Date: 20020930
Docket: T-2429-98
Neutral citation: 2002 FCT 1023
Toronto, Ontario, Monday, the 30th day of September, 2002
PRESENT: Roger R. Lafrenière, Esquire
Prothonotary
(SIMPLIFIED ACTION)
BETWEEN:
AMERICAN RISK MANAGEMENT INC.
and AMTEX (PRIVATE) LIMITED
Plaintiffs
- and -
APL CO. PTE. LTD., AMERICAN PRESIDENT LINES, LTD.
and THE OWNERS AND ALL OTHERS INTERESTED IN
THE SHIPS "EAGLE STRENGTH" and "HYUNDAI PIONEER"
Defendants
REASONS FOR JUDGMENT AND JUDGMENT
American Risk Management Inc. ("American Risk") purchased 52 rolls of mattress fabric from a mill in Pakistan. The cargo was carried by truck, by sea and by rail to its ultimate destination, American Risk's warehouse in Toronto. Within one or two days of receipt, American Risk discovered that the rolls were badly damaged by mould and by reddish-brown stains from what appeared to be saltwater contamination. American Risk claims that since the rolls were delivered in good condition to the carrier, American President Lines, Ltd. ("President Lines"), as evidenced by a clean bill of lading, President Lines is prima facie liable for the damages. American Risk therefore seeks to recover its losses from President Lines in the amount of $11,133.72 US. The co-plaintiff, Amtex (Private) Limited ("Amtex"), did not participate at trial, having discontinued its action against the defendants on June 8, 1999.
The critical issue in this action is who bears the burden of proof. American Risk claims that since the contract for the carriage of goods is a contract of bailment for reward, it need only prove that the goods were delivered in good condition to President Lines and that they were received damaged at the point of discharge. Once these facts are established, the burden would then be on President Lines to establish that the damage was not due to negligence on its part. President Lines says that American Risk has simply not made out its case and that, in any event, there is no evidence that the damage was caused while the goods were in its possession.
The trial of the action was conducted in accordance with the simplified action procedure set out in Rule 299 of the Federal Court Rules, 1998. The evidence-in-chief of the parties consisted of seven affidavits, including the reports of two experts. Five witnesses were cross-examined at trial: (1) Simon Zysman ("Zysman"), the manager of American Risk, (2) David Gordon ("Gordon"), an expert on testing cargo, (3) Harry Baikowitz (Baikowitz"), an expert chemist, (4) Janet Costas ("Costas"), a senior claims specialist with President Lines, and (5) Aaron Daniels ("Daniels"), a marine surveyor. The parties also tendered an agreed chronology of events.
Background facts
American Risk is a small company which operates out of an office in Toronto and some rental premises in Kingston, Ontario. The company is in the business of mattress and box spring de-construction. In May 1998, Zysman decided to purchase mattress ticking, which is used for the outside covering of mattresses, from Amtex, a fabric mill in Faisalabad, Pakistan. American Risk contracted for the purchase of 53 rolls of mattress fabric for the sum of $11,347.38 US. One roll was sent ahead by air for inspection purposes, while separate arrangements were made for transportation of the remaining 52 rolls, including carriage of the cargo by sea with President Lines.
Each roll was 250 yards in length and 82 inches in width. For transport purposes, the fabric material was rolled onto a hollow cardboard tubing. Plastic sheeting was wrapped around the rolls and tucked into the hollow portion of the cardboard tubing at each end. A woven polypropylene fabric was then wrapped around the rolls and sewn tightly with sisal twine.
Carriage of goods from Faisalabad, Pakistan to Toronto, Ontario, Canada
The parties disagree as to who was responsible for stuffing the rolls into a container in Faisalabad and delivering the container by truck to Karachi. According to Zysman, President Lines hired a company, Multi Transport International ( "MTI"), to pick up the rolls from the fabric mill and to deliver them to its inland container terminal. Zysman acknowledged that he was not present in Pakistan when the rolls were picked up from the mill. Nor was his company ever not invoiced by President Lines for cartage charges. Zysman stated that he believed that President Lines was responsible for the cartage from Faisalabad to Karachi based on his review of transport documents and what he had been told by his supplier. Yet, the bill of lading indicates that the mode of transport contracted for was "CFS/CFS", which suggests that President Lines only contracted to carry the cargo from the container freight station at Karachi to the one nearest to Toronto. In the absence of any evidence to the contrary, I accept the evidence of Costas that under this mode of transport, it was the shipper's responsibility to deliver the goods to the container freight station. I therefore find that President Lines was not responsible for cartage of the rolls by MTI from Faisalabad to Karachi.
The container holding the rolls was eventually loaded onboard the ship "EAGLE STRENGTH" on September 14, 1998. The ship proceeded to Fujairah, one of the Emirates in the Gulf of Oman, where the container was then loaded on the ship "NEPTUNE ALEXANDRITE" and carried as deck cargo from Fujairah to Colombo, Sri Lanka, Singapore and then Kaohsiung, Taiwan. The container was discharged at Kaohsiung where the rolls were stuffed into another container destined for Montreal. This container was then loaded below deck on the "HYUNDAI PIONEER"which sailed to Vancouver, arriving on October 21, 1998. The container was delivered to Canadian Pacific for rail carriage and ultimately transferred to the Transpacific Container Terminal in Brampton, Ontario on November 9, 1998.
Based on a review of President Lines' business records, Costas found that no exceptions had been noted as to the apparent order or condition of the cargos being shipped alongside the rolls, such as torn packages, wetness or crushing. Although at one point the container holding the rolls was carried above deck, the records show that the weather and sea conditions were good and the voyage uneventful. Further, there were no reports of any damage found on a container, such as holes in the roof, floor or sides of containers. Finally, none of the cargos carried alongside the rolls were ever noted to be wet or damaged.
Condition of the cargo upon delivery
On November 16, 1998, Zysman arranged to have an employee pick up the rolls and deliver them to his company's warehouse. In his affidavit, Zysman stated that the exterior of the rolls looked normal. However, when asked to confirm in cross-examination that the goods were received in apparent good order, Zysman answered that he had in fact observed stains along the length of many of the rolls, which he described as a thin, slightly reddish, streak. I do not believe this statement to be true. Zysman acknowledges that he had not previously mentioned staining of the outer packaging to President Lines, or made any reference to it in his affidavit. Logic dictates that such pertinent information, if true, would have been immediately brought to the attention of President Lines. In fact, Zysman explicitly disclaimed any concern regarding the state of the packaging in a letter to President Lines dated November 18, 1998, in which he wrote "the outside packaging of each roll was dry and normal". I find that Zysman was untruthful in attempting to portray the packaging of the rolls as stained, in a vain attempt to establish that the goods were not received in good condition.
On November 18, 1998, Zysman arranged to have two rolls delivered to the company's commission quilter, Supreme Quilting, and twelve rolls to another customer, Factory Mattress. The balance of the rolls remained in the company warehouse. Shortly after delivering the rolls to his customers, Zysman received a complaint from an employee of Supreme Quilting that the rolls were stained and showed signs of mould and mildew. Zysman proceeded to unpack a few rolls in his warehouse and observed that they were badly stained. He also detected a strong musty smell of mouldiness and mildew emanating from them. Upon checking with Factory Mattress, he learned that their rolls were also stained and emitting a musty odour.
As mentioned earlier, on November 18, 1998, Zysman sent a claim letter to President Lines. He wrote that the rolls "were received in water damaged condition" and that the goods were a complete loss.
Testing of the cargo
Daniels, a marine surveyor, was retained to examine the shipment and report the nature, extent and cause of damage. On November 24, 1998, he attended at the warehouse of American Risk, as well as Supreme Quilting's place of business. He observed that externally, the rolls were in apparent sound condition. Once the burlap and plastic wrapping were partially removed, he noted that the fabric and packing material showed evidence of being previously wetted and dried out. Daniels proceeded to conduct a silver nitrate test on the woven polypropylene fabric and plastic wrapping of a few rolls to determine whether salt was present. The results was negative for saltwater contamination. He concluded in a written report that the damage must therefore have been caused by ingress of fresh water into the rolls of fabric at some unknown stage.
On November 27, 1998, Zysman delivered a roll from his company's warehouse to Experchem, a company that performs chemical analyses for various industries for analysis. The parties agreed that Gordon, the vice-president of Experchem, was an expert on testing cargos. Gordon tested two specimens from the stained fabric material for the presence of sodium, potassium, calcium and magnesium. Based on the ratio of sodium and chloride, and the presence of other elements he found on the fabric, Gordon deduced that the fabric had been contaminated with salt water.
Gordon's conclusion was contradicted by Baikowitz, an expert chemist called to testify by President Lines. Baikowitz prepared an expert report based on his review of the survey report by Daniels, the test results obtained by Experchem and the Gordon's affidavit. He concluded that the wetting of the mattress ticking occurred as a result of condensation from high humidity trapped by the impervious plastic sheeting and cover. He also found the results of the analysis by Experchem for sea water was inconsistent with the ratios for the elements in sea water, and specifically, chlorides.
President Lines denied liability on December 8, 1998. American Risk sought to mitigate its damages by approaching two companies to purchase the stained rolls as salvage. Dissatisfied with the low offers he received, Zysman approached one of his customers which offered to purchase 46 rolls for $1,710.87. In cross-examination, Zysman could not account for what happened with the balance of the rolls, except to say that notwithstanding a diligent search, due to the passage of time, they could no longer be located.
Analysis
Where damage to cargo is alleged to have been caused by a carrier, the burden and order of proof will shift depending on the particular facts of each case. Professor William Tetley sets out in Marine Cargo Claims the first principle of proof of a marine cargo claim as follows:
The carrier is prima facie liable for all loss or damage to cargo received in good order and out-turned short or in bad order. The carrier having received the goods in good order under a clean bill of lading and having received bad order receipts on delivery is prima facie liable for the loss or damage, which is presumed to have occurred while the goods were in its custody.
Although a clean bill of lading was issued by President Lines in Karachi, I conclude that the document only means that the goods were accepted in apparent good condition. It was virtually impossible for the President Lines to ascertain the condition of the rolls due to the packaging, which I find concealed their actual condition. The fact that the rolls were discharged at the point of destination without exceptions simply confirms that any damage to the rolls was not readily apparent. A properly claused bill of lading simply serves as proof of visible, actual damage, if any, at the time of loading. However, before a carrier will be required to disprove negligence or establish other exemptions to liability, a claimant must first prove delivery in good order by means other than the bill of lading itself where the damage could not be discovered upon reasonable examination: Wirth Ltd. et al v. Belcan N.V. et al. (1996), 112 F.T.R. 81 (F.C.T.D.).
I conclude that neither President Lines nor American Risk actually knew, or could reasonably suspect, that the rolls were damaged when received by them. As a claimant, American Risk had the initial burden of establishing that the cargo was delivered to President Lines in good condition, but failed to do so. Zysman's hearsay evidence regarding the good condition of the rolls upon delivery was inadequate, especially since President Lines had put American Risk to the strictest proof that the shipment was not damaged at the time of delivery. Moreover, it appears that the cargo was simply delivered to American Risk in the same apparent order and condition as it was received by President Lines. The fact that the roll sent by air was received in good condition does not attest to the condition of the other rolls at the time of delivery to President Lines.
Although it is possible that the damage to the cargo may have occurred while in the possession of President Lines, the evidence, taken as a whole, would suggest otherwise. President Lines established, to my satisfaction, that the exterior packaging of the rolls and the fabric material itself was not contaminated by sea water. The evidence of Daniels regarding the negative test of the packaging was uncontradicted and was largely corroborated by Baikowitz, an expert chemist. I preferred Baikowitz conclusions regarding the nature of the fluid over that of Gordon, who was more tentative in his findings. Consequently, I conclude that the rolls were not contaminated or stained by sea water.
I do not consider the fact that the container was loaded on deck to have placed the goods in any peril in the particular circumstances of this case. Moreover, the absence of any other claims by shippers, or any notation of damage to cargo shipped alongside the rolls or the containers themselves, buttress President Lines' contention that nothing out of the ordinary transpired during carriage of the cargo by President Lines.
There is no dispute that wetting from some unknown external source penetrated into the rolls at one point. However, American Risk has not established, to my satisfaction, that President Lines should be held responsible for the damage in question. Accordingly, the action is dismissed, with costs.
In light of the above disposition, I need not deal with the issues of damages and spoliation of evidence. Out of sake of completeness, however, I conclude that Zysman made reasonable efforts to mitigate his company's damages. The loss of six rolls is of little consequence since the value of the rolls was substantially reduced due to the serious damage to the fabric. I would therefore have fixed damages as claimed by American Risk, less the salvage value of the six missing rolls.
As for the allegation of wilful destruction of evidence, I accept Zysman's evidence
that the rolls were misplaced and that there was no intention to deprive President Lines an opportunity to test the fabric. In any event, President Lines was not prejudiced thereby, since no timely request for testing was ever made.
JUDGMENT
1. The Plaintiff's action is dismissed, with costs.
"Roger R. Lafrenière"
Prothonotary
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
DOCKET: T-2429-98
STYLE OF CAUSE: AMERICAN RISK MANAGEMENT INC. and AMTEX (PRIVATE ) LIMITED
Plaintiffs
- and -
APL CO. PTE. LTD., AMERICAN PRESIDENT LINES LTD. and THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIPS EAGLE STRENGTH and HYUNDAI PIONEER
Defendants
DATE OF HEARING: MARCH 28 and 29, 2001
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR JUDGMENT
AND JUDGMENT BY: LAFRENIÈRE P.
DATED: MONDAY, SEPTEMBER 30, 2002
APPEARANCES BY: Mr. Garri Hendell
For the Plaintiff,
American Risk Management Inc.
Ms. Mireille Tabib
For the Defendant, APL CO. PTE. Ltd.
SOLICITORS OF RECORD:Borden, Ladner, Gervais LLP
Barristers & Solicitors
Scotia Plaza
40 King Street West
Toronto, Ontario
M5H 3Y4
For the Plaintiff
Stikeman, Elliott
Barristers & Solicitors
4000-1155 René-Levesque Blvd. West
Montreal, Quebec
H3B 3V2
For the Defendant
FEDERAL COURT OF CANADA
Date: 20020930
Docket: T-2429-98
BETWEEN:
AMERICAN RISK MANAGEMENT INC. and AMTEX (PRIVATE ) LIMITED
Plaintiffs
- and -
APL CO. PTE. LTD., AMERICAN PRESIDENT LINES LTD. and THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIPS EAGLE STRENGTH and HYUNDAI PIONEER
Defendants
REASONS FOR JUDGMENT
AND JUDGEMENT
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