The plaintiff claimed damages from the defendants for breach of contract, negligence or gross negligence in the carriage of its goods from Massena, New York, to Villa Carcina, Italy, in the amount of USD 43,116.96. The defendants relied upon the terms of their bill of lading to limit their liability. The plaintiff, on the other hand, argued that this bill of lading did not constitute a contract governing the relations between the parties.

Held: The defendants are entitled to rely on the exclusionary limitation of liability and governing law provisions contained in the standard bill of lading issued by CP Ships (UK) Ltd (CP). There was no fundamental breach that would have the effect of denying the defendants the benefits of these provisions in the bill of lading.

The bill of lading provided as follows:

5. CARRIER’S RESPONSIBILITY AND CLAUSE PARAMOUNT

(b) Multi-Modal Transport

(1) With respect to Multi-Modal transport from, to, or within the United States, and the loss or damage occurs while the Goods are in the custody of any Underlying Carrier, liability shall be governed by the terms and conditions of any private contract of carriage between the Carrier and the Underlying Carrier which is incorporated herein by reference and available to the Merchant at any office of the Carrier upon request. In all other cases, the Carrier’s liability shall be governed by the U.S. Carriage of Goods by Sea Act ('COGSA'), regardless of where the loss or damage occurs ...

(2) With respect to all Multi-Modal Transport outside the United States where COGSA is not contractually applicable, and outside Mexico, the unamended Hague Rules 1924 shall apply whether the loss or damage occurs on land or sea. ...

(4) In the event the provisions of this subsection 5(b)(1 to 3) are held inapplicable to any aspect of the Carriage covered by local law or International Convention or otherwise, the Carrier shall nevertheless be relieved of liability for loss or damages occurring during the Carriage if such loss or damages was caused by any event which the Carrier could not avoid and the consequences whereof he could not prevent by the exercise of due diligence.

18. GENERAL DISCLAIMERS AND LIMITATION OF LIABILITY

...

(b) In no event shall the Carrier be liable for loss or damage to or in connection with the Goods in an amount exceeding US$2.50 per kilo, or US$500 per package or per shipping unit where the Goods are not shipped in Packages. If such limitation is inapplicable under the local law in which an action is brought, then the Hague Rules (Unamended) limitation of £100 sterling lawful money of the United Kingdom per Package or shipping until shall apply, or alternatively, if the shipment covered by this Bill of Lading originates in a country where the Hague-Visby Amendments to the Hague Rules are mandatorily applicable, Carriers liability shall not exceed 2 SDR per kilo or 666.67 SDR per Package or shipping unit whichever is the greater.

(c) In the absence of any compulsorily applicable law to the contrary, the Carrier shall be entitled to the full benefit of the 1976 Convention on Limitation of Liability for Maritime Claims.

(d) The aforementioned limitations of liability set forth in Clause 18(b) shall be applicable unless the nature and value of the Goods have been declared by the Merchant before shipment and agreed by the Carrier, and are inserted in this Bill of Lading and the applicable 'ad valorem' freight rate, as set out in the Carrier’s tariff, is paid. Any partial loss or damage shall be adjusted pro rata on the basis of such declared value and if the declared value is higher than the actual value, the Carrier shall in no event be liable to pay more than the shippers invoice value of the Goods plus Freight and insurance.

Clause 5(b)(1) is not vague or contradictory and, therefore, is enforceable. The relevant transportation is multimodal and originates from the United States. The loss occurred while the goods were under the control of Cast Transport Inc (Cast). There is no private contract of carriage between CP and Cast and, therefore, resort must be had to the US statute. Therefore, it follows that the Defendants are correct and their limitation of liability pleading must be given effect - ie their liability is limited to USD 4,000.

Clause 18 is inapplicable because cl 5(b)(1) clearly applies to the situation at hand. The general must give way to the specific. Liability limitation is not uncommon in the carriage of goods industry. There is nothing unfair, unreasonable, or unconscionable about the limitation of liability in this case.

[For the successful appeal to the Ontario Court of Appeal, see Alcoa Inc v CP Ships (UK) Ltd (CMI1445).]