This case involved multimodal carriage of goods from the US to Italy. The carriage was covered by a standard form bill of lading which 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.

The trial Judge held that cl 5(b)(1) applied, and that the defendants' liability was thus limited to USD 4,000: see Alcoa Inc v CP Ships (UK) Ltd (CMI1444). The plaintiff appealed.

Held: Appeal upheld. Judgment in favour of the appellant against the respondents in the amount of CAD 65,899.96.

The trial judge did not address the argument which we were told was raised before him and which was argued on the appeal, that within the terms of the bill of lading, cl 5(b)(3) is applicable rather than cl 5(b)(1). Clause 5(b)(3) is the applicable provision in this case. Clause 5(b)(1) relates to multimodal transportation 'from, to or within the U.S.', while the underlying carrier has the goods, in which case liability is governed by COGSA. Clause 5(b)(2) deals with multimodal transportation outside the US and Mexico where COGSA is not applicable. Clause 5(b)(3) applies to the road and rail transport portion of multimodal transport in Europe or within a State other than the US. Canada is such a State and cl 5(b)(3) applies specifically to the road portion of multimodal transport in Canada.

One possible contrary reading of cl 5(b)(3) is that it only applies when cl 5(b)(1) does not. However, because cl 5(b)(3) refers to a State other than the United States, it appears that cl 5(b)(3) is intended to limit cl 5(b)(1) situations.

The respondent says that Ontario cannot be a 'State' within the meaning of cl 5(b)(3). It is unnecessary to decide that issue because if Canada is the State and no federal laws govern, then the default provision is cl 5(b)(4) which applies because the respondent was found to be negligent in this case.