On 18 June 1973, Quebec Liquor Corp (the plaintiff) purchased 7,280 cases of gin from James Burrough Ltd (London). The terms of the sale were FOB, net cash on receipt of documents. The plaintiff contracted with Dart Container Line Co Ltd (the defendant) for carriage of the cases in nine 20-foot containers from Southampton to Halifax, and then for inland delivery at Montreal. The gin was carried on the Dart Europe which arrived in Halifax on 15 July 1973. The nine containers were discharged and delivered in good condition to a third party, Canadian National Railway (CNR). The defendant regularly contracted with CNR to carry cargo by rail from Halifax to various inland places in Canada. That carriage was subject to the classifications and tariffs in effect by the Railway Transport Committee of the Canadian Transport Commission.

CNR delivered two of the containers to the plaintiff with 694 cases of gin missing, causing a loss to the plaintiff of CAD 36,194.86. This loss occurred when thieves broke into CNR's Montreal terminal.

The plaintiff claimed that the cargo was loaded on board the vessel in good order and condition under a clean through house-to-house bill of lading, and that as a result of a breach of that contract the defendant was liable for the loss that it suffered. The plaintiff further claimed that the defendant could not avail itself of any of the immunities or limitations of liability provided in the bill of lading or the CNR tariff because the loss was due to gross negligence on its part.

Held: Judgment for the plaintiff.

CNR was not grossly negligent. The theft was co-ordinated as a highly sophisticated operation that could not have been anticipated. The security provided in CNR's terminal, although imperfect, cannot be described as so 'ineffective that not even the most careless and stupid people' would have countenanced it.

The defendant claimed that its liability was limited by the inland carrier's contract of carriage. The defendant specifically referred to cl 1(A) which provided:

(i) In respect of 20 foot containers and their contents ...

b) in respect of the contents of any such container, (1) the value of such contents at the place and time that such contents were loaded into the container (including the freight charges if paid and the duty if paid or payable and not refunded or refundable) (2) the sum of $10,000.00, or (3) and amount equal to the liability of the steamship company Pursuant to the Ocean Bill of Lading, whichever sum shall be the lesser.

This meant that the defendant would guarantee to pay the lesser of the three amounts. The first is the value of the stolen cases of gin, or CAD 36,194.86 as claimed. The second is CAD 10,000.00. The third amount is the liability of the defendant under the bill of lading. Does that tariff clause revive the limitation clause stamped on the face of the bill of lading? It does so, only in so far as it does not lessen the carrier's liability other than as provided by the Hague Rules. Article 3.8 of the Hague Rules provides:

Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connection with, goods arising from negligence, fault, or failure in the duties and obligations provided in this Article or lessening such liability otherwise than as provided in this Convention, shall be null and void and of no effect. A benefit of insurance clause in favour of the carrier or similar clause shall be deemed to be a clause relieving the carrier from liability.

However, the Hague Rules only apply at sea (tackle to tackle) and would not limit liability in a Montreal railway yard unless they have been incorporated into the bill of lading by the parties to cover the voyage from house to house.

The bill of lading contained a paramount clause which effectively meant that the parties incorporated the limits of liability contained in art 4.5 of the Hague Rules, in this case CAD 252 per 'package or unit'.

The key issue is therefore, what is the package? Is it the container, or is it the case of gin? The bill of lading in this case lists each of the nine containers and its contents. It is less descriptive of the container and more descriptive of the contents. The defendant knew exactly what each container contained, and is deemed to have accepted the counts of the contents. Therefore the 'package' was not each of the nine containers, but each of the 7,280 cases.

The lesser of the three sums for which CNR and the defendant under the bill of lading are liable is therefore the sum of CAD 10,000.