Timberwest Forest Corp (the plaintiff) entered into contracts to sell logs to Harwood Products Inc (Harwood). Under these contracts, the plaintiff would retain title, ownership and risk regarding the logs until they were delivered to and paid for by Harwood. Harwood made all the arrangements for the carriage of the logs, which were to be carried on deck by Pacific Link Ocean Services Corp (the defendant). The contract of carriage not only covered the logs owned by the plaintiff but also logs that were owned by Harwood in which the plaintiff had no interest. The contract of carriage incorporated a standard form bill of lading. The quoted freight rate specifically excluded cargo insurance. The plaintiff's marine cargo insurance policy stated, as an insuring condition, that there was a waiver of subrogation against the defendant.

The plaintiff filed a claim against the defendant for the loss of its shipment of logs. The trial Judge held that the Hague-Visby Rules did not govern the contract of carriage; the cargo was not 'goods' as defined in the Hague-Visby Rules; and the waiver of subrogation in favour of the defendant contained in the plaintiff's insurance policy was not rendered null and void and of no force or effect by the Hague-Visby Rules; see Timberwest Forest Corp v Pacific Link Ocean Services Corp 2008 FC 801 (CMI1076). The plaintiff appealed.

Held: Appeal dismissed.

By virtue of s 43 of the Marine Liability Act, SC 2001, c 6 (the Act), the Hague-Visby Rules had the force of law in Canada in respect of contracts for the carriage of goods by water between different States, as described in art 10 of the Hague-Visby Rules. The contract of carriage, in this case, was within the scope of art 10.

Article 3 of the Hague-Visby Rules set out several responsibilities and liabilities of carriers and ships. Article 3.8 of the Hague-Visby Rules limited the ability of carriers and ships to contract out of those obligations.

In this case, the contract of carriage included the bill of lading and contained clauses limiting the liability of the carrier for the loss of the cargo. However, art 3.8 invalidated those clauses only if the cargo met the definition of 'goods' in the Hague-Visby Rules. 'Goods' were defined as follows in art 1.c: '"goods" includes goods, wares, merchandise and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried'.

The plaintiff argued that the trial Judge erred in relying on cl 9 of the bill of lading (which provided that '[a]ll cargo is carried on deck unless otherwise expressly stated in this Bill of Lading. Cargo carried on deck is carried at the sole risk of the owner thereof. In no event shall the Carrier be liable for any loss or damage in respect of cargo carried on deck, howsoever caused...'), when provisions in the contract of carriage indicated an intention that the Hague-Visby Rules would apply. These apparent inconsistencies, it was argued, justified the Court in construing the contract of carriage contra proferentem, that is, in the plaintiff's favour. The Court rejected this argument. No contractual terms were inconsistent with the terms stating that the cargo would be carried on deck, as all parties knew would necessarily be the case. The Court concluded that the cargo of logs was not 'goods' as defined in the Hague-Visby Rules. Therefore, the contract of carriage was not governed by the Hague-Visby Rules, and the Rules did not invalidate the waiver of subrogation clause in the contract of insurance.