Court of Appeal of Quebec

Canadian National Railway Company c. Ace European Group Ltd.

500-09-026940-171

Giroux, Hogue, Sansfaçon

Appeal from a judgment of the Superior Court granting an application for damages. Dismissed.

The Canadian National Railway Company (CN) appeals from a judgment of the Superior Court condemning it to pay $611,414 for damages caused to railcars it was to carry at Bombardier’s request, and the respondent Ace European Group Ltd. (Ace) is substituted for Bombardier as the insurer. The agreement between the parties stipulated that CN’s liability was limited to $0. The trial judge found that the clause was not enforceable against Ace because section 137(1) of the Canada Transportation Act (S.C. 1996, c. 10) allows the carrier to limit its liability but not to exclude it entirely.

The Act allows rail carriers to enter into confidential contracts with terms and conditions that differ from the tariffs for their services. In addition, section 126(1)(e) of the Act allows them to determine the amounts they must pay in the event of a failure to comply with obligations imposed by section 113 of the Act. According to section 137 of the Act, as it read in 2009 when CN and Bombardier entered into the contract, the limitation of liability must be recorded in a written agreement signed by the shipper. Thus, section 126 of the Act is the source of the right of carriers to limit their liability, not section 137, as the trial judge found, which instead imposes a formal condition to limit liability, that is, a written agreement.

Section 126(1)(e) of the Act must be construed as allowing carriers to liquidate potential damages that a shipper can claim for a carrier’s wrongful non-performance, but not as allowing carriers to exclude their liability entirely or to limit it to a trivial amount. The carrier’s principal obligation is to carry goods from one point to another and to take measures so that the goods arrive at their destination intact. To allow a carrier to escape liability in advance of any failure to meet that principal obligation due to its fault would make it a purely potestative obligation and would distort the contract of carriage.

 Legislation interpreted: paragraph 126(1)(e) and subsection 137(1) of the Canada Transportation Act.

*Summary by SOQUIJ
Text of the decision: Http://citoyens.soquij.qc.ca

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