Agro Co of Canada Ltd (the plaintiff) was the shipper, and Argonaut Marine Inc (the defendant) was the owner of the Regal Scout. A bill of lading dated 30 October 1975 was issued to cover barley in bulk loaded on board the Regal Scout in Vancouver, for carriage to the consignee, Toshoku Ltd, at Tokyo, Japan. In the bill of lading, cl 1 made Japanese law the applicable law and cl 3 required the Japanese court to apply Japanese law. The bill of lading was not personally executed by the defendant. It was executed by the agent of Yamashita Shinnihon Steamship Co Ltd, who was not a demise charterer.

The questions before the Court were: first, did the parties agree to have their dispute resolved by the Tokyo District Court; and second, if the parties did not so agree, had the plaintiff made out a strong case to refuse the stay in favour of proceedings in this Court?

The plaintiff opposed the application to stay upon two grounds. First, the Japanese forum clause was invalid because the Tokyo District Court would apply substantive domestic law lessening the liability of the defendant. The liability of the defendant would be significantly lower than that permitted by the Carriage of Goods by Water Act, RSC c 15 (the Act), which a Canadian court would be bound to apply. Second, even if the jurisdiction clause were valid, there would be strong reasons sufficient to support the conclusion that it would not be reasonable or just in the circumstances to stay the proceedings in this action and require the plaintiff to sue the defendant in the Tokyo District Court.

Held: Judgment for the plaintiff.

According to s 2 of the Act, the Hague Rules have the force of law in Canada. According to arts 2 and 3.8 of the Rules, if the jurisdiction clause providing for the application of Japanese law in a Japanese court has the effect of lessening liability for loss, the clause is null and void and of no effect. The Act applies whether the proper law of the contract is Canadian or foreign law. Thus, the Hague Rules will be applied by a Canadian court to shipments from a Canadian port to a port outside Canada, whatever may be the proper law of the contract or the nationality of the vessel.

According to Japanese law, the defendant is not a party to the contract of carriage. The contract of carriage is between the plaintiff and Yamashita Shinnihon Steamship Co Ltd. Therefore, the difference between Canadian law and Japanese law is that, under Canadian law, a Canadian court would construe the defendant as being a party to the contract of carriage whereas a Japanese court, on the authorities to date, would not construe the defendant to be a party to the contract of carriage. Therefore, Japanese law will not merely have the effect of lessening the liability of the defendant but of totally obliterating it. By virtue of art 3.8 of the Hague Rules, the carrier is a party to the contract of carriage. As was decided in The Morviken [1983] 1 Lloyd's Rep 1 (CMI597), any clause in a bill of lading designed to relieve the carrier from liability or damage as provided in art 3.8 or to lessen the liability as provided in the Rules is null and void and to no effect.

The choice of forum clause is of no effect. It is therefore not necessary to consider the plaintiff's second ground.