AGF Steel Inc (AGF) and Miller Shipping Ltd (Miller) entered into an agreement whereby Miller accepted to transport 43,000 mt of steel using two designated vessels over six voyages. AGF obtained insurance for the loss of cargo; Miller obtained hull and machinery insurance and P&I insurance as per the contract. The contract also contained an exclusion of liability clause, whereby each party agreed to bear the risk of loss or damage to its own property (characterized by the parties as a 'knock-for-knock' clause). The first two voyages were completed without any issues, but during the third voyage, in May 2013, one of the vessels, the Arctic Lift 1, capsized on the south coast of Newfoundland and Labrador, causing a total loss of about 7,100 metric tons of steel. AGF claimed damages of CAD 8.2 million from Miller.

Miller argued that the contract’s exclusion clause protected it from any liability whatsoever, both in contract and tort. As such, they believed that there was no genuine issue to be tried by the Court and they applied for summary judgment under r 215 of the Federal Court Rules (FCR).

Miller argued that the contract between the parties was not a contract for the 'carriage of goods by water' within the scope of s 43(2) of the Marine Liability Act (MLA). It pointed to the language of the contract, arguing that it was in fact a charterparty. Miller argued that the contract was fundamentally one for the hire of a ship, which is the principal attribute of a charterparty. Moreover, no bill of lading had been issued with respect of the cargo, further pointing in the direction of a charterparty. As such, since the contract is a charterparty, the Hague-Visby Rules do not apply to the relationship between the parties and the contract between them is the basis for determining liability. The contract was a freely negotiated contract between two sophisticated commercial entities, and AGF should be held to the exclusion of liability and prohibition of suit clause to which it agreed. The insurance and liability scheme entered into by the parties also means that the parent company of Miller may profit from the prohibition of suit clause. The action taken by AGF shows no reasonable cause of action and should be set aside by means of summary judgment. In support of this argument, Miller relied upon the decisions in T Co Metals LLC v Federal EMS (Vessel), 2012 FCA 284 (CanLII), [2014] 1 FCR 836 (FCA) [76]-[80] (CMI1151) and Wells Fargo Equipment Finance Co v Barge 'MLT-3' (The) (2013), 2013 FCA 96 (CanLII), 359 DLR (4th) 561 [33], [36]-[40] (see Mercury XII (Ship) v MLT-3 (Belle Copper No 3) CMI1153).

AGF argued that summary judgment would be inappropriate in the circumstances and that a proper trial is required to hear the evidence - the bulk of which was not yet before the Court. AGF contended that Miller had overloaded the barge, which eventually caused the accident. They argued that the contract between the parties was one of carriage of goods by water, where Miller was the carrier. As such, the contract should be subject to the Hague-Visby Rules. Under the Hague-Visby Rules, a carrier may not exclude its liability further than what is described in art 3.8. Moreover, the interpretation given to the prohibition of suit clause in the contract by Miller is unconscionable, as AGF never agreed to give up its right of action as against third parties, such as the parent company of Miller.

Held: The motion for summary judgments partially succeeds. The contract is a charterparty and the Hague-Visby Rules do not apply. All other issues must proceed to trial.

The Court began its analysis by repeating that the test for summary judgment under r 215 of the FCR is that it must be shown that there is no genuine issue for trial. The threshold for establishing this is high.

The Court then considered the question if the contract was a charterparty or a contract for carriage. Literally, the contract was for the transportation of the steel rebar from Sorel (Quebec) to Long Pond (Newfoundland and Labrador). The title page read 'Cargo contract'. The table of contents referred to 'time charter party', and the parties were referred to in the contract as 'charterer' and 'contractor' respectively. The Court concluded that, in its pith and substance, the contract contemplated the hire of a tug and barge to transport cargo – making it a charterparty. Referring to The Federal Ems case, the Court rejected AGF’s argument that where a charterer is also the carrier, the contract is one of carriage of goods. Since the contract is a charterparty, the Hague-Visby Rules do not apply and as such, the parties are free to negotiate any type of limitation of liability they see fit.

However, as to the prohibition of suit, the parties were giving divergent interpretations of the ambit of the clause. Contractual interpretation is a problem that mixes fact and law – for which summary judgment cannot be rendered. The intention of the parties must be proven through evidence presented before a judge during a proper trial.