connexion [sic] with, goods arising from neg
ligence, fault, or failure in the duties and obligations provided
in this Article or lessening such liability otherwise than as pro
vided in this Convention, shall be null and void and of no
effect. A benefit of insurance in favour of the carrier or similar
clause shall be deemed to be a clause relieving the carrier from
liability.
(It will be noted that Article 3, paragraph 2 creates
the liability of the carrier and Article 4, subparagraph
5a) provides the normal limitation of that liability.) It
appears to me that one of the fundamental purposes
of the Hague-Visby Rules is to protect both carriers
and shippers: carriers are protected from undue liabil
ity by the limits stated in the Hague-Visby Rules
which can be modified upward only if the shipper
declares a higher value and is prepared to pay higher
rates; and the shipper is protected by provisions such
as Article 3, paragraph 8 from being excluded from
the level of recovery provided by those Rules by
means of some obscure provision in the bill of lading
which is normally drafted by the carrier.
Even if the prohibition against such a limitation of
liability did not apply compulsorily by virtue of Bel-
gian law to this transaction, I would interpret the bill
of lading so as not to impose such a limit. As drafted
there is an ambiguity in the bill of lading as between
the provisions of paragraph 3 and the provisions of
paragraph 18. Paragraph 3 purports to make applica
ble either the Hague Rules or the Hague-Visby Rules
and makes the bill of lading "subject to" the legisla-
12 Castel, supra, note 7, at pp. 550-551.
tion incorporating those rules or states that the rules
"as enacted ... shall apply". Both sets of rules con
tain the clause prohibiting further limitation of liabil
ity. Yet paragraph 18 purports to modify those Rules.
As I observed before bills of lading, like other con
tracts, must be construed contra proferentem, that is
against those who drafted them. As the defendants
drafted this bill of lading any inconsistency between
paragraph 3 and paragraph 18 must he interpreted
against them and in favour of the plaintiff, meaning
that the limitation purportedly imposed by paragraph
18 cannot stand against the acceptance by the parties
in paragraph 3 of the application of the Hague Rules
or the Hague-Visby Rules which preclude such limi
tations.
The plaintiff is therefore entitled to judgment
based on the limits of liability prescribed in Article 4,
subparagraph 5a) of the Hague-Visby Rules as
amended by the Brussels Protocol of 1979. I will
leave it to counsel to prepare formal judgment with
the correct calculation based on two units of account
per kilogramme of gross weight of the cargo in ques
tion.
With respect to interest, this is a matter within my
discretion. After considering all the circumstances I
am awarding the plaintiff pre-judgment interest at the
rate of 11.58% per annum, the rate agreed by the par
ties as being the "weighted average prime commer
cial rate of interest from October 25, 1985 to April
23, 1991". This interest will be compounded semi-
annually as requested by the plaintiff. This pre-judg
ment interest will run from the date of discharge,
October 25, 1985, up to and including the date of
these reasons. Interest after that date will be payable
at the rate of interest paid on money paid into the
Federal Court and subject to such rules for com
pounding as apply to monies so paid into Court. I am
choosing the date of reasons as the date of change in
the rate of interest because the date of formal judg
ment is as yet unknown, and I have applied the inter
est rate for money paid into Court for future interest
because there is an established method of calculation
for it. The plaintiff is entitled to costs, the defendant
having conceded this if I should conclude that the rel
evant limitation of liability was that based on weight
of the bus frame.
I hereby request counsel for the plaintiff to prepare
a draft judgment and to seek the consent of counsel
for the defendants as to form. If possible, application
for approval of the formal judgment should be made
in writing under Rule 324 but if necessary counsel
can speak to the matter at a later date.
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.