Mazda Canada Inc (the plaintiff) shipped a cargo of automobiles and trucks on the Cougar Ace from Japan to Canada. During a ballasting operation at sea, the vessel listed violently and severely and the cargo was damaged. The plaintiff commenced action in Canada and sued the vessel, the shipowner MOB Cougar (Pte) Ltd, the time charterer Mitsui OSK Lines Co Ltd, as well as the master, chief engineer and second engineer of the vessel (collectively, the defendants). The defendants applied to have the Canadian proceedings stayed in favour of Japanese proceedings, on the basis that: (i) the bill of lading called for Japanese law and jurisdiction; and (ii) Japan had the closest connection with the dispute.

Held: The defendants' application for a stay of proceedings was rejected.

Although there was no natural forum here, and three, if not four, jurisdictions had a real and substantial connection with this case: Canada, Japan, Singapore, and perhaps the United States, and the connecting factors as between Canada and Japan were largely neutral, the Court found that the plaintiff would be denied a juridical advantage if the dispute was heard in Japan. Under art 4.5 of the Hague-Visby Rules and art 6.1.b of the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 1976) which apply in both Canada and Japan, the plaintiff’s recovery would both be limited. However, because Canada had adopted the 1996 Protocol (ie LLMC 1996) which calls for higher limits, the plaintiff would gain a financial advantage of about USD 1,500,000 should the action continue in Canada. The plaintiff would be prejudiced if denied of such an advantage since Canada had a real and substantial connection with this case because the discharge port, New Westminster, was in Canada, and the ship was trading to Canada.

The defendants were also not looking to Japan merely to limit their liability, but were relying on art 4.2.a of the Hague-Visby Rules to avoid liability because the mistake made by the chief officer during ballasting was an error in management of the vessel, which would be a complete defence. They argued that the Hague-Visby Rules fully exonerated them from liability irrespective of the forum in which the case is heard. As to the public policy issues at stake, freedom of contract is subordinated to the will of the State. A domestic carrier doing business within Canada, or a foreign carrier doing business with Canada, cannot circumvent Canadian law simply by inserting a foreign forum selection clause in the bill of lading, and then moving that foreign Court for a negative declaration of liability.

Section 46 of the Marine Liability Act, SC 2001, c 6 (MLA), gives the plaintiff the option to commence action in Canada. Section 46 does not expressly override the Court’s discretion to stay proceedings under s 50 of the Federal Courts Act, RSC 1985, c F-7, and the two can be read together. As stated in OT Africa (see Magic Sportswear Corp v Mathilde Maersk (The) 2006 FCA 284 (CMI1038)), s 46 of the MLA 'removes the Court's discretion to stay solely on the ground that the parties have selected an exclusive forum outside Canada'.

The plaintiff suggested that s 46 of the MLA flies in the face of international comity. The Court disagreed, noting that, although the Hague-Visby Rules do not deal with jurisdiction, the Hamburg Rules, a Convention designed to replace the Hague-Visby Rules, do. The Hamburg Rules were enacted and form part of the MLA, but have not been proclaimed in force. It may well be, as the plaintiff suggests, that the Hamburg Rules may never gain general acceptation and may never come into force here. Nevertheless, a number of countries, including Canada, which do not give effect thereto have enacted jurisdictional provisions inspired therefrom. Evans J surveyed the field in OT Africa (CMI1038). He pointed out that Australia, New Zealand, South Africa, Denmark, Finland, Norway, Sweden and the People’s Republic of China have enacted provisions similar to s 46 of the MLA. Indeed, the Australian Carriage of Good by Sea Act 1991 (Cth) and the New Zealand Maritime Transport Act 1994 (NZ) strike down exclusive foreign jurisdiction clauses as null and void. All this demonstrated that s 46 of the MLA does not make Canada an international pariah. In this case, unlike in OT Africa (CMI1038), the Japanese courts have not issued an anti-suit injunction. Although the opinion has been offered that the Japanese courts will take jurisdiction, they apparently will do nothing to impede the Canadian action. Nor is Mazda seeking an anti-suit injunction. These last mentioned factors all weigh in favour of Canada, the plaintiff’s choice of forum.

The case also differs from that before the House of Lords in The Morviken (Owners of the Cargo on Board the Morviken v Owners of the Hollandia [1983] 1 AC 565 (CMI597)). Cargo had been taken onboard in the UK for through carriage to the Netherland Antilles. The bill of lading called for Netherlands law and jurisdiction. At the time the UK had given effect to the Hague-Visby Rules while the Netherlands had not yet done so. Under the laws of the UK, the Hague-Visby Rules were compulsory applicable. The limitation of liability under the Hague-Visby Rules was much higher than under the Hague Rules. Lord Diplock held that the bill of lading was to be read as if it contained neither a proper law, nor a forum selection clause. However, in this case, unlike in The Morviken (CMI597), s 46 of the MLA does not have the effect of rendering either the proper law clause or the forum selection clause null and void.

Since the jurisdiction clause is not illegal here, it should not be ignored, but little weight can be given to it in the light of Canada's public policy as enunciated in s 46. Certainly, it does not tip the scales in Japan's favour. In summary, the effect of s 46 of the MLA is to deem that a case has a real and substantial connection with Canada should one of the factors in s 46 be present. Canada has a real and substantial connection with this case because New Westminster was the intended port of discharge. The plaintiff is entitled to select its forum. It has not been clearly established that Japan would be a more appropriate forum.

[For the successful appeal to the Federal Court of Appeal, see Mazda Canada Inc v Cougar Ace (The) [2008] FCA 219 (CMI1104).]