Date: 20070504
Docket: T-557-04
Citation: 2007 FC 491
Toronto, Ontario, May 4, 2007
PRESENT: Madam Prothonotary Milczynski
BETWEEN:
LOVAT INC. and
GURIS INSASAT VE MUHENDISLIK, A.S.
Plaintiffs
and
BLUE ANCHOR LINE,
KUEHNE & NAGEL INTERNATIONAL LTD.,
carrying on business as "Blue Anchor
Line"
and the owners and charters and all
others interested in
the ship "ATLANTIC ACTION" and
the Ship "TYRUSLAND"
and NORDANA LINE A.S.
Defendants
REASONS FOR JUDGMENT AND JUDGMENT
Issue and Summary
[1]
This is an
action for damages in respect of cargo sent from Etobicoke, Canada by the Plaintiff, Lovat Inc.
(“Lovat”) to the Plaintiff, Guris Insasat Ve Muhendislik, A.S. (“Guris”) in Ankara, Turkey, in respect of which the carrier
services of the Defendants were rendered. The Plaintiffs allege that the
cargo, a main bearing, was damaged en route, alleging specifically that the
damage occurred during the overseas portion of the shipping.
[2]
In that
respect, any finding of where and how the damage occurred has an impact on
liability as between the Defendants and possibly, the limitation of liability
and quantum of damages. These issues, however, must remain academic since for
the reasons set out below, the action is dismissed. The liability of the
carriers under the terms of their respective bills of lading ended on discharge
of the main bearing in the port
of Istanbul. In
that respect, the Defendants have established that the main bearing was
discharged in Istanbul in the same apparent good
order and condition as when it was shipped from the Plaintiff Lovat’s premises
and when it was loaded for overseas shipping. The Plaintiffs have failed to
prove, on a balance of probabilities, that the damage to the cargo was caused
while under the responsibility or in the hands of any of the Defendants.
Facts
[3]
The cargo
in this case is a main bearing that is a part to be installed on a tunnel
boring machine. The bearing was manufactured in the United States by Rotek Incorporated and shipped to
Lovat in Canada in August 1996, where it was
stored in Lovat’s warehouse. Some seven years later, on July 7, 2003, the
bearing was purchased by Guris.
[4]
At the
time of the Guris’ order, Lovat had the bearing inspected. Some rust was found
on the bearing, and it was Lovat’s evidence that this rusting was superficial
in nature, and likely caused by humidity in the warehouse where the bearing had
been stored. The bearing was cleaned with an abrasive “scotch-brite” pad and
some light oil.
[5]
The
bearing was prepared for shipping by Lovat. After the rust was removed, the
bearing was greased, sprayed with an anti-rust protectant and wrapped with one
layer of paper moisture wrap and another layer of shrink plastic wrap. The
bearing was then strapped on a wooden skid and secured with steel strapping.
It was the evidence of Lovat that this preparation and wrapping would be
adequate for the bearing to be shipped, and that it would withstand the
elements, including rain and even hurricane force winds.
[6]
To ship
the bearing to Guris in Ankara, Turkey, Lovat entered into a contract for
shipping with the defendant, Blue Anchor Line, through Blue Anchor’s agent
Kuehne and Nagel International Ltd. (together, “Kuehne & Nagel”). Blue
Anchor Line issued bill of lading No. 6120-4046-309.21 in Toronto. The bill of lading states
that it is for carriage of the bearing from Toronto to Istanbul. Under the clear terms and conditions
of this bill of lading, the contract was for carriage overland from Toronto to Baltimore and by sea to Istanbul. Carriage under this contract
ended in Istanbul.
[7]
Kuehne
& Nagel retained the defendant and third party, Nordana Line AS (“Nordana”)
to conduct the overseas phase of the shipping from Baltimore, Maryland, to Istanbul, Turkey. Nordana issued bill of lading No.
NODAS320BAPIR001 regarding the overseas phase of the transport. This transport
was comprised of shipment on the vessel “Atlantic Action” from Baltimore to Piraeus, Greece, and from Piraeus to Istanbul, Turkey on the vessel, “Tyrusland”.
[8]
As the
final destination for the bearing were Guris’ premises in Ankara, Turkey, arrangements needed
to be made for transportation of the main bearing from Istanbul. On the documentation filed, and on the
basis of evidence adduced during the hearing, I find that these arrangements
were made by Kuehne & Nagel as agent for Lovat. These arrangements were
not part of the contract of carriage as evidenced in the bills of lading. On
behalf of Lovat, Kuehne & Nagel instructed a Kuehne & Nagel company in Istanbul (K&N Turkey) to engage
the services of a local Turkish trucker to move the bearing from the customs
shed in Istanbul to Ankara. The fact that there is some
documentation in the form of invoices is insufficient to establish a contract
for “door to door” shipping as is submitted by the Plaintiffs. Other documents
filed by Kuehne & Nagel clearly show that the different services provided
are not purporting to provide door to door service, but itemize each service:
all inclusive carriage (overland and by sea) from Etobicoke to Istanbul as set
out by the bills of lading, and the on-carriage in Turkey are listed
separately, as are the customs clearance and the fee that generates profit for
Kuehne & Nagel as agent.
[9]
In any
event, the bearing was picked up on September 8, 2003 at Lovat’s premises and
transported from Etobicoke to Baltimore by a trucking company
retained by Blue Anchor Line, Trendway Transportation Services Inc. It arrived
at CNX Marine Terminal in Baltimore on September 11, 2003.
[10]
The
bearing remained in Baltimore from September 11, 2003 until
September 23, 2003. During this time it was stored at a shed at one of the
piers at the terminal (Pier 10 Southeast).
[11]
Also
during this time, Baltimore was struck by a hurricane -
Hurricane Isabel. The storm hit on September 18-19, 2003 and caused
significant flooding at the CNX Marine Terminal. Much of the terminal was
flooded, and the evidence indicates clearly that flooding was severe and that a
good deal of cargo was damaged.
[12]
The main
bearing, however, appears to have escaped the ravages of the hurricane.
[13]
Prior to
any cargo being loaded on to the “Atlantic Action”, a survey was arranged by
Nordana to have their cargo surveyor evaluate whether any damage had occurred
to cargo destined to be loaded on their vessels. Nordana would not load cargo
which, in their opinion, required corrective measures to avoid further damage.
I accept Nordana’s evidence in that respect, that it had no intention to load
cargo which had been exposed to wetting. It was in Nordana’s interest to seek
out possible damage from the hurricane, and in fact, Nordana refused to load
cargo that was found to have suffered wetting – it was either returned to
shippers, or Nordana received specific instructions to ship the cargo in that
condition.
[14]
Captain
Heiner Popp conducted the survey on September 19 and 20, 2003 and reported, in
writing on the 23rd, that the main bearing, which was stored on Pier
10SE was in “good order” and had not been subjected to flooding or water
damage. The Plaintiffs accept and agree with this assessment.
[15]
The main
bearing was loaded on board the vessel “Atlantic Action” at Baltimore on September 23, 2003.
[16]
The voyage
from Baltimore to Pireaus was uneventful.
Reports indicate that the seas and weather were typical and not excessive for
the season.
[17]
The main
bearing was discharged from the Atlantic Action at Piraeus, Greece on October 15, 2003. It was discharged
without any negative remarks being made about its condition or subsequent
handling by the Pireaus stevedores.
[18]
The main
bearing was then stored on the Pireaus terminal awaiting shipment to Istanbul.
On November 6, 2003, the main bearing was loaded on board
the vessel “Tyrusland” at Piraeus. The Tyrusland bill of
lading is without any negative remarks as to the condition of the bearing.
[19]
The main
bearing was discharged from the Tyrusland at Istanbul, Turkey on November 12, 2003. The
documents signed at the time of discharge and the evidence of the witnesses
present and on board the Tyrusland at the time of discharge indicate clearly
that at discharge, the main bearing was in its original as shipped condition,
wrapped in plastic and on a skid.
[20]
The
bearing was inspected visually by Veli Kosali, the terminal manager for Soyak
Port Administration at the Port of Istanbul and Serdar Bilgili, the Port
operations manager, responsible for all operational matters including ship
arrivals, ship clearance, planning for suitable docking, and cargo unloading.
[21]
Mr. Kosali
was onboard the Tyrusland when it docked in Istanbul. His evidence was that he reviewed the
stowage plan and saw the location of the main bearing. He remembered seeing
the main bearing and that there was no visible damage. Most importantly, he
remembered seeing that it was wrapped and secured to a skid.
[22]
Mr.
Bilgili was onboard the Tyrusland to attend the cargo unloading and to inspect
for cargo damage prior to any cargo being offloaded in Istanbul. He too remembers the main bearing
being onboard in its stowage position, intact, wrapped and on a skid.
[23]
Mr.
Kosali’s evidence was also that the bearing remained in a secure depot after
offloading from the Tyrusland until it was picked up by the trucker. Mr.
Bilgili also stated that the main bearing was unloaded from the Tyrusland and
brought to the warehouse for storage. He took notes and stated that the
warehouse officers checked every piece of cargo that is received for signs or
evidence of damage. No damage reports or notations were made of any kind - the
bearing was delivered intact and good order.
[24]
Mr.
Bilgili also reviewed the terminal delivery report for the main bearing. It
was issued and completed when the main bearing was picked by the trucker. The
delivery report was signed by the terminal officers, the customs officers and
the receivers’ representatives. The delivery report contains no remarks or
statements to signify that the main bearing showed any signs of damage at the
time of delivery.
[25]
The main
bearing was stored at the terminal warehouse at the port of Istanbul until it was picked up on November 18,
2003 by the inland trucker for carriage to final destination.
[26]
There is
no evidence that the apparent condition of the bearing was different at
unloading than it was on receipt by Kuehne & Nagel in Etobicoke. There is
no evidence to contradict that at all times during transportation from
Baltimore to Istanbul, the bearing was properly
handled, stowed and carried. There is also no evidence that anything occurred
during the overseas portion of transport, either on the Atlantic Action or on
the Tyrusland that could have caused damage after loading onboard either
vessel.
[27]
The main
bearing arrived at the Guris warehouse in Ankara, Turkey on November 20, 2003. Lovat’s
technician, Heinz Brockamp, was present at the time of delivery in Ankara to assist in the bearing’s
installation on to the tunnel boring machine. His and other of Lovat’s
evidence is that the bearing arrived in very poor condition. His report,
prepared on November 20th states that the bearing arrived by truck
with almost none of the packing or shipping material left. There was no skid.
The main bearing was very rusty and wet, with bolt holes full of water. His
report also indicated that a single lip seal had been partially ripped out of
its groove. The report indicates on November 20th that the necessary repair
work was not just to repair damage due to rust, but also welding work and the
installation of the last double lip seal on to the envelope plate and seal
ring.
[28]
The main
bearing was also cleaned and 17 rollers were replaced, at a total cost for
parts of $1161.60 (U.S.) plus $560.83 (U.S.) for shipping. The bearing was put into
operation, and it continued to work for approximately two years, boring tunnel
for a total of 4176 metres.
[29]
Lovat’s
evidence was that it was estimated that the lifespan of the main bearing was
5000 metres. There was, however, no evidence regarding the nature of the
actual use of the main bearing or the factors that would affect its lifespan,
including actual load conditions experienced by the main bearing, ground conditions
– whether it bore tunnel through sand or rock, speed and cutting angles,
maintenance (such as frequency of lubrication) or storage of the main bearing
by Guris. There is no evidence upon which to conclude that the lifespan of the
main bearing was shortened by something that occurred during its shipment from
Etobicoke.
Discussion
[30]
The burden
is on the Plaintiff to prove that the loss or damage took place in the
carrier’s hands. This is generally done by proving the condition of the goods
when received by the carrier and the condition of the goods at discharge. As
set out in Wirth Ltd et al v. Belcan, N.V. et al ( 1996), 112 FTR 81
(T.D.), the first principle of proof in a marine cargo claim is that the
carrier is prima facie liable for loss or damage to cargo received in
good order and out-turned short or in bad order. The burden is then upon the
carrier to establish that the damage is attributable to a peril for which it is
not liable. Where cargo is received and delivered by the carrier in the same
apparent good order and condition, the onus is on the plaintiff to demonstrate
that the damage occurred while the cargo was in the care and custody of the
carrier.
[31]
As noted,
in this case, there was an inspection of the goods after the hurricane in Baltimore that indicated that the
bearing had not been submerged and was in good order and condition. The goods
were received in good order in Piraeus upon offloading from the
Atlantic Action. They were inspected onboard the Tyrusland in preparation for
offloading in Istanbul – inspected each time
specifically to look for damage. Each time the goods were found to be in good
order and condition.
[32]
There was
much speculation as to when exposure might have occurred to cause the rusting
to the main bearing. The Plaintiff accepts the Popp survey report and argues
that the damage was not caused by the hurricane, but must have been incurred at
sea. The difficulty is that there is no evidence as to how that might have
occurred and no evidence concerning the actual rust damage to this main bearing
that is the subject of this action. There was visual inspection, anecdotal
evidence and much speculation or bare assertion. However, there was no
analysis of the main bearing or the nature and scope of the actual rust damage.
[33]
As set out
in Francosteel Corp. et al v. Fednav Ltd. et al (1990), 37 FTR 184
(T.D.):
In order to convince the court that the
damage occurred while the cargo was in the carrier’s custody, the plaintiff
would have to establish, by a preponderance of evidence, that the proximate
cause of the rust was either precipitation or condensation forming in the
ship’s hold. The evidence before me as to the proximate cause of the rust
damage is insufficient to establish, on balance, that it occurred during the period
of the defendant’s custody….it is just as conceivable that the rusting was due
to moisture entering the coils prior to loading, or that condensation which
developed either during discharge operations or possibly at sea, due to
circumstances beyond the defendant’s control, began to cause rust when allowed
to sit in warehouses for between one and two months subsequent to discharge.
[34]
At best in
the case at hand, there were some inconclusive water samples and silver nitrate
tests, but no analysis of the actual rust damage to assist in the determination
of what might have caused the rust, and when there might have been exposure to
cause the rust. There was even a lack of evidence as to what the main bearing
was made of that would assist in determining when and/or how the rust damage
might have been inflicted.
[35]
The
evidence of Christopher N. Mapp was particularly helpful in this respect. Mr.
Mapp is metallurgical engineer and gave evidence regarding metals and rust. To
determine the degree and severity of rusting, it is necessary to determine
whether there is atmospheric or surface rust, which may be superficial, or
whether there is uniform corrosion or pitting. Sometimes rust may look to the
eye, or appear to be worse than it really is.
[36]
To make
any determination regarding rust damage, a number of factors must be
considered, including:
-
the
composition of the metal;
-
the type
of moisture to which the metal was exposed, (whether it was atmospheric
humidity, freshwater, or salt or sea water); and
-
the
duration of the exposure.
[37]
With
respect to the first factor, if the main bearing was made of low alloy steel,
depending on conditions, it could rust very quickly. If the main bearing was
made of high alloy steel, rusting could take longer – again depending on the conditions
of exposure to moisture. There is, however, no evidence of the main bearing’s
composition.
[38]
With
respect to determining the nature of the rust damage, a visual inspection,
particularly one made simply by viewing photographs, is insufficient. Mr. Mapp
testified that to make an accurate assessment, specialized testing is required,
including x-rays, quantitative chemical analysis and microscopic examination.
This was not done in the case of the main bearing. I accept Mr. Mapp’s
evidence that the testing that was done, a silver nitrate test, was inadequate
to determine whether metal has been affected by sea water.
[39]
The
evidence confirms that the main bearing arrived in Istanbul in its as-shipped condition: wrapped and
secured to a skid. However, the bearing arrived at the Guris premises in Ankara unwrapped and damaged.
There is no evidence of what happened to the two layers of packaging and to the
skid upon which the main bearing was strapped. There is also insufficient
evidence of the specific nature of the damage – whether there was uniform or
surface rust, or deep pitting.
[40]
The
Defendants Kuehne and Nagel admit that the main bearing sustained some
superficial rusting, but deny that this rusting prevented use of the equipment
for its intended purpose. I agree; the superficial rust sustained by the
bearing was cleaned in Ankara, Turkey, in the same manner it was cleaned by
Lovat prior to and in preparation for the main bearing’s shipment. With
respect to any more serious rust or other damage, there is insufficient
evidence of the degree, nature and scope of the damage sustained so as to
require the 17 rollers to be replaced or sufficient evidence that, on a balance
of probabilities, would lead to a finding that such damage occurred due to rust
from exposure while in the hands of the carriers under the terms of their
respective bills of lading. Whatever evidence there is regarding the scope
of the damage indicates rust damage in a general way, but in no way does this
provide a basis to determine if it was severe rust such as pitting, or uniform
surface rust, or when or how it may have been incurred. There is no
conclusive answer regarding rust, and whatever evidence there is regarding the
scope of the damage also indicates damage other than and additional to rust.
Lovat’s own technician refers to physical damage to the main bearing, such as
the single lip seal having been partially ripped out of its groove.
[41]
There is
thus no evidence other than the damage having been most likely incurred after
delivery from the warehouse at the port of Istanbul – and in that regard, none of the named
Defendants are responsible for the Istanbul to Ankara leg of the shipment of the main bearing
under the terms of their respective bills of lading.
[42]
I find
that the Plaintiff has failed to discharge its burden of proof that the main
bearing was damaged while in the care and custody of the Defendants pursuant to
the terms of the bills of lading. Under the terms of the bills of lading, it
is clear that the liability of the carriers, Kuehne & Nagel and Nordana
ended once the main bearing was off-loaded and discharged in Istanbul. As noted in Voest-Alpine
Canada Corp. v. Pan Ocean Shipping Co., (1993), 79 B.C.L.R. (2d) 379, the
Court is left with the presumption that it was the last carrier, the trucker,
who transported the bearing from Istanbul
to Ankara that may be liable.
JUDGMENT
THIS COURT ADJUDGES that:
1.
The action
is dismissed.
2.
If the
party cannot agree on costs, they may file written submissions no longer than
three pages in length, within twenty days of the date of this judgment.
“Martha Milczynski”
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